AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 1996
REGISTRATION STATEMENT NO. 333-05581
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- -----------------------------------------------------------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GOLDEN BEAR GOLF, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 7999 APPLIED FOR
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD (I.R.S. EMPLOYER
OF INDUSTRIAL
INCORPORATION OR ORGANIZA- CLASSIFICATION CODE IDENTIFICATION NUMBER)
TION) NUMBER)
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<TABLE>
<CAPTION>
<S> <C>
RICHARD P. BELLINGER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
GOLDEN BEAR GOLF, INC.
11780 U.S. HIGHWAY #1 11780 U.S. HIGHWAY #1
NORTH PALM BEACH, FLORIDA 33408 NORTH PALM BEACH, FLORIDA 33408
TELEPHONE (407) 626-3900 TELEPHONE (407) 626-3900
ADDRESS, INCLUDING ZIP CODE, (NAME, ADDRESS, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER, INCLUDING AREA CODE, AND TELEPHONE NUMBER, INCLUDING
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
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PLEASE SEND COPIES OF ALL COMMUNICATIONS TO:
ALISON W. MILLER, ESQ. VALERIE FORD JACOB, ESQ.
STEVEN D. RUBIN, ESQ. FRIED, FRANK, HARRIS,
SHRIVER
STEARNS WEAVER MILLER & JACOBSON
WEISSLER
ALHADEFF & SITTERSON, P.A. ONE NEW YORK PLAZA
150 WEST FLAGLER STREET NEW YORK, NEW YORK 10004
MIAMI, FLORIDA 33130 (212) 859-8000
(305) 789-3200
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this 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: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
<S> <C> <C>
Proposed Maximum
TITLE OF EACH CLASS Aggregate Amount of
OF SECURITIES TO BE REGISTERED Offering Price(1)(2) Registration Fee(3)
Class A Common Stock, par value $.01 per share $33,120,000 $ 11,421
<FN>
- --------
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933.
(2) Includes shares of Common Stock which may be purchased by the
Underwriters pursuant to an over-allotment option.
(3) Previously paid.
</FN>
</TABLE>
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, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
GOLDEN BEAR GOLF, INC.
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING THE LOCATION IN THE PROSPECTUS OF THE RESPONSES TO THE ITEMS OF PART I OF FORM S-1.
FORM S-1 ITEM NO. ITEM CAPTION Location in Prospectus
- -------------------------------------------------------------------------------------------------------
1. Forepart of the Registration Statement and Forepart of the Registration Statement and Outside
Outside Front Cover Page of Prospectus Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages Inside Front and Outside Back Cover Pages of
of Prospectus Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Underwriting
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Underwriting
9. Description of Securities to be Registered Description of Capital Stock
10. Interests of Named Experts and Counsel Not Applicable
11. Information with Respect to the Registrant Prospectus Summary; Risk Factors; The Company;
Capitalization; Selected Historical Combined
Financial and Operating Data; Management's
Discussion and Analysis of Financial Condition and
Results of Operations; Business; Principal
Shareholders; Management; Certain Relationships
and Related Transactions; Description of Capital
Stock; Shares Eligible for Future Sale;
Underwriting; Combined Financial Statements
12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities Not Applicable
</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 18, 1996
P R O S P E C T U S
1,800,000 SHARES
[LOGO]
CLASS A COMMON STOCK
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All of the 1,800,000 shares of Class A Common Stock, par value $.01 per
share (the "Class A Common Stock"), of Golden Bear Golf, Inc. (the "Company")
offered hereby are being offered by the Company.
Each share of Class A Common Stock entitles its holder to one vote. The
Company also has authorized and outstanding shares of Class B Common Stock,
par value $.01 per share (the "Class B Common Stock"), which are held by
Nicklaus Family Members (as hereinafter defined). Each share of Class B
Common Stock entitles the holder to ten votes. The Class A Common Stock and
the Class B Common Stock are collectively referred to herein as the "Common
Stock." After consummation of the Offering, Nicklaus Family Members will
beneficially own shares representing approximately 93.9% of the combined
voting power of the Company's Common Stock and 62.5% of the Company's
outstanding Common Stock. Each share of Class B Common Stock will
automatically convert into one share of Class A Common Stock upon the
transfer of such shares to any person other than a Nicklaus Family Member.
All of the Class B Common Stock will convert into Class A Common Stock if the
total number of shares of Class B Common Stock outstanding falls below 20% of
the aggregate number of shares of Common Stock outstanding. Except for voting
and conversion rights, the Class A Common Stock and the Class B Common Stock
are identical.
Prior to the Offering, there has been no public market for the Class A
Common Stock. It is currently anticipated that the initial public offering
price for the Class A Common Stock will be between $14 and $16 per share. See
"Underwriting" for a discussion of various factors considered in determining
the initial public offering price.
The Class A Common Stock has been approved for quotation on the Nasdaq
National Market under the symbol "JACK."
SEE "RISK FACTORS," BEGINNING ON PAGE 7, FOR A DISCUSSION OF RISK FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE CLASS A
COMMON STOCK OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR 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>
<S> <C> <C> <C>
PRICE TO Underwriting Proceeds to
PUBLIC Discount(1) Company(2)
Per Share $ $ $
Total(3) $ $ $
<FN>
- --------
(1) The Company and Golden Bear International, Inc. have agreed to indemnify
the several Underwriters against certain liabilities, including certain
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses of the Offering payable by the Company
estimated to be $ .
(3) The Company has granted the Underwriters a 30-day option to purchase up
to 270,000 additional shares of Class A Common Stock, solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
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</FN>
</TABLE>
The shares of Class A Common Stock are offered by the several
Underwriters, subject to prior sale, when, as and if delivered to and
accepted by them, subject to approval of certain legal matters by counsel for
the Underwriters and certain other conditions. The Underwriters reserve the
right to withdraw, cancel or modify such offer and to reject orders in whole
or in part. It is expected that delivery of the shares of Class A Common
Stock will be made in New York, New York on or about , 1996.
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Merrill Lynch & Co.
William Blair & Company
Dean Witter Reynolds Inc.
- -----------------------------------------------------------------------------
The date of this Prospectus is , 1996.
1
<PAGE>
[INSERT PHOTOS HERE]
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A
COMMON STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements examined and reported upon, with an
opinion expressed by independent certified public accountants, and quarterly
reports containing unaudited financial information for the first three
quarters of each year.
NICKLAUS, JACK NICKLAUS and GOLDEN BEAR are registered trademarks of
Golden Bear International, Inc., a privately held Florida corporation, which
have been licensed to the Company.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
(INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS
OTHERWISE INDICATED, (I) ALL INFORMATION IN THIS PROSPECTUS GIVES RETROACTIVE
EFFECT TO A 3,000-FOR-1 STOCK SPLIT AND ASSUMES THAT THE UNDERWRITERS'
OVER-ALLOTMENT OPTION IS NOT EXERCISED AND (II) ALL REFERENCES IN THIS
PROSPECTUS TO THE "COMPANY" OR "GOLDEN BEAR" REFER TO GOLDEN BEAR GOLF, INC.,
A FLORIDA CORPORATION AND ITS SUBSIDIARIES, AFTER GIVING EFFECT TO THE
REORGANIZATION, AS MORE FULLY DESCRIBED UNDER "THE COMPANY--THE
REORGANIZATION," AND TO THE TRANSFER OF THE ASSETS AND STOCK TO AND THE
ASSUMPTION OF THE RELATED LIABILITIES BY THE COMPANY IN THE REORGANIZATION,
AS IF SUCH ASSETS AND STOCK HAD BEEN TRANSFERRED TO AND OPERATED BY, AND
RELATED LIABILITIES HAD BEEN OBLIGATIONS OF, THE COMPANY FOR THE PERIODS
PRESENTED HEREIN.
THE COMPANY
Golden Bear Golf, Inc. ("Golden Bear" or the "Company") is a diversified,
international brand name golf products and services company engaged in the
development, marketing and management of golf-related businesses, including
the licensing, ownership and operation of golf practice and instruction
facilities, the construction and renovation of golf courses, the marketing of
golf course design services and the licensing, distribution and sale of
golf-related consumer products. Through its two divisions, the Golf Division
and the Marketing Division, the Company provides high quality products and
services in over 40 countries primarily under the NICKLAUS, JACK NICKLAUS and
GOLDEN BEAR brand names. From 1993 to 1995, the Company realized an increase
in revenues and operating income from $11.8 million to $31.5 million and from
$0.1 million to $3.3 million, respectively.
The Company's Golf Division is involved in the licensing, ownership and
operation of golf practice and instruction facilities under the JACK NICKLAUS
GOLF CENTER, JACK NICKLAUS ACADEMY OF GOLF and GOLDEN BEAR GOLF CENTER brand
names. The Company's golf centers are designed to provide affordable golf
practice and instruction facilities to a large golfer population, to attract
new participants to the game and to create an environment for family
entertainment. The Company believes the highly fragmented golf practice and
instruction facility industry presents advantageous opportunities to acquire,
upgrade and renovate golf centers over the next five years. The Company
believes that its golf facilities are differentiated from its competitors on
the basis of the consumer's recognition of the high quality of the products
and services associated with the NICKLAUS, JACK NICKLAUS and GOLDEN BEAR
brand names, the quality of its facilities and the availability at its
facilities of the unique and individualized golf instruction programs
designed by Jack Nicklaus and Jim Flick, a world renowned instructor.
The Company currently operates three golf practice and instruction
facilities and recently entered into letter agreements or letters of intent
regarding the proposed acquisition or lease of four additional existing
facilities and two facilities currently under development. See "The
Company--Recent Acquisitions." As part of its growth strategy to focus its
efforts on the ownership and operation of facilities, the Company has
identified approximately 60 to 70 markets within the United States which it
believes can support one or more golf practice and instruction facilities of
the type operated by the Company. Although there is no assurance that
additional facilities will be acquired, the Company's plan is to acquire or
develop a total of ten facilities during 1996 and an additional twelve
facilities by the end of 1997. In addition to the three golf practice and
instruction facilities it currently operates, the Company currently licenses
for operation by third parties 17 golf practice and instruction facilities
under the JACK NICKLAUS GOLF CENTER, JACK NICKLAUS ACADEMY OF GOLF and GOLDEN
BEAR GOLF CENTER brand names. The Company intends to continue to support its
existing licensee base.
The Company's Golf Division also is involved in the marketing of golf
course designs on behalf of designers, primarily for the golf course design
division of Golden Bear International, Inc. ("GBI"), Nicklaus Design, and
directly provides technical construction services in connection with the
construction and renovation of golf courses. Since 1983, such construction
services have been provided throughout the world in the development of
approximately 39 golf courses, most of which were designed by Mr. Nicklaus
through Nicklaus Design. In addition, the Company provides club management
and consulting services to golf course owners, with five Nicklaus designed
courses currently under management in the United States and one under
management in Asia.
3
<PAGE>
Through its Marketing Division, the Company licenses NICKLAUS, JACK
NICKLAUS and GOLDEN BEAR branded consumer products and operates its
Nicklaus/Flick Golf Schools. The Company believes, based upon estimated
mark-ups of wholesale prices or factory costs, that retail sales of the
Company's licensed products, including apparel and accessories, were
approximately $320 million worldwide in 1995, which generated approximately
$5.1 million of licensing revenue for the Company in 1995. The Company also
operates in its Marketing Division high-end golf schools under the
NICKLAUS/FLICK GOLF SCHOOL brand name. The Company has developed innovative
teaching methods which are offered at the Nicklaus/ Flick Golf Schools
throughout the United States and serve as the basis for instruction at the
Company's golf practice and instruction facilities worldwide. The Company has
invested approximately $1.3 million in a proprietary teaching method
including instruction books and a computer assisted video swing analysis
device. This teaching methodology is the basis for the JACK NICKLAUS COACHING
STUDIOS included within the Company's golf practice and instruction
facilities worldwide as well as teaching at the Nicklaus/Flick Golf Schools.
The Company's strategy is to increase its worldwide revenue and operating
income by capitalizing on the growth and popularity of golf and Mr. Nicklaus'
reputation, image and accomplishments as one of the greatest golfers ever to
play the game. Specific components of the Company's growth strategy include
(i) acquiring, leasing or entering into joint ventures for well-located golf
practice and instruction facilities that have the potential for improvement
under the Company's management and with improved or expanded facilities; (ii)
developing new golf practice and instruction facilities in locations where
suitable acquisition opportunities are not available; (iii) capitalizing on
the demand for the construction of new golf courses and the renovation of
existing courses; and (iv) broadening the Company's base of branded consumer
product offerings under the NICKLAUS, JACK NICKLAUS and GOLDEN BEAR brand
names. The Company also believes that cross-marketing of its products and
services will provide it with opportunities to maximize its operating
performance. To this end, it is anticipated that the acquisition and
development of new golf practice and instruction facilities will provide the
Company with additional opportunities to market its Nicklaus/Flick Golf
School programs and to sell its licensed products at retail pro shops
established at such facilities. Similarly, the Company believes that the
Company's arrangement as exclusive marketer of Nicklaus Design's services
will increase the exposure of the Company's products and provide it with a
competitive advantage in obtaining golf course construction and renovation
business.
The Company and its predecessors have been controlled by Mr. Nicklaus
since their founding. Immediately after the Offering, Mr. Nicklaus will be
the Chairman of the Board of the Company and Nicklaus Family Members (as
defined) will beneficially own shares representing approximately 93.9% of the
voting power of the Company's Common Stock and 62.5% of the Company's
aggregate outstanding Common Stock.
RECENT ACQUISITIONS
Consistent with its business strategy of increasing its ownership and
operation of golf practice and instruction facilities, the Company has
entered into purchase, lease and management agreements relating to three
existing facilities. On April 15, 1996, the Company assumed operation of a
golf practice and instruction facility located in Pittsburgh, Pennsylvania
pursuant to a long-term lease agreement with an option to purchase; on May 1,
1996, the Company assumed operation of a New Jersey facility pursuant to a
management agreement with the intent to execute a long-term lease agreement
for the property and a purchase agreement for the assets within 90 days; and
on June 17, 1996 the Company acquired and assumed operation of a second
Pittsburgh golf practice and instruction facility pursuant to a purchase and
sale agreement. Additionally, on June 11, 1996, the Company entered into
letters of intent with one of its licensees with respect to the proposed
acquisition of an existing GOLDEN BEAR GOLF CENTER located in Columbus, Ohio
and two GOLDEN BEAR GOLF CENTERS currently under development in Fort
Lauderdale, Florida and Charlotte, North Carolina; on July 16, 1996, the
Company entered into a letter of intent with another of its licensees with
respect to the proposed acquisition of two other GOLDEN BEAR GOLF CENTERS
located in Moreno Valley, California and Carrollton, Texas; and on July 16,
1996, the Company entered into a letter agreement with respect to the
proposed lease of an existing facility in the Dayton, Ohio area. Consummation
of any of the above-described pending transactions
4
<PAGE>
are subject to the satisfaction of various conditions, including, the
execution of definitive agreements and the satisfactory completion of due
diligence by the Company. There is no assurance that any of the
above-described pending transactions will be consummated. While there can be
no assurance that any additional facilities will be acquired, the Company's
strategy is to acquire or develop a total of ten golf practice instruction
facilities during 1996 and an additional twelve facilities by the end of
1997. See "The Company--Recent Acquisitions." Assuming the above-described
existing facilties had been acquired on January 1, 1995, the Company's 1995
pro forma revenues and operating income would have been $36.9 million and
$2.0 million, respectively. The closing of the above-described transactions
is not a condition to the consummation of this Offering. The Company is
actively pursuing acquisitions and is currently having preliminary
discussions regarding acquisitions of additional facilities on terms not yet
determined. Any such acquisitions may be significant and may have a material
impact on the Company's financial condition and operating results. See "The
Company--Recent Acquisitions--Other Potential Acquisitions."
THE OFFERING
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<CAPTION>
<S> <C>
CLASS A COMMON STOCK OFFERED ...........1,800,000 SHARES
Common Stock to be outstanding after
the Offering:
Class A Common Stock .................. 2,040,000 shares(1)
Class B Common Stock .................. 2,760,000 shares(2)
---------
Total ................................ 4,800,000 shares
---------
---------
Voting Rights .......................... The Class A Common Stock and Class B Common Stock vote as a
single class on all matters, except as otherwise required by
law, with each share of Class A Common Stock entitling its holder
to one vote and each share of Class B Common Stock entitling
its holder to ten votes.
Use of Proceeds ........................ The net proceeds from the Offering will be used for working
capital and general corporate purposes, including the acquisition
and development of golf practice and instruction facilities
and to repay approximately $1.65 million of indebtedness to
Mr. Nicklaus incurred by the Company in connection with the
Acquisitions (as defined). See "The Company--The Reorganization"
and "Use of Proceeds."
Nasdaq National Market Symbol .......... JACK
<FN>
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(1) Does not include an aggregate of up to 384,000 shares of class a common stock
reserved for issuance upon exercise of stock options which will be outstanding
upon consummation of the offering under the company's 1996 stock option plan.
see "management--executive compensation."
(2) Each share of Class B Common Stock is convertible at any time into one
share of Class A Common Stock and will convert automatically into Class A
Common Stock upon a transfer to anyone other than a Nicklaus Family
Member or on the record date of any meeting of shareholders if the total
number of shares of Class B Common Stock outstanding is less than 20% of
the aggregate number of shares of Common Stock outstanding. In addition,
shares of Class B Common Stock owned by Nicklaus Family Members are
subject to certain transfer restrictions. See "Certain Relationships and
Related Transactions" and "Description of Capital Stock."
</FN>
</TABLE>
RISK FACTORS
Prospective purchasers of the Class A Common Stock offered hereby should
consider the risk factors set forth in "Risk Factors," as well as the other
information set forth in this Prospectus, before making an investment in the
Class A Common Stock.
5
<PAGE>
SUMMARY FINANCIAL DATA
The summary historical financial information presented below is derived
from the Company's Combined Financial Statements as of the date and for the
periods indicated. The combined financial and operating data include the
financial statements of Golden Bear Golf Centers, Inc. ("Golf Centers") and
Paragon Golf Construction, Inc. ("Paragon") (collectively, the "Operating
Subsidiaries"), Golden Bear Club Services, Inc. ("Club Services") and certain
divisions of GBI. The Operating Subsidiaries, Club Services and the divisions
of GBI are hereinafter sometimes collectively referred to as the "Predecessor
Companies." As a result of the Reorganization described under "The
Company--The Reorganization," the Predecessor Companies will be acquired by
the Company. The summary historical financial information should be read in
conjunction with the Company's Combined Financial Statements and the related
notes thereto included elsewhere in this Prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
See "The Company--The Reorganization."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------- --------------------
1993 1994 1995 1995 1996
----------- --------- ---------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Golf division ........................................ $ 3,699 $ 7,504 $21,475 $1,799 $2,590
Marketing division ................................... 8,069 9,121 10,070 2,453 2,382
----------- --------- ---------- --------- ---------
Total revenues ...................................... 11,768 16,625 31,545 4,252 4,972
Operating costs and expenses:
Construction and shaping costs ....................... 1,894 4,737 16,500 1,423 2,000
Operating expenses ................................... 6,502 7,756 8,422 1,615 1,699
Corporate overhead ................................... 2,994 3,051 3,121 714 751
Depreciation and amortization ........................ 243 199 233 53 72
----------- --------- ---------- --------- ---------
Total costs and expenses ........................... 11,633 15,743 28,276 3,805 4,522
Operating income ...................................... 135 882 3,269 447 450
Other income (expense) ................................ 2 (10) (1) (4) 4
----------- --------- ---------- --------- ---------
Income before income taxes and minority interest ..... 137 872 3,268 443 454
Foreign tax provision ................................. 616 699 1,010 178 96
Minority interest(a) .................................. 925 1,038 1,024 203 325
----------- --------- ---------- --------- ---------
Income (loss) before pro forma income taxes .......... $(1,404) $ (865) $ 1,234 $ 62 $ 33
=========== ========= ========== ========= =========
As Adjusted to Reflect C-Corp Status(b):
Pro forma income tax (benefit) ....................... (923) (764) (135) (84) (46)
----------- --------- ---------- --------- ---------
Pro forma net income (loss) .......................... $ (481) $ (101) $ 1,369 $ 146 $ 79
=========== ========= ========== ========= =========
Pro forma net income (loss) per share of common stock $ 0.46 $ 0.03
========== =========
Weighted average number of shares of common stock and
common stock equivalents outstanding ............... 3,000 3,000
========== =========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------ -------------------------
1993 1994 1995 1996
--------- -------- -------------------------
AS
ACTUAL ADJUSTED(C)
--------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Working capital (deficit) ..................... $ 609 $ (139) $ 535 $ (664) $21,596
Total assets .................................. 3,676 4,841 8,906 7,888 48,183
Long-term debt ................................ -- 113 44 25 13,010
Shareholders' equity .......................... 1,110 256 1,030 280 25,940
INDUSTRY OVERVIEW:
Total commercial golf ranges open at year-end 1,588 1,731 1,932
Golf course openings during the year ......... 358 381 468
Golf courses under construction at year-end .. 671 769 820
Total golf courses open at year-end ........... 14,648 14,939 15,390
</TABLE>
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(a) Reflects minority interest of the Company's partner in Jack Nicklaus Apparel
International, the partnership operating the apparel licensing activities of
the Company outside the United State and Europe.
(b) See Note 1 to the Company's Combined Financial Statements.
(c) Adjusted to reflect the Acquisitions, the sale of Class A Common Stock
offered in the Offering (at an assumed initial public offering price of
$15.00 per share, which represents the midpoint of the estimated range of
the initial public offering price) and a $1.5 million charge for
compensation to be recorded in June 1996 related to deemed compensation
received by certain executives in connection with their purchase of
shares in Golf Centers.
6
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY BEFORE INVESTING IN THE
CLASS A COMMON STOCK OFFERED HEREBY.
DEPENDENCE UPON JACK NICKLAUS AND USE OF THE NICKLAUS, JACK NICKLAUS AND
GOLDEN BEAR NAMES AND SYMBOLS
The Company's success will depend, in large part, on the continued
visibility and reputation of Mr. Nicklaus. Any diminution in Mr. Nicklaus'
involvement in or the success of Mr. Nicklaus' independent golf course design
company could materially adversely affect the opportunities available to the
Company to perform construction services with respect to Nicklaus designed
courses as well as to receive marketing fees for developing design
opportunities for Mr. Nicklaus. Further, the NICKLAUS, JACK NICKLAUS and
GOLDEN BEAR names and symbols and the image and reputation of Mr. Nicklaus
serve to distinguish the Company and its activities from its competitors. The
Company derives significant earnings from the use of such names and related
trademarks and service marks, including licensing fees paid by third parties.
Accordingly, the occurrence of any event which diminishes the reputation or
visibility of Mr. Nicklaus and the related trademarks and service marks could
materially adversely affect the Company and its prospects. Further, the
Company and GBI have granted licenses to third parties to use the NICKLAUS,
JACK NICKLAUS and GOLDEN BEAR trademarks. Any action which has an adverse
impact on the value of the trademarks could have a material adverse effect on
the Company and the value of its brand names.
DEPENDENCE ON LICENSED TRADEMARKS
Subject to certain exclusions relating to GBI's continuing businesses,
GBI, a private company controlled by Mr. Nicklaus, has, pursuant to a
thirty-year renewable license agreement (the "License Agreement"), granted
the Company an exclusive royalty-free license to utilize and sublicense all
major trademarks and service marks owned or developed by GBI, including the
NICKLAUS, JACK NICKLAUS and GOLDEN BEAR trademarks (the "Licensed Marks"),
and the right, subject to the approval of GBI, to obtain the registration of
additional trademarks and service marks related to the Nicklaus name in
connection with the future expansion of the Company. GBI and its affiliates
have retained the exclusive right to utilize and license the NICKLAUS, JACK
NICKLAUS and GOLDEN BEAR names and symbols in connection with their
continuing businesses, which are currently limited to golf course design and
consulting, the development of residential communities and daily fee golf
courses, the manufacture and marketing of golf clubs and equipment, the
creation, production and marketing of golf and other sporting events, the
creation, development, editing and distribution of books, articles and print
media creative works and audio visual media programming and properties,
including video games and a membership club offering golf improvement tips.
GBI has agreed to give the Company an exclusive opportunity to negotiate to
acquire the businesses prior to offering the businesses to third parties. The
Company has agreed not to enter into any of these businesses without the
prior written consent of GBI.
The License Agreement imposes certain obligations on the Company with
respect to the continued use of the Licensed Marks and the quality of the
products sold and services offered which bear the Licensed Marks. The License
Agreement also provides that it may be terminated in certain events. See
"Certain Relationships and Related Transactions--Reorganization--Trademark
License." Although the License Agreement requires GBI and its other licensees
to adhere to certain quality requirements, there is no assurance that GBI or
any of its licensees will observe such quality requirements and the failure
to do so could have a material adverse effect on the Company and the value of
the Company's rights to the Nicklaus brand names. Further, there are risks
associated with the financial condition of GBI, which are beyond the control
of the Company. In the event that a case under the Federal bankruptcy laws is
commenced by or against GBI in the future, the trustee in the bankruptcy case
or GBI, as debtor-in-possession, may have the right to reject the License
Agreement. In the event of any such termination or rejection, the Company
would lose its right to use the Licensed Marks, which would have a material
adverse effect on the Company. Moreover, the trustee in bankruptcy or GBI, as
the debtor-in-possession,
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could reject the rights granted to the Company pursuant to the terms of the
License Agreement to acquire the Licensed Marks in certain circumstances. See
"The Company--The Reorganization" and "Certain Relationships and Related
Transactions--Reorganization--Trademark License."
Under the License Agreement, the Company is required to devote resources
to the registration, maintenance, and protection of the Licensed Marks. There
can be no assurance that the actions taken by the Company to establish and
protect its rights to the Licensed Marks and other proprietary rights will
prevent imitation of its products or infringement of its trademarks by
others, prevent the loss of revenue or other damages caused thereby or
prevent third parties from challenging the Licensed Marks. While the Company
may seek to expand its trademark rights for new products and in foreign
countries, there can be no assurance that such efforts will be successful or
that others will not resist such efforts or seek to block sales of the
Company's products as violative of their trademark and proprietary rights. In
addition, the laws of certain foreign countries do not protect proprietary
rights to the same extent as do the laws of the United States. See
"Business--Intellectual Property Rights."
EXPANSION STRATEGY AND ADDITIONAL FINANCING REQUIREMENTS
The Company is a newly formed entity that has never operated as a
stand-alone company. The Company's ability to increase its revenues and
operating cash flow will depend in part on (i) the development or acquisition
of additional golf practice and instruction facilities, (ii) the Company's
ability to obtain additional golf course construction contracts and (iii) the
expansion of the markets for its licensed products. There is no assurance
that opportunities will be available or that the Company will be in a
position to take advantage of such opportunities if presented. Additionally,
the Company will be required to raise additional capital in the future in
order to meet its current expansion plan through 1997. Such capital may be
raised by the issuance of additional equity or the incurrence of
indebtedness. In addition, in appropriate situations, the Company may seek
financing from other sources or may enter into joint ventures and other
collaborative or licensing arrangements for the acquisition and operation of
additional golf practice and instruction facilities. See "The Company--Recent
Acquisitions" for a description of proposed joint ventures for the future
development of facilities. The Company may not be able to obtain additional
capital in a timely manner, on favorable terms or at all. The Company's
growth and profitability will further depend on its ability to implement
expanded operating controls and information systems, hire and train
additional personnel and to integrate these employees and businesses acquired
by the Company with its existing businesses. There can be no assurance that
the Company will be able to accomplish the foregoing in a timely or
profitable manner. See "Use of Proceeds," "Capitalization" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
ACQUISITION OF ADDITIONAL GOLF CENTERS AND LIMITED HISTORY OF DIRECT
OPERATIONS
While the Company currently intends to seek to acquire or develop
approximately 19 golf practice and instruction facilities by the end of 1997,
the ability of the Company to make acquisitions or develop sites in
accordance with its business plan will be affected by the ability of the
Company to locate appropriate acquisitions or suitable sites for development
and obtain financing and may also be affected by required compliance with
zoning and environmental regulations. If the Company is unable to meet its
contemplated opening schedules and successfully integrate new centers into
its ongoing business, the Company's results of operations would be materially
adversely affected. Additionally, while the Company has been licensing golf
practice and instruction facilities under the names JACK NICKLAUS GOLF
CENTER, JACK NICKLAUS ACADEMY OF GOLF and GOLDEN BEAR GOLF CENTER for over
four years, the Company has only limited experience in the acquisition and
direct ownership and operation of golf centers. There is currently
considerable competition to acquire golf practice and instruction facilities
and the Company's competitors for such acquisitions may have greater
resources than the Company. The acquisition of facilities may become more
expensive in the future to the extent demand and competition increases. There
can be no assurance that the Company will make additional acquisitions or
locate suitable sites for development or that any golf centers acquired or
developed by the Company will operate profitably.
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COMPETITION
The Company faces intense competition in its golf operations and licensing
activities, including competition from traditional golf ranges and golf
courses, as well as other golf centers, golf course construction companies,
golf schools and licensed apparel products. The Company also faces
competition from other leisure and recreational activities and accordingly,
the Company's revenues will also be affected by the demand for golf in
general and the availability of alternative forms of recreation and changing
consumer preferences. The Company's revenues from licensed products in
particular will depend upon its licensees' ability to introduce innovative,
well-received products and there is no assurance that the Company's licensees
will be able to do so. While the Company believes that its trademarks and
brand name recognition distinguish it from its competition, the Company may
face imitation and other forms of competition. Moreover, many of the
Company's existing and potential competitors may have considerably greater
experience and financial resources than the Company. See
"Business--Competition."
DEPENDENCE ON KEY EMPLOYEES
The Company's success is dependent on the active participation of the
Company's principal executive officers and the Company's ability to continue
to attract and retain highly capable management personnel. The loss of the
services of any of the Company's current executive officers could materially
adversely affect the Company. The Company has entered into employment
agreements with terms ranging from 3 1/2 to 5 years with Mr. Nicklaus,
Chairman of the Board; Mr. Richard P. Bellinger, President and Chief
Executive Officer; Mr. Mark F. Hesemann, Senior Vice President; Mr. Thomas P.
Hislop, Senior Vice President; and Mr. Jack P. Bates, Senior Vice President
and Chief Financial Officer. See "Management--Employment Agreements."
POTENTIAL CONFLICTS OF INTEREST
Mr. Nicklaus, the Chairman of the Board of the Company, is engaged in, and
after the Offering will continue to be engaged in, activities other than
those related to the Company. In addition to his activities as a professional
golfer, Mr. Nicklaus is the principal shareholder of GBI (a private company
which is the largest shareholder of the Company), and affiliated companies
which, after the Offering, will continue to be involved in or affiliated with
the businesses of (i) golf course design and consulting, (ii) residential
community development, (iii) sponsorship, promotion and management of golf
tournaments, (iv) daily fee golf course development, (v) the manufacture and
marketing of golf clubs and equipment, (vi) the creation, production and
marketing of golf and other sporting events, (vii) the creation, development,
editing and distribution of books, articles and print media creative works
and audio visual media programming and properties, including video games and
(viii) a membership club offering golf improvements tips. The Company is
restricted from entering into these businesses without the prior consent of
GBI. GBI has agreed to give the Company an exclusive opportunity to negotiate
to acquire these businesses prior to offering the businesses to third
parties.
Mr. Richard P. Bellinger, the President and Chief Executive Officer of the
Company, and Mr. Jack P. Bates, a Senior Vice President and the Chief
Financial Officer of the Company, also perform services for GBI and other
entities controlled by Mr. Nicklaus. Accordingly, GBI may compete with the
Company for the management time of Messrs. Nicklaus, Bellinger and Bates. In
this connection, Messrs. Bellinger and Bates have agreed to devote at least
80% of their business time to the affairs of the Company. The remainder may
be spent on management of other entities controlled by Mr. Nicklaus. Pursuant
to Mr. Nicklaus' employment agreement with the Company, in addition to the
time associated with serving as Chairman of the Board, Mr. Nicklaus will only
be required to spend a maximum of 10 days performing personal services or
making appearances in connection with the Company's licensing arrangements
and marketing partnerships.
As described herein, the Company has entered into a Trademark License
Agreement, Design Services Management Agreement, Golf Equipment Marketing
Support Agreement, Sublease and
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Sharing Agreement, Office Staff and Equipment Service Agreement, and Personal
Services Management Agreement (each as defined and collectively, the
"Intercompany Agreements"). See "Certain Relationships and Related
Transactions--Reorganization." The terms of the Intercompany Agreements were
established by Mr. Nicklaus and management of GBI and are not the result of
arm's-length negotiations. There is no assurance that these agreements are on
terms as favorable as those which could have been obtained in arm's-length
transactions. Further, GBI will have the right to terminate any of the
Intercompany Agreements in the event of the breach of any such agreement by
the Company and may terminate the License Agreement in the event that the
Company elects to abandon its use of all or substantially all of the Licensed
Marks in all or substantially all of the jurisdictions in which the Company
has the right to use the Licensed Marks. As officers of both GBI (the largest
shareholder of the Company) and the Company, Messrs. Nicklaus, Bellinger and
Bates will have an inherent conflict of interest in making any determination
on behalf of GBI relative to the approval of new uses for the Licensed Marks
or any decisions regarding compliance with the terms of the Intercompany
Agreements. The factors and procedures to be utilized by Messrs. Nicklaus,
Bellinger and Bates in making such decisions on behalf of GBI have not yet
been determined and will be determined by them in the future on a
case-by-case basis.
Following the closing of the Offering, the Company intends to submit any
transactions between the Company and its directors or principal shareholders
and their affiliates to a committee of disinterested members of the Company's
Board of Directors or to require approval of such transactions by a majority
of the disinterested members of the Board of Directors. Additionally,
provisions of the Florida Business Corporation Act require that certain
specified transactions between the Company and holders of more than 10% of
the outstanding voting power of the Company's Common Stock will require the
approval of the disinterested shareholders of the Company, unless such
transactions are approved by a majority of the disinterested members of the
Board of Directors.
RISKS ASSOCIATED WITH ACTIVITIES OUTSIDE THE UNITED STATES; RISK OF CURRENCY
FLUCTUATION
The Company has historically derived a significant amount of revenue from
sources outside the United States. The Company's arrangements with its
customers, suppliers, manufacturers, licensees and distributors are subject
to various risks associated with conducting business outside the United
States, including political uncertainty and instability. The imposition of
additional regulations relating to imports (including quotas, duties or other
taxes or charges on imports), possible work stoppages and other factors could
have a material adverse effect on the Company's results of operations and
financial condition. Additionally, because a substantial portion of the
revenues of the Company's overseas licensees are generated in foreign
currencies, fluctuations in the values of these currencies relative to the
United States dollar could have a material adverse effect on the Company's
profitability. Royalty payments received by the Company relating to foreign
licensing arrangements are generally based on the exchange rate at the time
of payment. The Company does not currently utilize any hedging arrangements
to reduce its risks relating to currency fluctuations, but may do so in the
future. Further, since the prices of the Company's products and services are
generally denominated in United States dollars, the competitiveness of the
pricing of the Company's products and services may be affected by
fluctuations in exchange rates. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Currency Fluctuations."
CONSUMER SPENDING AND TRENDS
The amount spent by consumers on discretionary items, such as those
offered by the Company, has historically been dependent upon levels of
discretionary income which may be adversely affected by general economic
conditions. A decrease in consumer spending on golf-associated activities
could have a material adverse effect on the Company's financial condition and
results of operations. Additionally, the success of the Company's licensed
apparel products is substantially dependent upon the ability of the Company
and its licensees to anticipate, gauge and respond to changing consumer
demands and fashion trends in a timely manner. Failure by the Company and its
licensees to identify and respond
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appropriately to changing consumer demands and fashion trends could adversely
affect consumer acceptance of NICKLAUS, JACK NICKLAUS and GOLDEN BEAR
PRODUCTS.
VARIABILITY OF QUARTERLY OPERATING RESULTS; UNCERTAINTY OF FUTURE OPERATING
RESULTS
While the Company's historical operating results have generally not been
seasonal, the Company anticipates that quarterly operating results may in the
future be subject to significant seasonal variation as a greater percentage
of its operations relate to golf practice and instruction facilities and golf
course construction activities which generally are the most active during the
second and third quarters of the year. The inherent seasonality of
participation in golf and golf-related activities and the effect of weather
conditions on the progress of golf construction projects and the opening of
new golf practice and instruction facilities are all expected to result in
greater revenues and income during the second and third quarters as compared
to the first and fourth quarters of the year. Poor weather conditions and
unforeseen natural events may have an adverse effect on the Company's ability
to complete the construction of golf courses in a timely manner and may
result in reduced utilization of the Company's golf practice and instruction
facilities. Accordingly, in the future, the Company's quarterly information
may not be indicative of the Company's ongoing performance or of future
results. Additionally, while revenues during 1996 are expected to increase as
compared to 1995 as a consequence of the contemplated acquisitions of golf
practice and instruction facilities, the costs associated with the addition
of systems and personnel to support such acquisitions and the integration of
the operations of the acquired facilities into the Company are expected to
result in decreased operating income for 1996 as compared to 1995. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview."
CONSTRUCTION CONTRACTS
A significant portion of the Company's revenues and earnings are generated
through fixed price contracts for the construction of golf courses. In 1995,
the dollar amount of the Company's construction contracts ranged from
$200,000 to $8 million. Such fixed price contracts expose the Company to the
risks of cost overruns and inflation as well as credit risks associated with
the customer. The Company recognizes revenues and expenses on a
percentage-of-completion basis whereby revenue and expenses, and thereby
profit, in a given period are determined based on the Company's estimates as
to the status of and the costs remaining to complete a particular project. To
the extent that the Company underestimates the remaining cost to complete a
project, it may overstate the revenues and profit in a particular period.
Further, certain of the Company's construction contracts provide for
penalties for failure to timely complete construction or require that the
Company, at its expense, correct and remedy to the satisfaction of the golf
course owner, certain structural, aesthetic or functional defects. The
Company may enter into additional contracts containing provisions of this
type or other performance obligations in the future and there is no assurance
that expenses relating to these provisions will not have a material adverse
effect on the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Note 8 to the Combined Financial
Statements."
ZONING AND ENVIRONMENTAL REGULATIONS
The construction of golf courses for third parties and the development of
golf practice and instruction facilities involve compliance with land use
planning, zoning and environmental regulations, including regulations
applicable to the treatment, storage and disposal of hazardous and solid
wastes as well as to wetland development. Regulations governing the use and
development of real estate may prevent the Company from acquiring or
developing prime locations for golf facilities, substantially delay or
complicate the process of developing locations acquired by the Company for
golf facilities or constructing golf courses on locations owned by others, or
materially increase the cost thereof.
Further, the operation and management of golf practice and instruction
facilities (whether pursuant to direct ownership, lease or management
contract) involve the use and limited storage of certain hazardous materials
such as herbicides, pesticides, fertilizers, motor oil, gasoline and paint.
The Company will be required to obtain various environmental permits and
licenses in connection with its operations and activities and comply with
various health and safety regulations adopted by federal, state, local and
foreign authorities governing the use and storage of such hazardous
materials. Under various federal, state, local and foreign laws, ordinances
and regulations, various categories of persons,
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including owners, operators or managers of real property may be liable for
the costs of investigation, removal and remediation of hazardous substances
that are or have been released on or in their property even if such releases
were by former owners or occupants. In addition, the Company provides
management services in connection with the operation of a golf course
constructed on the Anaconda Smelter Superfund site in Deer Lodge County,
Montana. Based on information currently available to the Company, the Company
does not believe that it will incur any material environmental liability with
respect to this site. The Company believes that it is in substantial
compliance with all environmental laws, ordinances and regulations applicable
to its properties or operations; however, there may be potential
environmental liabilities or conditions of which the Company is not aware.
See "Business--Governmental Regulations."
CONTROL BY CURRENT SHAREHOLDERS AND ANTI-TAKEOVER EFFECT OF DUAL CLASSES OF
STOCK
Holders of the Company's Class A Common Stock are entitled to one vote per
share and holders of the Company's Class B Common Stock are entitled to ten
votes per share. Each share of Class B Common Stock is convertible at any
time into one share of Class A Common Stock. Following the completion of the
Offering, Nicklaus Family Members will beneficially own or control, directly
or indirectly, all of the outstanding shares of the Company's Class B Common
Stock and may be deemed to beneficially own an additional 240,000 shares of
Class A Common Stock which in the aggregate will represent approximately
62.5% of the outstanding shares of Common Stock and 93.9% of the combined
voting power of such stock. The Nicklaus Family Members will, therefore,
initially have the ability to elect all of the directors of the Company and
to control the outcome of all issues submitted to a vote of the shareholders
of the Company. Each of the Nicklaus Family Members and Messrs. Bellinger,
Hesemann, Hislop and Bates have assigned to Mr. Nicklaus their right to vote
all shares of Common Stock currently owned by them. See "Principal
Shareholders" and "Certain Relationships and Related
Transactions--Shareholders' Agreements." Voting control by Nicklaus Family
Members may discourage certain types of transactions involving an actual or
potential change of control of the Company, including transactions in which
the holders of Class A Common Stock might receive a premium for their shares
over prevailing market prices.
DILUTION
Upon the completion of the Offering, investors in the Offering will
experience immediate dilution in the per share net tangible book value of
their Class A Common Stock of $10.27 from an assumed initial public offering
price of $15 per share. See "Dilution."
ABSENCE OF PUBLIC MARKET AND VOLATILITY
Prior to the Offering, there has been no public market for the Class A
Common Stock. Although the Class A Common Stock has been approved for
quotation on the Nasdaq National Market, there is no assurance that any
trading market for the shares will develop, or, if any such market develops,
that it will be sustained. Accordingly, purchasers of the Class A Common
Stock may experience difficulty selling or otherwise disposing of their
shares. The initial public offering price of the Class A Common Stock offered
hereby will be determined through negotiations among the Company and the
Underwriters and may not be indicative of the market price for the Class A
Common Stock after the Offering. Moreover, the market price for the Class A
Common Stock after the Offering may be volatile and will be affected by,
among other things, the Company's performance, industry related factors and
general market conditions. See "Underwriting" for information relating to the
method of determining the initial public offering price of the Class A Common
Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have outstanding a
total of 2,040,000 shares of Class A Common Stock, 2,760,000 shares of Class
B Common Stock and approximately 384,000 shares of Class A Common Stock
subject to stock options granted under the Company's 1996 Stock Option Plan.
See "Management--Executive Compensation." Of such shares, the 1,800,000
shares of Class A Common Stock being sold in the Offering (together with any
shares sold upon exercise of the Underwriters' over-allotment options) and
shares issued upon exercise of stock options will be immediately eligible for
sale in the public market without restriction, except for shares purchased by
or
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issued to any "affiliate" of the Company (within the meaning of the
Securities Act of 1933, as amended (the "Securities Act")). All of the
outstanding shares of Class B Common Stock (which may be converted into Class
A Common Stock at any time) will be beneficially owned by Nicklaus Family
Members. All of the currently outstanding shares of Common Stock will be
"restricted securities" as such term is defined under Rule 144 under the
Securities Act ("Rule 144") in that such shares were issued in private
transactions not involving a public offering. See "Shares Eligible for Future
Sale." Certain Nicklaus Family Members and management have been granted
registration rights with respect to their shares of Common Stock. However,
all Nicklaus Family Members and management who are currently shareholders of
the Company have agreed not to exercise such rights or sell or otherwise
dispose of any shares of Class A Common Stock without the consent of Merrill
Lynch, Pierce, Fenner & Smith Incorporated for a period of 180 days after the
date of this Prospectus. The transfer of shares of Class B Common Stock held
by Nicklaus Family members (other than Mr. Nicklaus) and Class A Common Stock
held by Messrs. Bellinger, Hesemann, Hislop and Bates at the time of the
Offering, are also subject to restrictions contained in certain shareholder
agreements. See "Certain Relationships and Related
Transactions--Shareholders' Agreement."
No information is currently available and no prediction can be made as to
the timing or amount of future sales of such shares or the effect, if any,
that future sales of shares, or the availability of shares for future sale,
will have on the market price of the Class A Common Stock prevailing from
time to time. Sales of substantial amounts of Class A Common Stock (including
shares issuable upon conversion of Class B Common Stock and upon the exercise
of stock options), or the perception that such sales could occur, could
materially adversely affect prevailing market prices for the Class A Common
Stock and the ability of the Company to raise equity capital in the future.
See "Shares Eligible for Future Sale," "Certain Relationships and Related
Transactions--Registration Rights" and "--Shareholders' Agreements."
POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER PROVISIONS; PREFERRED STOCK
Certain provisions of the Company's Articles and Bylaws, such as the
Company's staggered board, the advance notice requirements for the nomination
of directors and limits on the ability of the shareholders to call a special
meeting, have anti-takeover effects and may delay, defer or prevent a
takeover of the Company. In addition, Florida has enacted legislation that
may deter or frustrate takeovers of Florida corporations. The Florida Control
Share Act generally provides that shares acquired in a "control share
acquisition" will not possess any voting rights unless such voting rights are
approved by a majority of the corporation's disinterested shareholders or
approved by resolution of the Board of Directors. A "control share
acquisition" is an acquisition, directly or indirectly, by any person or
ownership of, or the power to direct the exercise of voting power with
respect to, issued and outstanding, "control shares" of a publicly-held
Florida corporation. "Control shares" are shares, which, except for the
Florida Control Share Act, would have voting power that, when added to all
other shares owned by a person or in respect of which such person may
exercise or direct the exercise of voting power, would entitle such person,
immediately after acquisition of such shares, directly or indirectly, alone
or as a part of a group, to exercise or direct the exercise of voting power
in the election of directors within any of the following ranges: (a) at least
20% but less than 33 1/3 % of all voting power; (b) at least 33 1/3 % but
less than a majority of all voting power; or (c) a majority or more of all
voting power. See "Description of Capital Stock."
The Company's Articles authorize the issuance of 20 million shares of
"blank check" preferred stock with such designation, rights and preferences
as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without shareholder
approval, to issue preferred stock with dividend, liquidation, conversion,
voting or other rights that could materially adversely affect the voting
power or other rights of the holders of the Company's Common Stock. In the
event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying, or preventing a change
in control of the Company. Although the Company has no present intention to
issue any shares of its preferred stock, there can be no assurance that the
Company will not do so in the future. The application of any such provisions
or the issuance of preferred stock could prevent shareholders from realizing
a premium upon the sale of their shares of Class A Common Stock. See
"Description of Capital Stock."
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THE COMPANY
The Company is a diversified, international brand name golf products and
services company engaged in the development, marketing and management of
golf-related businesses, including the licensing, ownership and operation of
golf practice and instruction facilities, the construction and renovation of
golf courses, the marketing of third party golf course design services and
the licensing, distribution and sale of golf-related consumer products.
Through its two divisions, the Golf Division and the Marketing Division, the
Company offers high quality products and services in over 40 countries
primarily under the NICKLAUS, JACK NICKLAUS and GOLDEN BEAR brand names. The
Company was incorporated in 1996, its principal executive offices are located
at 11780 U.S. Highway One, North Palm Beach, Florida 33408 and its telephone
number is (407) 626-3900.
THE REORGANIZATION
The Company was organized in connection with the Offering. Prior to the
Offering, the Company's business was conducted through GBI, Club Services and
the Operating Subsidiaries. GBI has agreed, concurrent with the consummation
of the Offering, to contribute to the Company its businesses and operations
relating to its: (i) trademark licensing and marketing activities; (ii)
development and operation of golf practice and instruction facilities; (iii)
club management and consulting activities; and (iv) development and operation
of golf instruction programs, in exchange for shares of the Company's Class B
Common Stock and the assumption by the Company of the liabilities related to
such businesses and operations. Concurrent with the consummation of the
Offering, the shareholders of the Operating Subsidiaries will contribute
their shares in the Operating Subsidiaries to the Company in exchange for
shares of the Company's Class A Common Stock and Class B Common Stock, the
Operating Subsidiaries will become wholly-owned subsidiaries of the Company
and the Company will acquire all of the capital stock of Club Services from
the shareholders of Club Services for nominal consideration of ten dollars.
The foregoing transactions will be made pursuant to the terms of an Agreement
and Plan of Reorganization (the "Reorganization Agreement") among GBI, the
Company and the shareholders of the Operating Subsidiaries. Such contribution
and exchange are referred to as the "Reorganization." The Reorganization will
be accounted for on a historical cost basis. Upon the effectiveness of the
Registration Statement (of which this Prospectus is a part) the assets and
stock to be contributed to the Company in connection with the Reorganization
will be placed into escrow pending the consummation of the Offering.
GBI and Mr. Nicklaus will also grant to the Company the exclusive right to
utilize and license various trademarks and other intellectual properties
which were used by the contributed business operations and additional rights
which were formerly licensed by GBI and Mr. Nicklaus to the Operating
Subsidiaries in connection with their respective business activities. See
"Certain Relationships and Related Transactions--Reorganization--Trademark
License." Prior to the Reorganization (i) Nicklaus Family Members owned all
of the issued and outstanding capital stock of GBI and Paragon; (ii) Richard
P. Bellinger and John G. Hines owned all of the issued and outstanding
capital stock of Club Services; and (iii) Mr. Bellinger, Mark F. Hesemann,
Thomas P. Hislop, Jack P. Bates, Mr. Nicklaus and certain other Nicklaus
Family Members, owned all of the issued and outstanding capital stock of Golf
Centers. In connection with the above transactions, Nicklaus Family Members
will receive an aggregate of 2,760,000 shares of the Company's Class B Common
Stock.
The Common Stock that the Company agreed to issue in the Reorganization
and the value of the businesses and operations and capital stock interests
exchanged or contributed to the Company was determined by Nicklaus Family
Members and management of GBI without any independent third party valuation.
The value assigned to such businesses and operations and capital stock
interests may not represent and should not be deemed to be indicative of
their respective fair market values.
RECENT ACQUISITIONS
The Company has entered into the following agreements and letters of
intent pursuant to which it recently acquired two golf practice and
instruction facilities, one by purchase and the other pursuant to
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a long-term lease and proposes to acquire, subject to the satisfaction of
certain conditions, five other existing golf practice and instruction
facilities (one of which it currently manages) and two facilities currently
under development (together, the "Acquisitions"). Consummation of the
Offering is not conditioned upon consummation of any of the Acquisitions.
MCDAIN GOLF CENTER
On April 15, 1996, the Company entered into a long-term lease agreement
with McDain Golf Center of Monroeville, a Pennsylvania limited partnership,
for the lease of an existing golf practice and instruction facility in the
greater Pittsburgh area and has begun operating the facility as a GOLDEN BEAR
GOLF CENTER. The lease is for a term of twenty-nine years and calls for
annual payments of $325,000 with annual cost of living increases commencing
after the fifth year. The Company has been granted an option to purchase the
leased premises for $2,000,000 in 2001. The Company has not yet determined
whether it will acquire the leased premises pursuant to the option.
TOMS RIVER GOLF CENTER
On April 26, 1996, the Company entered into an agreement, subject to
certain conditions, with First Sports Capital Development Associates, Ltd.
("FSCDA") to lease certain real property and to purchase certain assets
utilized in connection with an existing golf practice and instruction
facility located in Toms River, New Jersey. The lease is for a term of 20
years and may be extended for two five-year terms. The purchase price for the
assets is $1.9 million dollars, of which $500,000 will be paid at closing
with the remainder of the purchase price to be evidenced by a promissory note
for a term of three years at an interest rate equal to the prime rate of
interest, plus one and one half percent (1 1/2 %).
The Company also entered into an interim management agreement with FSCDA
to manage the facility pending closing of the above-described transaction. In
the event this transaction is not consummated, the Company has agreed to
enter into a GOLDEN BEAR GOLF CENTER franchise agreement with FSCDA with
respect to the facility. The consummation of this transaction is subject to a
number of conditions, including the satisfactory completion of due diligence
by the Company. There is no assurance that this transaction will be
consummated.
COOL SPRINGS GOLF CENTER
On June 17, 1996, the Company purchased an existing golf practice and
instruction facility on 40.833 acres of land in Pittsburgh, Pennsylvania
pursuant to purchase and sale agreements with Cool Springs, Inc. and William
T. Duckworth. The purchase price for the land and assets was $2.9 million.
EAST COAST FACILITIES
On June 11, 1996, the Company entered into letters of intent with each of
East Coast Golf Centers of Columbus, Ltd., East Coast Golf Centers of Fort
Lauderdale, Inc. and East Coast Golf Centers, Inc. ("East Coast"), providing
for the proposed purchase and/or assumption of lease of an existing GOLDEN
BEAR GOLF CENTER located in Columbus, Ohio and two GOLDEN BEAR GOLF CENTERS
currently under development in Fort Lauderdale, Florida and Charlotte, North
Carolina (collectively, the "East Coast Facilities"). The facility in Fort
Lauderdale, Florida is expected to open in August, 1996. Construction of the
facility in Charlotte, North Carolina has not yet commenced and opening of
the facility is not expected until late in the second quarter of 1997. The
purchase price for the East Coast Facilities is anticipated to be
approximately $5.8 million, of which $5.2 million will be paid in cash at the
closing and the remainder will be payable in either cash or restricted shares
of the Company's Class A Common Stock valued at the initial public offering
price set forth on the cover page hereof. It is anticipated that the Company
will acquire each of these facilities by assumption of the existing leases
for the real property and purchase of the assets relating to or utilized in
the operation or development of the facilities. The Company has also agreed
to grant to East Coast certain registration rights if restricted shares of
Class A Common Stock are issued in connection with the transaction. Pursuant
to such rights,
15
<PAGE>
during the two year period following consummation of the acquisition of the
East Coast Facilities, the Company will, subject to various restrictions and
limitations, (i) at any time after the date which is one year following
consummation of the Offering, if and when requested by East Coast, file with
the Securities and Exchange Commission (the "SEC") a registration statement
for the proposed sale from time to time by East Coast of all or any portion
of such shares of Class A Common Stock and (ii) provide East Coast with the
opportunity to participate in certain registration statements filed with the
SEC by the Company for the offering of Class A Common Stock. The rights and
obligations of each of the above parties in the above-described transactions
will be defined in and subject to the execution of definitive purchase and
sale agreements. Consummation of each of these transactions is subject to a
number of conditions, including the satisfactory completion of due diligence
by the Company. There is no assurance that the above-described transactions
will be consummated.
The Company has also entered into a letter agreement with East Coast
outlining the terms of a proposed joint venture agreement among the Company
and East Coast pursuant to which the joint venture shall enter into an
exclusive five year agreement to develop and operate GOLDEN BEAR GOLF CENTERS
in certain territories in North Carolina and South Carolina and a
non-exclusive development agreement for territories in Florida (excluding
Palm Beach County), Ohio and Long Island, New York. The rights and
obligations of the parties in the joint venture will be defined in and
subject to the execution of a binding definitive agreement. There is no
assurance that a definitive joint venture agreement will be executed or, if
executed, that any GOLDEN BEAR GOLF CENTER will ever be developed or operated
by the joint venture.
HIGHLANDER FACILITIES
On July 16, 1996 the Company entered into letters of intent with
Highlander Golf Corp. Ltd. ("Highlander") to acquire the GOLDEN BEAR GOLF
CENTER located in Carrollton, Texas and to lease the GOLDEN BEAR GOLF CENTER
located in Moreno Valley, California. It is anticipated that the purchase
price for the Texas facility will be $2.25 million, of which $1.5 million
will be paid at closing, with the remainder of the purchase price to be
evidenced by a promissory note. The note will require payments of interest
only for five years at a rate of 8% per annum, with the entire principal
amount due in five years. The Company will enter into a ground lease for the
underlying real property of the Texas facility with an entity affiliated with
Highlander. The ground lease will be for a term of 15 years, and will be
renewable for two additional 5-year terms. The annual rent under the ground
lease will equal 8% of the gross sales attributable to the facility for years
one through five and 10% of gross sales for years six through fifteen. The
minimum rent under the ground lease will be $122,500 per year, increasing 3%
per year. The Company will have a right of first refusal with respect to
proposed sales of the leased premises throughout the term of the lease.
The lease of the facility located in California provides for a ground
lease of the real property and an operating lease of the facility. Both the
ground lease and the operating lease will be for a period of ten years,
renewable for two additional five year terms. The annual rent due under the
ground lease will be equal to 10% of the gross revenues attributable to the
facility with a minimum rent of $65,000 per year. The annual rent due under
the operating lease will be $50,000. The annual rent under the operating
lease and the minimum rent under the ground lease will increase 3% annually,
effective every fifth lease year. The rights and obligations of the parties
in this transaction will be defined in and subject to the execution of
definitive agreements. Consummation of the acquisitions of these facilities
will be subject to the satisfaction of a number of conditions, including the
satisfactory completion of due diligence by the Company. There is no
assurance that either of these transactions will be consummated.
The Company has also entered into a letter agreement with Highlander
outlining the terms of a proposed joint venture agreement between the Company
and Highlander pursuant to which the joint venture will enter into an
exclusive five year agreement to develop and operate GOLDEN BEAR GOLF CENTERS
in certain territories in Dallas/Ft. Worth, Texas, Orange and San Diego
Counties, California and Chicago, Illinois and a non-exclusive development
agreement for certain territories in Nevada and northern California. The
rights and obligations of the parties in the joint venture will be defined in
and
16
<PAGE>
subject to the execution of a binding definitive agreement. There is no
assurance that the definitive joint venture agreement will ever be executed
or, if executed, that any GOLDEN BEAR GOLF CENTER will ever be developed or
operated by the joint venture.
ROLLANDIA GOLF PARK PLUS
On July 17, 1996, the Company entered into a letter agreement with Sugar
Creek Golf Course, Inc. ("Sugar Creek") outlining the terms of a proposed
long-term lease of an existing golf practice and instruction facility in the
Dayton, Ohio area. The proposed terms of the lease provide for a term of
twenty years, with an initial up-front payment of $1.1 million and annual
rental payments of $325,000 in year one, $350,000 in year two, $375,000 in
years three through thirteen, $300,000 in year fourteen and $200,000 in years
fifteen through twenty. The Company will also commit to invest at least
$750,000 in improvements to the property within the first two years of the
term of the lease. The Company will retain Sugar Creek as a consultant for a
period of one year for a fee of $60,000. The Company will be granted a right
of first refusal with respect to proposed sales of the leased premises
throughout the term of the lease. The rights and obligations of the parties
in this transaction will be defined in and subject to the execution of a
definitive lease agreement. Consummation of the lease transaction will be
subject to the satisfaction of a number of conditions, including the
satisfactory completion of due diligence by the Company and there can be no
assurance that this transaction will be consummated.
OTHER POTENTIAL ACQUISITIONS
The Company's plan is to acquire or develop a total of ten golf practice
and instruction facilities during 1996 and an additional twelve facilities by
the end of 1997. To this end, in addition to the acquisitions described
above, the Company is currently having preliminary discussions with various
owners of one or more golf practice and instruction facilities throughout the
United States. As consideration for any future acquisition, the Company may,
among other things, pay cash, contribute assets, incur indebtedness or issue
debt or equity securities. Although the Company has not, except as described
herein, entered into any acquisition agreements or letters of intent with
respect to any such facilities, the Company's goal is to enter into such
agreements as soon as possible after the date hereof and to consummate the
transactions shortly thereafter. Such acquisitions could result in material
changes in the Company's financial condition and operating results. However,
there can be no assurance that any such acquisitions will occur, and if they
occur, as to the timing of the consummation of such acquisitions.
17
<PAGE>
USE OF PROCEEDS
The net proceeds to be received from the sale of the 1,800,000 shares of
Class A Common Stock by the Company in the Offering (after deducting
underwriting discounts and estimated offering expenses) are estimated to be
approximately $24.1 million, based on an assumed initial public offering
price of $15.00 per share (which is the midpoint of the estimated range of
the initial public offering price), and $27.9 million if the Underwriters'
over-allotment option is exercised in full with the Company. The Company
intends to use the net proceeds of the Offering for working capital and
general corporate purposes including the acquisition and development of golf
practice and instruction facilities, additional advertising and expansion of
the Company's product development efforts, both domestically and
internationally, and the repayment of approximately $1.65 million of
indebtedness to Mr. Nicklaus which was advanced to the Company by Mr.
Nicklaus as a bridge loan in connection with the Acquisitions. The
indebtedness to Mr. Nicklaus is payable on demand and bears interest at the
Federal Mid-Term annual interest rate in effect at the time the promissory
note evidencing the indebtedness was executed. While the Company is currently
having discussions with various parties regarding the acquisition of golf
instruction and practice facilities throughout the United States, other than
as described herein under the caption "Recent Acquisitions," the Company has
not entered into any agreements in principle relating to any acquisitions
material to the Company. Pending utilization of the funds, the proceeds will
be invested in short term United States government securities.
DIVIDEND POLICY
The Company currently intends to retain any earnings to finance the
development and expansion of the Company's business and does not anticipate
paying any cash dividends in the foreseeable future. The declaration and
payment of dividends by the Company are subject to the discretion of the
Board of Directors of the Company. The Class A Common Stock and the Class B
Common Stock will share pro rata in dividends and other distributions. Any
future determination to pay dividends will depend on the Company's results of
operations, financial condition, capital requirements, contractual
restrictions and other factors deemed relevant at the time by the Board of
Directors.
18
<PAGE>
DILUTION
The net tangible book value of the Common Stock, assuming the consummation
of the Reorganization, as of March 31, 1996 was $1.8 million, or $0.59 per
share of Common Stock. Net tangible book value per share represents the total
tangible assets of the Company, reduced by the amount of its total
liabilities and divided by the number of shares of Common Stock outstanding
(3,000,000 at March 31, 1996). After giving effect to the sale by the Company
of the 1,800,000 shares of Class A Common Stock offered in the Offering
(based on an assumed initial public offering price of $15.00 per share which
is the midpoint of the estimated range of the initial public offering price)
and after deducting the estimated underwriting discounts and offering
expenses, the as adjusted net tangible book value of the Company as of March
31, 1996 would have been $22.7 million, or $4.73 per share of Common Stock.
This represents an immediate increase in net tangible book value of $4.14 per
share to existing shareholders and an immediate dilution of $10.27 per share
to new investors purchasing Class A Common Stock at the assumed initial
public offering price. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
ASSUMED INITIAL PUBLIC OFFERING PRICE OF CLASS A COMMON STOCK(1) ..... $15.00
Net tangible book value per share of Common Stock before the Offering.. $0.59 ---------
Increase in net tangible book value per share of Common Stock
attributable to new investors ...................................... 4.14
--------
As adjusted net tangible book value per share of Common Stock
after the Acquisitions and the Offering ............................ 4.73
---------
Dilution in net tangible book value per share of Common Stock
to new investors(2) ................................................ $10.27
=========
</TABLE>
- -----------------------------------------------------------------------------
(1) Before deduction of estimated underwriting discounts and offering
expenses.
(2) Dilution is determined by subtracting pro forma net tangible book value
per share of Common Stock after the Offering from the initial public
offering price of the Class A Common Stock.
The following table summarizes on a pro forma basis as of March 31, 1996,
after giving effect to the sale by the Company of 1,800,000 shares of Class A
Common Stock in the Offering, the differences between existing shareholders
and new investors with respect to the number of shares of Common Stock
purchased from the Company and the total and average consideration paid per
share (without ascribing any discount to the shares purchased prior to the
Offering to reflect their relative illiquidity.)
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------ --------------------------
AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ---------- -------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1)(2) 3,000,000 62.5% $ 2,461,000 8.4% $ 0.82
------------ ---------- -------------- ---------- ----------------
New investors(3) ............ 1,800,000 37.5% $27,000,000 91.6% $15.00
------------ ---------- -------------- ---------- ----------------
Totals .................... 4,800,000 100.0% $29,461,000 100.0% $ 6.14
============ ========== ============== ========== ================
</TABLE>
- -----------------------------------------------------------------------------
(1) As of the date of this Prospectus (and assuming consummation of the
Reorganization), there are 2,040,000 shares of Class A Common Stock and
2,760,000 shares of Class B Common Stock outstanding. All of the
outstanding Class B Common Stock is held of record by Nicklaus Family
Members. Shares of Class B Common Stock are convertible at any time into
Class A Common Stock and convert automatically into Class A Common Stock
upon a transfer to anyone other than a Nicklaus Family Member.
(2) Does not reflect the possible exercise of options to purchase 384,000
shares of Class A Common Stock granted under the Company's 1996 Stock
Option Plan.
(3) Assumes an initial public offering price of $15.00 per share of Class A
Common Stock (the midpoint of the estimated range of the initial public
offering price) and that the Underwriters' over-allotment option is not
exercised. Sales by the Company pursuant to the exercise by the
Underwriters of the over-allotment option will cause the total number of
shares, percent of shares held by new investors, total consideration paid
by new investors, percent of total consideration paid by new investors
and average price per share for all investors to increase to 5,070,000,
40.8%, $31,050,000, 92.7% and $6.98, respectively.
19
<PAGE>
CAPITALIZATION
The following table sets forth, as of March 31, 1996, (i) the
capitalization of the Company as if the Reorganization had occurred on such
date and certain shares of capital stock had been sold to management and
certain Nicklaus Family Members, (ii) the pro forma capitalization of the
Company as adjusted to reflect the Acquisitions and (iii) the as adjusted
capitalization of the Company as adjusted to reflect the sale of Class A
Common Stock offered in the Offering (at an assumed initial public offering
price of $15.00 per share, which represents the midpoint of the estimated
range of the initial public offering price). The following table should be
read in conjunction with the combined financial statements of the Company and
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------------------------
PRO FORMA FOR
REORGANIZATION
AND SALE OF PRO FORMA FOR AS
STOCK(1) ACQUISITIONS ADJUSTED
--------------- ---------------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Short-term debt:
Current portion of notes payable ............................. $ 674 $ 2,324 $ 674
=============== ================ ===========
Long-term debt ................................................ $ 25 $13,010 $13,010
--------------- ---------------- -----------
Shareholders' equity(2):
Preferred Stock, $.01 par value, 20,000,000 shares
authorized, no shares issued and outstanding ............... -- -- --
Class A Common Stock, $.01 par value, 70,000,000 shares
authorized, 240,000 shares issued and outstanding,
pro forma for the Reorganization and for the sale of
stock to certain executives and certain Nicklaus Family
Members; 2,040,000 shares issued and outstanding,
as adjusted ................................................ 2 2 20
Class B Common Stock, $.01 par value, 10,000,000 shares
authorized, 2,760,000 shares issued and outstanding,
pro forma for the Reorganization and for Acquisitions;
2,760,000 shares issued and outstanding, as adjusted ....... 28 28 28
Additional paid-in-capital ................................... 3,790 3,790 27,932
Retained earnings (accumulated deficit) ...................... (2,040) (2,040) (2,040)
--------------- ---------------- -----------
Total shareholders' equity .................................. 1,780 1,780 25,940
--------------- ---------------- -----------
Total capitalization ....................................... $ 2,479 $17,114 $39,624
=============== ================ ===========
<FN>
- --------
(1) Adjusted to reflect the sale of capital stock of Golf Centers to certain
executives and certain Nicklaus Family Members for $600,000 and $900,000,
respectively and a $1.5 million charge for compensation to be recorded in
June 1996 related to deemed compensation received by certain executives
in connection with their purchase of shares in Golf Centers.
(2) Does not include the reservation of up to 384,000 shares of Class A
Common Stock that may be issued upon the exercise of options granted
under the Company's 1996 Stock Option Plan. See "Management--Compensation
of Executive Officers."
</FN>
</TABLE>
20
<PAGE>
SELECTED HISTORICAL COMBINED FINANCIAL DATA
Set forth below are the selected combined financial data of the Company
for each of the years in the five year period ended December 31, 1995 and for
the three month periods ended March 31, 1996 and 1995. The combined financial
data include the financial statements of the Predecessor Companies. The
statement of operations and balance sheet data as of and for the three months
ended March 31, 1995 and 1996 and the years ended December 31, 1991 and 1992
have been derived from the unaudited books and records of the Predecessor
Companies. The statement of operations data and balance sheet data as of and
for the years ended December 31, 1993, 1994 and 1995 have been derived from
the Combined Financial Statements of the Predecessor Companies which have
been audited by Arthur Andersen LLP as indicated in their reports included
elsewhere in this Prospectus. The selected financial data for the three
months ended March 31, 1995 and 1996 include, in the opinion of management,
all adjustments (consisting only of normal recurring adjustments) necessary
to prevent fairly the financial position and results of operations of the
Predecessor Companies for such periods. The results of operations for the
three months ended March 31, 1996 are not necessarily indicative of results
for a full fiscal year. The data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" as well as the Combined Financial Statements of the Predecessor
Companies and the related Notes thereto, included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS
ENDED
FOR THE YEARS ENDED DECEMBER 31, MARCH 31,
-----------------------------------------------------------
--------------------
1991 1992 1993 1994 1995 1995
1996
--------- ----------- ----------- ---------- ---------- ---------
---------
STATEMENT OF OPERATIONS DATA: (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Golf division .................................. $ 4,500 $ 2,764 $ 3,699 $ 7,504 $21,475 $1,799
$2,590
Marketing division ............................. 7,197 7,232 8,069 9,121 10,070 2,453
2,382
--------- ----------- ----------- ---------- ---------- ---------
---------
Total revenues ................................ 11,697 9,996 11,768 16,625 31,545 4,252
4,972
Operating costs and expenses:
Construction and shaping costs ................. -- -- 1,894 4,737 16,500 1,423
2,000
Operating expenses ............................. 6,111 6,047 6,502 7,756 8,422 1,615
1,699
Corporate overhead ............................. 3,915 3,315 2,994 3,051 3,121 714
751
Depreciation and amortization .................. 244 265 243 199 233 53
72
--------- ----------- ----------- ---------- ---------- ---------
---------
Total costs and expenses ...................... 10,270 9,627 11,633 15,743 28,276 3,805
4,522
----------- ----------- ---------- ---------- ---------
---------
Operating income ................................ 1,427 369 135 882 3,269 447
450
Other income (expense) .......................... 84 27 2 (10) (1) (4)
4
--------- ----------- ----------- ---------- ---------- ---------
---------
Income before income taxes and minority interest 1,511 396 137 872 3,268 443
454
Foreign tax provision ........................... 447 568 616 699 1,010 178
96
Minority interest(a) ............................ 951 921 925 1,038 1,024 203
325
--------- ----------- ----------- ---------- ---------- ---------
---------
Income (loss) before pro forma income taxes .... $ 113 $(1,093) $(1,404) $ (865) $ 1,234 $ 62 $
33
========= =========== =========== ========== ========== =========
=========
As Adjusted to Reflect C-Corp Status(b):
Pro forma income tax (benefit) ................. -- -- (923) (764) (135) (84)
(46)
--------- ----------- ----------- ---------- ---------- ---------
---------
Pro forma net income (loss) .................... $ 113 $(1,093) $ (481) $ (101) $ 1,369 $ 146 $
79
========= =========== =========== ========== ========== =========
=========
Pro forma net income (loss) per share
of common stock ............................... $ 0.04 $ (0.36) $ (0.16) $ (0.03) $ 0.46 $ 0.05 $
0.03
=========== =========== ========== ========== =========
=========
Weighted average number of common stock
and common stock equivalents outstanding ..... 3,000 3,000 3,000 3,000 3,000 3,000
3,000
=========== =========== ========== ========== =========
=========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------------------------------------- --------------------------------------
1991 1992 1993 1994 1995 1995 1996
--------- -------- -------- --------- -------- ----------- -------------------------
AS
ACTUAL ADJUSTED(C)
--------- --------------
BALANCE SHEET DATA (AT PERIOD
END) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Working capital (deficit) ..... $1,549 $ 709 $ 609 $ (139) $ 535 $(1,289) $ (664) $21,596
Total assets ................... 2,866 2,599 3,676 4,841 8,906 4,016 7,888 48,183
Long-term debt ................. -- -- -- 113 44 96 25 13,010
Shareholders' equity ........... 1,893 1,439 1,110 256 1,030 (652) 280 25,940
</TABLE>
- -----------------------------------------------------------------------------
(a) Reflects minority interest of the Company's partner in Jack Nicklaus Apparel
International, the partnership operating the apparel licensing activities of the
Company outside the United States and Europe.
(b) See Note 1 to theCompany'sCombined Financial Statements.
(c) Adjusted to reflect the Acquisitions, thesale of Class A Common Stock
offered in the Offering (at an assumed initial public offering price of $15.00
per share, which represents the midpoint of the estimated range of the initial
public offering price) and a $1.5 million charge for compensation to be recorded
in June 1996 related to deemed compensation
21
<PAGE>
received by certain executives in connection with their purchase of
shares in Golf Centers.
21
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company for the three month periods ended March 31, 1996
and 1995, and the years ended December 31, 1995, 1994 and 1993. This
discussion and analysis should be read in conjunction with the Selected
Historical Combined Financial Data and the audited combined financial
statements of the Company and the related notes thereto which are included
elsewhere in this Prospectus.
OVERVIEW
The Company operates its business through two principal groups: the Golf
Division and the Marketing Division. The Golf Division owns, operates and
licenses the Company's golf practice and instruction facilities under JACK
NICKLAUS GOLF CENTER, JACK NICKLAUS ACADEMY OF GOLF and GOLDEN BEAR GOLF CENTER
brand names, provides technical construction services in connection with the
construction and renovation of golf courses, is involved in the marketing of
golf course design services on behalf of designers, primarily Nicklaus Design,
and provides golf course management and consulting services throughout the
world. The Marketing Division is involved primarily in the licensing of
NICKLAUS, JACK NICKLAUS AND GOLDEN BEAR branded products throughout the world,
the operation of the NICKLAUS/FLICK GOLF SCHOOLS and marketing fees related to
Jack Nicklaus' personal endorsements (which are reflected in the Company's
statement of operations under the heading related party commissions).
The Company has achieved significant growth in revenues, operating income and
net income over the period from January 1, 1993 to December 31, 1995. The
Company's revenues increased to $31.5 million in 1995 from $11.8 million in 1993
while operating income increased to $3.3 million in 1995 from $0.1 million in
1993. Net income (after giving pro forma effect to income taxes) increased to a
profit of $1.4 million in 1995 from a net loss of $0.5 million in 1993.
Management believes that the Company's financial performance has benefitted from
an increase in golf course construction and renovation projects worldwide, the
increase in the number of golf practice and instruction facilities licensed by
the Company, the increase in the licensed product offerings under NICKLAUS, JACK
NICKLAUS AND GOLDEN BEAR brand names and growth in international demand for the
Company's products and services. The improvement in the Company's operating
margins to 10.4% in 1995 from 1.2% in 1993 resulted primarily as a consequence
of the improved profitability of the Company's golf course construction
activities, increased marketing fees relating to the sale of Nicklaus Design
services (which are reflected in the Company's statement of operations under the
heading related party management fees), increased licensing revenues from golf
practice and instruction facilities and a reduction in corporate overhead as a
percentage of revenues.
Consistent with the Company's strategy to increase its ownership and operation
of golf practice and instruction facilities, the Company recently entered into
purchase, lease and management agreements pursuant to which it commenced
operation of three existing golf practice and instruction facilities and has
entered into letter agreements or letters of intent with respect to the
acquisition or lease of four additional existing golf practice and instruction
facilities and two facilities under development. The Company currently operates
one of the facilities pursuant to a long-term lease and another facility
pursuant to a management contract pending consummation of the acquisition of
that facility. See "The Company--Recent Acquisitions." The Company is seeking to
acquire or develop a total of ten facilities during 1996 and an additional
twelve facilities by the end of 1997. While there is no assurance that any such
additional facilities will be acquired, the Company believes the Golf Division's
revenues will continue to increase relative to Marketing Division revenues. In
addition, the Company believes that as its currently operated and future
acquired golf practice and instruction facilities are converted to the GOLDEN
BEAR brand name, revenues and operating income from such facilities may increase
based on improved marketing and increased customer awareness, expanded
facilities and amenities offered such as pro shops, batting cages and miniature
golf courses and revenues associated with golf lessons. such increases may,
however, be partially offset by initial losses from pre-opening costs and
potential initial operating losses associated with new golf practice and
instruction facilities.
22
<PAGE>
Historically, the Company's revenues attributable to golf practice and
instruction facilities have been derived from license agreements with third
parties who operate such facilities under the JACK NICKLAUS GOLF CENTER, JACK
NICKLAUS ACADEMY OF GOLF AND GOLDEN BEAR GOLF CENTER brand names. While the
Company plans to continue to support its domestic and international licensees,
the Company's current domestic strategy of owning and operating golf practice
and instruction facilities directly is expected to result in less emphasis on
the licensing of domestic golf practice and instruction facilities in the
future. In implementing the Company's growth strategy, the Company may purchase
or lease land, purchase, lease or construct facilities or enter into joint
ventures for the operation of golf practice and instruction facilities.
The Company's golf course construction, shaping and consulting services
revenues increased to $19.2 million in 1995 from $2.2 million in 1993. This
increase was primarily attributable to the increased number of, and amount of
work performed under, construction and renovation projects, the increased
demand for golf course development and construction throughout Southeast Asia
and increased construction and renovation projects in the United States. The
Company believes that domestic and international demand for new and renovated
golf courses will provide continuing growth opportunities. In addition, the
Company believes that its position as the exclusive marketing agent for
Nicklaus Design and its familiarity with Nicklaus Design golf course projects
will provide it with a competitive advantage in obtaining new construction
contracts relating to Nicklaus Design assignments as well as assist the
Company in marketing its construction services to non-Nicklaus designed
courses.
The Company has realized consistent growth in revenues over the past three
years from licensed products utilizing the NICKLAUS, JACK NICKLAUS AND GOLDEN
BEAR BRAND NAMES, including apparel and accessories, with revenues increasing
from $4.6 million in 1993 to $5.1 million in 1995. The apparel licensing
activities of the company outside the United States and Europe are conducted
through its subsidiary, Jack Nicklaus Apparel International ("JNAI"), a
general partnership between the Company and an affiliate of Hartmarx
Corporation. The operations and balance sheet of JNAI are consolidated with
the Company and the Company's operating results are reduced to reflect the
minority interest of its partner. Under licensing agreements, JNAI receives
royalties based on a percentage of net sales of licensed products. JNAI'S
license income increased to $3.8 million in 1995 from $3.5 million in 1993.
As part of its strategy, the Company expects to continue to broaden its base
of branded product offerings under the NICKLAUS, JACK NICKLAUS and GOLDEN
BEAR brand names.
While there is no assurance that the Company will achieve continued
growth, the Company believes that growth will continue as it pursues its
business plan to acquire additional golf practice and instruction facilities
and to expand its construction and licensing operations. The Company expects
that 1996 will be a transition year as it focuses its efforts on acquiring
golf practice and instruction facilities, invests in additional management
information systems and personnel to support its growth strategy and a new
licensee commences its activities with respect to certain of the Company's
branded products. While revenues in 1996 are expected to increase as a
consequence of the contemplated acquisitions of golf practice and instruction
facilities, the costs associated with the foregoing items and the costs
associated with such acquisitions and the integration of the operations of
the acquired facilities into the Company, are expected to result in decreased
earnings for 1996 as compared to 1995. Based on preliminary information
available to the Company, revenues for the first six months of 1996 are
expected to increase by approximately 11% to approximately $14 million from
$12.6 million in the comparable period of 1995. Based on such preliminary
information, however, the Company expects to report a decline in operating
income of between 30% and 35% for the first six months of 1996 as compared to
operating income of $1.8 million in the comparable period of 1995. Second
quarter results will also be reduced by a one-time expense of approximately
$1.5 million associated with deemed compensation received by executives of
the Company in connection with shares purchased by them in Golf Centers prior
to the execution of the Reorganization Agreement.
23
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the operating results (as a percentage of
net revenues) for the periods indicated by each item reflected in the
Company's combined statement of operations. Pro forma income tax benefit
reflects adjustments to historical operating results for federal and state
income taxes as if the Predecessor Companies had been taxed as C corporations
rather than S corporations.
<TABLE>
<CAPTION>
FOR THE
FOR THE YEARS ENDED DECEMBER THREE MONTHS ENDED
31, MARCH 31,
------------------------------ ------------------
1993 1994 1995 1995 1996
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Golf division ........................... 31.4% 45.1% 68.1% 42.3% 52.1%
Marketing division ...................... 68.6 54.9 31.9 57.7 47.9
--------- --------- -------- -------- --------
Total revenues ......................... 100.0 100.0 100.0 100.0 100.0
Operating costs and expenses:
Construction and shaping costs .......... 16.1 28.5 52.3 33.5 40.2
Operating expenses ...................... 55.2 46.6 26.7 38.0 34.2
Corporate overhead ...................... 25.4 18.4 9.9 16.8 15.1
Depreciation and amortization ........... 2.1 1.2 0.7 1.2 1.5
--------- --------- -------- -------- --------
Total costs and expenses ............... 98.8 94.7 89.6 89.5 91.0
Operating income ......................... 1.2 5.3 10.4 10.5 9.0
Other income (expense) ................... 0.0 (0.1) 0.0 (0.1) 0.1
--------- --------- -------- -------- --------
Income before income taxes and
minority interest ...................... 1.2 5.2 10.4 10.4 9.1
Foreign tax provision .................... 5.2 4.2 3.2 4.2 1.9
Minority interest expense ................ 7.9 6.2 3.3 4.8 6.5
--------- --------- -------- -------- --------
Income (loss) before pro forma income
taxes .................................. (11.9) (5.2) 3.9 1.4 0.7
========= ========= ======== ======== ========
Pro forma income tax benefit ............. (7.8) (4.6) (0.4) (2.0) (0.9)
Pro forma net income (loss) .............. (4.1)% (0.6)% 4.3% 3.4% 1.6%
========= ========= ======== ======== ========
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1995
Total revenues increased 16.9% to approximately $5.0 million in the three
months ended March 31, 1996 from $4.3 million in the comparable period of
1995, an increase of approximately $0.7 million. The increase in total
revenues was principally the result of an increase of Golf Division revenues
to $2.6 million from $1.8 million. This increase was primarily attributable
to increased revenue in golf course construction activities to $2.1 million
in the three months ended March 31, 1996 compared to $1.4 million in the
comparable period of 1995. Golf Division revenues also improved due to
increased revenues from golf centers and academy fees and royalties to $0.2
million in the three months ended March 31, 1996 from $0.1 million in the
comparable period of 1995, attributable primarily to an increase in the
number of licensed facilities to sixteen during the quarter ended March 31,
1996 from eleven during the quarter ended March 31, 1995. The Company's
Marketing Division revenues remained relatively constant at approximately
$2.4 million in 1996 and $2.5 million in 1995. Within the Marketing Division,
licensing and other revenues increased by approximately $160,000 which was
offset by a decrease in golf instruction revenues of approximately $180,000.
Operating income (after corporate overhead) remained relatively constant
at approximately $0.4 million for the three months ended March 31, 1996 and
March 31, 1995. Operating income (after corporate overhead) as a percentage
of total revenues decreased to 9.0% in the three months ended March 31, 1996
from 10.5% in the comparable period of 1995, primarily as a result of lower
operating
24
<PAGE>
margins (before corporate overhead) in the Marketing Division of 45.1%
compared to 48.7%, respectively. The decline in the Marketing Division's
operating margin (before corporate overhead) was primarily the result of
decreased revenue from NICKLAUS/FLICK GOLF SCHOOLS. the decline in the
marketing division's operating margin (before corporate overhead) was
partially offset by the improved operating margin (before corporate overhead)
in the Golf Division of 7.6% in the three months ended March 31, 1996
compared to 1.1% in the comparable period of 1995. The improved operating
margin (before corporate overhead) in the Golf Division resulted primarily
from the improved profitability associated with the Company's marketing of
golf course design activities, increased construction and shaping revenues in
the first quarter of 1996 and increased revenues attributable to golf centers
and academy fees and royalties.
Corporate overhead, consisting primarily of corporate headquarters rent
and occupancy costs, as well as corporate management and employees, remained
relatively constant at approximately $0.8 million in the three months ended
March 31, 1996 compared to $0.7 million in the three months ended March 31,
1995. The Company was able to achieve improved operating efficiencies in
overhead during the first quarter of 1996 as the higher level of total
revenues were spread over relatively constant levels of corporate overhead
expense. The Company believes it has the senior management resources in place
to grow its business for the foreseeable future; however, the Company plans
to upgrade its management information systems and add additional accounting
and finance personnel in 1996 in order to support its growth strategy.
Management anticipates that corporate overhead will increase due to the
aforementioned systems upgrade and additions to personnel as well as the
increased costs associated with operating the Company as a separate public
company and the expansion of the Company's business.
The provision for foreign income taxes was $0.1 million in the three
months ended March 31, 1996 compared to $0.2 million for the comparable
period in 1995. The relatively constant foreign income tax provision resulted
from the relatively constant operating income from foreign operations of $0.8
million in the three months ended March 31, 1996 compared to $0.9 million in
the comparable period of 1995. As S corporations, the Predecessor Companies
have historically only paid foreign income taxes and have not paid United
States federal income taxes. Because the Company will be a C corporation, a
pro forma income tax benefit of $45,600 for the three months ended March 31,
1996 and $84,502 for the comparable period of 1995 has been included in the
Company's combined statements of operations for informational purposes as if
the domestic operations of the Predecessor Companies were C corporations
during the years presented. The Company expects to recognize tax credits for
foreign taxes paid against its United States income tax obligation. The pro
forma United States income taxes reflect an approximate effective rate of
39%.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
Total revenues increased 89.7% to $31.5 million in 1995 from $16.6 million
in 1994. The $14.9 million increase in total revenues was principally the
result of an increase of Golf Division revenues to $21.5 million from $7.5
million. This increase was primarily attributable to an increase in revenue
from golf course construction and shaping activities to $19.2 million in 1995
from $5.6 million in 1994. Golf Division revenues also improved due to an
increase in revenues from golf centers and academy fees and royalties to $1.0
million in 1995 from $0.7 million in 1994, attributable primarily to an
increase in the number of licensed facilities. In addition, the Company
experienced an increase in Marketing Division revenues to $10.1 million in
1995 from $9.1 million in 1994, principally due to increased sales of branded
consumer products and services and increased revenues generated by the
Company's NICKLAUS/FLICK GOLF SCHOOLS. In 1995, revenues from a single
unaffiliated Paragon customer represented approximately 16% of the Company's
total revenues.
Operating income (after corporate overhead) increased to $3.3 million in
1995 from $0.9 million in 1994. Operating income (after corporate overhead)
as a percentage of total revenues increased to 10.4% in 1995 from 5.3% in
1994, primarily as a result of an improved 1995 operating margin (before
corporate overhead) in the Golf Division of 9.7% as compared to (2.7)% in
1994 and the achievement of operating
25
<PAGE>
efficiencies in overhead in 1995 as the higher level of total revenues was
spread over a relatively stable level of corporate overhead. The improved
operating margin (before corporate overhead) in the Golf Division in 1995 was
primarily associated with the improved profitability of the Company's
construction activities. The Marketing Division's operating margin (before
corporate overhead) declined to 45.1% in 1995 from 47.5% in 1994, primarily
due to increased expenses of $0.2 million incurred in connection with the
establishment of the Jack Nicklaus International Club.
Corporate overhead, consisting primarily of corporate headquarters rent
and occupancy costs, as well as corporate management and employees, remained
constant at approximately $3.1 million in 1995 and 1994.
The provision for foreign income taxes was $1.0 million in 1995 compared
to $0.7 million in 1994. The increase in the foreign income tax provision
resulted from increased operating income from foreign operations to $4.7
million in 1995 from $3.7 million in 1994, attributable principally to
additional Far East golf course construction projects and increased foreign
licensing revenues. As S corporations, the Predecessor Companies have
historically paid only foreign income taxes and have not paid United States
federal income taxes. Because the Company will be a C corporation, a pro
forma income tax benefit of $0.1 million for 1995 and $0.8 million for 1994
has been included in the Company's combined statements of operations for
informational purposes as if the domestic operations of the Predecessor
Companies were C corporations during the years presented. The pro forma
United States income taxes reflect an approximate effective rate of 39%.
YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED DECEMBER 31, 1993
Total revenues increased 41.3% to $16.6 million in 1994 from $11.8 million
in 1993, an increase of $4.8 million. The increase in total revenues was
principally the result of an increase of Golf Division revenues to $7.5
million from $3.7 million. This increase was primarily attributable to
increased revenue in golf course construction and shaping activities to $5.6
million in 1994 from $2.2 million in 1993. Golf Division revenues also
improved due to increased revenues from golf centers and academy fees and
royalties, from $0.6 million in 1993 to $0.7 million in 1994, primarily
attributable to an increase in the number of licensed facilities. In
addition, the Company experienced an increase in Marketing Division revenues
to $9.1 million in 1994 from $8.1 million in 1993, principally due to
increased revenues generated by the NICKLAUS/FLICK GOLF SCHOOLS.
Operating income (after corporate overhead) increased to $0.9 million in
1994 from $0.1 million in 1993. Operating income (after corporate overhead)
as a percentage of total revenues increased to 5.3% in 1994 from 1.2% in
1993, generally as a result of an improved 1994 operating margin (before
corporate overhead) in the Golf Division to (2.7)% from (14.3)% in 1993. The
improved operating margin (before corporate overhead) in the Golf Division
resulted primarily from improved operations in the Company's construction and
shaping activities in 1994. The Marketing Division's operating margin (before
corporate overhead) decreased to 47.5% in 1994 from 48.3% in 1993 due
principally to increased expenses of $0.1 million incurred in connection with
the establishment of the Jack Nicklaus International Club.
Corporate overhead, consisting primarily of corporate headquarters rent
and occupancy costs, as well as corporate management and employees, increased
to approximately $3.1 million in 1994 from $3.0 million in 1993. The increase
in corporate overhead was primarily attributable to salary increases, and
increased personnel.
The provision for foreign income taxes was $0.7 million in 1994 compared
to $0.6 million in 1993. The increase in the foreign income tax provision
resulted from increased operating income from foreign operations to $3.7
million in 1994 from $2.6 million in 1993, attributable principally to
additional golf course construction projects in the Far East. As noted above,
the Predecessor Companies have historically only paid foreign income taxes
and have not paid United States federal income taxes. Because the Company
will be a C Corporation, a pro forma income tax benefit of $0.8 million for
1994
26
<PAGE>
and $0.9 million for 1993 has been included in the Company's combined
statements of operations for informational purposes as if the domestic
operations of the Predecessor Companies were C Corporations during the years
presented. The pro forma United States income taxes reflect an approximate
effective rate of 39%.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company relied primarily upon internally generated funds
from operations supplemented by borrowings as needed to finance its
operations. The cash provided by operating activities totalled approximately
$0.9 million for the three months ended March 31, 1996, $1.6 million in the
year ended December 31, 1995 and $0.5 million in the year ended December 31,
1994. Cash used by the Company's investing activities totalled approximately
$0.7 million in the three months ended March 31, 1996, $1.3 million in the
year ended December 31, 1995 and $1.3 million in the year ended December 31,
1994, primarily representing distributions to minority investors related to
JNAI's licensing activities outside the United States and Europe. Cash used
in financing activities totalled $0.3 million in the three months ended March
31, 1996 and $0.4 million in the year ended December 31, 1995, principally
related to transfers to GBI. Cash provided by financing activities totalled
$0.2 million in the year ended December 31, 1994 principally related to
capital contributions to Paragon. At December 31, 1995 and March 31, 1996,
the Company had working capital (deficit) of $0.5 million and $(0.7) million,
respectively, and $0.4 million and $0.3 million, respectively in cash and
cash equivalents.
Capital expenditures totalled approximately $0.1 million in the three
months ended March 31, 1996, approximately $0.2 million in the year ended
December 31, 1995 and approximately $0.2 million in the year ended December
31, 1994. The Company currently estimates that planned capital expenditures
for 1996 will be approximately $0.5 million, including $0.2 million for an
upgraded management information system and $0.1 million for leasehold
improvements at the Company's corporate headquarters. The Company also
intends to expend approximately $15 million to $20 million in 1996 for the
acquisition of golf practice and instruction facilities. The Company plans to
finance capital expenditures and acquisitions of facilities in 1996 primarily
with net proceeds from the Offering. In addition, the Company may obtain
mortgage financing secured by the facilities acquired or enter into operating
leases for new facilities which may not require a significant initial cash
outlay. Actual expenditures will depend on, among other things, the
availability of funds, the availability of suitable facilities, the location
and condition of the acquired facilities (i.e. whether significant capital
improvements are necessary), whether the Company acquires or leases the
related land, competitive developments and strategic marketing decisions.
Paragon currently has a $1 million line of credit which matures on April
26, 1997. As of June 30, 1996, $603,220 was outstanding under the line.
To provide for additional liquidity, the Company is seeking to obtain a
$10-$15 million line of credit from a bank or other financial institution.
Any such credit facility would likely include customary representations and
warranties and covenants with respect to the conduct of the Company's
business and require the maintenance of various financial ratios, which could
limit amounts available to be borrowed under the facility. There can be no
assurance that the Company will obtain this credit facility or as to the
amount or terms of any such facility. Consummation of the Offering is not
conditioned upon the Company obtaining a credit facility.
The Company believes that the net proceeds from the Offering, together
with cash provided by operations will be sufficient to meet its operating
needs and anticipated capital expenditure and acquisition requirements
through February 1997. If the Company obtains the line of credit financing
described in the prior paragraph, the Company believes that it would have
sufficient funds through 1997. Beyond such period, the Company will be
required to raise additional capital in order to pursue its planned
acquisition and expansion strategy. Such capital may be raised by the
issuance of additional equity or the incurrence of additional indebtedness.
There is no assurance that the Company will be able to obtain additional
capital or to borrow funds in a timely manner on favorable terms or at all.
To
27
<PAGE>
the extent that the Company is not able to do so, the Company may be required
to delay or reduce its planned acquisition and expansion strategy. See "Risk
Factors--Expansion Strategy and Additional Financing Requirements and
Additional Financing Requirements" and "--Acquisition of Additional Golf
Centers and Limited History of Direct Operations." In addition, in
appropriate situations, the Company may seek financing from other sources or
may enter into joint ventures and other collaborative or licensing
arrangements for the acquisition and operation of additional golf practice
and instruction facilities. See "The Company--Recent Acquisitions" for a
description of certain joint ventures currently under consideration.
CURRENCY FLUCTUATIONS
Although substantially all of the Company's contracts are denominated in
United States dollars, fluctuations in the value of foreign currencies
relative to the United States dollar impact the Company's results of
operations. For 1995, approximately 30% of the Company's total revenues and
approximately 74% of the Company's licensing revenues were generated
overseas, primarily in Japan. A substantial portion of the revenues of the
Company's overseas licensees are generated in foreign currencies and
accordingly, fluctuations in the values of these currencies relative to the
United States dollar could have a material adverse effect on the Company's
profitability. Royalty payments received by the Company relating to foreign
licensing arrangements are generally based on the exchange rate at the time
of payment. In addition, the Company's construction contracts are also
denominated in dollars and accordingly the effective cost to customers for
construction services performed overseas will increase or decrease as foreign
currencies fluctuate relative to the United States dollar, unless the Company
changes its United States dollar prices to reflect the fluctuations in
currency. Approximately 23% of the Company's construction revenues in 1995
were pursuant to overseas contracts. The Company does not currently engage in
hedging activities with respect to such currency fluctuations, but may do so
in the future. See "Risk Factors--Risks Associated with Activities Outside
the United States."
INFLATION
The Company does not believe that the relatively moderate rates of
inflation experienced in the United States over the last three years have had
a significant effect on its revenues or profitability. Although higher rates
of inflation have been experienced in a number of foreign countries in which
the Company does business, the Company does not believe that they have had a
material effect on the Company's revenues or profitability.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Prospectus contains forward-looking statements, including statements
regarding, among other things, (i) the Company's growth strategies, including
its intention to acquire or develop a total of ten golf practice and
instruction facilities during 1996 and an additional twelve facilities by the
end of 1997 and enter into new markets and product areas, (ii) anticipated
trends in the domestic and international golf industry and in the Company's
other businesses and (iii) the Company's future financing plans. These
forward-looking statements are based largely on the Company's expectations
and are subject to a number of risks and uncertainties, many of which are
beyond the Company's control. Actual results could differ materially from
these forward-looking statements as a result of changes in the trends in the
golf industry and the factors described in "Risk Factors" including among
others, (i) dependence on licensed trademarks, (ii) expansion strategy and
additional financing requirements, (iii) acquisition of additional golf
practice and instruction facilities and limited history of direct operations
and (iv) competition. In light of these risks and uncertainties, there can be
no assurance that the forward-looking information contained in this
Prospectus will in fact occur.
28
<PAGE>
BUSINESS
The Company is a diversified, international brand name golf products and
services company engaged in the development, marketing and management of
golf-related businesses, including the licensing, ownership and operation of
golf practice and instruction facilities, the construction and renovation of
golf courses, the marketing of golf course design services, and the
licensing, distribution and sale of golf related consumer products. Through
its two divisions, the Golf Division and the Marketing Division, the Company
provides high quality products and services in over 40 countries primarily
under the NICKLAUS, JACK NICKLAUS and GOLDEN BEAR brand names. From 1993 to
1995, the company realized an increase in revenues and operating income from
$11.8 million to $31.5 million and from $0.1 million to $3.3 million,
Respectively.
The Company's Golf Division is involved in the licensing, ownership and
operation of golf practice and instruction facilities under the JACK NICKLAUS
GOLF CENTER, JACK NICKLAUS ACADEMY OF GOLF and GOLDEN BEAR GOLF CENTER brand
names. the company's golf centers are designed to provide affordable golf
practice and instruction facilities to a large golfer population, to attract
new participants to the game and to create an environment of family
entertainment. The Company believes the highly fragmented golf practice and
instruction facility industry presents advantageous opportunities to acquire,
upgrade and renovate golf centers over the next five years. The Company
believes that its golf facilities are differentiated from its competitors on
the basis of consumers' recognition of the high quality of the products and
services associated with the NICKLAUS, JACK NICKLAUS and GOLDEN BEAR brand
names, the quality of its facilities and the availability at its facilities
of the unique and individualized golf instruction programs designed by Mr.
Nicklaus and Jim Flick, a world renowned instructor.
The Company currently operates three golf practice and instruction
facilities and recently entered into letter agreements or letters of intent
regarding the proposed acquisition or lease of four additional existing
facilities and two facilities currently under development. See "The
Company--Recent Acquisitions." As part of its growth strategy to focus its
efforts on the ownership and operation of facilities, the Company has
identified approximately 60 to 70 markets within the United States which it
believes can support one or more golf practice and instruction facilities of
the type operated by the Company. Although there is no assurance that
additional facilities will be acquired, the Company's plan is to acquire or
develop a total of ten facilities during 1996 and an additional twelve
facilities by the end of 1997. In addition to the three golf practice and
instruction facilities it currently operates, the company currently licenses
for operation by third parties 17 golf practice and instruction facilities
under the JACK NICKLAUS GOLF CENTER, JACK NICKLAUS ACADEMY OF GOLF and GOLDEN
BEAR GOLF CENTER brand names. The Company intends to continue to support its
existing licensee base.
The Company's Golf Division also is involved in the marketing of golf
course designs on behalf of designers, primarily for the golf course design
division of GBI, Nicklaus Design, and directly provides technical
construction services in connection with the construction and renovation of
golf courses. Since 1983, such construction services have been provided
throughout the world in the development of over 40 golf courses, most of
which were designed by Mr. Nicklaus through Nicklaus Design. In addition, the
Company provides club management and consulting services to golf course
owners, with five Nicklaus designed courses currently under management in the
United States and one under management in Asia.
Through its Marketing Division, the Company licenses NICKLAUS, JACK
NICKLAUS and GOLDEN BEAR branded consumer products and operates its
nicklaus/flick golf schools. The Company believes, based upon estimated
mark-ups of wholesale prices or factory costs, that retail sales of the
Company's licensed products, including apparel and accessories, were
approximately $320 million world-wide in 1995, which generated approximately
$5.1 million of licensing revenue for the Company in 1995. The Company also
operates in its marketing division high-end golf schools under the
NICKLAUS/FLICK GOLF SCHOOL brand name. The Company has developed innovative
teaching methods which are offered at the Nicklaus/ Flick Golf Schools
throughout the United States and serve as the basis for instruction at the
Company's golf practice and instruction facilities worldwide. The Company has
invested approximately $1.3 million in a proprietary teaching method
including instruction books and a computer assisted video swing
29
<PAGE>
analysis device. This teaching methodology is the basis for the JACK NICKLAUS
COACHING STUDIOS included within the Company's golf practice and instruction
facilities worldwide as well as teaching at the Nicklaus/Flick Golf Schools.
The Company's strategy is to increase its worldwide revenue and operating
income by capitalizing on the growth and popularity of the game of golf and
Mr. Nicklaus' reputation, image and accomplishments as one of the greatest
golfers ever to play the game. Specific components of the Company's growth
strategy include (i) acquiring, leasing or entering into joint ventures for
well-located golf practice and instruction facilities that have the potential
for improvement under the Company's management and with improved or expanded
facilities; (ii) developing new golf practice and instruction facilities in
locations where suitable acquisition opportunities are not available; (iii)
capitalizing on the demand for the construction of new golf courses and the
renovation of existing courses; and (iv) broadening the Company's base of
branded consumer product offerings under the NICKLAUS, JACK NICKLAUS and
GOLDEN BEAR brand names. The Company also believes that cross-marketing of
its products and services will provide it with opportunities to maximize its
operating performance. To this end, it is anticipated that the acquisition
and development of new golf practice and instruction facilities will provide
the Company with additional opportunities to market its Nicklaus/Flick Golf
School programs and to sell its licensed products at retail pro shops
established at such facilities. Similarly, the Company believes that the
Company's arrangement as exclusive marketer of Nicklaus Design's services
will increase the exposure of the Company's products and provide it with a
competitive advantage in obtaining golf course construction and renovation
business.
INDUSTRY OVERVIEW
GENERAL
According to the National Golf Foundation ("NGF"), there were
approximately 25 million golfers (an individual age 12 or older who played at
least one round of golf during the survey year) ("Golfers") in the United
States in 1995, representing approximately 11.6% of the total United States
population age 12 or older. The average age of a Golfer in 1995 was
approximately 40 years old and the average household income of Golfers was
approximately $56,900. The Company believes that there will be an increased
demand for golf facilities and golf-related products as a result of the
increased interest in golf by the aging "baby boom" population, primarily as
a consequence of an increase in that group's disposable income and leisure
time and the appropriateness of golf as a sport for an aging population.
Total spending on golf-related equipment, merchandise, accessories,
playing fees and miscellaneous items (not including lessons) was estimated to
be approximately $16.3 billion for the twelve months ended August 1994.
Approximately 33% of such amount was for golf equipment and other golf
merchandise and approximately 67% of the amount was for club membership, cart
and greens fees. While the number of Golfers and rounds played increased only
moderately from 1986 through 1994, total spending by Golfers increased by
8.6% compounded annually over the same period.
Total spending can be analyzed further on a segment basis. The NGF
evaluates total spending by the following golfer frequency segments: AVID
GOLFER, a golfer aged 18 or older who played 25 rounds or more of golf during
the survey year; MODERATE GOLFER, a golfer aged 18 or older who played eight
through 24 rounds of golf during the survey year; and OCCASIONAL GOLFER, a
golfer aged 18 or older who played one through seven rounds of golf during
the survey year. Table 1 below provides the number of golfers, the average
age, average years played, average household income, and average rounds
played per golfer segment. Table 2 below reflects that Avid Golfers, though
comprising only 24% of the golfer population, represented 61% of all spending
on golf-related purchases by golfers. In addition, Table 2 reveals that Avid
Golfers' average annual expenditures are more than double that of Moderate
Golfers and approximately nine times greater than Occasional Golfers' average
annual expenditures. The Company believes that as the average Occasional and
Moderate Golfers age and move into the prime income producing stages of their
working lives, the number of Avid Golfers may be anticipated to increase and,
if this occurs, total expenditures on golf-related products and services
would also be anticipated to increase.
30
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TABLE 1
<TABLE>
<CAPTION>
CHARACTERISTICS OF GOLFER SEGMENTS IN 1995
(AGE 18 YEARS AND OLDER)
OCCASIONAL MODERATE AVID
------------- ----------- ----------
<S> <C> <C> <C>
GOLFER SEGMENTS:
Number of Golfers(000s) . 11,340 6,078 5,503
Average Age .............. 38 41 50
Average Years Played .... 13 15 21
Average Household Income $54,800 $57,400 $59,300
Average Rounds Played ... 3 14 62
<FN>
- -----------
Source: NGF
</FN>
</TABLE>
TABLE 2
<TABLE>
<CAPTION>
TOTAL SPENDING BY GOLFER FREQUENCY SEGMENT
PERCENT OF AVERAGE
PERCENT OF TOTAL ANNUAL
ALL GOLFERS SPENDING EXPENDITURES
-------------- ------------- ---------------
<S> <C> <C> <C>
GOLFER SEGMENTS:
Avid ............ 24% 61% $1,710
Moderate ........ 26% 27% $ 719
Occasional ...... 50% 12% $ 183
<FN>
- --------
Source: NGF
</FN>
</TABLE>
The Company also believes that many new golf markets are developing
globally. In addition to the popularity of golf in Australia, Japan and New
Zealand, each with golfers representing approximately 10% of their respective
total populations based on Company estimates, the Company believes the Asian
and South American markets represent attractive markets for growth. As of
August 1995, the Company estimated that golfers represented less than 2% of
the total populations of China, Hong Kong, India, Korea, Malaysia, and
Thailand. The Company believes that its experience in international markets
and its brand name recognition and strong reputation will position it to
benefit from increased international demand for golf-related products and
services.
GOLF PRACTICE AND INSTRUCTION FACILITIES
The Company believes that one of the fastest growing segments of the golf
industry is the commercial golf range and golf course practice area segment.
The Company estimates that, since 1990, the number of stand-alone commercial
ranges has increased from approximately 1,200 to approximately 1,900 at the
end of 1995 in the United States. During the twelve months ended December
1994, approximately 11.1 million people used a stand-alone commercial range
in the United States. Currently, the stand-alone golf range industry is
highly fragmented; the Company estimates that over 90% of stand-alone ranges
are managed by owner-operators. The Company believes that this highly
fragmented industry presents advantageous opportunities for the Company to
acquire, upgrade and renovate golf centers and driving ranges throughout the
United States.
The Company believes that the growth in the golf practice and instruction
facilities markets has been driven by the steady inflow of new players, the
limited number of golf courses available for daily fee play, the increase in
the number of beginners to the sport who are intimidated on a golf course and
31
<PAGE>
the cost and time required to play rounds on overcrowded golf courses. In
addition, the Company believes that municipalities and real estate developers
are looking to establish affordable recreation alternatives in their
communities, and the Company believes golf practice and instruction
facilities meet their objectives by providing wholesome, family oriented
affordable recreational and entertainment facilities.
GOLF COURSE CONSTRUCTION
As of December 31, 1995, there were approximately 15,000 golf courses in
the United States, with approximately 1,900 of such courses opening since
December 31, 1990. The construction of golf courses has trended upward since
1990. During 1995, 468 golf courses opened in the United States. Golf course
openings in 1995 increased by approximately 23% over golf course openings in
1994. From 1990 to 1995 the number of golf courses open for play increased by
approximately 10.3%. At year end 1995, 820 golf courses were under
construction, with approximately 500 of these anticipated to open in 1996. In
addition to the United States, the Company believes emerging markets like
China, India, South America and South Africa represent significant golf
course design and construction opportunities. This belief is based on the
size of the populations in these emerging markets, the receptivity of these
cultures to American exports, the fact that the climate in these areas are
generally conducive to resort activities, and the rising popularity of the
game of golf internationally.
GOLF DIVISION
The Golf Division is involved in the operation and licensing of the
Company's golf practice and instruction facilities, the construction and
renovation of golf courses and the provision of golf course management and
consulting services primarily to owners and operators of Nicklaus designed
golf courses. In addition, through the Golf Division, the Company markets
golf course design services for Nicklaus Design, a division of GBI. The Golf
Division had revenues of $21.5 million in 1995, compared to $7.5 million in
1994 and $3.7 million in 1993. The Company believes that its owned and
licensed golf facilities are differentiated from its competitors on the basis
of consumers' recognition of the JACK NICKLAUS and GOLDEN BEAR brand names,
the quality of the facilities and the unique and individualized golf
instruction programs designed by Jack Nicklaus and Jim Flick available at the
facilities.
GOLF CENTERS AND ACADEMIES
The Company's golf centers and academies are golf practice and instruction
facilities designed to provide golf practice facilities, affordable golf
instruction and related recreational activities. Domestically, the Company
currently operates three golf centers and has entered into agreements or
letters of intent regarding the proposed acquisition of four existing
facilities (three of which are currently operated by licensees of the
Company) and two facilities currently under development by a licensee of the
Company. In addition to the facilties operated by licensees which are the
subject of the agreements or letters of intent, there are presently seven
other licensed GOLDEN BEAR GOLF CENTERS being operated by licensees of the
Company in the United States, with three additional licensed facilities
scheduled to open in 1996. Internationally, the Company's licensees operate
seven facilities under the name JACK NICKLAUS GOLF CENTERS and JACK NICKLAUS
ACADEMY OF GOLF which are located in nine countries in the Pacific Rim and
England.
DOMESTIC OPERATIONS. The owned and licensed domestic golf centers are
generally centered around a practice range designed with target greens,
bunkers and traps to simulate golf course conditions. The ranges generally
feature both covered and uncovered hitting stations to maximize usage under
all weather conditions and are lighted to permit nighttime use. In addition
to the practice range, the golf centers typically include short game practice
areas, including putting greens and sand traps, comprehensive GOLDEN BEAR
instruction programs designed by the internationally recognized NICKLAUS/
FLICK GOLF SCHOOL, a JACK NICKLAUS COACHING STUDIO (a proprietary multimedia
video and computer swing analysis system) and a clubhouse facility which
typically includes a full-line retail pro shop, limited locker facilities and
a restaurant or snack bar. The domestic golf centers generally also include
other recreational amenities such as miniature golf courses and baseball
batting areas.
32
<PAGE>
The Company currently operates three golf practice and instruction
facilities and recently entered into agreements or letters of intent
regarding the proposed acquisition of four additional existing facilities and
two facilities currently under development. See "The Company--Recent
Acquisitions." While there is no assurance that it will successfully do so,
the Company's goal is to acquire or develop a total of ten facilities during
1996 and an additional twelve facilities by the end of 1997. While the
Company intends to continue to support its existing licensee network, the
Company's present strategy is to focus its efforts on the direct ownership
and operation of facilities and to pursue new licenses and enter into
additional territory development agreements only in locations and territories
where the Company does not intend to acquire or develop its own facilities.
The Company anticipates that it will add golf centers either by acquiring or
converting existing golf centers or practice facilities or by acquiring
undeveloped sites and constructing new golf centers. The Company believes the
highly fragmented golf range industry presents advantageous opportunities for
the Company to acquire, upgrade and renovate golf centers and driving ranges
over the next five years. The Company believes that its GOLDEN BEAR branding
and its instruction programs will provide the Company with a competitive
advantage and differentiate GOLDEN BEAR GOLF CENTERS from other range
operators. See "Risk Factors--Expansion Strategy and Additional Financing
Requirements" and "--Acquisition of Additional Golf Centers and Limited
History of Direct Operations."
Currently, there are ten licensed GOLDEN BEAR GOLF CENTERS in the United
States which are operated by three owners, none of which is affiliated with
the Company. As discussed above, the Company has recently entered into
agreements or letters of intent to acquire or lease three of such facilities.
Each licensee has been provided an exclusive license in a specified territory
to operate a GOLDEN BEAR GOLF CENTER and is able to utilize certain of the
Company's trademarks, servicemarks and other rights relating to the operation
of the facility. Additionally, the Company has agreements with two licensees
which grant to the licensees the exclusive right to develop five GOLDEN BEAR
GOLF CENTERS within the Baltimore, Maryland and Fairfax, Virginia areas.
Licensees are required to operate their GOLDEN BEAR GOLF CENTERS in
compliance with the Company's methods, standards and specifications regarding
such matters as facility design, site approval, layout and design of teaching
and practice-related facilities, fixtures and furnishings, decor and signage,
merchandise type, presentation and customer service. Licensees are not
required to purchase supplies or products from the Company other than the
workbooks, software and manuals associated with the teaching studios which
must be included in each facility. Licensees pay a facility license fee of
$25,000-$35,000 for each facility opened by the licensee within the
designated territory, and pay continuing monthly royalty fees of 3 to 5% of
adjusted gross revenues, subject to a minimum guaranteed royalty of $50,000
per year. In some instances, generally for facilities in less populated
areas, in lieu of monthly revenue-based royalty fees, fixed annual fees are
paid generally ranging between $35,000 and $45,000, subject to increases
based on the consumer price index. The Company's license fees, royalties and
other similar payments from its domestic golf center licensees totalled
approximately $101,000 for the first three months of 1996 and approximately
$461,000, $198,000 and $74,000 for the years 1995, 1994 and 1993,
respectively.
The Company has recently entered into letters of intent with two of its
existing licensees, East Coast and Highlander outlining the terms of proposed
joint venture agreements providing for the development and operation of
GOLDEN BEAR GOLF CENTERS over a five year period. The letters of intent
contemplate the granting of exclusive development rights in certain
territories in North Carolina, South Carolina, Dallas/Ft. Worth, Texas,
Orange County, California and Chicago, Illinois and non-exclusive development
rights in certain territories in Florida (excluding Palm Beach County), Ohio,
Long Island, New York, northern California, Nevada and San Diego County. It
is contemplated that the joint venture would enter into license agreements
with the Company containing the same general compliance standards and methods
described above with respect to the Company's other licensees. The rights and
obligations of the parties in the joint ventures will be defined and is
subject to the execution of binding definitive agreements. There is no
assurance that definitive joint venture agreements will ever be executed or
that, if executed, that any GOLDEN BEAR GOLF CENTERS will ever be developed
by the joint ventures.
33
<PAGE>
Set forth below is a list of the Company's existing domestic licensees and
the facilities operated.
<TABLE>
<CAPTION>
LICENSEE GROUP EXISTING FACILITIES
---------------------------------------------------------
<S> <C>
Family Golf Centers, Inc. Henrietta, NY
Farmingdale, NY
Elmsford, NY
Douglaston, NY
Liverpool, NY
Wayne, NJ
El Segundo, CA
Highlander Golf Corp. Ltd.* Moreno Valley, CA
Carrollton, TX
East Coast Golf Centers, Inc.* Columbus, OH
<FN>
- --------
* The Company recently entered into letters of intent with Highlander and
East Coast regarding the proposed purchase of the facilities operated or
under development by Highlander and East Coast. See "The Company--Recent
Acquisitions."
</FN>
</TABLE>
INTERNATIONAL OPERATIONS. The Company has entered into license
agreements for the development and operation of golf center facilities
outside of the United States under the brand names JACK NICKLAUS GOLF CENTER
and JACK NICKLAUS ACADEMY OF GOLF. The latter generally provides more
substantial practice facilities and practice golf holes on a larger site. In
some territories, the Company has granted a master license for a country or
region which gives the master licensee the exclusive right within defined
territories to own, operate or sublicense to others the right to own and
operate golf centers and golf academies in the territory. In other cases, the
Company has granted a site specific license similar to its domestic franchise
agreements giving the site licensee the right to open a single golf center or
golf academy at a specific location. The Company has generally granted its
foreign licensees an exclusive radius around the site of each facility.
The Company's foreign licensees currently have seven facilities open and
in operation and an additional three facilities are under development with
openings anticipated by the end of 1997. The Company has an agreement with a
corporate affiliate of its British licensees to market the Company's golf
facility licensing program, contact and identify prospective licensees within
the European Economic Community, and assist the Company in negotiating
license agreements with such prospects. Outside the United States, the
Company currently intends to continue to pursue licensing agreements, rather
than direct ownership of golf centers, although there is no assurance that
the Company will be successful in its licensing efforts. The Company's
license fees, royalties and other similar payments from its international
golf center operations totalled approximately $108,000 for the first three
months of 1996 and approximately $530,000, $527,000 and $478,000 for the
years 1995, 1994 and 1993, respectively.
GOLF COURSE CONSTRUCTION
The Company provides comprehensive golf course construction services.
These services include project management, shaping, renovation and golf
course construction. While the Company originally only provided services for
Nicklaus designed golf courses, the Company began offering its golf course
construction services to non-Nicklaus designed golf courses in 1995. The
Company is currently shaping two golf courses for other architects, one in
the United States and one in Korea. The Company is presently working in eight
countries, including the United States, and is currently involved in the
construction of fourteen active projects.
The Company believes that the rapid development of golf courses in the
United States has been a direct result of the increased demand for access to
golf courses. In the United States, new facilities are presently being opened
for golf course communities, private clubs, semi-private courses, and daily
fee facilities at the rate of approximately one per day. In addition, the
demand for new golf courses has also
34
<PAGE>
substantially increased throughout southeast Asia. In addition to Malaysia,
Korea and Indonesia, where golf course construction has been strong, the pace
of golf course construction is also increasing steadily in China and India.
The Company believes that emerging markets like China, India, South America,
and South Africa represent significant opportunities given their vast
populations, cultures that are increasingly receptive to American exports,
climates which are conducive to resort activities, and the rising popularity
of the game of golf.
In addition to new construction, golf course renovation has become
increasingly popular in the United States as established courses try to
compete with newer facilities. Over time, even the best maintained golf
courses require some renovation. Such improvements are generally necessitated
by the effects of wear and tear, the introduction of new golf equipment and
technology which render a hole design or yardage obsolete, or improvements in
technology and efficiency which require upgrades of irrigation, drainage or
course features, including greens, tees and bunkers.
The Company and its predecessors have furnished golf construction and
renovation services on approximately 39 golf courses since 1983, 9
domestically and 30 internationally. Set forth below are the projects
undertaken and services provided by the Company since 1993:
<TABLE>
<CAPTION>
YEAR LOCATION PROJECT DESCRIPTION
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993 Chung Shan Hot Springs, Zongshan, China 18 - hole shaping
Eaglebend Golf Club, Big Fork, Montana 9 - hole construction
Governors Club, Chapel Hill, North Carolina 9 - hole construction
Ishioka Country Club, Ogawa, Japan 18 - hole shaping
Le Robinie Golf Club, Solbiate, Italy 18 - hole shaping
London Golf Club, London, England 36 - hole shaping
Miramar Linkou, Taipei, Taiwan 36 - hole shaping
1994 Borneo Golf Club, Kota Kinabalu, Malaysia 18 - hole construction
English Turn, New Orleans, Louisiana 18 - hole renovation
Hammock Creek, Stuart, Florida 18 - hole construction
Jeredong Resort Golf Course, Brunei 18 - hole project
management/shaping
La Gorce Country Club, Miami, Florida 18 - hole renovation
Sanyo Golf Club, Okyama, Japan 18 - hole shaping
1995 Montreux Golf Club, Reno, Nevada 18 - hole construction
Top Of The Rock, Branson, Missouri 9 - hole construction
Indigo Run Country Club, Hilton Head, South Carolina 18 - hole construction
MacGregor Golf Course, Gumma-ken, Japan 18 - hole shaping
Suzhou Golf Course, Suzhou, China 18 - hole project
management/shaping
Oshige Country Club, Nagoya, Japan 18 - hole shaping
Rokko Kokusai, Kobe, Japan 9 - hole shaping
Borneo Golf Club, Kota Kinabalu, Malaysia 18 - hole construction
Classic Golf, New Delhi, India 18 - hole construction
Beijing Well Bond, Beijing, China 36 - hole construction
</TABLE>
The Company believes it is well-positioned to continue to grow its golf
course construction and renovation activities given its full service
organization, its strong reputation and the Company's contractual arrangement
as exclusive marketing agent for Nicklaus Design. The Company markets its
services simultaneously with its marketing of Nicklaus Design services. The
Company believes its association with Nicklaus Design provides it a
competitive advantage based on its opportunity to meet with prospective
developer clients at the earliest stage of a course's planning and the fact
that its familiarity with the Nicklaus Design philosophy enables the Company
to anticipate problems and reduce duplication of efforts. In addition, the
Company believes that the combination of Nicklaus Design with the other
services offered by the Company, provide clients with an array of
high-quality
35
<PAGE>
services with the convenience and advantages of "one-stop shopping." While
the relationship with Nicklaus Design may be a disadvantage in obtaining the
work of other course designers, the Company believes that Paragon's
reputation and service will attract non-Nicklaus design firms to utilize
Paragon's services. See "Certain Relationships and Related
Transactions--Reorganization--Nicklaus Design Marketing Agreement."
The Company's construction services are generally offered pursuant to
either a general construction contract or a technical services agreement. The
Company may also supply specialized golf construction services to third
parties on a subcontract or consulting basis where warranted by the needs of
the customer. The general construction contract generally offers developers
and owners comprehensive management of the entire course construction process
on a cost plus fee or a fixed price basis. Under a technical services
agreement, the Company typically provides only a technical team, which
generally consists of a project manager, shapers, finishers and foremen. This
team focuses primarily on the management of personnel and equipment and the
purchase of materials required for the construction of the golf course.
Payments for construction services are generally made in installments over
the term of the contract based on the stage of completion of the project.
MARKETING OF GOLF COURSE DESIGNS
Pursuant to a Design Services Marketing Agreement with GBI, the Company
markets golf course design worldwide for Nicklaus Design and may in the
future seek to market golf course design for other designers and architects
subject to certain limitations set forth in the agreement. The Company will
receive 10% of gross design fees received by GBI. The Company believes the
marketing of Nicklaus Design provides a competitive advantage to the Company
in obtaining construction and renovation contracts as well as obtaining club
management contracts at Nicklaus Design courses. See "Certain
Relationships--Reorganization--Nicklaus Design Marketing Agreement."
Mr. Nicklaus has been a leader in the golf course design industry for more
than 25 years, having designed, co-designed or re-designed 124 courses that
are open for play. Seventeen of Mr. Nicklaus' course designs have been ranked
by GOLF DIGEST in the United States TOP 100. In GOLF MAGAZINE'S latest
rankings of the "Greatest Courses in the World," four of Mr. Nicklaus'
designs are listed: Muirfield Village (Dublin, OH), Harbour Town (Hilton
Head, SC), Cabo del Sol (Los Cabos, Mexico) and Shoal Creek (Birmingham, Al).
GOLF COURSE MANAGEMENT
In 1995, the Company began offering comprehensive golf club management
services, including services related to course maintenance and marketing of
club operations. In addition to offering comprehensive club management, the
Company is available as a consultant or independent contractor to assist
clubs in developing conceptual plans, membership programs, employee policies
and procedures, operations manuals, job descriptions, budgets and financial
systems. The Company offers its management services primarily to owners and
operators of Nicklaus designed courses throughout the world and currently
provides management services to five golf facilities in the United States and
one in Asia.
MARKETING DIVISION
The Marketing Division is involved primarily in the licensing of NICKLAUS,
JACK NICKLAUS, and GOLDEN BEAR branded products and services throughout the
world and the operation of the Nicklaus/ Flick Golf Schools. The Marketing
Division focuses its efforts on combining the marketing power associated with
the recognition and reputation of the Jack Nicklaus brand names with high
quality products and services in the markets it serves. the company believes
that, based upon estimated mark-ups of wholesale prices or factory costs,
retail sales of the company's licensed products were $320 million in 1995,
which generated approximately $5.1 million in licensing revenue for the
company in 1995. the marketing division, as a whole, had revenues of $10.1
million in 1995 compared to $9.1 million in 1994 and $8.1 million in 1993.
MARKETING AND LICENSING
The Company manages Jack Nicklaus' brands and marketing relationships. The
Company's activities include the licensing and marketing of a wide variety of
Jack Nicklaus branded consumer
36
<PAGE>
products and services, primarily under the NICKLAUS, JACK NICKLAUS, and
GOLDEN BEAR BRAND NAMES. These three separate brands are targeted at distinct
markets segmented by product design, distribution channels and price. The
Company believes that the continued growth in the popularity of golf
worldwide represents a strong opportunity to grow the NICKLAUS, JACK
NICKLAUS, and GOLDEN BEAR brand names. In addition, the Company believes that
the trend toward casual dress in the workplace and the growing importance of
leisure activities within its target markets should enhance the growth
potential of its brands.
The Company currently licenses the Jack Nicklaus brands to over 20
companies which distribute products in over 35 countries. The largest markets
for the Company's branded markets are currently the United States, Korea and
Japan. Licensed product categories includes men's and women's sportswear,
men's tailored clothing, neckwear, luggage, socks, headwear, belts, small
leather goods, jewelry, accessories, calendars and various forms of artwork
and commemoratives.
The Company's licensing of apparel outside of the United States and Europe
is conducted exclusively through JNAI, a joint venture with an affiliate of
Hartmarx Corporation. This joint venture has in turn entered into separate
licensing arrangements through partnerships relating to Japan (the "Japanese
Partnership") and the rest of Asia (the "Asian Partnership"). Pursuant to
such arrangements, JNAI will receive from 50% to 75% of the revenues of the
Japanese Partnership and approximately 66 2/3 % of amounts distributed by the
Asian Partnership.
The Company also has developed two types of "marketing partnerships" for
Mr. Nicklaus with selected companies worldwide. These partnerships involve
either Mr. Nicklaus' personal endorsement and use of his likeness or
strategic marketing alliances which utilize golf and the Company's marketing
capabilities to help market a partners' products or services. Such marketing
partnerships have been established with, among others, Lincoln-Mercury, a
division of Ford Motor Company, Gulfstream Aerospace Corporation, Rolex,
Textron, GOLF MAGAZINE and Griptec. Marketing partnerships are important to
the Company in that they increase the exposure and reinforce the image of Mr.
Nicklaus and his brands in the Company's target markets. The Company will
receive a percentage of all revenues received by Mr. Nicklaus for personal
endorsement services obtained through the marketing efforts of the Company
equal to (i) 30% of all such revenues under any existing contract or
arrangement or renewal thereof and (ii) an agreed upon amount not less than
20% of all such revenues received under any new contract or arrangement. The
Company will receive 100% of any revenues associated with strategic marketing
alliances. See "Certain Relationships and Related
Transactions--Reorganization--Personal Services Management AGREEMENT."
The Company's marketing and licensing strategy is to (i) expand the
worldwide sales of the Company's products, particularly throughout the United
States, Europe and Asia; (ii) selectively expand its licensed product lines,
particularly in accessories and women's sportswear; (iii) work with existing
licensees to maximize brand advertising and promotional exposure; and (iv)
develop new licensing relationships for product categories that are
appropriate for Jack Nicklaus brands, such as home furnishings and skincare.
The Company is also considering several retail strategies, including stand
alone retail shops devoted primarily to the Company's branded products and
the creation of dedicated areas in golf shops and better department stores.
No assurances can be given that any such retail strategies will be
undertaken. The Company will seek to create dedicated areas for the sale of
the Company's branded products within the pro shops of GOLDEN BEAR GOLF
CENTERS and at NICKLAUS DESIGNED GOLF COURSES.
37
<PAGE>
The following table sets forth the Company's principal licensees and
products:
<TABLE>
<CAPTION>
LICENSED LICENSEE
LICENSEE PRODUCTS BRANDS TERRITORIES SINCE
-------- -------- ------------- ------------- --------
<S> <C> <C> <C> <C>
Hart, Schaffner & Marx, a Slacks, JACK NICKLAUS United States 1969
business unit of Hartmarx sportscoats,
Corporation blazers,
woven dress
shirts
Trans-Apparel Group, a business
unit of Hartmarx Corporation Men's and JACK NICKLAUS North America 1990
women's NICKLAUS Europe
shirts, slacks,
shorts,
blazers,
socks,
sweatshirts,
outerwear,
rainwear
The Rockport Corporation Casual and JACK NICKLAUS Worldwide 1992
dress shoes, GOLDEN BEAR
golf shoes
Brookville Corporation Neckwear JACK NICKLAUS United States 1995
NICKLAUS
Abba Accessories, Inc. Cufflinks, JACK NICKLAUS United States 1995
belt buckles, NICKLAUS Great Britain
tie bars and
tacks
Platinum Hosiery Socks JACK NICKLAUS United States 1995
NICKLAUS
American Contract Luggage JACK NICKLAUS United States 1995
Manufacturers, a business unit NICKLAUS
of Boyt
Italian Design Group Belts and JACK NICKLAUS United States 1995
small leather NICKLAUS Great Britain
goods
JNAI: Men's and JACK NICKLAUS Japan 1973
Partnership with ladies' NICKLAUS Southeast
Hartmarx Corporation sportswear GOLDEN BEAR Asia
Australia
South Africa
South
America
JNAI/FE: Men's and JACK NICKLAUS Thailand 1973
Partnership between JNAI and ladies' NICKLAUS Indonesia
Kosugi Sangyo to license sportswear GOLDEN BEAR Korea
Jack Nicklaus brands in Asia and Malaysia
accessories Singapore
Philippines
JNJ: Hats, ties, JACK NICKLAUS Japan 1995
Partnership between JNAI and men's/ladies'/ NICKLAUS
Kosugi Sangyo to serve as children's GOLDEN BEAR
master licensee in Japan sportswear, MUIRFIELD
gloves, belts,
luggage,
casual and
business bags
and eyewear
</TABLE>
38
<PAGE>
NICKLAUS/FLICK GOLF SCHOOL
The Company operates a high-end golf school principally under the
NICKLAUS/FLICK GOLF SCHOOL ("NFGS") brand name. Jack Nicklaus and Jim Flick,
a world renowned instructor, collaborated to develop a program which has been
recognized by major golf publications for its leadership role in the golf
instruction industry since the school's inception in 1991.
The Company believes that growth in the golf instruction industry is
driven by existing golfers' desire to continually improve their golf games
and by new golfers seeking to learn the game. Historically, instruction was
provided by local golf professionals. In recent years technological changes
have made possible the development of sophisticated instruction products and
computer programs for use in teaching. The Company has invested approximately
$1.3 million in a proprietary teaching method including instruction books and
a computer assisted video swing analysis device. This teaching methodology is
the basis for the JACK NICKLAUS COACHING STUDIOS included within the
Company's golf practice and instruction facilities worldwide as well as
teaching at the NFGS.
The NFGS offers over 85 Master Golf Instruction multi-day programs
including several specialty programs targeted at women, couples, parents and
children and special alumni groups. NFGS currently operates as an independent
contractor at five resort destinations and/or private clubs located in the
United States: Pebble Beach, Monterey, California; Desert Mountain Golf Club,
Carefree, Arizona; Ibis Golf & Country Club, Palm Beach, Florida; Boyne
Highlands Resort, Harbor Springs, Michigan; and Park Meadows, Park City,
Utah. The Company is currently pursuing additional venues for its NFGS
operations.
The target market for the NFGS retail schools is consumers who have
significant disposable income. NFGS has historically priced its package
offerings at the upper end of golf school pricing which is consistent with
other Company product offerings. The Company is considering commencing
operation of a moderately priced golf school under the GOLDEN BEAR brand name
in 1997. The Company currently markets retail schools principally through:
(i) direct response media advertising; (ii) direct mail programs targeted at
NFGS graduates (currently over 3,000) and high net worth golfers; (iii) word
of mouth referrals; and (iv) telemarketing.
The NFGS teaching faculty is currently comprised of 18 teaching
professionals selected by Jack Nicklaus and Jim Flick, six of whom were
included in GOLF MAGAZINE's list of the top 100 golf instructors in the
United States in 1995. These professionals have been trained in a philosophy
that is consistent with Jack Nicklaus' approach to playing the game and Jim
Flick's approach to teaching. Most of NFGS' instruction staff are independent
outside contractors and their agreements with NFGS are negotiated annually.
In addition to its regular three and five-day consumer packages, NFGS
provides businesses and corporations with a wide range of program
alternatives including, three-day executive golf programs, one-day golf
outings, charity golf events and hospitality programs at select professional
tour events. These corporate programs, which operate under the brand name
GOLDEN BEAR EXECUTIVE GOLF, are designed specifically for corporations as an
effective way to entertain clients, strengthen business relationships, reward
top performers and raise funds for charitable organizations. The corporate
programs also expose a wide variety of people to the Company's golf programs,
which provide future referral sources for the NFGS retail sessions.
JACK NICKLAUS INTERNATIONAL GOLF CLUB
The Jack Nicklaus International Golf Club was founded in mid-1995 to
provide additional benefits to Nicklaus Design golf courses. The Jack
Nicklaus International Golf Club is a proprietary membership club which
offers its members an opportunity to obtain a variety of member services
including golf playing privileges at prestigious private clubs worldwide that
feature a Jack Nicklaus Signature or Nicklaus Design golf course. Membership
in the Club is by invitation only and is restricted to members
39
<PAGE>
of the golf clubs that agree to participate in the program ("Host Clubs").
There are currently approximately 70 Host Clubs. Members enjoy reciprocal
playing and guest privileges at each of the Host Clubs. The current
membership fee is $250 per year. There is no membership fee to the
participating Host Clubs and each is permitted to impose a direct charge for
golf playing privileges extended to Club members. In addition to fees
generated from its members, the Company may receive revenues through travel
services and the sale of golf-related products. The Company believes the
availability of the Jack Nicklaus International Golf Club assists the
Company's marketing efforts on behalf of Nicklaus Design.
COMPETITION
The Company's competition varies among its business lines. The markets in
which the Company competes in its Golf Division are generally highly
competitive. The Company's golf practice and instruction facilities compete
against other golf centers, traditional golf ranges, golf courses and other
recreational pursuits. Competition for prime locations is intense. In the
provision of golf course construction and golf course management and
consulting services, the Company faces competition both domestically and
internationally from several national golf course construction firms and golf
course management firms, as well as from several smaller regional firms.
Competition associated with the Company's golf practice and instruction
facilities primarily relates to the location, the quality of the facilities
and services offered, marketing of the facilities and proximity to other golf
centers. Competition in golf course construction is based mainly on
reputation, quality of service, experience and price. While many of the
Company's Golf Division competitors and potential competitors have
considerably greater financial resources and experience than does the
Company, the Company believes that its well recognized brand names and its
reputation for providing high quality, innovative products and services will
distinguish it from its competitors.
The consumer markets for goods and services in which the Company's
Marketing Division competes are extremely competitive, with the Company's
products and services competing against a mix of established brand name
consumer products and services, products and services licensed or endorsed by
sports and entertainment celebrities, private label products and generic
products which have not established a distinct brand identity. Competition in
these products and services is centered mainly on styling, quality, price,
brand recognition and service. In order for the Company to be competitive in
these marketplaces, the Company must effectively maintain and promote the
unique brand image of its services and its licensed products among consumers
and establish strong marketing relationships with manufacturers and
distributors of products which enhance that brand image. While the Company
believes that its strong brand name recognition and established licensing and
distribution networks will enable it to compete effectively, the Company and
its licensees compete with a number of manufacturers and marketers of
sporting goods, recreational products, apparel and other consumer products
and services, many of which have substantially greater resources than the
Company and its licensees and many of which have well recognized brand names
and broader and more established distribution networks. These markets also
face competition from other leisure and recreational activities and sales of
leisure and recreational products and services are affected by changes in
consumer preferences, which are difficult to predict.
EMPLOYEES
As of March 31, 1996, the Company had approximately 140 employees. The
number of part-time employees fluctuates during peak seasonal periods. The
Company has no collective bargaining agreements covering any of its
employees, has not experienced any material labor disruption and is unaware
of any efforts or plans to organize its employees. The Company considers
relations with its employees to be satisfactory.
INTELLECTUAL PROPERTY RIGHTS
The Company's NICKLAUS, JACK NICKLAUS and GOLDEN BEAR brand names are
believed by the Company to be well-recognized by consumers and therefore
important in the sales of its products. the
40
<PAGE>
public identification of these brands has been developed historically through
their association with the personal rights of Jack Nicklaus as a living
individual to commercialize his personality under common law and various
statutes enacted in certain domestic states and foreign countries. As part of
the Reorganization, the Company will acquire from GBI the exclusive
royalty-free rights to utilize and license the major trademarks and service
marks which have been developed under common law prior to the formation of
the Company, including marks previously registered in the United States and
various foreign countries in which products or services are currently sold by
GBI and its licensees, and the right, subject to the approval of GBI, to
obtain the registration of additional trademarks and service marks for the
future expansion of the business of the Company. The Company also will
acquire rights to utilize customer lists, trade secrets, know-how, and
certain copyrighted materials necessary or useful in the conduct of its
business, including intellectual property currently provided to the
predecessors of the Company under license from GBI. See "Certain
Relationships and Related Transactions--Reorganization--Trademark License,"
"Risk Factors--Dependence Upon Jack Nicklaus and Use of the NICKLAUS, JACK
NICKLAUS and GOLDEN BEAR Names and Symbols" and "--Dependence on Licensed
Trademarks."
PROPERTIES
The following table sets forth certain information concerning the
Company's corporate and administrative offices:
<TABLE>
<CAPTION>
APPROXIMATE NATURE
SQUARE OF
LOCATION PRIMARY USE FOOTAGE OCCUPANCY TERM
- ------------------ ------------------------------------- -------------- ------------ -------
<S> <C> <C> <C> <C>
North Palm Beach,
Florida ........ Corporate and administrative offices 16,000 Lease 2000
Singapore ........ Corporate and administrative offices 3,000 Lease 1997
</TABLE>
The Company subleases its corporate headquarters in North Palm Beach,
Florida from GBI, a private company controlled by Nicklaus Family Members.
The Company believes that its corporate and administrative offices are
adequate and suitable for its current needs. See "Certain Relationships and
Related Transactions--Reorganization--Sublease and Sharing Agreement." The
Company has also commenced the operations of three golf instruction and
practice facilities and has entered into agreements or letter agreements
regarding the proposed acquisition of four additional existing facilities and
two facilities currently under development which are described under "The
Company--Recent Acquisitions."
GOVERNMENTAL REGULATION
The Company's golf centers and its golf course and construction operations
are subject to various federal, state, local and foreign laws and regulations
designed to protect the environment from waste emissions, the handling,
treatment and disposal of solid and hazardous wastes and the remediation of
contaminates associated with the use and disposal of hazardous substances.
Although the Company believes that it is in substantial compliance with all
such laws, ordinances and regulations applicable to its properties and
operations, there can be no assurance that compliance with such requirements
in the future will not have a material adverse effect on the Company's
financial condition. It is the Company's general practice to hire
environmental consultants to conduct environmental assessments, including
invasive procedures such as soil sampling or ground water analysis, on golf
facilities it owns, operates or intends to acquire or develop, in some cases
only limited invasive procedures are conducted on such properties.
Accordingly, there may be environmental liabilities or conditions associated
with such properties of which the Company is not aware. The Company is also
subject to the federal Occupational Safety and Health Act and other laws and
regulations affecting the safety and health of employees. Further, 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. Additionally, certain
restaurants and snack bars at the Company's golf facilities serve alcoholic
beverages and are subject to certain state "dram shop" laws, which provide a
person injured
41
<PAGE>
by an intoxicated individual the right to recover damages from an
establishment that wrongfully served such beverages to the intoxicated
individual. The Company will also be subject to foreign immigration, labor,
safety and environmental laws in those jurisdictions where the Company
performs services.
LEGAL PROCEEDINGS
The Company is a party to various legal proceedings that have arisen in
the ordinary course of its business. The Company does not believe that it is
currently involved in any legal proceedings which, individually or in the
aggregate, could be expected to have a material adverse effect on its
operations or financial position.
42
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth the names and ages of the directors and
executive officers of the Company as well as the positions and offices held
by such persons. Each of the Company's executive officers is currently
employed by and provides services to GBI and/or various of the Operating
Subsidiaries. Upon completion of the Offering, each of the Company's
executive officers other than Messrs. Nicklaus, Bellinger and Bates, will be
employed solely by the Company. Messrs. Bellinger and Bates have agreed to
dedicate a minimum of 80% of their business time to providing services to the
Company. Mr. Nicklaus, in addition to the time necessary to serve as Chairman
of the Board, will only be required to spend a maximum of ten days performing
personal services or making appearances in connection with the Company's
licensing arrangements and marketing partnerships. A summary of the
background and experience of each of these individuals is set forth after the
table. The officers of the Company serve at the discretion of the Company's
Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---------------------- ------ ------------------------------------------------
<S> <C> <C>
Jack W. Nicklaus .... 56 Chairman of the Board
Richard P. Bellinger 44 President, Chief Executive Officer and Director
Mark F. Hesemann .... 42 Senior Vice President and Director
Thomas P. Hislop .... 39 Senior Vice President and Director
Jack P. Bates ........ 36 Senior Vice President and Chief Financial Officer
</TABLE>
JACK W. NICKLAUS serves as the Chairman of the Board of the Company. Mr.
Nicklaus founded GBI in 1970 and has served as Chairman of the Board of GBI
since its inception. Mr. Nicklaus, who has been a professional golfer for
over 35 years, continues to be one of professional golf's most recognized
players. Mr. Nicklaus also has over 25 years experience as a golf course
designer, having designed 124 courses in 23 countries. Mr. Nicklaus received
the Athlete of the Decade Award (1970-1979) from SPORTS ILLUSTRATED magazine
and the Golfer of the Century Award in 1988.
RICHARD P. BELLINGER is a member of the Company's Board of Directors and
serves as the President and Chief Executive Officer of the Company. Mr.
Bellinger joined GBI in 1979 as Controller for the golf course and real
estate development areas of GBI. In 1981, he was promoted to Treasurer, and
in 1984, became GBI's Chief Financial Officer. Mr. Bellinger was promoted to
Chief Operating Officer of GBI in 1985 and was named President in 1989. Mr.
Bellinger graduated from the University of Miami where he earned both his BBA
in accounting and his MBA.
MARK F. HESEMANN is a member of the Company's Board of Directors and
serves as the Senior Vice President of the Company, with primary
responsibility for the Company's Golf Division. Mr. Hesemann joined GBI in
1982 as Director of Marketing. He became Executive Vice President of Jack
Nicklaus Club Management, a division of GBI in 1984 and was named Vice
President of GBI in 1985 with responsibility for marketing of Jack Nicklaus
Golf Services, the golf course design division of GBI. He became General
Manager of Jack Nicklaus Golf Services in 1986 and assumed the additional
responsibility of Senior Vice President of GBI in 1992. From October 1994 to
January 1996, Mr. Hesemann served as Managing Director in charge of all of
GBI's business in Asia. Mr. Hesemann graduated from Indiana University where
he earned both a BS in Marketing and an MBA in International Finance.
THOMAS P. HISLOP is a member of the Company's Board of Directors and
serves as a Senior Vice President of the Company, with primary responsibility
for the Company's Marketing Division. Mr. Hislop joined GBI in 1984 as
Director of Marketing. Mr. Hislop became Vice President of Marketing in 1985
with responsibility for Jack Nicklaus' marketing and endorsement
relationships. Mr. Hislop was named General Manager of Jack Nicklaus
Marketing Services in 1986, Senior Vice
43
<PAGE>
President of GBI in 1992 and member of GBI's Executive Committee in 1994. Mr.
Hislop completed his undergraduate education at Bucknell University and
obtained his MBA from Harvard Business School.
JACK P. BATES serves as a Senior Vice President and the Chief Financial
Officer of the Company. Mr. Bates joined GBI in 1984. From 1985 to 1993, he
served as Treasurer and became Chief Financial Officer, Senior Vice President
and an Executive Committee member of GBI in 1993. Mr. Bates is a member of
the Florida Institute of Certified Public Accountants. He received a Bachelor
of Science Degree in Accounting from Florida Southern College.
BOARD OF DIRECTORS
GENERAL. The Board of Directors of the Company is currently comprised of
four directors. The Company anticipates that the Board of Directors will be
comprised of seven directors, including the four current directors and three
independent directors to be appointed as soon as practicable but no later
than 90 days after consummation of the Offering. The directors will be
divided into three classes at the first annual meeting of shareholders after
the Offering. At such meeting, one class will be elected to serve a term
expiring one year thereafter, the second class will be elected to serve for a
term expiring two years thereafter and the third class will be elected to
serve for a term expiring three years thereafter. After expiration of such
initial terms, each class will be elected for a three-year term. Directors
may be removed only for cause and only by the affirmative vote of holders of
greater than 66 2/3 % of the total voting power of the Company.
COMMITTEES. Upon election of the additional directors, the Board of
Directors will establish an Audit Committee and a Compensation Committee. The
Audit Committee, which will consist of at least a majority of directors who
are not employees of the Company, will, among other things, make
recommendations to the Board of Directors regarding the independent auditors
for the Company, approve the scope of the annual audit activities of the
independent auditors and review audit results and have general responsibility
for all auditing related matters. The Compensation Committee will consist
entirely of directors who are not employees of the Company. The Compensation
Committee will recommend to the Board of Directors compensation plans and
arrangements with respect to the Company's executive officers and will
administer certain employee benefit plans, including the Company's 1996 Stock
Option Plan.
COMPENSATION OF DIRECTORS. The Company intends to implement a compensation
program for non-employee directors pursuant to which such directors will
receive fees and stock options. Non-employee directors will be entitled to
receive $20,000 per year for his or her services as a director plus
reimbursement of travel expenses to board and committee meetings. Pursuant to
the Company's 1996 Stock Option Plan, non-employee directors automatically
are granted each year, on the first business day following the Company's
annual meeting of shareholders, non-qualified options to purchase 1,000
shares of Class A Common Stock at an exercise price equal to the fair market
value of the Common Stock on the date of grant, and having a term of ten
years. Directors who are also employees of the Company will receive no
additional compensation for service as a director other than reimbursement of
out-of-pocket travel expenses associated with attendance at meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the Offering, the Company had no separate compensation committee
or other board committee performing equivalent functions. The Company's Board
of Directors carried out this function. Each of the directors of the Company
participated in deliberations concerning executive compensation.
44
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the total compensation earned by Mr.
Nicklaus and the Company's four most highly compensated executive officers
for services rendered in all capacities to GBI and the Operating Subsidiaries
for the fiscal year ended December 31, 1995.
SUMMARY HISTORICAL COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------
OTHER ANNUAL ALL OTHER
SALARY BONUS COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(2) ($) ($) ($)(3)
- --------------------------------------- ------- ---------- --------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Jack W. Nicklaus 1995 800,000 0 -- 8,550
Chairman of the Board
Richard P. Bellinger 1995 400,000 16,250 -- 58,176
President and Chief Executive Officer
Mark F. Hesemann 1995 172,700 8,125 -- 40,604
Senior Vice President
Thomas P. Hislop 1995 175,000 9,800 -- 21,396
Senior Vice President
Jack P. Bates 1995 150,000 5,417 -- 20,330
Senior Vice President and Chief
Financial Officer
<FN>
- --------
(1) Only approximately 50% of the amounts included in the "Annual
Compensation" and "All Other Compensation" columns for Messrs. Bellinger,
Hesemann and Bates and 15% of such amounts for Mr. Nicklaus, were
expenses allocated to the Predecessor Companies for services rendered by
such individuals to such companies and reflected in the historical
financial statements of the Company. The remainder of such amounts were
expenses allocated to divisions of GBI and its affiliates not being
contributed to the Company pursuant to the Reorganization.
(2) Pursuant to employment agreements with the Company, Messrs. Nicklaus,
Bellinger, Hesemann, Hislop and Bates will receive base salaries of
$125,000, $450,000, $210,000, $210,000 and $160,000. See
"Management--Employment Agreements."
(3) The amounts included in the "All Other Compensation" column represent
matching contributions made by the Company under the Company's 401(k)
plan, allowances for automobile related expenses and profit sharing
contributions.
</FN>
</TABLE>
1996 STOCK OPTION PLAN
The Company's 1996 Stock Option Plan was adopted in July 1996. A total of
675,000 shares of Class A Common Stock may be issued under the 1996 Stock
Option Plan. The Company has granted under the 1996 Stock Option Plan,
subject to the closing of the Offering, options to purchase 384,000 shares of
Class A Common Stock, exercisable at the initial public offering price set
forth on the cover page hereof. Messrs. Bellinger, Hesemann, Hislop and Bates
have received options to purchase 96,000, 32,000, 32,000 and 32,000 shares of
Class A Common Stock, respectively, pursuant to their employment agreements.
Additionally, pursuant to an employment agreement with Mr. Nicklaus, the
Company has agreed to grant Mr. Nicklaus options to purchase 65,000 shares of
Class A Common Stock each year for a period of four years, commencing one
year after consummation of the Offering at the fair market value on the date
of grant. See "Management--Employment Agreements."
Pursuant to the 1996 Stock Option Plan, the Company may grant incentive
stock options within the meaning of Section 422A of the Internal Revenue Code
of 1986, as amended (the "Code"), to employees, and non-qualified stock
options to non-employee directors, independent contractors and agents, as
well as to employees of the Company. The 1996 Stock Option Plan provides for
administration by a committee of the Board of Directors. As stated above, the
compensation committee of the Board of Directors (the "Compensation
Committee"), once it is established, will administer the 1996 Stock Option
Plan.
45
<PAGE>
The Compensation Committee will select the optionees (excluding
non-employee directors), authorize the grant of options and determine the
exercise price, terms and vesting schedule for options. The Compensation
Committee also has the authority to prescribe, amend and rescind rules and
regulations relating to the Plan, to accelerate the exercise date of any
option, to delegate authority to specific members or a committee of
management, and to interpret the Plan and make all necessary determinations
in administering the Plan. All options granted under the Plan shall be
evidenced by written option agreements, which shall contain such provisions,
including, without limitation, restrictions upon the exercise of the options,
as the Compensation Committee shall determine.
Under the 1996 Stock Option Plan, an option to purchase 1,000 shares shall
be granted to each person who is a non-employee director on the first
business day following the annual meeting of shareholders of the Company.
These non-employee director options shall terminate 10 years from the date of
grant.
The per share exercise price of an option shall be as determined by the
Compensation Committee, provided that the exercise price of incentive stock
options and non-qualified stock options may not be less than fair market
value on the date of grant and shall be equal to the fair market value on the
date of grant for non-qualified stock options granted to non-employee
directors. Further, no person who owns, directly or indirectly, at the time
of the granting of an incentive stock option to such person, 10% or more of
the total combined voting power of all classes of stock of the Company (a
"10% Shareholder") shall be eligible to receive any incentive stock options
under the 1996 Stock Option Plan unless the exercise price is at least 110%
of the fair market value of the shares of Class A Common Stock subject to the
option, determined on the date of grant. The purchase price for shares
acquired pursuant to the exercise of an option shall be as determined by the
Compensation Committee and may consist of cash, check, promissory note,
surrender of other shares of the Company's capital stock, or any combination
thereof.
No stock options may be transferred by an optionee other than by will or
the laws of descent and distribution or pursuant to a qualified domestic
relations order, and, except with respect to a qualified domestic relations
order, during the lifetime of an optionee, the option will be exercisable
only by the optionee. Notwithstanding the foregoing, to the extent permitted
by applicable law and Rule 16b-3 under the Securities Exchange Act of 1934,
the Compensation Committee may permit an optionee to (i) designate in writing
during the optionee's lifetime a family member or a trust established
primarily for the benefit of the optionee or a family member (a
"Beneficiary"), to receive and exercise the optionee's non-qualified stock
options in the event of such optionee's death or (ii) transfer a
non-qualified stock option to a Beneficiary, a trust or a charitable
organization. In the event of termination of employment other than by reason
of retirement or as a result of termination by the Company for deliberate,
willful or gross misconduct, the option will be exercisable within twelve
months after such termination (unless otherwise determined by the
Compensation Committee) to the extent the option was exercisable as of the
date of termination. Upon termination of employment of an optionee by reason
of such employee's retirement, such optionee's options remain exercisable for
thirty-six months thereafter to the extent such options were exercisable on
the date of such termination. In the event of termination of employment of an
optionee by the Company for deliberate, willful or gross misconduct, all
stock options held by such optionee will be immediately cancelled and will
not be exercisable, unless otherwise determined by the Compensation
Committee. Upon termination of employment by reason of death, such optionee's
options remain exercisable, subject to certain limitations by the optionee's
legal representative or heir, but only to the extent such options were
exercisable as of the date of death (unless otherwise determined by the
Compensation Committee). The exercise of any option after termination of
employment may be subject to the condition that the optionee not engage in
deliberate action which, as determined by the Compensation Committee, causes
substantial harm to the interests of the Company or constitutes a breach of
any obligation of the optionee to the Company. In no case may options be
exercised later than the expiration date of the stock options originally
specified in the option agreements. In the event of change of control of the
Company, all options then outstanding under the plan will become immediately
exercisable.
46
<PAGE>
The 1996 Stock Option Plan will expire in 2006 unless terminated earlier
by the Board of Directors. No options granted under the 1996 Stock Option
Plan can be exercised more than 10 years from the date of grant. Incentive
stock options issued to a 10% Shareholder are limited to a five year term.
Shares under any unexercised options that expire or that terminate upon an
employee's ceasing to be employed by the Company become available again for
issuance under the 1996 Stock Option Plan.
The 1996 Stock Option Plan may be amended or terminated by the Board of
Directors without shareholder approval, except that no amendment which
increases the maximum aggregate number of shares which may be issued under
the 1996 Stock Option Plan, changes the class of persons who are eligible to
participate in the 1996 Stock Option Plan or materially increases the
benefits accruing to the participants, may be made without the approval of
the shareholders of the Company. No amendment or termination of the 1996
Stock Option Plan will affect previously granted awards without the
optionee's consent unless the Compensation Committee determines that such
amendment is in the best interest of the shareholders or optionees.
ANNUAL INCENTIVE PLAN
The Company's annual incentive compensation plan (the "Annual Incentive
Plan") is designed to motivate employee participants to achieve the Company's
annual strategic goals. Only certain employees are eligible to participate in
the Annual Incentive Plan. Under the Annual Incentive Plan, each
participating employee is assigned a target bonus award representing up to a
specified percentage of his or her annual base salary that will be paid if
the Company's annual performance objectives and the participant's individual
performance objectives are achieved. Company performance objectives are
established by senior management members for each fiscal year and individual
performance objectives are established by the manager of the applicable
subsidiary or division of the Company for each fiscal year. Performance
objectives and awards for executive officers under the Annual Incentive Plan
will be made by the Compensation Committee for recommendation to the full
Board of Directors. Payouts are determined annually following determination
of the Company's fiscal year-end results, and the Company intends to make the
payments in quarterly installments to participants who remain employed at
that time or, in the Company's discretion, to participants who have ceased to
be employed by the Company. The Annual Incentive Plan is subject to amendment
or termination at any time, but no such action may adversely affect any
rights or obligations with respect to any awards theretofore made under the
Annual Incentive Plan.
EMPLOYEE SAVINGS PLAN
The Company also sponsors a defined contribution profit-sharing plan (the
"401(k) Savings Plan"). Under the Plan, each participant may, subject to the
requirements and limitations imposed on 401(k) plans under the Code, elect to
have up to 15% of his or her annual earnings deferred and contributed to the
Plan. All full-time employees of the Company who are at least 21 years old
are eligible to participate in the 401(k) Savings Plan on the first day of
the quarter following the employee's date of hire. Under the 401(k) Savings
Plan, the Company may, in its discretion, match the participant's annual
contributions in cash or shares of Class A Common Stock, up to a maximum
amount to be determined by the Company each year. The 401(k) Savings Plan
also allows the Company to make other discretionary contributions, including
profit sharing contributions, which will be administered by the Compensation
Committee.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Mr. Nicklaus,
effective upon consummation of the Offering, which provides for an annual
base salary of $125,000, subject to annual increases thereafter as determined
by the Compensation Committee. The Company will employ Mr. Nicklaus for a
period of five years, which period is automatically extended for additional
one year periods until the employment agreement is terminated by the Company
or Mr. Nicklaus. Pursuant to the terms of this agreement, in addition to the
time associated with serving as the Chairman of the
47
<PAGE>
Board of the Company, Mr. Nicklaus will be required to spend a maximum of ten
days performing personal services or making appearances in connection with
the Company's licensing arrangements and marketing partnerships. Compensation
for any additional days in which Mr. Nicklaus agrees to provide such personal
services or appearances on behalf of the Company will be agreed upon by the
Company and Mr. Nicklaus on a case-by-case basis. Mr. Nicklaus will also be
entitled to receive options to purchase 65,000 shares of Class A Common Stock
each year, for a period of four years, commencing one year after consummation
of the Offering. The options will be immediately exercisable upon grant, will
expire in 2006 and will have a per share exercise price equal to the fair
market value on the date of grant. In the event of Mr. Nicklaus' death, Mr.
Nicklaus' heirs will be entitled to continue to receive the stock options
which Mr. Nicklaus would have been entitled to receive under the employment
agreement.
The Company has also entered into employment agreements with Messrs.
Bellinger, Hesemann, Hislop and Bates (the "Employment Agreements"),
effective upon consummation of the Offering, which provide for an annual base
salary and certain other benefits. Pursuant to the Employment Agreements, the
fiscal 1996 base salaries of Messrs. Bellinger, Hesemann, Hislop and Bates
for the services provided to the Company are to be $450,000, $210,000,
$210,000 and $160,000, respectively, subject in each case to annual increases
thereafter as determined by the Compensation Committee. The Employment
Agreements also provide for the payment of annual performance-based
additional compensation through the Company's Annual Incentive Plan, equal to
a percentage of such executive's base salary, based on the achievement by the
Company and the executive of certain pre-established performance objectives.
Under the terms of the Employment Agreements, the Company will employ Messrs.
Bellinger, Hesemann, Hislop and Bates for periods extending through September
30, 2001, March 31, 2001, September 30, 2000 and March 31, 2000,
respectively, which periods are automatically extended for additional
two-year periods until their respective Employment Agreements are terminated
by the Company or the executive.
Pursuant to the Employment Agreements, if Messrs. Bellinger, Hesemann,
Hislop or Bates are terminated by the Company without "cause" (as defined in
each Employment Agreement), if the Company does not renew their employment
upon the expiration of the original term or any renewal term or if such
executive terminates the Employment Agreement for "good reason" (as defined
in the Employment Agreement), which would include a material breach by the
Company under the agreement or a material reduction in such executive's
duties or responsibilities, such executive will: (i) be entitled to continue
to be paid for the greater of the remainder of the current term or two years
(a) his base salary (as in effect at the time of termination of the
Employment Agreement (the "Base Salary")) and (b) annual additional
compensation equal to the average of the actual additional incentive
compensation paid to him prior to such termination for the most recent fiscal
year prior to termination (the "Bonus Compensation"); (ii) continue to
receive health insurance benefits for himself and his family for a period of
18 months; and (iii) not be subject to a covenant not to compete provided for
in such Employment Agreement. If an executive's employment is terminated for
any of the reasons listed above within one year of a change of control of the
Company, the executive will be entitled to receive all of the amounts
described above in a lump sum cash payment. If any of the executives are
terminated for cause or resigns, the payment of salary and additional
compensation will cease. In the event such executive's employment is
terminated due to death or "disability" (as defined in the agreement), such
executive or his legal representative (as applicable) will be paid (i) such
executive's Base Salary for a period of two years from the date of
termination and (ii) the cost of health insurance benefits for himself and
his family for a period of 18 months.
Pursuant to the Employment Agreements, each of the executives have agreed
to devote their full business time (except for Messrs. Bellinger and Bates,
who are required to dedicate at least 80% of their business time) to
providing services to the Company. The remainder of Messrs. Bellinger's and
Bates' business time may be spent on management of other entities, including
those controlled by Jack Nicklaus. Each Employment Agreement also contains
certain confidentiality and non-competition provisions.
48
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Class A Common Stock and Class B Common
Stock (after giving pro forma effect to the Reorganization) immediately prior
to and immediately following the Offering by (i) each person or entity who is
the beneficial owner of five percent or more of the outstanding shares of
Class A Common Stock or Class B Common Stock, (ii) each director and named
executive officer of the Company and (iii) all directors and executive
officers of the Company as a group. The business address of each five percent
holder is the Company's corporate address. As described in the notes to the
table, voting and/or investment power with respect to certain shares of
Common Stock is shared by the named individuals. Consequently, such shares
may be shown as beneficially owned by more than one person.
<TABLE>
<CAPTION>
TOTAL COMMON STOCK
------------------------------
NUMBER OF NUMBER OF
SHARES OF SHARES OF
CLASS A CLASS B PERCENT OF
COMMON STOCK COMMON STOCK TOTAL VOTING PERCENT OF
OWNED PRIOR OWNED PRIOR POWER PRIOR TOTAL VOTING
TO THE TO THE TO THE POWER AFTER
BENEFICIAL OWNER OFFERING OFFERING(1) OFFERING THE OFFERING
- ----------------------------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Jack W. Nicklaus(2)(4)(5) ............... 240,000 2,760,000 100.0% 93.9%
Golden Bear International, Inc.(3) ..... -- 1,320,000 47.4% 44.5%
Richard P. Bellinger and
Barbara B. Nicklaus, as
co-trustees(4) ........................ -- 573,600 20.6% 19.4%
Richard P. Bellinger(4)(5) .............. 120,000 -- * *
Mark F. Hesemann(5) ..................... 40,000 -- * *
Thomas P. Hislop(5) ..................... 40,000 -- * *
Jack P. Bates(5) ........................ 40,000 -- * *
All directors and executive officers as
a group (5 persons)(2)(4)(5)(6) ....... 240,000 2,760,000 100.0% 93.9%
<FN>
- ---------
* Represents less than 1% of the total.
(1) Each share of Class B Common Stock is convertible at the option of the
holder into one share of Class A Common Stock and is automatically
converted into a share of Class A Common Stock upon transfer to a person
who is not a Nicklaus Family Member or if the total number of shares of
Class B Common Stock is less than 20% of the aggregate number of shares
of Common Stock outstanding on the record date of any shareholders
meeting. See "Description of Capital Stock."
(2) Includes the 573,600 shares of Class B Common Stock held in family trusts
for the benefit of Mr. Nicklaus' children, and the 240,000 shares of
Class A Common Stock pledged to Mr. Nicklaus by Messrs. Bellinger,
Hesemann, Hislop and Bates as to which Mr. Nicklaus disclaims beneficial
ownership. Also includes the 1,320,000 shares of Class B Common Stock
owned of record by GBI.
(3) Mr. Nicklaus is the Chairman of the Board and the beneficial owner of the
controlling interest in GBI and, accordingly, will be deemed to
beneficially own all such shares.
(4) All 573,600 shares of Class B Common Stock are held by Mr. Bellinger and
Mrs. Nicklaus as co-trustees of trusts for the benefit of Mr. and Mrs.
Nicklaus' children. Mr. Bellinger and Mrs. Nicklaus disclaim beneficial
ownership of such shares. All of these shares are subject to a
shareholders' agreement with Mr. Nicklaus which, among other things,
grants to Mr. Nicklaus the right to vote all such shares and imposes
certain limitations on the transfer of such shares. Certain of these
shares are pledged to Mr. Nicklaus to secure loans made by Mr. Nicklaus
to each of the trusts to fund the purchase by the trusts of additional
shares of Golf Centers. These pledged shares are subject to further
restrictions prohibiting the sale or other disposition of any such shares
for a two year period. See "Certain Relationships and Related
Transactions--Shareholders' Agreements."
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<PAGE>
(5) Messrs. Bellinger, Hesemann, Hislop and Bates acquired shares of the
capital stock of Golf Centers immediately prior to signing of the
Reorganization Agreement. As a consequence of the Reorganization, Messrs.
Bellinger, Hesemann, Hislop and Bates received shares of the Company's
Class A Common Stock in exchange for their shares in Golf Centers. See
"The Company--Reorganization." All of such shares are pledged to Mr.
Nicklaus to secure loans made by Mr. Nicklaus to such individuals to fund
the purchase of such shares. All of these shares are subject to
shareholder agreements with Mr. Nicklaus, prohibiting each of Messrs.
Bellinger, Hesemann, Hislop and Bates from, without the consent of Mr.
Nicklaus, selling or otherwise disposing of any such shares for a
two-year period ending in June 1998, granting Mr. Nicklaus the right to
vote all of such shares until such shares are sold or transferred to a
third party and imposing certain limitations on the transfer of such
shares. See "Certain Relationships and Related
Transactions--Shareholders' Agreements." Mr. Nicklaus disclaims
beneficial ownership of such shares.
(6) Excludes stock options with respect to a total of 192,000 shares granted
to executive officers and directors of the Company immediately prior to
the Offering. See "Management--Executive Compensation--1996 Stock Option
Plan."
</FN>
</TABLE>
50
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FAMILY RELATIONSHIPS
As described under the heading "Reorganization," various businesses and
operations were contributed to the Company by GBI and its affiliates. Mr.
Nicklaus, who founded GBI in 1970, is the principal shareholder of GBI and
will also be the Chairman of the Board and the principal shareholder of the
Company. See "Risk Factors--Potential Conflicts of Interest" and "The
Reorganization."
As used in this Prospectus, the term "Nicklaus Family Member" includes the
following persons: (i) Jack W. Nicklaus, Barbara B. Nicklaus and their
estates, guardians, conservators, committees or attorneys-in-fact; (ii) each
lineal descendant of Jack W. Nicklaus and Barbara B. Nicklaus (a "Nicklaus
Descendant") and their respective guardians, conservators, committees or
attorneys-in-fact; (iii) each "Family Controlled Entity" (as defined below);
and (iv) the trustee, in their respective capacities, as such, of each
"Family Controlled Trust" (as defined below). The term "Family Controlled
Entity" means (i) any not-for-profit corporation if at least 80% of its Board
of Directors is composed of Mr. Nicklaus and/or Nicklaus Descendants; (ii)
GBI and any other corporation if at least 80% of the value of its outstanding
equity is owned by Nicklaus Family Members; (iii) any partnership if at least
80% of the value of its partnership interests are owned by Nicklaus Family
Members; and (iv) any limited liability or similar company if at least 80% of
the value of the company is owned by Nicklaus Family Members. The term
"Family Controlled Trust" includes certain trusts existing on the date hereof
and trusts, the primary beneficiaries of which are Mr. Nicklaus, Nicklaus
Descendants, spouses of Nicklaus Descendants and/or charitable organizations,
provided that if the trust is a wholly-charitable trust, at least 80% of the
trustees of such trust consist of Mr. Nicklaus and/or Nicklaus Descendants.
REORGANIZATION
Immediately prior to the consummation of the Offering, the Company, its
shareholders, GBI and certain other Nicklaus Family members will consummate
the Reorganization. As a result of the Reorganization, GBI will contribute to
the Company certain assets and Messrs. Bellinger, Hesemann, Hislop and Bates,
Mr. Nicklaus and certain other Nicklaus Family Members will contribute to the
Company their shares in the Operating Subsidiaries, in exchange for shares of
the Company's Common Stock. Additionally, in connection with the transactions
described under the heading "Reorganization," the Company entered into
various agreements with GBI, which will, following completion of the
Offering, continue to be involved in or affiliated with the businesses of (i)
golf course design and consulting, (ii) residential community development,
(iii) daily fee golf course development, (iv) the manufacture and marketing
of golf clubs and equipment, (v) the creation, production and marketing of
golf and other sporting events, (vi) the creation, development and editing of
books, articles and print media creative works and (vii) a membership club
offering golf improvement tips. The terms of these agreements were
established by Mr. Nicklaus and management of GBI and are not the result of
arm's-length negotiations. There is no assurance that these agreements are on
terms as favorable as those which could have been obtained in arm's-length
transactions. All of these agreements will be effective only upon
consummation of the Offering. See "Risk Factors--Potential Conflicts of
Interest."
TRADEMARK LICENSE
Pursuant to a Trademark License Agreement (the "License Agreement"), GBI
has granted to the Company a royalty-free, exclusive right (subject to the
exceptions described below) to utilize and sublicense all major trademarks,
tradenames and service marks owned or developed by GBI, including the GOLDEN
BEAR, NICKLAUS and JACK NICKLAUS trademarks (collectively, the "Licensed
Marks") in any jurisdiction worldwide in which GBI has trademark rights, and
the right, subject to the approval of GBI, to obtain the registration of
additional trademarks and service marks related to the Nicklaus name deemed
by the Company to be necessary or prudent to the maintenance and future
expansion of the Company. The Company has the right to sublicense the
Licensed Marks provided such sublicense is expressly subject to the terms of
the License Agreement. Subject to receipt of GBI's approval which
51
<PAGE>
shall not be unreasonably withheld or delayed, the Company will have the
right to adopt and use any mark which is similar in sound or appearance to
any of the Licensed Marks subject to compliance with quality standards. GBI
has also granted to the Company the right to use the name, likeness,
nickname, biographical data and other identifying characteristics of Mr.
Nicklaus in connection with the advertising, promotion, sale or rendering of
the Company's products or services throughout the world. GBI has retained the
exclusive right to utilize and license any of the Licensed Marks in
connection with and limited to its continuing businesses (such businesses
being hereinafter referred to as the "Retained Businesses"), which are
limited to (i) golf course design and consulting; (ii) residential community
development; (iii) the creation, sponsorship, production and marketing of
golf and other sporting events; (iv) daily fee golf course development; (v)
the manufacture and marketing of golf clubs and equipment; (vi) the creation,
development, editing and distribution of books, articles and print media
creative works including audiovisual media programming and properties
including video games; and (vii) a membership club offering golf improvement
tips. Additionally, by virtue of a Memorandum of Understanding among
predecessors of the Company and Suntory Limited, a Japanese corporation, the
Company will be required to offer to Suntory a right of first refusal to
participate in any business or licensing arrangement generally relating to a
non-golf sporting goods business in which the Company proposes to engage in
Japan or South Korea utilizing any of the Licensed Marks. Such arrangement
could deter the Company's ability to expand its business in such area into
those territories in the future.
Pursuant to the License Agreement, in the event GBI decides to assign,
transfer or otherwise convey its legal title and ownership interest in any of
the Licensed Marks, GBI must first offer to transfer such interests to the
Company for nominal consideration, subject to GBI's exclusive rights with
respect to the Retained Businesses. In the event GBI desires to negotiate
with any third party (other than a Nicklaus Family Member) to (i) assign,
convey or transfer its ownership interest in or to license substantially all
of its beneficial interest in the right to license and utilize any part of
the Licensed Marks in connection with the Retained Businesses or (ii)
otherwise divest itself of all or substantially all of the assets, equity
holdings or business opportunities relating to any of the Retained
Businesses, GBI has agreed to enter into good faith negotiations with the
Company for a period of sixty days for the acquisition by the Company of any
such rights, assets or businesses which GBI desires to transfer to third
parties.
The License Agreement also contains provisions which are intended to
assure the quality of the goods produced and services rendered under the
Licensed Marks including the obligation of the Company to produce goods that
meet established standards of quality. New products will be subject to
quality standards which GBI must approve, which approval shall not be
unreasonably withheld. In order to insure the quality standards, the Company
has agreed to furnish, at GBI's request, samples of any product and to allow
GBI or its designee to inspect the Company's goods and services. In addition,
all advertising and labeling of the Company's products must be in conformity
with good industry practice and must be submitted to GBI for approval, which
shall not be unreasonably withheld. Under the License Agreement, GBI is also
required to maintain certain quality standards with respect to its goods and
services using the NICKLAUS, JACK NICKLAUS and GOLDEN BEAR trademarks.
Under the terms of the License Agreement, the Company will bear the cost
of filing and maintenance of registration of the Licensed Marks and will
advance to GBI any governmental fees and out-of-pocket expenses, including
attorneys' fees in connection with filing or maintenance of registrations or
trademark litigation involving the Licensed Marks. GBI has also agreed to
maintain registrations for as long as the Company is using the mark and will,
upon request of the Company, file applications to register any of the
Licensed Marks in any country where the Licensed Marks are not presently
registered.
GBI has also granted the Company a security interest in the Licensed Mark
for the purpose of securing a claim for damages which the Company would incur
in the event that the license granted to the Company were rejected in a
future bankruptcy proceeding. The term of the Company's license is initially
for a period of thirty years but is renewable by the Company for additional
ten-year periods thereafter and may only be terminated by GBI, after notice,
in the event the Company abandons its use
52
<PAGE>
of all or substantially all of the Licensed Marks in all or substantially all
of the countries where the Company has the right to use the Licensed Marks or
materially breaches the License Agreement or following a material breach by
the Company after notice and an opportunity to cure and following the
completion of arbitration. In the event that an arbitrator determines that
there has been a material breach, the Company will be afforded an additional
opportunity to cure the breach or, if such breach is not subject to cure and
the arbitrator has determined actions or payments which would appropriately
ameliorate such breach, an additional period of time to do so. The Company
may transfer its rights under the License Agreement, without the consent of
GBI, by assignment or by operation of law, to any entity which acquires all
or substantially all of the Company's licensing business and which agrees in
writing to accept and be bound by all of the terms and conditions of the
agreement to the extent such undertaking is not made by operation of law.
AGREEMENTS REGARDING CORPORATE HEADQUARTERS IN NORTH PALM BEACH, FLORIDA
The Company subleases its corporate headquarters in North Palm Beach,
Florida from GBI pursuant to a Sublease and Sharing Agreement. The sublease
commences concurrently with the consummation of the Offering and terminates
January 31, 2000. The terms of the sublease are expressly subject to the
provisions of a Lease Agreement between the third party unaffiliated lessor,
Golden Bear Plaza Associates and GBI, as lessee (the "Primary Lease").
Aggregate monthly rent under the Primary Lease, including all common area
maintenance, personal property taxes and sales taxes, is $101,630, and
pursuant to the Sublease and Sharing Agreement, the Company is responsible
for 47% of such monthly rent. Such percentage was calculated based on an
estimate of the percentage of the total leased space which will be utilized
by the Company. GBI and the Company have further agreed to share the usage
and costs of all common areas and facilities located in the premises covered
by the Primary Lease (the "Premises"), which generally consist of reception
areas, conference rooms and storage areas.
In connection with the sublease, GBI and the Company also entered into an
Office Staff and Equipment Service Agreement which provides for the sharing
and joint ownership of certain office and business services and equipment,
including the telephone systems, main switchboard, central facsimile
machines, photocopying machines and computer networks. The Company has also
agreed, during the term of the Office Staff and Equipment Service Agreement,
to provide to GBI the services of certain identified office staff and
personnel whom the parties believe can effectively serve the needs of both
organizations and facilitate the joint use of the common areas of the
Premises. Pursuant to the agreement, GBI has agreed to pay to the Company a
monthly management fee equal to fifty percent (50%) of the current cost to
the Company of employing the identified shared office staff and personnel and
a monthly equipment fee equal to fifty percent (50%) of the agreed costs of
service, consumable supplies and maintenance of the shared office and
business equipment. Additionally, the Company will pay GBI a monthly phone
rental fee based upon the Company's pro rata share of GBI's costs of
providing local telephone service. Both the Sublease and Sharing Agreement
and the Office Staff and Equipment Service Agreement will be subject to
future adjustment to re-apportion the costs to be shared by the parties based
upon actual usage.
PERSONAL SERVICES MANAGEMENT AGREEMENT
Pursuant to a Personal Services Management Agreement, GBI and Jack W.
Nicklaus have retained the Company as the exclusive manager and
representative to market the personal endorsement services of Mr. Nicklaus as
a celebrity and corporate spokesman for third parties not affiliated with GBI
or the Company throughout the world. The Company may, during the term of the
agreement, represent, manage or otherwise provide marketing services similar
to those contemplated by the agreement to any other professional golfer
without the prior written consent of GBI, subject to various conditions
restricting the use of any confidential information obtained by the Company
and so long as the Company does not otherwise take unfair advantage of its
corporate affiliations or licensing relationships with GBI or Mr. Nicklaus
(i) to further the interests of any other professional golfer in obtaining
personal service contracts where such contract opportunities would otherwise
be reasonably available to Mr. Nicklaus or (ii) to imply the endorsement of
GBI or Mr. Nicklaus for the personal services of such
53
<PAGE>
a golfer. The services provided by the Company will include development of
personal appearance and personal service opportunities for approval by Mr.
Nicklaus and GBI, reviewing requests from prospective clients, identification
and qualification of prospects, negotiation of contracts for approval by GBI
and Mr. Nicklaus, and coordination of all scheduling and performance under
approved contracts. As compensation for the services to be provided by the
Company under the agreement, GBI will pay the Company, on a monthly basis in
arrears, a percentage of the net revenues (as defined) received by GBI from
endorsement services (i) equal to 30% of all such net revenues recorded under
any existing contract or arrangement or renewal thereof during the term of
the agreement and (ii) a percentage to be negotiated (but in no event less
than 20%) of all such revenues under any new contract (and extensions
thereof) signed or substantially negotiated during the term of the agreement.
The term of the agreement will commence concurrently with the consummation
of the Offering and will expire on December 31, 2006, unless otherwise
terminated or renewed. The Company has the right, upon expiration of the
initial term of this agreement, to continually renew the agreement for
successive three (3) year terms, subject to its satisfactory performance of
its responsibilities to GBI under the agreement through the effective date of
such renewal. The agreement may be terminated by the Company at the end of
any calendar year, commencing with the end of calendar year 1997, upon
written notice to GBI of its intention to terminate not later than July 1 of
the year in which such termination is to be effective. Either party has the
right to terminate the agreement in the event of a material breach by the
other party which is not cured within ninety (90) days after receipt of
written notice specifying the breach.
DESIGN SERVICES MARKETING AGREEMENT
Pursuant to a Design Services Marketing Agreement, GBI has retained the
Company as its exclusive worldwide marketing representative and sales agent
(except for certain exclusions described below) for the purpose of
identifying and negotiating contracts with developers, owners and operators
of golf facilities for GBI's golf course design and consulting services,
including the promotion of the golf course design services of Jack W.
Nicklaus, Jack W. Nicklaus II, Steven C. Nicklaus, Gary T. Nicklaus and other
associated designers employed or retained by GBI. The Company is not required
to represent GBI or its Nicklaus Design division exclusively and may, during
the term of this agreement, participate in the promotion, sale, negotiation,
contracting or performance of golf course design for its own account or on
behalf of any other golf course designer, subject to certain covenants and
conditions. In particular, the Company agrees at all times during the term of
the agreement to use its reasonable efforts to promote the services of
Nicklaus Design throughout the world and to actively encourage all
prospective clients to utilize the services of Nicklaus Design, unless (i)
Nicklaus Design has expressly rejected a client introduced by the Company or
(ii) a client has contacted the Company for the express purpose of obtaining
the services of another golf course designer. Additionally, the Company has
agreed not to utilize any confidential information obtained in connection
with this agreement or any other agreement or association with GBI or a
Nicklaus Family Member to further the interests of any competing golf course
designer or to imply the endorsement of Nicklaus Design or any Nicklaus
Family Member for the services of such a designer.
GBI is free to deal directly with respect to the marketing and negotiation
of contracts, agreements and undertakings to provide any of the following
design services: (i) any design or design consulting services provided for
any entity controlled by, or under common control with GBI or, in the case of
a residential golf community, in which GBI, Jack Nicklaus or any other
Nicklaus Family Members acquire a controlling interest; (ii) any design
services provided as a courtesy or at Nicklaus Design's cost to modify,
upgrade or redesign any existing golf course which was designed or previously
redesigned by GBI or its predecessor entities; or (iii) any daily fee golf
facility developed by GBI, licensed by GBI to operate utilizing GBI's
trademarks on a royalty basis. To the extent the Company provides services to
GBI in connection with any of these particular design services, it will be
entitled to receive reasonable compensation as determined by mutual agreement
of the parties on a case-by-case basis. GBI will have the right to approve,
which approval shall not be unreasonably withheld, any prospective clients
identified by the Company prior to their solicitation by the Company. GBI
will also provide
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<PAGE>
promotional materials and other information regarding GBI's design business
and will provide access to its professional staff in connection with the
marketing of design work.
As compensation for the services provided by the Company under the
agreement, GBI will pay the Company, on a monthly basis in arrears, a
commission at the rate of ten percent (10%) of the gross fees (as defined)
received by GBI from any design contract executed by GBI during the term of
this agreement, except for design contracts for any of the specifically
excluded design services described above. The term of the agreement will
commence concurrently with the consummation of the Offering and will expire
on December 31, 2006, unless otherwise terminated or received. The Company
has the right, upon expiration of the initial term of this agreement, to
continually renew the agreement for successive three (3) year terms, subject
to its satisfactory performance of its responsibilities to GBI under the
agreement through the effective date of such renewal. The agreement may be
terminated by the Company at the end of any calendar year, commencing with
the end of calendar year 2000, upon written notice to GBI of its intention to
terminate not later than July 1 of the year in which such termination is to
be effective. Either party has the right to terminate the agreement in the
event of a material breach by the other party which is not cured within
ninety (90) days after receipt of written notice specifying the breach.
MARKETING, CONSULTING AND COOPERATION AGREEMENT
Pursuant to a Marketing, Consulting and Cooperation Agreement, GBI has
agreed to retain the Company to provide services to Nicklaus Golf Equipment
Company, L.C. ("NGEC") which GBI is currently required to provide to NGEC
relating to certain marketing activities. The Company will receive a fee of
$100,000 per year for such services. NGEC, in which GBI has a 50% ownership
interest, manufactures, markets and distributes golf equipment, including
golf clubs, bags, belts, gloves, carts (other than riding golf cars) and
other accessories (other than items of apparel, footwear and luggage)
utilizing the NICKLAUS, JACK NICKLAUS and GOLDEN BEAR trademarks and
tradenames. The term of the agreement will commence concurrently with the
consummation of the Offering and will expire on December 31, 2006, unless
otherwise terminated or renewed. The Company has the right, upon expiration
of the initial term of this agreement, to continually renew the agreement for
successive three (3) year terms, subject to its satisfactory performance of
its responsibilities to GBI under the agreement through the effective date of
such renewal. The agreement may be terminated by the Company upon ninety (90)
days written notice to GBI, if the time and staff commitments of the Company
are materially increased at any time or, at the end of any calendar year,
commencing with the end of calendar year 1997, upon written notice to GBI of
its intention to terminate the agreement. Either party has the right to
terminate the agreement in the event of a material breach by the other party
which is not cured within ninety (90) days after receipt of written notice
specifying the breach.
REGISTRATION RIGHTS AGREEMENTS
Mr. Nicklaus, GBI, certain Family Controlled Trusts and the Company will
enter into a Registration Rights Agreement (the "Nicklaus Family Registration
Rights Agreement") upon the consummation of the Offering, pursuant to which
each of Mr. Nicklaus, GBI and the Family Controlled Trusts will be granted
three demand registration rights with respect to their shares of Class A
Common Stock (including Class A Common Stock issued upon conversion of Class
B Common Stock) held by them; provided that each such registration includes
at least 33% of their then current holdings or all remaining shares of Class
A Common Stock held by Mr. Nicklaus, GBI and the Family Controlled Trusts.
Additionally, Messrs. Bellinger, Hesemann, Hislop and Bates will, upon
consummation of the Offering, enter into a Registration Rights Agreement (the
"Management Registration Rights Agreement" and, together with the Nicklaus
Family Registration Rights Agreement, the "Registration Rights Agreements"),
pursuant to which each of them will have the right at any time during the
period until two years after repayment of certain loans from Mr. Nicklaus
(see "Certain Relationships and Related Transactions--Shareholders'
Agreements") to cause the Company to file a registration statement for the
proposed sale from time to time of all or any portion of their shares of
Class A Common Stock acquired pursuant to the Reorganization. Each of the
foregoing parties to the
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<PAGE>
Registration Rights Agreements (other than the Company) and Messrs.
Bellinger, Hesemann, Hislop and Bates will also have an unlimited number of
piggyback registration rights in respect of their shares. The Company will
not be required to effect more than one registration of Class A Common Stock
under the Nicklaus Family Registration Rights Agreement in any twelve
calendar month period. The piggyback registration rights will allow the
holders to include their shares of Class A Common Stock in any registration
statement filed by the Company, subject to certain limitations. The Company
may postpone any registration pursuant to these agreements for a period of up
to 90 days if the Company believes that such registration might have a
material adverse effect on any plan or proposal by the Company with respect
to any financing, acquisition, recapitalization, reorganization or other
similar transaction, or the Company is in possession of material non-public
information which if disclosed could result in a material disruption of a
material corporate development or transaction then pending or in progress or
in other material adverse consequences to the Company.
The Company will pay all expenses (other than underwriting discounts and
commissions of the selling shareholders, taxes payable by the selling
shareholders and the fees and expenses of the selling shareholders' counsel)
in connection with any demand registrations, as well as any registrations
pursuant to the exercise of piggyback rights. The Company also will agree to
indemnify such persons against certain liabilities, including liabilities
arising under the Securities Act. The Nicklaus Family Members who are parties
to the Nicklaus Family Registration Rights Agreement will agree not to
exercise their registration rights without the prior written consent of
Merrill Lynch, Pierce, Fenner & Smith Incorporated for a period of 180 days
following the date of this Prospectus. See "Underwriting."
ARRANGEMENTS WITH GBI
A majority of the construction, shaping and consulting contracts received
by Paragon have been entered into with respect to golf courses designed by
GBI, through its Nicklaus Design division. Certain payments under consulting
contracts awarded to Paragon have been remitted directly to GBI. At December
31, 1995, $637,210 of such amounts were due from GBI. Historical revenues of
the Company include 10% of the golf course design fees received by GBI. Such
amounts totalled $953,656, $1,160,371, $1,310,523 and $299,539 in 1993, 1994
and 1995 and the first three months of 1996, respectively.
During the year ended December 31, 1994, Paragon paid off a note payable
to GBI in the amount of $20,593. Additionally, in 1994 Paragon agreed to
build a golf course for GBI at cost. The estimated project cost is $1,360,000
and construction began in February 1995. Approximately 11% of the Company's
revenues in 1995 related to this project.
Historical revenues of the Company also include 30% of net revenues for
GBI's endorsement contracts. Such amounts totalled $116,250, $300,000,
$480,000 and $78,750 in 1993, 1994, 1995 and the first three months of 1996
respectively. In the future, the Company will be entitled to 30% of net
revenues for endorsement contracts (and continuations thereof) entered into
prior to the Reorganization and a percentage to be mutually agreed upon by
the parties but in no event less than 20% of net revenues for new endorsement
contracts.
SHAREHOLDERS' AGREEMENTS
All Nicklaus Family Members that beneficially own shares of Class B Common
Stock as of the date of this Prospectus will enter into a shareholders'
agreement upon consummation of the Offering (the "Family Shareholders'
Agreement"). Each of the shareholders who are parties to the Family
Shareholders' Agreement will assign to Mr. Nicklaus (or GBI, in the event of
the death or incompetence of Mr. Nicklaus) the right to vote all shares of
Class B Common Stock owned by such shareholder in Mr. Nicklaus' discretion on
any and all corporate matters on which such shareholder is entitled to vote.
The Family Shareholders' Agreement will also contain certain limitations on
the transfer of shares of Common Stock owned by the shareholders. In
addition, each shareholder who is a party to the Family Shareholders'
Agreement (the "Offering Shareholders") will grant to the other parties
thereto (the "Offerees") a right of first offer to purchase the shares of
Common Stock the
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<PAGE>
Offering Shareholder intends to sell or transfer to a person (or group of
persons) who is not a trust established for the benefit or certain Nicklaus
Family Members. Each Offeree will have the opportunity to purchase the
Offeree's pro rata portion of the shares to be offered by the Offering
Shareholder, as well as additional shares not purchased by other Offerees.
Any shares not purchased pursuant to the right of first offer may be sold at
or above the price offered to the Offerees. Each shareholder who is a party
to the Family Shareholders' Agreement is also granted the right to purchase a
pro rata portion of the shares owned by any shareholder subject to the
agreement who is declared or adjudicated bankrupt, or the legal termination
of the trust under which such shareholder holds the shares, as well as
additional shares not purchased by other shareholders. The provisions of the
Family Shareholders' Agreement will not apply to any shares of Class A Common
Stock acquired by the stockholders after the Offering.
Certain of the shares of Class B Common Stock owned by certain Family
Controlled Trusts were acquired pursuant to the Reorganization in exchange
for additional shares of the capital stock of Golf Centers purchased by such
trusts for an aggregate purchase price of $900,000 immediately prior to the
Reorganization. All of such shares are pledged to Mr. Nicklaus to secure
loans made by Mr. Nicklaus to such trusts to fund the purchase of such shares
of Golf Centers. The Family Controlled Trusts will be prohibited from
selling, disposing or otherwise transferring any such shares for a period of
two years ending July, 1998.
Messrs. Bellinger, Hesemann, Hislop and Bates acquired shares of the
outstanding capital stock of Golf Centers immediately prior to the
Reorganization for an aggregate purchase price of $600,000. As a consequence
of the Reorganization, Messrs. Bellinger, Hesemann, Hislop and Bates will
receive shares of the Company's Class A Common Stock in exchange for their
shares in Golf Centers. All of such shares are pledged to Mr. Nicklaus to
secure loans made by Mr. Nicklaus to such individuals to fund the purchase of
such shares of Golf Centers. All of such individuals have entered into a
shareholders' agreement with Mr. Nicklaus and the Company (the "Management
Shareholders' Agreement"), pursuant to which they assigned to Mr. Nicklaus
the right to vote all of such shares in Mr. Nicklaus' discretion until such
shares are sold or transferred to a third party. The Management Shareholders'
Agreement also prohibits any of Messrs. Bellinger, Hesemann, Hislop or Bates
from, without the consent of Mr. Nicklaus, selling, disposing or otherwise
transferring any such shares for a period of two years ending July 1998. In
addition, each of Messrs. Bellinger, Hesemann, Hislop and Bates granted to
Mr. Nicklaus a right of first offer to purchase the shares of Class A Common
Stock which he intends to sell or transfer to a person (or group of persons)
who is not a holder of Class B Common Stock. Any shares not purchased
pursuant to the right of first offer may be sold at or above the price
offered to Mr. Nicklaus. Each of Messrs. Bellinger, Hesemann, Hislop and
Bates also granted to Mr. Nicklaus the right to purchase his shares in the
event of his death, declaration or adjudication of personal bankruptcy or
legal declaration of incompetency.
INDEBTEDNESS TO MR. NICKLAUS
Mr. Nicklaus provided a bridge loan of approximately $1.65 million to Golf
Centers in connection with the Acquisitions. The loan is evidenced by a
demand promissory note, bears interest at the Federal Mid-Term annual
interest rate in effect at the time the note was executed and will be repaid
from the proceeds of the Offering. See "Use of Proceeds."
FUTURE TRANSACTIONS WITH AFFILIATES
Following the closing of the Offering, the Company intends to submit any
transactions between the Company and its directors and its principal
shareholders and their affiliates to a committee of disinterested members of
the Company's Board of Directors or to require approval of any such
transactions by a majority of the disinterested members of the Board of
Directors. Additionally, provisions of the Florida Business Corporation Act
require that certain specified transactions between the Company and holders
of more than 10% of the outstanding voting power of the Company's Common
Stock will require the approval of the disinterested shareholders of the
Company, unless such transactions are approved by a majority of the
disinterested members of the Board of Directors.
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DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital consists of 70 million shares of Class A
Common Stock, par value $.01 per share ("Class A Common Stock"), 10 million
shares of Class B Common Stock, par value $.01 per share ("Class B Common
Stock"), and 20 million shares of preferred stock, par value $.01 per share
(the "Preferred Stock"). As of the date of this Prospectus (assuming
consummation of the Reorganization) there are 2,760,000 shares of Class B
Common Stock outstanding (which may be converted into Class A Common Stock at
any time), all of which are owned by Nicklaus Family Members and 240,000
shares of Class A Common Stock outstanding. See "The Reorganization" and
"Principal Shareholders." No shares of Preferred Stock are outstanding as of
the date of this Prospectus.
The Company's shareholders have approved Amended and Restated Articles of
Incorporation and Bylaws to become effective upon consummation of the
Offering. The discussions herein describe the Company's capital stock,
Articles of Incorporation and Bylaws as anticipated to be in effect upon
consummation of the Offering. The following descriptions of the Company's
capital stock do not purport to be complete and are subject to and qualified
in their entirety by the provisions of the Company's Articles of
Incorporation and Bylaws, which are included as exhibits to the Registration
Statement of which this Prospectus is a part, and by the provisions of
applicable law.
COMMON STOCK
The shares of Class A Common Stock and Class B Common Stock are identical
in all respects, except for voting rights and certain conversion rights and
transfer restrictions in respect of the shares of the Class B Common Stock,
as described below.
VOTING RIGHTS. Each share of Class A Common Stock entitles the holder to
one vote on each matter submitted to a vote of the Company's shareholders and
each share of Class B Common Stock entitles the holder to ten votes on each
such matter, including the election of directors. Except as required by
applicable law, holders of the Class A Common Stock and Class B Common Stock
will vote together on all matters submitted to a vote of the shareholders.
See "Risk Factors--Control By Current Shareholders and Anti--Takeover Effect
of Dual Classes of Stock." Neither the Class A Common Stock nor the Class B
Common Stock have cumulative voting rights.
Any action that can be taken at a meeting of the shareholders may be taken
by written consent in lieu of the meeting if the Company receives consents
signed by shareholders having the minimum number of votes that would be
necessary to approve the action at a meeting at which all shares entitled to
vote on the matter were present. This could permit the holders of Class B
Common Stock to take all actions required to be taken by the shareholders
without providing the other shareholders the opportunity to make nominations
or raise other matters at a meeting.
DIVIDENDS. Holders of Class A Common Stock and Class B Common Stock are
entitled to receive dividends at the same rate if and when declared by the
Board of Directors out of funds legally available thereform, subject to the
dividend and liquidation rights of any Preferred Stock that may be issued and
outstanding. No dividend or other distribution (including redemptions or
repurchases of shares of capital stock) may be made if after giving effect to
such distribution, the Company would not be able to pay its debts as they
become due in the usual course of business, or if the Company's total assets
would be less than the sum of its total liabilities plus the amount that
would be needed at the time of a liquidation to satisfy the preferential
rights of any holders of Preferred Stock. See "Dividend Policy."
If a dividend or distribution payable in Class A Common Stock is made on
the Class A Common Stock, the Company must also make a pro rata and
simultaneous dividend or distribution on the Class B Common Stock payable in
shares of Class B Common Stock. Conversely, if a dividend or distribution
payable in Class B Common Stock is made on the Class B Common Stock, the
Company
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must also make a pro rata and simultaneous dividend or distribution on the
Class A Common Stock payable in shares of Class A Common Stock.
RESTRICTIONS ON TRANSFER. If a holder of Class B Common Stock transfers
such shares, whether by sale, assignment, gift, bequest, appointment or
otherwise, to a person other than a Nicklaus Family Member, such shares will
be converted automatically into shares of Class A Common Stock. In the case
of a pledge of shares of Class B Common Stock to a financial institution,
such shares will not be deemed to be transferred unless and until a
foreclosure or similar event occurs.
CONVERSION. Class A Common Stock has no conversion rights. Class B Common
Stock is convertible into Class A Common Stock, in whole or in part, at any
time and from time to time at the option of the holder, on the basis of one
share of Class A Common Stock for each share of Class B Common Stock
converted. In the event of a transfer of shares of Class B Common Stock to
any person other than a Nicklaus Family Member, each share of Class B Common
Stock so transferred will be converted automatically into one share of Class
A Common Stock. Each share of Class B Common Stock will also automatically
convert into one share of Class A Common Stock if, on the record date for any
meeting of the shareholders, the number of shares of Class B Common Stock
then outstanding is less than 20% of the aggregate number of shares of Class
A Common Stock and Class B Common Stock then outstanding.
LIQUIDATION. In the event of liquidation, after payment of the debts and
other liabilities of the Company and after making provision for the holders
of Preferred Stock, if any, the remaining assets of the Company will be
distributable ratably among the holders of the Class A Common Stock and Class
B Common Stock treated as a single class.
MERGERS AND OTHER BUSINESS COMBINATIONS. Upon the merger of consolidation
of the Company, holders of each class of Common Stock are entitled to receive
equal per share payments or distributions, except that in any transaction in
which shares of capital stock are distributed, such shares may differ as to
voting rights to the extent and only to the extent that the voting rights of
the Class A Common Stock and Class B Common Stock differ at that time.
OTHER PROVISIONS. The holders of the Class A Common Stock and Class B
Common Stock are not entitled to preemptive rights. Neither the Class A
Common Stock nor the Class B Common Stock may be subdivided or combined in
any manner unless the other class is subdivided or combined in the same
proportion.
TRANSFER AGENT AND REGISTRAR. The Transfer Agent and Registrar for the
Class A Common Stock is First Union National Bank.
LISTING. The Class A Common Stock has been approved for quotation on the
Nasdaq National Market under the trading symbol "JACK," subject to official
notice of issuance.
PREFERRED STOCK
The Board of Directors of the Company is authorized, without further
shareholder action, to divide any or all shares of the authorized Preferred
Stock into series and fix and determine the designations, preferences and
relative rights and qualifications, limitations, or restrictions thereon of
any series so established, including voting powers, dividend rights,
liquidation preferences, redemption rights and conversion privileges. As of
the date of this Prospectus, the Board of Directors has not authorized any
series of Preferred Stock, and there are no plans, agreements or
understandings for the authorization or issuance of any shares of Preferred
Stock. The issuance of Preferred Stock with voting rights or conversion
rights may adversely affect the voting power of the Common Stock, including
the loss of voting control to others. The issuance of Preferred Stock may
have the effect of delaying, deferring or preventing a change of control of
the Company without shareholder approval. See "Risk Factors--Preferred
Stock; Possible Anti--Takeover Effect of Certain Charter Provisions."
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CERTAIN PROVISIONS OF FLORIDA LAW
The Company is subject to several anti-takeover provisions under Florida
law that apply to a public corporation organized under Florida law, unless
the corporation has elected to opt out of such provisions in its Articles of
Incorporation or Bylaws. The Company has not elected to opt out of such
provisions. Accordingly, the Common Stock of the Company is subject to the
"affiliated transactions" and "control-share acquisition" provisions of the
Florida Business Corporation Act. These provisions require, subject to
certain exceptions, that an "affiliated transaction" be approved by the
holders of two-thirds of the voting shares other than those beneficially
owned by an "interested shareholder" or by a majority of disinterested
directors and that voting rights be conferred on "control shares" acquired in
specified control share acquisitions generally only to the extent conferred
by resolution approved by the shareholders, excluding holders of shares
defined as "interested shares." In addition, Florida law presently limits the
personal liability of a corporate director for monetary damages, except where
the director (i) breaches his or her fiduciary duties and (ii) such breach
constitutes or includes certain unlawful distributions or certain other
reckless, wanton or willful acts or misconduct. See "Risk Factors--Preferred
Stock; Possible Anti-Takeover Effect of Certain Charter Provisions."
INDEMNIFICATION AND LIMITED LIABILITY
Pursuant to the Company's Articles of Incorporation, Bylaws and
indemnification agreements between the Company and each of its officers and
directors the Company is obligated to indemnify each of its directors and
officers to the fullest extent permitted by law with respect to all liability
and loss suffered, and reasonable expense incurred, by such person in any
action, suit or proceeding in which such person was or is made or threatened
to be made a party or is otherwise involved by reason of the fact that such
person is or was a director or officer of the Company. The Company is also
obligated to pay the reasonable expenses of indemnified directors or officers
in defending such proceedings if the indemnified party agrees to repay all
amounts advanced should it be ultimately determined that such person is not
entitled to indemnification.
The Company maintains an insurance policy covering directors and officers
under which the insurer agrees to pay, subject to certain exclusions, for any
claim made against the directors and officers of the Company for a wrongful
act for which they may become legally obligated to pay or for which the
Company is required to indemnify its directors or officers.
OTHER CHARTER AND BY-LAW PROVISIONS
The Articles of Incorporation provide that the Board of Directors will be
divided into three classes, with each class, after a transitional period,
serving for three years, and one class being elected each year. A majority of
the remaining directors then in office, though less than a quorum, or the
sole remaining director, will be empowered to fill any vacancy on the Board
which arises during the term of a director. The provision for a classified
board may be altered or repealed only upon the affirmative vote of holders of
at least 66 2/3 % of the total voting power of the Company. The
classification of the Board of Directors may discourage a third party from
making a tender offer or otherwise attempting to gain control of the Company
and may have the effect of maintaining the incumbency of the Board.
Special meetings of shareholders may be called by the Company's Board of
Directors, the Chairman of the Board of Directors or the Chief Executive
Officer. Shareholders of the Company may only call a special meeting of
shareholders if the holders of at least 50% of the total voting power of the
Company sign, date and deliver to the Company's secretary one or more written
demands for the meeting describing the purpose or purposes for which it is to
be held.
Shareholders of the Company are required to provide advance notice of
nominations of directors to be made at, and of business proposed to be
brought before, a meeting of shareholders. The failure to deliver proper
notice within the periods specified in the Company's Bylaws will result in
the denial of the shareholder's right to make such nominations or propose
such action at the meeting.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Class A
Common Stock. No information is currently available and no prediction can be
made as to the timing or amount of future sales of shares, or the effect, if
any, that market sales of shares or the availability of shares for sale will
have on the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of Class A Common Stock (including shares issuable upon
conversion of Class B Common Stock and upon exercise of stock options) in the
public market after the lapse of the restrictions described below, or the
perception that such sales may occur, could materially adversely affect the
prevailing market prices for the Class A Common Stock and the ability of the
Company to raise equity capital in the future. See "Risk Factors--Shares
Eligible for Future Sale."
After completion of the Offering, the Company will have 2,040,000 shares
of Class A Common Stock outstanding (2,310,000 if the Underwriters'
over-allotment option is exercised in full) and 2,760,000 shares of Class B
Common Stock outstanding. All of the 1,800,000 shares of Class A Common Stock
offered hereby (2,070,000 if the Underwriters' over-allotment option is
exercised in full), will be freely tradeable without restriction or further
registration under the Securities Act, unless purchased by "affiliates" of
the Company, as that term is defined in Rule 144, described below. All of the
shares of Class B Common Stock held by Nicklaus Family Members, as well as
shares of Class A Common Stock issuable upon conversion of Class B Common
Stock, and all of the Class A Common Stock acquired by certain executives of
the Company pursuant to the Reorganization, are "Restricted Securities," as
that term is defined in Rule 144, and may not be sold in the absence of
registration other than in accordance with Rule 144 described below or
another exemption from registration under the Securities Act.
In general, under Rule 144 as currently in effect, any affiliate of the
Company or any person (or persons whose shares are aggregated in accordance
with the Rule) who has beneficially owned Common Stock which is treated as
Restricted Securities for at least two years would be entitled to sell within
any three-month period a number of shares that does not exceed the greater of
1% of the outstanding shares of Class A Common Stock (approximately 20,400
shares based upon the number of shares outstanding after the Offering) or the
reported average weekly trading volume in the Class A Common Stock during the
four weeks preceding the date on which notice of such sale was filed under
Rule 144. Sales under Rule 144 are also subject to certain manner of sale
restrictions and notice requirements and to the availability of current
public information concerning the Company. In addition, affiliates of the
Company must comply with the restrictions and requirements of Rule 144 (other
than the two-year holding period requirements) in order to sell Class A
Common Stock that are not Restricted Securities (such as Class A Common Stock
acquired by affiliates in market transactions). Further, if a period of at
least three years has elapsed from the date Restricted Securities were
acquired from the Company or an affiliate of the Company, a holder of such
Restricted Securities who is not an affiliate at the time of the sale and who
has not been an affiliate for at least three months prior to such sale would
be entitled to sell the shares immediately without regard to the volume,
manner of sale, notice and public information requirements of Rule 144.
Mr. Nicklaus, GBI, the Family Controlled Trusts and Messrs. Bellinger,
Hesemann, Hislop and Bates will each have certain demand registration rights
(subject to the 180-day lock-up arrangement described below), under certain
circumstances and subject to certain conditions, to require the Company to
register their shares of Common Stock under the Securities Act and, certain
rights to participate in any future registration of securities by the
Company. The Company is not required to effect more than one demand
registration on behalf of the Nicklaus Family Members in any twelve calendar
month period. See "Certain Relationships and Related
Transactions--Registration Rights Agreement."
The Company intends to file a registration statement on Form S-8 covering
all shares of Class A Common Stock issuable under the Company's employee
benefit plans in effect on the date of this Prospectus. The Company has
granted stock options with respect to an aggregate of approximately 384,000
shares of Class A Common Stock. Accordingly, any shares issued upon exercise
of outstanding options will be eligible for sale in the public market
(subject to the 180-day lock-up arrangement described below) beginning on the
effective date of such registration statement.
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The Company and the Nicklaus Family Members and members of the Company's
management who are shareholders of the Company have agreed for 180 days
following the offering not to, without the prior written consent of Merrill
Lynch, Pierce, Fenner & Smith Incorporated, (i) directly or indirectly,
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of any share of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or file any registration statement under the Securities Act with
respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Stock,
whether any such swap or transaction described in clause (i) or (ii) above is
to be settled by delivery of Common Stock or such other securities, in cash
or otherwise. The foregoing sentence shall not apply to (A) the shares of
Common Stock to be sold hereunder, (B) any shares of Common Stock issued by
the Company upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof and referred to in this Prospectus,
(C) any shares of Common Stock issued or options to purchase Common Stock
granted pursuant to existing employee benefit plans of the Company referred
to in this Prospectus, (D) any shares of Common Stock issued pursuant to any
non-employee director stock plan or (E) the pledge by certain shareholders of
the Company of shares of Common Stock to Mr. Nicklaus.
CERTAIN U.S. FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF CLASS A COMMON STOCK
The following is a general discussion of the material United States
federal income and estate tax consequences of the ownership and disposition
of shares of Class A Common Stock applicable to non-U.S. Holders of such
shares of Class A Common Stock. In general, a "non-U.S. Holder" is any holder
other than (i) a citizen or resident of the United States for income tax
purposes, (ii) a corporation or partnership created or organized in the
United States or under the laws of the United States or of any State, or
(iii) any estate or trust whose income is includible in gross income for
United States federal income tax purposes regardless of its source. The
discussion is based on the provisions of the Internal Revenue Code of 1986,
as amended (the "Code") and regulations thereunder and judicial and
administrative interpretations as of the date of this Prospectus, all of
which are subject to change, possibly with retroactive effect, and is for
general information only. The discussion does not address all aspects of
federal income and estate taxation nor any aspects of state, local or foreign
tax laws. The discussion does not consider any specific facts or
circumstances that may apply to a particular non-U.S. Holder (including,
without limitation, certain U.S. expatriates, insurance companies, tax-exempt
organizations, financial institutions or broker dealers). Accordingly,
prospective investors are urged to consult their tax advisors regarding the
United States federal, state, local and non-U.S. income, estate and other tax
consequences of the acquisition, ownership and disposition of shares of Class
A Common Stock that may apply to them.
An individual may, subject to certain exceptions, be deemed to be a
resident alien for income tax purposes (as opposed to a non-resident alien)
by virtue of being present in the United States for at least 31 days in the
calendar year and for an aggregate of at least 183 days during a three-year
period ending in the current calendar year (counting for such purposes all of
the days present in the current year, one-third of the days present in the
immediately preceding year, and one-sixth of the days present in the second
preceding year). Resident aliens are subject to tax as if they were United
States citizens.
DIVIDENDS
The Company currently intends to retain any earnings to finance the
development and expansion of the Company's business and does not anticipate
paying any cash dividends in the foreseeable future. See "Dividend Policy."
If, however, the Company were to pay dividends, then, in general, dividends
paid to a non-U.S. Holder will be subject to United States federal
withholding tax at a 30% rate (or lower rate as may be prescribed by an
applicable tax treaty) unless the dividends are effectively
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connected with a trade or business carried on by the non-U.S. Holder within
the United States. Dividends effectively connected with such a trade or
business will generally not be subject to withholding tax (if the non-U.S.
Holder properly files an executed IRS Form 4224 with the payor of the
dividend) and will generally be subject to United States federal income tax
on a net income basis at regular graduated rates. In the case of a non-U.S.
Holder which is a corporation, such effectively connected income also may be
subject to the branch profits tax (which is generally imposed on a foreign
corporation on the repatriation from the United States of effectively
connected earnings and profits at a 30% rate). The branch profits tax may not
apply (or may apply at a reduced rate) if the recipient is a qualified
resident of certain countries with which the United States has an income tax
treaty. To determine the applicability of a tax treaty providing for a lower
rate of withholding, dividends paid to an address in a foreign country are
presumed to be paid to a resident of that country, unless the payor has
definite knowledge that such presumption is not warranted. Proposed Treasury
regulations, if finally adopted, however, would require non-U.S. Holders to
file certain forms to obtain the benefit of any applicable tax treaty
providing for a lower rate of withholding tax on dividends. A non-U.S. Holder
that is eligible for a reduced rate of U.S. withholding tax pursuant to a tax
treaty may obtain a refund of any excess amounts withheld by filing an
appropriate claim for refund with the Internal Revenue Service. The Company
must report annually to the Internal Revenue Service and to each non-U.S.
Holder the amount of dividends paid to, and the tax withheld with respect to,
each non-U.S. Holder. These reporting requirements apply regardless of
whether withholding was reduced or eliminated by an applicable tax treaty.
Copies of these information returns also may be made available under the
provisions of a specific treaty or agreement with the tax authorities in the
country in which the non-U.S. Holder resides.
SALE OF CLASS A COMMON STOCK
Generally, a non-U.S. Holder will not be subject to United States federal
income tax on any gain realized upon the disposition of such holder's shares
of Class A Common Stock unless (i) the gain is effectively connected with a
trade or business carried on by the non-U.S. Holder within the United States
or, if an applicable tax treaty provides, is attributable to a permanent
establishment maintained by the non-U.S. Holder in the United States (in
either case, the branch profits tax described above may also apply to a
corporate non-U.S. Holder); (ii) the non-U.S. Holder is an individual who
holds the shares of Class A Common Stock as a capital asset and is present in
the United States for 183 days or more in the taxable year of the
disposition, and certain other conditions are met; or (iii) the Company is or
has been a "U.S. real property holding corporation" for federal income tax
purposes (which the Company does not believe that it has been) at any time
during the five-year period ending on the date of disposition (or such
shorter period that such shares were held). A corporation is generally a
"U.S. real property holding corporation" if the fair market value of its
"United States real property interests" equals or exceeds 50% of the sum of
the fair market value of its worldwide real property interests plus its other
assets used or held for use in a trade or business. As discussed above, one
of the Company's strategies is to focus its efforts on the acquisition and
development of golf practice and instruction facilities and accordingly, the
Company may in the future, depending on the assets which it then holds, be
deemed to be a "U.S. real property holding corporation." If the Company is or
has been a "U.S. real property holding corporation" at any time during the
relevant period, a non-U.S. Holder which did not directly or indirectly own
more than 5% of the Class A Common Stock at any time during the period would
not be subject to U.S. federal income tax provided that the Class A Common
Stock is regularly traded on an established securities market.
ESTATE TAX
Shares of Class A Common Stock owned or treated as owned by an individual
who is a non-U.S. Holder at the time of death will be includible in the
individual's gross estate for the United States federal estate tax purposes,
unless an applicable estate tax treaty provides otherwise, and may be subject
to United States federal estate tax.
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BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current United States federal income tax law, backup withholding tax
(which generally is a withholding tax imposed at the rate of 31% on certain
payments to persons that fail to furnish certain required information,
including the person's U.S. taxpayer identification number) and information
reporting requirements apply to payments of dividends (actual and
constructive) made to certain non-corporate United States persons. The United
States backup withholding tax and information reporting requirements (other
than those described above under "Dividends") will generally not apply to
dividends paid on Class A Common Stock to a non-U.S. Holder at an address
outside the United States that is either subject to the 30% withholding
discussed above or that is not so subject because a tax treaty applies that
reduces or eliminates such 30% withholding. However, backup withholding and
information reporting generally will apply to the dividends paid on shares of
Class A Common Stock to addresses in the United States to beneficial owners
that are not "exempt recipients" and that fail to provide in the manner
required certain identifying information.
The payment of the proceeds from the disposition of shares of Class A
Common Stock through the United States office of a broker will be subject to
information reporting and backup withholding unless the holder, under penalty
of perjury, certifies, among other things, its status as a non-U.S. Holder,
or otherwise establishes an exemption. Generally, the payment of the proceeds
from the disposition of shares of Class A Common Stock to or through a
non-U.S. office of a non-U.S. broker will not be subject to backup
withholding and will not be subject to information reporting. In the case of
the payment of proceeds from the disposition of shares of Class A Common
Stock through a non-U.S. office of a broker that is a U.S. person or a "U.S.
related person," existing regulations require information reporting (but not
backup withholding) on the payment unless the broker receives a statement
from the owner, signed under penalties of perjury, certifying, among other
things, its status as a non-U.S. Holder, or the broker has documentary
evidence in its files that the owner is a non-U.S. Holder and the broker has
no actual knowledge to the contrary. Proposed regulations state that backup
withholding will not apply to such payments (absent actual knowledge that the
payee is a U.S. person). For this purpose, a "U.S.-related person" is (i) a
"controlled foreign corporation" for United States federal income tax
purposes or (ii) a foreign person, 50% or more of whose gross income from all
sources for the three year period ending with the close of its taxable year
preceding the payment (or for such part of the period that the broker has
been in existence) is derived from activities that are effectively connected
with the conduct of a United States trade or business.
Any amounts withheld from a payment to a non-U.S. Holder under the backup
withholding rules will be allowed as a credit against such holder's United
States federal income tax liability and may entitle such holder to a refund,
provided that the required information is furnished to the U.S. Internal
Revenue Service. The backup withholding and information reporting rules are
currently under review by the U.S. Treasury Department and their application
to the shares of Class A Common Stock is subject to change.
Non-U.S. Holders should consult their tax advisors regarding the
application of these rules to their particular situations, the availability
of an exemption therefrom and the procedure for obtaining such an exemption,
if available.
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UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement") among the Company, GBI and the Underwriters named
below, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"), William Blair & Company, L.L.C. and Dean Witter Reynolds Inc. are
acting as representatives (the "Representatives"), the Company has agreed to
sell to each of the Underwriters, and each of the Underwriters severally has
agreed to purchase from the Company, the number of shares of Class A Common
Stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
CLASS A
UNDERWRITERS COMMON STOCK
-------------------------- ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............
William Blair & Company, L.L.C.......
Dean Witter Reynolds Inc. ...........
---------------
Total .................... 1,800,000
===============
</TABLE>
The Underwriters have agreed, subject to the terms and conditions set
forth in the Purchase Agreement, to purchase all of the shares of Class A
Common Stock being sold pursuant to the Purchase Agreement, if any are
purchased. Under certain circumstances, the commitments of non-defaulting
Underwriters may be increased as set forth in the Purchase Agreement.
The Representatives have advised the Company that the Underwriters propose
initially to offer the shares of Class A Common Stock to the public at the
initial public offering price set forth on the cover page of this Prospectus,
and to certain dealers at such price less a concession not in excess of $
per share of Class A Common Stock. The Underwriters may allow, and such
dealers may reallow, a discount not in excess of $ per share of Class A
Common Stock on sales to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
The Company has granted an option to the Underwriters, exercisable within
30 days after the date of this Prospectus, to purchase up to an additional
270,000 shares of Class A Common Stock at the initial public offering price
set forth on the cover page of this Prospectus, less the underwriting
discount. The Underwriters may exercise this option only to cover
over-allotments, if any, made on the sale of the Class A Common Stock offered
hereby. To the extent that the Underwriters exercise this option, each
Underwriter will be obligated, subject to certain conditions, to purchase a
number of additional shares of Class A Common Stock proportionate to such
Underwriter's initial amount reflected in the foregoing table.
The Company and the Nicklaus Family Members and members of the Company's
management who are shareholders of the Company have agreed for 180 days
following the offering not to, without the prior written consent of Merrill
Lynch, (i) directly or indirectly, offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of any share of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or file any registration
statement under the Securities Act with respect to any of the foregoing or
(ii) enter into any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Stock, whether any such swap or
transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise. The
foregoing sentence shall not apply to (A) the shares of Common Stock to be
sold hereunder, (B) any shares of Common Stock issued by the Company upon the
exercise of an option or warrant or the conversion of a security outstanding
on the date hereof and referred to in this Prospectus, (C) any shares of
Common Stock issued or options to purchase Common Stock granted pursuant to
existing employee benefit plans of the Company referred to in this
Prospectus, (D) any
65
<PAGE>
shares of Common Stock issued pursuant to any non-employee director stock
plan or (E) the pledge by certain shareholders of the Company of shares of
Common Stock to Mr. Nicklaus. See "Shares Eligible for Future Sale."
At the request of the Company, the Underwriters have initially reserved up
to 125,000 shares of Class A Common Stock for sale at the initial public
offering price set forth on the cover page of this Prospectus to directors,
officers, employees and business associates of the Company and other persons
associated with the Company or affiliated with any director, officer or
employee of the Company. The number of shares of Class A Common Stock
available for sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares which are not so
purchased will be offered by the Underwriters to the general public on the
same basis as other shares offered hereby. Certain managerial employees of
the Company who purchase reserved shares will be required to agree not to
dispose of such shares for a period of 180 days after the date of this
Prospectus.
Prior to the Offering, there has been no public market for the shares of
Class A Common Stock of the Company. The initial public offering price will
be determined through negotiations among the Company and the Representatives.
Among the factors considered in determining the public offering price, in
addition to prevailing market conditions, are price-earnings ratios of
publicly traded companies that the Representatives believe to be comparable
to the Company, certain financial information of the Company, the history of,
and the prospects for, the Company and the industry in which it competes, an
assessment of the Company's management, its past and present operations, the
prospects for, and timing of, future revenues of the Company, the present
state of the Company's development, and the above factors in relation to
market values and various valuation measures of other companies engaged in
activities similar to the Company. There can be no assurance given as to the
liquidity of the trading market for the Class A Common Stock or that an
active public market will develop for the Class A Common Stock or that the
Class A Common Stock will trade in the public market subsequent to the
Offering at or above the initial public offering price. If an active public
market for the Common Stock does not develop, the market price and liquidity
of the Class A Common Stock may be adversely affected.
The Class A Common Stock has been approved for quotation on the Nasdaq
National Market under the proposed trading symbol "JACK."
Each Underwriter has agreed that (i) it has not offered or sold and, prior
to the expiration of the period of six months from the Closing Date, will not
offer or sell any shares of Class A Common Stock to persons in the United
Kingdom, except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances
which do not constitute an offer to the public in the United Kingdom within
the meaning of the Public Offers of Securities Regulations 1995; (ii) it has
complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the
Class A Common Stock in, from or otherwise involving the United Kingdom; and
(iii) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issuance of
Class A Common Stock to a person who is of a kind described in Article 11(3)
of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1995 or is a person to whom such document may otherwise lawfully be
issued or passed on.
The Underwriters do not intend to confirm sales of the Class A Common
Stock offered hereby to any accounts over which they exercise discretionary
authority.
The Company and GBI have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act.
66
<PAGE>
LEGAL MATTERS
The validity of the Class A Common Stock being offered hereby and certain
other legal matters will be passed upon for the Company by Stearns Weaver
Miller Weissler Alhadeff & Sitterson, P.A., Miami, Florida. Certain legal
matters will be passed upon for the Underwriters by Fried, Frank, Harris,
Shriver & Jacobson (a partnership, including professional corporations), New
York, New York. Fried, Frank, Harris, Shriver & Jacobson will rely on the
opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson P.A. as to
matters relating to Florida law.
EXPERTS
The financial statements and schedule included in this Registration
Statement have been audited by Arthur Andersen LLP, independent certified
public accountants, and are included herein in reliance upon the authority of
said firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Class A Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain portions of which are omitted as
permitted by the rules and regulations of the Commission. Such additional
information may be obtained from the Commission's principal office in
Washington, D.C. Statements contained in this Prospectus regarding the
contents of any contract or other document referred to herein or therein are
not necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement or such other document, each such statement being qualified in all
respects by such reference.
Upon completion of the Offering, the Company will be subject to the
informational requirements of the Securities Exchange Act of 1934, as
amended, and, in accordance therewith, will file reports and other
information with the Commission. Such reports and other information, as well
as the Registration Statement and the exhibits and schedules thereto, may be
inspected, without charge, at the public reference facility maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at Seven World
Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
67
<PAGE>
GOLDEN BEAR GOLF, INC.
INDEX TO COMBINED FINANCIAL STATEMENTS
AND PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
THE REGISTRANT--GOLDEN BEAR GOLF, INC.:
Report of Independent Certified Public Accountants ........................................... F-4
Balance Sheet as of June 7, 1996 ............................................................. F-5
Notes to Balance Sheet ....................................................................... F-6
COMBINED BUSINESSES TO BE ACQUIRED--GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.:
Report of Independent Certified Public Accountants ......................................... F-12
Combined Balance Sheets as of December 31, 1994 and 1995
and March 31, 1996 (Unaudited) ............................................................. F-13
Combined Statements of Operations for each of the three years
in the period ended December 31, 1995 and for the three months ended
March 31, 1995 and 1996 (Unaudited) ........................................................ F-14
Combined Statements of Shareholders' Equity for each of the three years
in the period ended December 31, 1995 and for the three months ended
March 31, 1996 (Unaudited) ................................................................. F-15
Combined Statements of Cash Flows for each of the three years
in the period ended December 31, 1995 and for the three months ended
March 31, 1995 and 1996 (Unaudited) ........................................................ F-16
Notes to Combined Financial Statements ....................................................... F-17
BUSINESSES TO BE ACQUIRED SUBSEQUENT TO YEAR END:
COOL SPRINGS, INC. ...........................................................................
Report of Independent Certified Public Accountants ........................................... F-33
Balance Sheets as of October 31, 1994 and 1995 ............................................... F-34
Statements of Operations for the years ended October 31, 1994 and 1995 ....................... F-35
Statements of Stockholders' Equity for the years ended October 31, 1994 and 1995 ............ F-36
Statements of Cash Flows for the years ended October 31, 1994 and 1995 ....................... F-37
Notes to Financial Statements ................................................................ F-38
FIRST SPORTS CAPITAL DEVELOPMENT ASSOCIATES LTD., INC. .......................................
Report of Independent Certified Public Accountants ........................................... F-43
Balance Sheets as of December 31, 1994 and 1995 .............................................. F-44
Statements of Operations for the period from Inception (June 13, 1994)
to December 31, 1994 and for the year ended December 31, 1995 .............................. F-45
Statements of Stockholders' Equity for the period from Inception (June 13, 1994)
to December 31, 1994 and for the year ended December 31, 1995 .............................. F-46
Statements of Cash Flows for the period from Inception (June 13, 1994)
to December 31, 1994 and for the year ended December 31, 1995 .............................. F-47
Notes to Financial Statements ................................................................ F-48
</TABLE>
F-1
<PAGE>
GOLDEN BEAR GOLF, INC.
INDEX TO COMBINED FINANCIAL STATEMENTS
AND PRO FORMA FINANCIAL INFORMATION--(CONTINUED)
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
DALLAS HIGHLANDER, LTD.
Report of Independent Certified Public Accountants ................................. F-53
Balance Sheets as of December 31, 1995 and March 31, 1996 .......................... F-54
Statements of Operations for the year ended December 31, 1995
and for the three months ended March 31, 1996 .................................... F-55
Statements of Partners' Capital for the year ended December 31, 1995
and for the three months ended March 31, 1996 .................................... F-56
Statements of Cash Flows for the year ended December 31, 1995
and for the three months ended March 31, 1996 .................................... F-57
Notes to Financial Statements ...................................................... F-58
SUGAR CREEK GOLF COURSE, INC. AND MAGIC CASTLE, INC.
Report of Independent Certified Public Accountants ................................. F-63
Combined Balance Sheets as of December 31, 1995 and June 30, 1996 .................. F-64
Combined Statements of Operations for the year ended December 31, 1995
and for the six months ended June 30, 1996 ....................................... F-65
Combined Statements of Stockholders' Equity for the year ended December 31, 1995
and for the six months ended June 30, 1996 ....................................... F-66
Combined Statements of Cash Flows for the year ended December 31, 1995
and for the six months ended June 30, 1996 ....................................... F-67
Notes to Combined Financial Statements ............................................. F-68
EAST COAST GOLF CENTER, INC. AND EAST COAST GOLF CENTER OF COLUMBUS, LTD. AND EAST
COAST GOLF CENTERS OF FORT LAUDERDALE, INC.
Report of Independent Certified Public Accountants ................................. F-73
Combined Balance Sheets as of December 31, 1995 and March 31, 1996 ................ F-74
Combined Statements of Operations for the year ended December 31, 1995
and for the three months ended March 31, 1996 .................................... F-75
Combined Statements of Shareholders' Equity for the year ended December 31, 1995
and for the three months ended March 31, 1996 .................................... F-76
Combined Statements of Cash Flows for the year ended December 31, 1995
and for the three months ended March 31, 1996 .................................... F-77
Notes to Combined Financial Statements ............................................. F-78
UNAUDITED PRO FORMA FINANCIAL INFORMATION:
Introduction to Unaudited Pro Forma Financial Information .......................... P-2
Unaudited Pro Forma Balance Sheet as of March 31, 1996 ............................. P-5
Unaudited Pro Forma Statements of Operations for the three months
ended March 31, 1996 and the year ended December 31, 1995 ........................ P-6
Notes to Unaudited Pro Forma Financial Information ................................. P-8
</TABLE>
F-2
<PAGE>
GOLDEN BEAR GOLF, INC.
BALANCE SHEET
F-3
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
Golden Bear Golf, Inc.:
We have audited the accompanying balance sheet of Golden Bear Golf, Inc.
as of June 7, 1996. This balance sheet is the responsibility of the Company's
management. Our responsibility is to express an opinion on this balance sheet
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in
all material respects, the financial position of Golden Bear Golf, Inc. as of
June 7, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
West Palm Beach, Florida,
June 7, 1996.
F-4
<PAGE>
GOLDEN BEAR GOLF, INC.
BALANCE SHEET
JUNE 7, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash ......................................................... $ --
DEFERRED OFFERING COSTS ....................................... 400,000
-----------
Total assets .............................................. $400,000
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses ............................................. $400,000
-----------
COMMITMENTS (Note 3)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 20,000,000 shares
authorized,
no shares issued and outstanding ........................... --
Common stock--
Class A, $.01 par value, 70,000,000 shares authorized,
no shares issued and outstanding .......................... --
Class B, $.01 par value, 10,000,000 shares authorized,
no shares issued and outstanding .......................... --
Total stockholders' equity ................................ --
-----------
Total liabilities and stockholders' equity ................ $400,000
===========
</TABLE>
The accompanying notes to balance sheet are an integral part of this balance
sheet.
F-5
<PAGE>
GOLDEN BEAR GOLF, INC.
NOTES TO BALANCE SHEET
JUNE 7, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Golden Bear Golf, Inc. (the "Golden Bear") was formed on June 7, 1996 to
enter into an exchange agreement which will be consummated only upon the
closing of a proposed initial public offering of Golden Bear's Class A Common
Stock. Parties to the plan of reorganization include Golden Bear's
affiliates, Golden Bear Golf Centers, Inc., Paragon Golf Construction, Inc.
(collectively, the "Companies") and Golden Bear International, Inc. ("GBI").
Pursuant to the exchange agreement, Golden Bear will acquire all of the
outstanding common stock of the Companies in exchange for an aggregate of
1,668,000 (after the proposed 3,000-for-1 stock split) shares of its Class A
and Class B Common Stock. In addition Golden Bear will acquire certain assets
and assume certain liabilities of GBI in exchange for 1,332,000 (after the
proposed 3,000-for-1 stock split) shares of Class B Common Stock.
If the exchange agreement is consummated and Golden Bear closes its
initial public offering, the transaction will be accounted for on a
historical cost basis in a manner similar to a pooling of interests as Golden
Bear and the Companies have common stockholders and management.
DEFERRED OFFERING COSTS
Deferred offering costs represent fees incurred related to the proposed
initial public offering. If consummated, such costs will be netted against
the proceeds of the initial public offering. If unsuccessful, such costs will
be expensed.
INCOME TAXES
Golden Bear is a corporation subject to Federal and state taxation. To
date, Golden Bear has had no operations and, therefore, has generated no tax
liabilities.
2. COMMON STOCK
The shares of Class A Common Stock and Class B Common Stock are identical
in all respects, except for voting rights and certain conversion rights and
transfer restrictions in respect of the shares of the Class B Common Stock,
as described below.
VOTING RIGHTS. Each share of Class A Common Stock entitles the holder to
one vote on each matter submitted to a vote of Golden Bear's shareholders and
each share of Class B Common Stock entitles the holder to ten votes on each
such matter, including the election of directors. Except as required by
applicable law, holders of the Class A Common Stock and Class B Common Stock
will vote together on all matters submitted to a vote of the shareholders.
Neither the Class A Common Stock nor the Class B Common Stock have cumulative
voting rights.
Any action that can be taken at a meeting of the shareholders may be taken
by written consent in lieu of the meeting if Golden Bear receives consents
signed by shareholders having the minimum number of votes that would be
necessary to approve the action at a meeting at which all shares entitled to
vote on the matter were present. This could permit the holders of Class B
Common Stock to take all
F-6
<PAGE>
GOLDEN BEAR GOLF, INC.
NOTES TO BALANCE SHEET-(CONTINUED)
JUNE 7, 1996
actions required to be taken by the shareholders without providing the other
shareholders the opportunity to make nominations or raise other matters at a
meeting.
DIVIDENDS. Holders of Class A Common Stock and Class B Common Stock are
entitled to receive dividends at the same rate if and when declared by the
Board of Directors out of funds legally available therefore, subject to the
dividend and liquidation rights of any Preferred Stock that may be issued and
outstanding. No dividend or other distribution (including redemptions or
repurchases of shares of capital stock) may be made if after giving effect to
such distribution, Golden Bear would not be able to pay its debts as they
become due in the usual course of business, or if Golden Bear's total assets
would be less than the sum of its total liabilities plus the amount that
would be needed at the time of a liquidation to satisfy the preferential
rights of any holders of Preferred Stock.
If a dividend or distribution payable in Class A Common Stock is made on
the Class A Common Stock, Golden Bear must also make a pro rata and
simultaneous dividend or distribution on the Class B Common Stock payable in
shares of Class B Common Stock. Conversely, if a dividend or distribution
payable in Class B Common Stock is made on the Class B Common Stock, Golden
Bear must also make a pro rata and simultaneous dividend or distribution on
the Class A Common Stock payable in shares of Class A Common Stock.
RESTRICTIONS ON TRANSFER. If a holder of Class B Common Stock transfers
such shares, whether by sale, assignment, gift, bequest, appointment or
otherwise, to a person other than a Nicklaus Family Member, such shares will
be converted automatically into shares of Class A Common Stock. In the case
of a pledge of shares of Class B Common Stock to a financial institution,
such shares will not be deemed to be transferred unless and until a
foreclosure occurs.
CONVERSION. Class A Common Stock has no conversion rights. Class B Common
Stock is convertible into Class A Common Stock, in whole or in part, at any
time and from time to time at the option of the holder, on the basis of one
share of Class A Common Stock for each share of Class B Common Stock
converted. In the event of a transfer of shares of Class B Common Stock to
any person other than a Nicklaus Family Member, each share of Class B Common
Stock so transferred will be converted automatically into one share of Class
A Common Stock. Each share of Class B Common Stock will also automatically
convert into one share of Class A Common Stock if, on the record date for any
meeting of the shareholders, the number of shares of Class B Common Stock
then outstanding is less than 20% of the aggregate number of shares of Class
A Common Stock and Class B Common Stock then outstanding.
LIQUIDATION. In the event of liquidation, after payment of the debts and
other liabilities of Golden Bear and after making provision for the holders
of Preferred Stock, if any, the remaining assets of Golden Bear will be
distributable ratably among the holders of the Class A Common Stock and Class
B Common Stock treated as a single class.
MERGERS AND OTHER BUSINESS COMBINATIONS. Upon the merger of consolidation
of Golden Bear, holders of each class of Common Stock are entitled to receive
equal per share payments or distributions, except that in any transaction in
which shares of capital stock are distributed, such shares may differ as to
voting rights to the extent and only to the extent that the voting rights of
the Class A Common Stock and Class B Common Stock differ at that time.
F-7
<PAGE>
GOLDEN BEAR GOLF, INC.
NOTES TO BALANCE SHEET-(CONTINUED)
JUNE 7, 1996
3. COMMITMENTS
In connection with the offering described above, Golden Bear intends to
enter into the following agreements:
DESIGN SERVICES MARKETING AGREEMENT-
GBI will retain Golden Bear as its exclusive worldwide marketing agent for
the purpose of identifying and negotiating contracts with developers, owners
and operators of golf facilities for GBI or its division, Nicklaus Design,
including the promotion of the golf course design and consulting services of
Jack W. Nicklaus, Jack W. Nicklaus II and other associated designers employed
or retained by GBI.
As compensation for the services provided by Golden Bear under the
agreement, GBI will pay Golden Bear, on a monthly basis in arrears, a
commission at the rate of ten percent (10%) of the gross fees (as defined)
received by GBI from any design contract executed by GBI during the term of
this agreement, except for design contracts for any of the specifically
excluded design services. The term of the agreement will commence
concurrently with the commencement of the proposed initial public offering
and will expire on December 31, 2006, unless otherwise terminated or
received. Golden Bear has the right, upon expiration of the initial term of
this agreement, to continually renew the agreement for successive three (3)
year terms, subject to its satisfactory performance of its responsibilities
to GBI under the agreement through the effective date of such renewal. The
agreement may be terminated by Golden Bear at the end of any calendar year,
(commencing with the end of calendar year 2000), upon written notice to GBI
of its intention to terminate not later than July 1 of the year in which such
termination is to be effective.
TRADEMARK LICENSE AGREEMENT-
GBI will grant to Golden Bear a royalty-free, indefinite, exclusive right
(subject to certain exclusions) to utilize and sublicense all major
trademarks, tradenames and service marks owned or developed by GBI, including
the GOLDEN BEAR, NICKLAUS and JACK NICKLAUS trademarks (collectively, the
"Licensed Marks") and the right, subject to the approval of GBI, to obtain
the registration of additional trademarks and service marks deemed by Golden
Bear to be necessary or prudent to the maintenance and future expansion of
Golden Bear. GBI will also grant Golden Bear the right to use the name,
likeness, nickname, biographical data and other identifying characteristics
of Jack Nicklaus in connection with the advertising, promotion, sale or
rendering of Golden Bear's products or services throughout the world. GBI
will retain the exclusive right to utilize any of the Licensed Marks in
connection with its continuing businesses, which encompass (i) golf course
design and consulting; (ii) residential community development; (iii) the
creation, sponsorship, promotion and management of golf tournaments; (iv)
daily fee golf course development; (v) the manufacture and marketing of golf
clubs and equipment; (vi) the creation, development and editing of books,
articles and print media creative works; and (vii) a membership club offering
golf improvement tips.
The initial term of the license is 30 years, renewable and may only be
terminated by GBI in the event Golden Bear abandons its use of the Licensed
Marks or breaches, violates or fails to perform or observe in any material
respect any of the material covenants, terms or conditions of the Trademark
License Agreement and fails to correct or take immediate action in good faith
to correct any such curable breach, violation or failure following the
receipt of notice of such breach or violation from an arbitrator.
F-8
<PAGE>
GOLDEN BEAR GOLF, INC.
NOTES TO BALANCE SHEET-(CONTINUED)
JUNE 7, 1996
3. COMMITMENTS-(CONTINUED)
PERSONAL SERVICES MANAGEMENT AGREEMENT-
GBI has agreed to retain Golden Bear as the exclusive manager and
representative to market the personal services of Jack Nicklaus as a
professional athlete, celebrity and corporate spokesman for third parties not
affiliated with GBI or Golden Bear throughout the world. Golden Bear has
agreed that it will not, during the term of the agreement, represent, manage
or otherwise provide marketing services similar to those contemplated by the
agreement to any other professional golfer without the prior written consent
of GBI. The services provided by Golden Bear will include development of
personal appearance and personal service opportunities for approval by Jack
Nicklaus and GBI as well as requests from prospective clients, identification
and qualification of prospects, negotiation of contracts for approval by GBI
and Jack Nicklaus, and coordination of all scheduling and performance under
approved contracts. As compensation for the services to be provided by Golden
Bear, GBI will pay Golden Bear, on a monthly basis in arrears, thirty percent
(30%) of the net revenues (as defined) received by GBI from existing
endorsement services and a percentage to be negotiated (but in no event less
than 20%) of net revenues (as defined) received by GBI from endorsement
services under any contract which is signed or substantially negotiated
during the term of the agreement.
The term of the agreement will commence concurrently with the consummation
of the initial public offering and will expire on December 31, 2006, unless
otherwise terminated or renewed. Golden Bear has the right, upon expiration
of the initial term of this agreement to continually renew the agreement for
successive three (3) year terms, subject to its satisfactory performance of
its responsibilities to GBI under the agreement through the effective date of
such renewal.
GOLF EQUIPMENT MARKETING, CONSULTING AND COOPERATION AGREEMENT-
GBI has agreed to retain Golden Bear to provide marketing, consulting and
cooperation services to International in connection with its marketing
obligations as a licensee and member of Nicklaus Golf Equipment Company,
L.C., a Florida limited liability company ("NGEC"). For these services Golden
Bear will receive a fee of approximately $100,000 per year. International has
a 50% ownership interest in NGEC, which manufactures, markets and distributes
golf equipment utilizing the Nicklaus, Jack Nicklaus and Golden Bear
trademarks and tradenames.
The term of the agreement will commence concurrently with the commencement
of the proposed initial public offering and will expire on December 31, 2006,
unless otherwise terminated or renewed. Golden Bear has the right, upon
expiration of the initial term of this agreement, to continually renew the
agreement for successive three (3) year terms, subject to its satisfactory
performance of its responsibilities to GBI under the agreement through the
effective date of such renewal. The agreement may be terminated by Golden
Bear upon ninety (90) days written notice to GBI, if the time and staff
commitments of Golden Bear are materially increased at any time or, at the
end of any calendar year, commencing with the end of calendar year 1997, upon
written notice to GBI of its intention to terminate the agreement.
OFFICE FACILITIES LICENSING AGREEMENT-
Golden Bear will sublease its corporate headquarters from GBI, pursuant to
a sublease and sharing agreement. The sublease commences concurrently with
the commencement of the proposed
F-9
<PAGE>
GOLDEN BEAR GOLF, INC.
NOTES TO BALANCE SHEET-(CONTINUED)
JUNE 7, 1996
3. COMMITMENTS-(CONTINUED)
initial public offering and terminates January 31, 2000. Aggregate monthly
rent payable under the agreement will be approximately $50,000, including
sales taxes and common area maintenance, representing approximately 47% of
the primary lease.
The agreement also provides for the sharing and joint ownership of certain
office and business services and equipment formerly provided by or owned by
GBI, including the telephone systems, main switchboard, central facsimile
machines, photocopying machines and computer networks. Pursuant to the
agreement, GBI has agreed to pay a monthly management fee equal to fifty
percent (50%) of the costs of employing the identified shared office staff
and personnel and a monthly equipment fee equal to fifty percent (50%) of the
agreed costs, consumable supplies and maintenance of the shared office and
business equipment. Additionally, Golden Bear will pay GBI a monthly phone
rental fee based upon the pro rata share of costs of providing local
telephone service and maintenance to dedicated and shared phone equipment in
the premises.
F-10
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
COMBINED FINANCIAL STATEMENTS
F-11
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Boards of Directors of
Golden Bear Golf Centers, Inc.,
Paragon Golf Construction, Inc. and
Golden Bear International, Inc.:
We have audited the accompanying combined balance sheets of Golden Bear
Golf Centers, Inc., Paragon Golf Construction, Inc. and Certain Operations of
Golden Bear International, Inc. (Florida corporations) as of December 31,
1994 and 1995 and the related combined statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Companies' management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Golden Bear Golf
Centers, Inc., Paragon Golf Construction, Inc. and Certain Operations of
Golden Bear International, Inc. as of December 31, 1994 and 1995, and the
results of their combined operations and cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
West Palm Beach, Florida,
April 17, 1996.
F-12
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
PRO FORMA
FOR
REORGANIZATION
MARCH 31, MARCH 31,
1994 1995 1996 1996
------------- ------------- ------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ..................... $ 441,308 $ 377,796 $ 299,784 $ 1,799,784
Restricted cash ............................... 52,353 52,353 52,353 52,353
Accounts receivable, net of allowances of
$572,999, $511,833 and $519,719 (unaudited) . 3,263,338 6,366,435 5,287,144 5,287,144
Due from International ........................ 30,089 647,146 253,840 253,840
Costs and estimated earnings in excess of
billings on uncompleted contracts ........... 194,177 666,338 869,940 869,940
Prepaid expenses and other current assets .... 188,972 174,032 363,085 363,085
------------- ------------- ------------- ---------------
Total current assets ........................ 4,170,237 8,284,100 7,126,146 8,626,146
PROPERTY AND EQUIPMENT, net .................... 620,109 582,586 566,682 566,682
OTHER ASSETS ................................... 50,400 39,673 195,426 195,426
------------- ------------- ------------- ---------------
Total assets ................................ $4,840,746 $8,906,359 $7,888,254 $ 9,388,254
============= ============= ============= ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .............................. $1,307,916 $4,268,808 $3,463,573 $ 3,463,573
Accrued expenses .............................. 1,168,643 1,889,912 1,594,272 1,594,272
Billings in excess of costs and estimated
earnings on uncompleted contracts ........... 829,792 602,990 846,213 846,213
Deferred revenue .............................. 858,019 700,824 1,144,767 1,144,767
Current portion of notes payable .............. 62,975 219,225 674,145 674,145
Provision for estimated losses on construction
contracts in process ........................ 82,147 67,288 67,288 67,288
------------- ------------- ------------- ---------------
Total current liabilities ................... 4,309,492 7,749,047 7,790,258 7,790,258
------------- ------------- ------------- ---------------
NOTES PAYABLE, net of current portion ......... 112,735 43,510 25,158 25,158
------------- ------------- ------------- ---------------
MINORITY INTEREST .............................. 162,903 83,484 (207,209) (207,209)
------------- ------------- ------------- ---------------
COMMITMENTS AND CONTINGENCIES
(Notes 8 and 11)
SHAREHOLDERS' EQUITY:
Common stock ................................ 30,000 30,000 30,000 30,000
Additional paid-in capital .................... 840,000 840,000 840,000 3,790,000
Retained earnings ............................. (614,384) 160,318 (589,953) (2,039,953)
------------- ------------- ------------- ---------------
Total shareholders' equity .................. 255,616 1,030,318 280,047 1,780,047
------------- ------------- ------------- ---------------
Total liabilities and shareholders' equity . $4,840,746 $8,906,359 $7,888,254 $ 9,388,254
============= ============= ============= ===============
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these combined balance sheets.
F-13
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------------------------- ----------------------------
1993 1994 1995 1995 1996
-------------- ------------- -------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Golf division -
Construction and shaping revenues $ 2,177,214 $ 5,598,978 $19,177,460 $1,434,680 $2,055,894
Golf centers and academy fees
and royalties .................. 567,639 744,549 986,790 125,375 233,952
Related party management fees ... 953,656 1,160,371 1,310,523 239,000 299,539
------------- ------------- -------------- ------------- -------------
Total golf division ............. 3,698,509 7,503,898 21,474,773 1,799,055 2,589,385
------------- ------------- -------------- ------------- -------------
Marketing division -
Golf instruction revenues ....... 2,283,417 2,965,482 3,535,444 1,141,771 961,037
Licensing and other revenues .... 5,669,786 5,855,245 6,055,260 1,181,924 1,342,540
Related party commissions ....... 116,250 300,000 480,000 129,375 78,750
------------- ------------- -------------- ------------- -------------
Total marketing division ....... 8,069,453 9,120,727 10,070,704 2,453,070 2,382,327
------------- ------------- -------------- ------------- -------------
Total revenues ................. 11,767,962 16,624,625 31,545,477 4,252,125 4,971,712
------------- ------------- -------------- ------------- -------------
OPERATING COSTS AND EXPENSES:
Construction and shaping costs ... 1,894,442 4,736,600 16,500,035 1,422,681 2,000,441
Operating expenses ................ 6,501,649 7,756,628 8,421,972 1,615,303 1,698,853
Corporate overhead ................ 2,994,015 3,051,444 3,121,257 714,052 750,466
Depreciation and amortization .... 243,318 198,710 233,041 53,305 72,207
------------- ------------- -------------- ------------- -------------
11,633,424 15,743,382 28,276,305 3,805,341 4,521,967
------------- ------------- -------------- ------------- -------------
Operating income ................. 134,538 881,243 3,269,172 446,784 449,745
------------- ------------- -------------- ------------- -------------
OTHER INCOME (EXPENSE):
Interest income ................... 9,146 17,929 37,166 1,352 4,356
Interest expense .................. -- (7,541) (25,255) (4,054) (12,342)
Other ............................. (6,751) (20,069) (12,954) (1,355) 12,116
------------- ------------- -------------- ------------- -------------
Total other income (expense) .... 2,395 (9,681) (1,043) (4,057) 4,130
------------- ------------- -------------- ------------- -------------
Income before income taxes and
minority interest .............. 136,933 871,562 3,268,129 442,727 453,875
FOREIGN TAX PROVISION .............. 616,038 699,499 1,010,312 177,880 95,975
MINORITY INTEREST .................. 924,935 1,037,698 1,023,942 203,294 324,708
------------- ------------- -------------- ------------- -------------
Income (loss) before pro forma
income taxes ................... (1,404,040) (865,635) 1,233,875 61,553 33,192
PRO FORMA INCOME TAX
BENEFIT--UNAUDITED
(Note 1) ......................... (923,358) (764,292) (135,080) (84,502) (45,600)
------------- ------------- -------------- ------------- -------------
Pro forma net income (loss) ..... $ (480,682) $ (101,343) $ 1,368,955 $ 146,055 $ 78,792
============= ============= ============== ============= =============
Pro forma net income per share of
common stock ..................... $ (0.16) $ (0.03) $ 0.46 $ 0.05 $ 0.03
============= ============= ============== ============= =============
Weighted average number of
common stock and common stock
equivalents outstanding .......... 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000
============= ============= ============== ============= =============
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these combined statements.
F-14
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS/
COMMON PAID-IN DIVISIONAL
STOCK CAPITAL EQUITY TOTAL
---------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1992 ........................ $ 1,250 $ 8,750 $ 1,429,022 $ 1,439,022
Sale of common stock of Golf Centers ............. 1,250 108,750 -- 110,000
Divisional transfers from International ......... -- -- 965,063 965,063
Net loss ......................................... -- -- (1,404,040) (1,404,040)
---------- ------------ -------------- -------------
BALANCE, December 31, 1993 ........................ 2,500 117,500 990,045 1,110,045
---------- ------------ -------------- -------------
Contributions to Paragon ......................... -- 750,000 -- 750,000
Divisional transfers to International ............ -- -- (738,794) (738,794)
Net loss ......................................... -- -- (865,635) (865,635)
---------- ------------ -------------- -------------
BALANCE, December 31, 1994 ........................ 2,500 867,500 (614,384) 255,616
---------- ------------ -------------- -------------
Divisional transfers to International ............ -- -- (459,173) (459,173)
Net income ....................................... -- -- 1,233,875 1,233,875
---------- ------------ -------------- -------------
BALANCE, December 31, 1995 ........................ 2,500 867,500 160,318 1,030,318
---------- ------------ -------------- -------------
Divisional transfers to International (unaudited) -- -- (783,463) (783,463)
Net income (unaudited) ........................... -- -- 33,192 33,192
---------- ------------ -------------- -------------
BALANCE, March 31, 1996 (unaudited) ............... $ 2,500 $867,500 $ (589,953) $ 280,047
========== ============ ============== =============
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these combined statements.
F-15
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------- -----------------------------
1993 1994 1995 1995 1996
--------------- -------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................... $(1,404,040) $ (865,635) $ 1,233,875 $ 61,553 $ 33,192
Adjustments to reconcile net income (loss) to
net cash provided by operating activities--
Depreciation and amortization ............... 243,318 198,710 233,041 53,305 72,207
Provision for uncollectibles ................... 96,037 476,962 98,046 -- 7,886
Provision for estimated losses on construction
contracts in process ......................... -- 82,147 (14,859) -- --
Minority interest .............................. 924,935 1,037,698 1,023,942 203,294 324,708
Changes in assets and liabilities:
Restricted cash ............................... -- (52,353) -- -- --
Accounts receivable ........................... (1,095,818) (1,879,278) (3,201,143) 802,810 1,087,177
Decrease (increase) in due from International 93,744 (69,488) (617,057) (123,548) 393,306
Costs and estimated earnings in excess of
billings on uncompleted contracts ........... -- (194,177) (472,161) 14,821 (203,602)
Prepaid expenses and other current assets .... (56,275) (51,039) 14,940 (5,171) (189,053)
Other assets .................................. 91,832 7,485 20,761 56,951 (171,926)
Accounts payable .............................. 466,077 396,952 2,960,892 (35,556) (805,235)
Accrued expenses .............................. 395,557 379,361 721,269 117,573 (295,640)
Billings in excess of costs and estimated
earnings on uncompleted contracts ........... 196,268 633,524 (226,802) (132,802) 243,223
Deferred revenue .............................. 244,985 364,554 (157,195) 538,296 443,943
------------- -------------- ------------- -------------- ------------
Net cash provided by operating activities ... 196,620 465,423 1,617,549 1,551,526 940,186
--------------- -------------- ------------- -------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................ (23,259) (248,551) (193,913) (111,876) (56,303)
Distributions to minority investors ............. (901,388) (1,002,137) (1,115,000) (347,500) (615,000)
--------------- -------------- -------------- -------------- ------------
Net cash used in investing activities ....... (924,647) (1,250,688) (1,308,913) (459,376) (671,303)
--------------- -------------- -------------- -------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock and contributions ......... 110,000 750,000 -- -- --
Proceeds from notes payable ..................... -- 200,242 150,000 -- 454,922
Payments on notes payable ....................... (106,314) (24,532) (62,975) (15,744) (18,354)
Divisional transfers from (to) International ... 965,063 (738,794) (459,173) (992,017) (783,463)
--------------- -------------- -------------- -------------- ------------
Net cash provided by (used in)
financing activities ....................... 968,749 186,916 (372,148) (1,007,761) (346,895)
--------------- -------------- -------------- -------------- ------------
Net increase (decrease) in cash and
cash equivalents ........................... 240,722 (598,349) (63,512) 84,389 (78,012)
CASH AND CASH EQUIVALENTS,
beginning of year .............................. 798,935 1,039,657 441,308 441,308 377,796
--------------- -------------- -------------- -------------- ------------
CASH AND CASH EQUIVALENTS, end of year ........... $ 1,039,657 $ 441,308 $ 377,796 $ 525,697 $ 299,784
=============== ============== ============== ============== ============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest ........................ $ -- $ 7,541 $ 24,962 $ 6,693 $ 3,394
=============== ============== ============== ============== ============
Cash paid for foreign taxes ..................... $ 386,038 $ 559,499 $ 532,383 $ 265,811 $ 277,975
=============== ============== ============== ============== ============
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these combined statements.
F-16
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The combined financial statements include the accounts of Golden Bear Golf
Centers, Inc. ("Golf Centers"), Paragon Golf Construction, Inc. ("Paragon")
and Certain Operations of Golden Bear International, Inc. ("GBI Carve-out")
(collectively, the "Companies"). All significant intercompany transactions
and accounts have been eliminated. Golden Bear International, Inc.
("International") is a privately owned company controlled by Jack Nicklaus,
primarily involved in golf course design and consulting, the development of
residential communities and daily fee golf courses, the manufacture and
marketing of golf clubs and equipment and the production and marketing of
golf and other sporting events. Golf Centers and Paragon are both owned and
controlled by Jack Nicklaus. Accordingly, for financial statement
presentation purposes, the businesses have been combined.
Golf Centers was incorporated in December 1992 to offer franchise
opportunities for the operation of golf instruction and practice facilities
that consist of practice stations and the teaching techniques developed by
Jack Nicklaus, Jim Flick and the International staff. In connection with the
franchise program, Golf Centers enters into various agreements with
franchisees including, but not limited to, development and license agreements
which provide for the establishment and operation of golf centers and use of
various trademarks, trade names and associated logos and symbols.
Paragon was incorporated in October 1992 to provide golf course
construction, shaping and consulting services to customers located throughout
the world. Construction and shaping work is performed under both
cost-plus-fee contracts and fixed-price contracts. Paragon also manages or
supervises, for a fee, the construction projects of others. The length of
Paragon's contracts varies but typically is less than two years.
GBI Carve-out provides golf club management services, operates golf
academies, licenses the brand names of Nicklaus, Jack Nicklaus and Golden
Bear and develops and conducts golf instruction. GBI Carve-out receives 30%
of all revenues received by Jack Nicklaus for personal endorsement services
with various companies. GBI Carve-out also receives a 10% management fee
based on the golf course design fees received by International. See Note 9.
The financial statements of GBI Carve-out, which are included in the
accompanying combined financial statements, have been prepared from the books
and records of International. As such, the combined statements of operations
include allocations of expenses between GBI Carve-out and the other divisions
of International which are material in amount. Such expenses include
allocations for corporate overhead, payroll, facilities, administration and
other overhead which were allocated to GBI Carve-out using a proportional
cost method of allocation because specific identification of expenses is not
practicable. Management believes that such allocations are representative of
stand-alone expenses based on GBI Carve-out's operations, and are further
supported by agreements to be entered into in connection with the proposed
initial public offering. See Note 11. The divisional equity of GBI Carve-out
includes transfers to International. Such transfers represent cash generated
by GBI Carve-out used in other operations of International.
In the opinion of management, the results of operations and cash flows of
GBI Carve-out are properly reflected in the accompanying combined financial
statements.
F-17
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS-(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-(CONTINIED)
The apparel licensing activities of GBI Carve-out are conducted through
Jack Nicklaus Apparel International ("JNAI") and its various partnerships.
GBI Carve-out serves as a 50% general partner and is generally entitled to
receive 50% to 66 2/3 % of the cash distributions of the various
partnerships' operations. GBI Carve-out is the owner of the various
trademarks and licenses used in JNAI's business and, as such, exercises total
control over the use of such trademarks and licenses. In addition, GBI
Carve-out's duties with respect to the various partnerships include contract
negotiation, accounting and determination and processing of distributions.
Accordingly, for financial reporting purposes, JNAI is considered to be
controlled by the Companies. Notwithstanding the lack of technical majority
ownership, consolidation of JNAI is necessary to fairly present the financial
position and results of operations of the Companies. The operations and
balance sheet data of JNAI are consolidated with GBI Carve-out, and minority
interest is reflected.
The minority interest asset of approximately $207,000 (unaudited) at March
31, 1996 results from cash distributions made during the three month period
exceeding income recognized during the period. Such asset will be realized as
additional income is recognized during the year.
CASH AND CASH EQUIVALENTS
The Companies consider all highly liquid investment instruments with a
maturity of three months or less when purchased to be cash equivalents. In
1994, the Companies adopted Financial Accounting Standards Board Statement
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
and, accordingly, all such instruments are classified as "held to maturity"
securities which are reported at amortized cost. The adoption of this
pronouncement did not have a material effect on the financial position or
results of operations of the Companies.
RESTRICTED CASH
In 1994, to begin construction on a certain project, Paragon was required
by a local government's environmental department to place $52,353 in a
certificate of deposit as a performance bond. This performance bond is
required until such time as the government agency deems it unnecessary to be
maintained. This three-month certificate of deposit is automatically extended
and bears interest at 2.8%.
ACCOUNTS RECEIVABLE AND REVENUE RECOGNITION
GOLF CENTERS
Revenues include franchise fees and royalty fees received from
franchisees. Franchise fees relate to the establishment of the golf centers
and royalties fees relate to the provision of assistance by Golf Centers with
marketing, training and other operational issues. Accordingly, franchise fees
are recognized as revenue when substantially all such services required under
the development agreement have been performed. Royalty fees are based upon
franchisees' adjusted gross revenues, as defined, and are recognized as
revenues when earned.
"Deferred revenue" includes franchise fees due or collected in excess of
amounts earned and amounted to $177,500, $190,000 and $190,000 (unaudited) at
December 31, 1994, December 31, 1995 and March 31, 1996.
F-18
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS-(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-(CONTINUED)
PARAGON
Paragon records profits on long-term construction and shaping contracts
using the percentage-of-completion method, measured by the percentage of
costs incurred to date as compared to estimated total cost for each contract.
This method is used as management considers expended contract costs to be the
best available measure of progress on these contracts. Provision for
estimated losses on uncompleted contracts are made in the period in which the
Company determines that such losses are probable.
Construction and shaping costs include all direct material and labor costs
and those indirect costs related to contract performance, such as indirect
labor, supplies, tools and repairs and depreciation costs. Selling, general
and administrative costs are charged to expense as incurred.
Accounts receivable are principally from owners of golf courses under
construction. Paragon performs periodic credit evaluations of its customers
and maintains allowances for potential credit losses.
In 1995, revenues from a single unaffiliated Paragon customer represented
approximately 16% of the combined Companies' total revenues. Accounts
receivable at December 31, 1995 include amounts due from this same customer
of approximately $1,000,000.
GBI CARVE-OUT
Fees received for golf management services are generally received and
recorded over the life of the related contracts. Golf academy and golf
instruction revenues are recognized concurrent with the time the services are
rendered. License revenue is recognized over the term of the underlying
license agreement, generally from five to ten years.
GBI Carve-out is also entitled to receive 30% of revenues received by Jack
Nicklaus for personal endorsement services with various companies and is
entitled to receive a management fee which represents 10% of the golf course
design fees received by International. Related revenues are recognized as
Jack Nicklaus becomes entitled to receive such personal endorsement fees and
as International receives its design fees. International generally receives
deposits ranging from 10% to 50% for its design services. The remaining
design fee is received in installments over the period of the design
contract.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Property and equipment are depreciated using straight-line and accelerated
methods over the estimated useful lives of the assets.
Maintenance and repairs are charged to expense when incurred; betterments
are capitalized. Upon the sale or retirement of assets, the cost and
accumulated depreciation are removed from the accounts and any gain or loss
is recognized currently.
F-19
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS-(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-(CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments" (SFAS 107), requires disclosure of the
fair value of certain financial instruments. Cash and cash equivalents,
accounts receivable, costs and estimated earnings in excess of billings on
uncompleted contracts, prepaid expenses and other current assets, accounts
payable, accrued expenses, billings in excess of costs and estimated earnings
on uncompleted contracts, deferred revenue, provision for estimated losses on
construction contracts in process and long-term debt are reflected in the
accompanying financial statements at cost which approximates fair value.
PRO FORMA INCOME TAXES
Golf Centers and Paragon are S Corporations for Federal income tax
reporting purposes. GBI Carve-out is a division of International, an S
Corporation. As S Corporations, net income (loss) and related temporary
differences which arise in the recording of income and expense items for
financial and income tax reporting purposes of the Companies are reported in
the tax returns of the individual shareholders.
Foreign tax provision represents taxes paid or accrued on the Companies'
foreign operations as foreign jurisdictions do not recognize the S
Corporation status.
The pro forma income tax benefit is included in the combined statements of
operations and is presented for informational purposes as if the domestic
operations of the Companies were C Corporations during the years presented.
Generally foreign taxes paid will serve to reduce the Companies' tax
obligation.
Pro forma taxes have been presented to reflect this benefit and to reduce
the historical effective tax rate to an overall estimated effective rate of
approximately 39%.
PRO FORMA NET INCOME PER SHARE OF COMMON STOCK
Pro forma net income is divided by the weighted average number of shares
of common stock and dilutive common stock equivalents outstanding, after
applying the treasury stock method to determine net income per share. Primary
and fully diluted net income per share are the same for all periods presented
as there were no common stock equivalents outstanding during any of the
periods presented.
INTERIM FINANCIAL DATA
In the opinion of the management of the Companies, the accompanying
unaudited combined financial statements contain all adjustments (consisting
of only normal recurring adjustments) necessary
F-20
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS-(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-(CONTINUED)
to present fairly the financial position of the Companies as of March 31,
1996, and the results of operations for the three-month periods ended March
31, 1995 and 1996. The results of operations and cash flows for the
three-month period ended March 31, 1996, are not necessarily indicative of
the results of operations or cash flows which may be reported for the
remainder of 1996.
2. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs and estimated earnings on uncompleted construction and shaping
contracts consist of the following for contracts recognized under the
percentage-of-completion method of accounting:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
MARCH 31,
1994 1995 1996
-------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Costs incurred on uncompleted contracts $4,368,661 $16,614,195 $16,529,729
Estimated earnings ...................... 435,335 2,116,225 2,560,969
-------------- -------------- --------------
4,803,996 18,730,420 19,090,698
Less-Billings to date ................... 5,439,611 18,667,072 19,066,971
-------------- -------------- --------------
$ (635,615) $ 63,348 $ 23,727
============== ============== ==============
</TABLE>
Such amounts are included in the accompanying combined balance sheets
under the following captions:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
MARCH 31,
1994 1995 1996
------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Costs and estimated earnings in excess of
billings on uncompleted contracts ...... $ 194,177 $ 666,338 $ 869,940
Billings in excess of costs and estimated
earnings on uncompleted contracts ...... (829,792) (602,990) (846,213)
------------- ------------ ------------
$(635,615) $ 63,348 $ 23,727
============= ============ ============
</TABLE>
Construction contract revenues and cost of construction contract revenues
consist of the following:
<TABLE>
<CAPTION>
CONSTRUCTION CONTRACT REVENUES COST OF CONSTRUCTION CONTRACT REVENUES
-------------------------------------------- -------------------------------------------
DECEMBER 31, DECEMBER 31,
----------------------------- -----------------------------
MARCH 31, MARCH 31,
1994 1995 1996 1994 1995 1996
------------- -------------- ------------- ------------- -------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Completed contracts .. $ 477,337 $ 4,255,046 $ -- $ 367,939 $ 3,391,505 $ --
Uncompleted contracts 5,121,641 14,922,414 2,055,874 4,368,661 13,108,530 1,567,540
------------- -------------- ------------- ------------- -------------- ------------
$5,598,978 $19,177,460 $2,055,874 $4,736,600 $16,500,035 $1,567,540
============= ============== ============= ============= ============== ============
</TABLE>
F-21
<PAGE>
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
USEFUL
MARCH 31, LIFE
1994 1995 1996 IN YEARS
------------ ------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Leasehold improvements ............ $ 299,354 $ 333,337 $ 333,337 3 -5
Equipment, furniture and fixtures 1,466,937 1,684,103 1,861,511 5 -10
------------ ------------ ------------
1,766,291 2,017,440 2,194,848
Less-Accumulated depreciation
and amortization ............. 1,146,182 1,434,854 1,628,166
------------ ------------ -------------
$ 620,109 $ 582,586 $ 566,682
============ ============ =============
</TABLE>
4. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
MARCH 31,
1994 1995 1996
------------- ------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Payroll and related costs $ 345,691 $ 623,811 $ 636,067
Foreign taxes ............. 680,000 1,132,464 922,214
Other ..................... 142,952 133,637 35,991
------------- ------------- ------------
$1,168,643 $1,889,912 $1,594,272
============= ============= ============
</TABLE>
5. NOTES PAYABLE
In August, 1994, Paragon purchased construction equipment valued at
$200,000 and received financing from a finance company. The note, which
extends through July 1997, requires payments of $6,414 per month, including
interest at 9.5% per annum and is secured by the construction equipment. The
note balance outstanding at December 31, 1994 and 1995 was $175,710 and
$112,735.
In 1995, Paragon entered into a loan agreement with a bank which provides
for a revolving line of credit collateralized by substantially all of
Paragon's assets. Borrowings under the line of credit are limited to a
percentage of eligible accounts receivable, as defined, and may not exceed
$1,000,000 through the April 26, 1996, maturity date. See Note 11. Interest
is payable at 8.5% per annum. The amount outstanding under the line was
$150,000 at December 31, 1995 and $600,000 (unaudited) at March 31, 1996.
The loan agreement contains restrictive covenants, including the
maintenance of various ratios. At December 31, 1995, Paragon was in
compliance with the covenants in the agreement. The loan agreement is
guaranteed by the Companies' majority stockholder.
F-22
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS-(CONTINUED)
6. STOCKHOLDERS' EQUITY
The combined stockholders' equity accounts, prior to the Reorganization
discussed in Note 11, include the accounts of the Companies at December 31,
1995 as follows:
<TABLE>
<CAPTION>
COMMON STOCK
--------------------
RETAINED
ADDITIONAL EARNINGS/
PAID-IN DIVISIONAL
SHARES AMOUNT CAPITAL EQUITY
--------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Golf Centers, $1 par value, 2,000 shares authorized 1,250 $1,250 $108,750 $(56,683)
Paragon, $1 par value, 2,000 shares authorized .... 1,250 1,250 758,750 125,864
GBI Carve-out ...................................... -- -- 91,137
--------- --------- ------------- -------------
2,500 $2,500 $867,500 $160,318
========= ========= ============= =============
</TABLE>
7. RETIREMENT SAVINGS PLAN
The Companies participate in a retirement savings plan (the "Plan")
sponsored by International. The Plan operates as a defined contribution plan
and is qualified under Section 401(k) of the Internal Revenue Code. The Plan
covers all employees who have completed one year of service. The Companies
match the employees' contributions, up to a maximum of $1,500 per employee
per Plan year. A participant's individual contribution is limited to the
maximum amount for such year under the Internal Revenue Code. Discretionary
contributions can also be made to the Plan. All employees who have completed
one year of service and are employed at year-end are eligible for this
contribution.
Contributions to the Plan were $47,183, $59,639 and $59,218 during the
years ended December 31, 1993, 1994 and 1995, respectively.
8. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Companies lease vehicles through lease agreements expiring at various
dates through 1997. Minimum lease payments under noncancelable operating
lease obligations at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
- --------------------------
<S> <C>
1996 ................. $32,712
1997 ................. 15,735
----------
$48,447
==========
</TABLE>
LITIGATION
In August 1995, Paragon brought an arbitration claim against a customer
for breach of contract. Paragon alleges it has properly completed the
construction relating to the renovation of the customer's golf course and is
seeking final payment of retainage and other amounts due, totaling $238,053.
In addition, Paragon is seeking additional damages of $144,820. Simultaneous
to this claim of arbitration, the customer filed a counterclaim of
arbitration against Paragon for alleged construction defects in the
F- 23
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS-(CONTINUED)
8. COMMITMENTS AND CONTINGENCIES-(CONTINUED)
renovation of its golf course. The customer is seeking damages in the amount
of $750,000. In the opinion of both legal counsel and management of Paragon,
the outcome of this counterclaim is indeterminable. As such, no additional
provision for loss has been recorded at December 31, 1995 or March 31, 1996.
GUARANTEES
Several of Paragon's construction contracts guarantee that Paragon shall,
at its sole cost and expense, properly correct and remedy, to the
satisfaction of the golf course owner, any structural, aesthetic or
functional defects which may appear in the work within a designated period of
time.
Additionally, Paragon has entered into construction agreements which
specify that Paragon will be liable for penalties incurred on all
construction projects uncompleted within a specified period of time.
Paragon's management does not expect the costs associated with corrective
action or penalties incurred, if any, to materially impact the financial
statements.
9. RELATED PARTY TRANSACTIONS
''Due from International" consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
MARCH 31,
1994 1995 1996
---------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Paragon ....... $ -- $637,210 $253,840
GBI Carve-out 30,089 9,936 --
---------- ----------- ------------
$30,089 $647,146 $253,840
========== =========== ============
</TABLE>
A majority of the construction, shaping and consulting contracts received
by Paragon have been entered into with respect to golf courses designed by
International. Certain payments under consulting contracts awarded to Paragon
are remitted directly to International. In 1994, Paragon contracted to build
a golf course for International at cost. The estimated project cost is
$1,360,000 and construction began in February 1995. At December 31, 1995,
$637,210 was due from International related to these arrangements.
During the year ended December 31, 1994, Paragon paid off a note payable
to International in the amount of $20,593.
GBI Carve-out revenues include 30% of the personal endorsement fees
received by Jack Nicklaus. Such amounts totaled $116,250, $300,000 and
$480,000 in 1993, 1994 and 1995, respectively, and $78,750 (unaudited) for
the three-month period ended March 31, 1996.
GBI Carve-out revenues include 10% of the golf course design fees received
by International. Such amounts totaled $953,656, $1,160,371 and $1,310,523 in
1993, 1994 and 1995, respectively, and $299,539 (unaudited) for the
three-month period ended March 31, 1996.
F-24
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS-(CONTINUED)
9. RELATED PARTY TRANSACTIONS-(CONTINUED)
An analysis of "Due from International" is as follows:
<TABLE>
<CAPTION>
BALANCE, DECEMBER 31, 1993 ... $ (39,399)
<S> <C>
Management fees and
commissions ................... 1,460,371
Cash received ................. (1,390,883)
--------------
Balance, December 31, 1994 ... 30,089
Management fees and
commissions ................... 1,790,523
Cash received ................. (1,173,466)
--------------
Balance, December 31, 1995 ... $ 647,146
==============
</TABLE>
10. SEGMENT REPORTING AND INTERNATIONAL OPERATIONS
SEGMENTS
The Golf Division includes the operating entities involved primarily in
golf course construction services and golf practice and instruction
facilities, while the Marketing Division includes operating entities involved
in the development of the licensed products and marketing endorsements
relationships. The employees are organized along these divisions, and the
divisions reflect the Companies approach to the businesses.
Operating results of each segment are detailed below.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------- ----------------------------
1993 1994 1995 1995 1996
-------------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES
Golf ........................ $ 3,698,509 $ 7,503,898 $21,474,773 $1,799,055 $2,589,385
Marketing ................... 8,069,453 9,120,727 10,070,704 2,453,070 2,382,327
-------------- -------------- -------------- ------------- -------------
$11,767,962 $16,624,625 $31,545,477 $4,252,125 $4,971,712
-------------- -------------- -------------- ------------- -------------
OPERATING INCOME (LOSS)
Golf ........................ $ (528,352) $ (199,360) $ 2,085,419 $ 19,054 $ 196,971
Marketing ................... 3,900,223 4,330,757 4,538,051 1,195,087 1,075,447
Corporate ................... (2,994,015) (3,051,444) (3,121,257) (714,052) (750,466)
-------------- -------------- -------------- ------------- -------------
$ 377,856 $ 1,079,953 $ 3,502,213 $ 500,089 $ 521,952
============== ============== ============== ============= =============
DEPRECIATION AND
AMORTIZATION
Golf ........................ $ 8,400 $ 17,702 $ 25,007 $ 6,252 $ 7,632
Corporate ................... 234,918 181,008 208,034 47,053 64,575
-------------- -------------- -------------- ------------- -------------
$ 243,318 $ 198,710 $ 233,041 $ 53,305 $ 72,207
============== ============== ============== ============= =============
</TABLE>
F-25
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS-(CONTINUED)
10. SEGMENT REPORTING AND INTERNATIONAL OPERATIONS-(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
MARCH 31,
1994 1995 1996
------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
IDENTIFIABLE ASSETS
Golf ................ $1,847,139 $6,082,513 $6,165,837
Marketing ........... 2,570,261 2,441,429 1,311,400
Corporate ........... 423,346 382,417 411,017
------------- ------------- -------------
$4,840,746 $8,906,359 $7,888,254
============= ============= =============
CAPITAL EXPENDITURES
Golf ................ $ 224,308 $ 102,638 $ 35,752
Corporate ........... 24,243 91,275 20,551
------------- ------------- -------------
$ 248,551 $ 193,913 $ 56,303
============= ============= =============
</TABLE>
INTERNATIONAL
The Companies derive a portion of their revenues from foreign sources.
Foreign operations are primarily conducted through Paragon and JNAI and are
located in the Asia Pacific region, primarily Japan. Substantially all
Paragon contracts and agreements are denominated in U.S. currency.
Accordingly, Paragon is not generally subject to foreign currency
transactions. A substantial portion of the revenues of JNAI's licensees are
generated in foreign currencies. The licensees pay the license to JNAI in
U.S. dollars based on the exchange rate on the date of payment. Although
foreign currency fluctuations have not been significant historically,
fluctuations in the values of these currencies relative to the United States
dollar could have a material adverse effect on the Companies' future
profitability. The following summarizes the combined financial data of
foreign activities (after elimination of intercompany transactions):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------------------------------- ----------------------------
1993 1994 1995 1995 1996
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Assets ................... $ 149,097 $2,468,810 $4,202,734 $1,542,768 $2,993,023
============= ============= ============= ============= =============
Revenues ................. $5,289,594 $6,537,105 $9,585,534 $1,614,106 $1,687,615
============= ============= ============= ============= =============
Contribution to operating
income before allocation
of corporate overhead .. $2,591,013 $3,660,780 $4,703,812 $ 848,047 $ 778,977
============= ============= ============= ============= =============
</TABLE>
11. SUBSEQUENT EVENTS
PLAN OF REORGANIZATION
The Companies have entered into a proposed plan of reorganization which
will be consummated only upon the closing of a proposed initial public
offering of Class A Common Stock. The Companies will become subsidiaries of a
newly-formed parent company, Golden Bear Golf, Inc. ("Golden Bear"). Pursuant
to an exchange agreement, Golden Bear will acquire all of the outstanding
common stock of
F-26
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS-(CONTINUED)
11. SUBSEQUENT EVENTS-(CONTINUED)
Golf Centers and Paragon in exchange for an aggregate of 1,668,000 shares
(after the proposed 3,000-for-1 stock split) of Golden Bear's Class A and
Class B Common Stock. In addition Golden Bear will acquire certain assets and
assume certain liabilities of GBI Carve-out for 1,332,000 (after the proposed
3,000-for-1 stock split) shares of Class B Common Stock.
If the exchange agreement is consummated and Golden Bear closes its
initial public offering, the transaction will be accounted for on a
historical cost basis in a manner similar to a pooling of interests as the
transaction is between entities under common control.
In June 1996, members of management and certain Nicklaus Family Members
purchased capital stock of Golf Centers for an aggregate price of $1,500,000.
The shares were sold to members of management for $600,000. The fair value of
the shares sold to management at the date of issuance was $2,050,000,
resulting in the recognition of compensation expense in the amount of
$1,450,000.
AGREEMENTS
In connection with the offering described above, Golden Bear intends to
enter into the following agreements. The agreements reflect terms and
agreements that are substantially the same as the allocated expenses
reflected in the GBI Carve-out books and records.
DESIGN SERVICES MARKETING AGREEMENT
International will retain Golden Bear as its exclusive worldwide marketing
agent for the purpose of identifying and negotiating contracts with
developers, owners and operators of golf facilities for International or its
division, Nicklaus Design's, including the promotion of the golf course
design and consulting services of Jack W. Nicklaus, Jack W. Nicklaus II and
other associated designers employed or retained by International.
As compensation for the services provided by Golden Bear under the
agreement, International will pay Golden Bear, on a monthly basis in arrears,
a commission at the rate of ten percent (10%) of the gross fees (as defined)
received by International from any design contract executed by International
during the term of this agreement, except for design contracts for any of the
specifically excluded design services. The term of the agreement will
commence concurrently with the commencement of the proposed initial public
offering and will expire on December 31, 2006, unless otherwise terminated or
received. Golden Bear has the right, upon expiration of the initial term of
this agreement, to continually renew the agreement for successive three (3)
year terms, subject to its satisfactory performance of its responsibilities
to International under the agreement through the effective date of such
renewal. The agreement may be terminated by Golden Bear at the end of any
calendar year, (commencing with the end of calendar year 2000), upon written
notice to International of its intention to terminate not later than July 1
of the year in which such termination is to be effective.
TRADEMARK LICENSE AGREEMENT
International will grant Golden Bear a royalty-free, exclusive right
(subject to certain exclusions) to utilize and sublicense all major
trademarks, tradenames and service marks owned or developed by
F-27
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS-(CONTINUED)
11. SUBSEQUENT EVENTS-(CONTINUED)
International, including the Golden Bear, Nicklaus and Jack Nicklaus
trademarks (collectively, the "Licensed Marks") and the right, subject to the
approval of International, to obtain the registration of additional
trademarks and service marks deemed by Golden Bear to be necessary or prudent
to the maintenance and future expansion of Golden Bear. International also
granted Golden Bear the right to use the name, likeness, nickname,
biographical data and other identifying characteristics of Jack Nicklaus in
connection with the advertising, promotion, sale or rendering of Golden
Bear's products or services throughout the world. International has retained
the exclusive right to utilize any of the Licensed Marks in connection with
its continuing businesses, which encompass (i) golf course design and
consulting; (ii) residential community development; (iii) creation,
sponsorship, production and marketing of golf and other sporting events; (iv)
daily fee golf course development; (v) the manufacture and marketing of golf
clubs and equipment; and (vi) the creation, development and editing of books,
articles and print media creative works and (vii) a membership club offering
golf improvement tips.
The initial term of Golden Bear's license is 30 years, renewable and may
only be terminated by International in the event Golden Bear abandons its use
of the Licensed Marks or breaches, violates or fails to perform or observe in
any material respect any of the material covenants, terms or conditions of
the Trademark License Agreement and fails to correct or take immediate action
in good faith to correct any such curable breach, violation or failure
following the receipt of notice of such breach or violation from an
arbitrator.
PERSONAL SERVICES MANAGEMENT AGREEMENT
International has agreed to retain Golden Bear as the exclusive manager
and representative to market the personal services of Jack Nicklaus as a
professional athlete, celebrity and corporate spokesman for third parties not
affiliated with International or Golden Bear throughout the world. Golden
Bear has agreed that it will not, during the term of the agreement,
represent, manage or otherwise provide marketing services similar to those
contemplated by the agreement to any other professional golfer without the
prior written consent of International. The services provided by Golden Bear
will include development of personal appearance and personal service
opportunities for approval by Jack Nicklaus and International as well as
requests from prospective clients, identification and qualification of
prospects, negotiation of contracts for approval by International and Jack
Nicklaus, and coordination of all scheduling and performance under approved
contracts. As compensation for the services to be provided by Golden Bear,
International will pay Golden Bear, on a monthly basis in arrears, thirty
percent (30%) of the net revenues (as defined) received by International from
existing endorsement services and a percentage to be negotiated but in no
event less than twenty percent (20%) of net revenues (as defined)) received
by International from endorsement services under any contract which is signed
or substantially negotiated during the term of the agreement.
The term of the agreement will commence concurrently with the consummation
of the initial public offering and will expire on December 31, 2006, unless
otherwise terminated or renewed. Golden Bear has the right, upon expiration
of the initial term of this agreement to continually renew the agreement for
successive three (3) year terms, subject to its satisfactory performance of
its responsibilities under the agreement through the effective date of such
renewal.
F-28
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS-(CONTINUED)
11. SUBSQUENT EVENTS-(CONTINUED)
GOLF EQUIPMENT MARKETING, CONSULTING AND COOPERATION AGREEMENT
International has agreed to retain Golden Bear to provide marketing,
consulting and cooperation services to International in connection with its
marketing obligations as a licensee and member of Nicklaus Golf Equipment
Company, L.C., a Florida limited liability company ("NGEC"). For these
services Golden Bear will receive a fee of approximately $100,000 per year.
International has a 50% ownership interest in NGEC, which manufactures,
markets and distributes golf equipment utilizing the Nicklaus, Jack Nicklaus
and Golden Bear trademarks and tradenames.
The term of the agreement will commence concurrently with the commencement
of the proposed initial public offering and will expire on December 31, 2006,
unless otherwise terminated or renewed. Golden Bear has the right, upon
expiration of the initial term of this agreement, to continually renew the
agreement for successive three (3) year terms, subject to its satisfactory
performance of its responsibilities to International under the agreement
through the effective date of such renewal. The agreement may be terminated
by Golden Bear upon ninety (90) days written notice to International, if the
time and staff commitments of Golden Bear are materially increased at any
time or, at the end of any calendar year, commencing with the end of calendar
year 1997, upon written notice to International of its intention to terminate
the agreement.
OFFICE FACILITIES LICENSING AGREEMENT
Golden Bear will sublease its corporate headquarters from International,
pursuant to a sublease and sharing agreement. The sublease commences
concurrently with the commencement of the proposed initial public offering
and terminates January 31, 2000. Aggregate monthly rent payable under the
agreement will be approximately $50,000, including sales taxes and common
area maintenance, representing approximately 47% of the primary lease.
The agreement also provides for the sharing and joint ownership of certain
office and business services and equipment formerly provided by or owned by
International, including the telephone systems, main switchboard, central
facsimile machines, photocopying machines and computer networks. Pursuant to
the agreement, International has agreed to pay a monthly management fee equal
to fifty percent (50%) of the costs of employing the identified shared office
staff and personnel and a monthly equipment fee equal to fifty percent (50%)
of the agreed costs, consumable supplies and maintenance of the shared office
and business equipment. Additionally, Golden Bear will pay International a
monthly phone rental fee based upon the pro rata share of costs of providing
local telephone service and maintenance to dedicated and shared phone
equipment in the premises.
LINE OF CREDIT
Subsequent to year-end, Paragon extended the maturity date of its line of
credit to April 26, 1997.
F-29
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS-(CONTINUED)
11. SUBSEQUENT EVENTS-(CONTINUED)
ACQUISITIONS
Subsequent to year-end, the Companies entered into agreements or letters
of intent to acquire or operate several independently owned golf centers for
approximately $16.7 million in cash and notes. The acquisitions will be
accounted for as purchases and, accordingly, the purchase price will be
allocated to the net assets acquired based on their estimated fair values at
the date of acquisition as follows:
<TABLE>
<CAPTION>
AGGREGATE PURCHASE PRICE ........... $16,685,000
<S> <C>
Estimated fair value of net assets 13,438,000
--------------
Goodwill ........................... $ 3,247,000
==============
</TABLE>
Had these acquisitions occurred as of January 1, 1994, the Companies
unaudited results of operations would have been as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
THREE MONTHS ENDED
1994 1995 MARCH 31, 1996
-------------------------- -------------------------- --------------------------
NET INCOME NET INCOME NET INCOME
REVENUES (LOSS) REVENUES (LOSS) REVENUES (LOSS)
----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Historical operating results ... $16,625 $(101) $31,545 $1,369 $4,972 $ 79
Operating results of business
to be acquired ................ 1,746 138 2,170 (926) 792 --
Pro forma adjustments, primarily
interest expense and goodwill,
net of tax .................... -- (131) -- (605) -- (360)
----------- ------------- ----------- ------------- ----------- -------------
Pro forma ....................... $18,371 $ (94) $36,968 $ (162) $5,764 $ (281)
=========== ============= =========== ============= =========== =============
</TABLE>
F-30
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS-(CONTINUED)
12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly operating results for the year ended December 31, 1995, are as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1995 1995 1995 1995
------------ ----------- ---------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Golf division ................. $1,799 $5,248 $ 8,076 $6,352
Marketing division ............ 2,453 3,113 1,938 2,566
------------ ----------- ---------------- ---------------
4,252 8,361 10,014 8,918
------------ ----------- ---------------- ---------------
Costs and operating expenses:
Construction and shaping costs 1,423 4,071 6,738 5,286
Operating expenses ............ 1,615 2,060 1,721 2,008
Corporate overhead ............ 714 788 773 846
Depreciation and amortization 53 58 59 63
------------ ----------- ---------------- ---------------
3,805 6,977 9,291 8,203
------------ ----------- ---------------- ---------------
Operating income ............... 447 1,384 723 715
------------ ----------- ---------------- ---------------
Other income (expense) ......... (207) (304) (159) (355)
------------ ----------- ---------------- ---------------
Income before income taxes .... 240 1,080 564 360
Foreign tax expense ............ 178 265 292 275
------------ ----------- ---------------- ---------------
Net income ................... $ 62 $ 815 $ 272 $ 85
============ =========== ================ ===============
</TABLE>
F-31
<PAGE>
COOL SPRINGS, INC.
FINANCIAL STATEMENTS
F-32
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
Cool Springs, Inc.:
We have audited the accompanying balance sheets of Cool Springs, Inc. (a
Pennsylvania corporation) as of October 31, 1994 and 1995, and the related
statements of operations, stockholders' equity and cash flows for the years
then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cool Springs, Inc. as of
October 31, 1994 and 1995, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
West Palm Beach, Florida,
June 7, 1996.
F-33
<PAGE>
COOL SPRINGS, INC.
BALANCE SHEETS
OCTOBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
------------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................................... $ 77,208 $161,328
Inventories ......................................................... 162,466 19,172
Prepaid expenses and other current assets ........................... 36,035 36,027
------------- -----------
Total current assets ............................................. 275,709 216,527
------------- -----------
PROPERTY AND EQUIPMENT, net .......................................... 737,770 719,014
------------- -----------
Total assets ..................................................... $1,013,479 $935,541
============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .................................................... $ 20,770 $ 8,167
Accrued liabilities ................................................. 44,925 35,336
Due to stockholder .................................................. 438,546 356,046
Deposits and other current liabilities .............................. 24,339 20,012
------------- -----------
Total current liabilities ........................................ 528,580 419,561
------------- -----------
COMMITMENTS (Notes 7 and 8)
STOCKHOLDERS' EQUITY:
Common stock, $.25 par value, 200,000 shares authorized, 99,755
shares issued, 67,445 and 62,120 shares outstanding, respectively . 15,530 15,530
Additional paid-in capital .......................................... 11,746 11,746
Retained earnings ................................................... 511,143 552,874
Less-Treasury stock, 32,310 and 37,635 shares, respectively, at cost (53,520) (64,170)
------------- -----------
Total stockholders' equity ....................................... 484,899 515,980
------------- -----------
Total liabilities and stockholders' equity ....................... $1,013,479 $935,541
============= ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-34
<PAGE>
COOL SPRINGS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED OCTOBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
REVENUES:
Admission fees ............................. $1,204,951 $1,184,414
Pro shop sales ............................. 284,547 338,522
------------- -------------
Total revenues .......................... 1,489,498 1,522,936
------------- -------------
OPERATING COSTS AND EXPENSES:
Operating costs ............................ 1,042,515 961,948
Cost of pro shop sales ..................... 204,923 303,570
General and administrative expenses ....... 143,579 131,938
Depreciation and amortization .............. 66,704 59,981
------------- -------------
Total operating costs and expenses ..... 1,457,721 1,457,437
------------- -------------
Operating income ........................ 31,777 65,499
------------- -------------
OTHER INCOME:
Interest ................................... 1,972 2,232
Insurance proceeds ......................... 70,000 --
Other ...................................... 4,641 10,000
------------- -------------
Total other income ...................... 77,613 12,232
------------- -------------
Income before provision for income taxes 109,390 77,731
------------- -------------
PROVISION FOR INCOME TAXES .................. 50,500 36,000
------------- -------------
Net income .............................. $ 58,890 $ 41,731
============= =============
</TABLE>
The accompanying notes to financial statements are an integral part
of these statements.
F-35
<PAGE>
COOL SPRINGS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
ADDITIONAL
PAID-IN TREASURY RETAINED
SHARES AMOUNT CAPITAL STOCK EARNINGS TOTAL
---------- ---------- ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, October 31, 1993 .. 99,755 $15,530 $11,746 $(12,552) $452,253 $466,977
Purchase of 30,248 shares
of treasury stock, at cost -- -- -- (40,968) -- (40,968)
Net income ................. -- -- -- -- 58,890 58,890
--------- ---------- ------------- ------------ ----------- -----------
BALANCE, October 31, 1994 .. 99,755 15,530 11,746 (53,520) 511,143 484,899
--------- ---------- ------------- ------------ ----------- -----------
Purchase of 5,325 shares of
treasury stock, at cost .. -- -- -- (10,650) -- (10,650)
Net income ................. -- -- -- -- 41,731 41,731
--------- ---------- ------------- ------------ ----------- -----------
BALANCE, October 31, 1995 .. 99,755 $15,530 $11,746 $(64,170) $552,874 $515,980
========= ========== ============= ============ =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part
of these statements.
F-36
<PAGE>
COOL SPRINGS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................ $ 58,890 $ 41,731
Adjustments to reconcile net income to net cash provided
by operating activities-
Depreciation and amortization ........................ 66,704 59,981
Changes in assets and liabilities:
Inventories ............................................ (38,638) 143,294
Prepaid expenses and other current assets .............. 19,069 8
Accounts payable ....................................... (41,429) (12,603)
Accrued liabilities .................................... 28,924 (9,589)
Deposits and other current liabilities ................. 3,238 (4,327)
----------- -----------
Net cash provided by operating activities ............. 96,758 218,495
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ...................................... (31,935) (41,225)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in due to stockholder ............................ (12,713) (82,500)
Purchase of treasury stock ................................ (40,968) (10,650)
----------- -----------
Net cash used in financing activities ................. (53,681) (93,150)
----------- -----------
Net increase in cash and cash equivalents ............. 11,142 84,120
----------- -----------
CASH AND CASH EQUIVALENTS, beginning of year ............... 66,066 77,208
----------- -----------
CASH AND CASH EQUIVALENTS, end of year ..................... $ 77,208 $161,328
=========== ===========
SUPPLEMENTAL INFORMATION:
Cash paid for income taxes ................................ $ 11,760 $ 42,367
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part
of these statements.
F-37
<PAGE>
COOL SPRINGS, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1994 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Cool Springs, Inc. (the "Company") is a Pennsylvania corporation engaged
in the operation of a golf driving range, a miniature golf course, baseball
batting cages, a golf pro shop, a golf school and an outdoor roller skating
center. The Company operates its facilities in Bethel Park, Pennsylvania.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less at the date of purchase to be cash
equivalents. Included in the cash and cash equivalents balance as of October
31, 1994 and 1995 are interest bearing deposits of $75,822 and $133,330,
respectively.
INVENTORIES
Inventories consist primarily of golf clubs, clothing and various other
golfer's supplies. Inventories are stated at the lower of cost, using
first-in, first-out method ("FIFO"), or net realizable value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Property and equipment are depreciated using accelerated methods over the
estimated useful lives of the assets ranging from five to thirty years.
REVENUE RECOGNITION
Revenues include fees received for use of the Company's various
facilities. Golf instruction revenues are recognized concurrent with the time
services are provided. Merchandise sales are recognized at the time of sale.
INCOME TAXES
The Company accounts for income taxes under Statements of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires
that deferred income taxes be recognized for the tax consequences in future
years of differences between the tax basis of assets and liabilities and
their financial reporting basis at rates based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires disclosure of the fair value
of certain financial instruments. Cash and cash equivalents, inventories,
prepaid expenses and other current assets, accounts payable, accrued
liabilities and deposits and other current liabilities are reflected in the
accompanying financial statements at cost which approximates fair value.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
F-38
<PAGE>
COOL SPRINGS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
OCTOBER 31, 1994 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
-----------------------------
1994 1995
-------------- --------------
<S> <C> <C>
Land ............................................ $ 134,026 $ 137,197
Furniture, fixtures and equipment ............... 452,852 478,035
Leasehold improvements .......................... 1,668,425 1,681,296
-------------- --------------
2,255,303 2,296,528
Less: Accumulated depreciation and amortization (1,517,533) (1,577,514)
-------------- --------------
$ 737,770 $ 719,014
============== ==============
</TABLE>
3. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
--------------------
1994 1995
---------- ---------
<S> <C> <C>
Accrued payroll and payroll taxes $10,985 $ 7,638
Accrued sales and amusement taxes 2,660 3,438
Income tax payable ................ 31,280 24,260
---------- ---------
$44,925 $35,336
========== =========
</TABLE>
4. DUE TO STOCKHOLDER
"Due to stockholder" represents non-interest bearing amounts owed to a
Company stockholder primarily for reimbursement of operating expenses paid by
the stockholder on behalf of the Company.
F-39
<PAGE>
COOL SPRINGS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
OCTOBER 31, 1994 AND 1995
5. INCOME TAXES
A reconciliation of the tax provision at the statutory rate of 34% to the
effective tax rate is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
OCTOBER 31,
---------------------
1994 1995
---------- ----------
<S> <C> <C>
Tax provision at the statutory rate $37,000 $26,500
State income taxes ................. 13,500 9,500
---------- ----------
$50,500 $36,000
========== ==========
</TABLE>
6. INSURANCE PROCEEDS
"Insurance proceeds" in the accompanying 1994 statement of operations
represents amounts received related to insurance recoveries for damaged
property resulting from severe weather conditions.
7. COMMITMENTS
The Company leases from Allegheny County, Pennsylvania, the property on
which the facility is located. Lease payments are based upon a percentage of
gross income as follows:
ROLLER SKATING RINK ... 10%
Ice skating rink ....... 16%
Bike rental ............ 18%
Lease payments to Allegheny County were $65,057 and $67,576 for the years
ended October 31, 1994 and 1995, respectively. The lease agreement was
terminated when the Company's majority stockholder purchased the Allegheny
property in November 1995.
The Company's lease with the majority stockholder has future annual
minimum payments as follows:
<TABLE>
<CAPTION>
YEAR ENDED AMOUNT
- --------------- -----------
<S> <C>
1996 ......... $133,455
1997 ......... 164,310
1998 ......... 164,310
1999 ......... 164,310
2000 ......... 164,310
Thereafter .. 13,692
-----------
$804,387
===========
</TABLE>
8. SUBSEQUENT EVENTS
Subsequent to year-end, the Company entered into a Guaranty and Suretyship
Agreement (the "Agreement") with a financing institution in order to secure
an obligation of the Company's majority stockholder in the amount of
$1,350,000. The obligation is secured by the land which is leased to the
Company. See Note 7.
F-40
<PAGE>
COOL SPRINGS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
OCTOBER 31, 1994 AND 1995
8. SUBSEQUENT EVENTS--(CONTINUED)
The Company entered into a letter agreement with Golden Bear Golf Centers,
Inc. ("Golf Centers"), an unaffiliated entity, for the sale of various assets
of the Company and the land owned by the majority stockholder. The purchase
price of the land and assets is $2,900,000. Pursuant to this letter
agreement, Golf Centers has made non-refundable deposits of $150,000 which
are to be credited against the purchase price. As of June 7, 1996, the terms
of the acquisition had not been finalized.
F-41
<PAGE>
FIRST SPORTS CAPITAL DEVELOPMENT ASSOCIATES LTD., INC.
FINANCIAL STATEMENTS
F-42
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
First Sports Capital Development Associates Ltd., Inc.:
We have audited the accompanying balance sheets of First Sports Capital
Development Associates Ltd., Inc. (a New Jersey corporation) as of December
31, 1994 and 1995, and the related statements of operations, stockholders'
equity and cash flows for the period from inception (June 13, 1994) to
December 31, 1994 and for the year ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of First Sports Capital
Development Associates, Ltd., Inc. as of December 31, 1994 and 1995, and the
results of its operations and its cash flows for the period from inception
(June 13, 1994) to December 31, 1994 and for the year ended December 31,
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
West Palm Beach, Florida,
June 21, 1996.
F-43
<PAGE>
FIRST SPORTS CAPITAL DEVELOPMENT ASSOCIATES LTD., INC.
BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................ $ 78,280 $ 2,445
Inventories ...................................... -- 6,464
Prepaid expenses ................................. -- 5,989
------------- -------------
Total current assets .......................... 78,280 14,898
PROPERTY AND EQUIPMENT, net ....................... 941,378 2,315,078
OTHER ASSETS ...................................... 11,855 32,614
------------- -------------
Total assets .................................. $1,031,513 $2,362,590
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ................................. $ 130,078 $ 44,523
Accrued liabilities .............................. 21,936 157,916
Current portion of long-term debt ................ -- 27,604
Due to stockholders .............................. 300,000 375,000
------------- -------------
Total current liabilities ..................... 452,014 605,043
------------- -------------
LONG-TERM DEBT, net of current portion ............ -- 519,590
------------- -------------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 8)
STOCKHOLDERS' EQUITY:
Common stock, no par value, 200 shares
authorized,
issued and outstanding, respectively ........... -- --
Additional paid-in capital ....................... 599,797 1,354,000
Accumulated deficit .............................. (20,298) (116,043)
------------- -------------
Total stockholders' equity .................... 579,499 1,237,957
------------- -------------
Total liabilities and stockholders' equity ... $1,031,513 $2,362,590
============= =============
</TABLE>
The accompanying notes to financial statements are an integral part
of these balance sheets.
F-44
<PAGE>
FIRST SPORTS CAPITAL DEVELOPMENT ASSOCIATES LTD., INC.
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (JUNE 13, 1994) TO DECEMBER 31, 1994
AND FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
1994 1995
------------ -----------
<S> <C> <C>
REVENUES ............................ $ -- $424,351
------------ -----------
OPERATING COSTS AND EXPENSES:
Cost of merchandise sold ........... -- 30,472
Operating costs .................... 7,979 372,497
Depreciation and amortization ..... -- 71,512
------------ -----------
Total operating costs and
expenses ............................ 7,979 474,481
------------ -----------
Operating loss .................. (7,979) (50,130)
------------ -----------
OTHER INCOME (EXPENSE):
Interest expense ................... (16,161) (71,798)
Interest income .................... 3,842 --
Utility rebate ..................... -- 26,183
------------ -----------
Total other income (expense) ... (12,319) (45,615)
------------ -----------
Net loss ........................ $(20,298) $(95,745)
============ ===========
</TABLE>
The accompanying notes to financial statements are an integral part
of these statements.
F-45
<PAGE>
FIRST SPORTS CAPITAL DEVELOPMENT ASSOCIATES LTD., INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JUNE 13, 1994) TO DECEMBER 31, 1994
AND FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
ADDITIONAL
PAID-IN ACCUMULATED
SHARES CAPITAL DEFICIT TOTAL
--------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
Issuance of common stock... 200 $ -- $ -- $ --
Capital contribution ..... -- 599,797 -- 599,797
Net loss .................. -- -- (20,298) (20,298)
--------- ------------- -------------- ------------
BALANCE, December 31, 1994 200 599,797 (20,298) 579,499
Capital contribution ..... -- 754,203 -- 754,203
Net loss .................. -- -- (95,745) (95,745)
--------- ------------- -------------- ------------
BALANCE, December 31, 1995 200 $1,354,000 $(116,043) $1,237,957
========= ============= ============== ============
</TABLE>
The accompanying notes to financial statements are an integral part
of these statements.
F-46
<PAGE>
FIRST SPORTS CAPITAL DEVELOPMENT ASSOCIATES LTD., INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JUNE 13, 1994) TO DECEMBER 31, 1994
AND FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
1994 1995
------------ --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................ $ (20,298) $ (95,745)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities-
Depreciation and amortization ....................... -- 71,512
Changes in assets and liabilities:
Inventories ........................................... -- (6,464)
Prepaid expenses ...................................... -- (5,989)
Other assets .......................................... (11,855) (20,759)
Accounts payable ...................................... 130,078 (85,555)
Accrued liabilities ................................... 21,936 135,980
------------ --------------
Net cash provided by (used in) operating activities 119,861 (7,020)
------------ --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .................................... (941,378) (1,445,212)
------------ --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions ................................... 599,797 754,203
Increase in due to stockholders ......................... 300,000 75,000
Borrowing on long-term debt ............................. -- 551,794
Payments on long-term debt .............................. -- (4,600)
------------ --------------
Net cash provided by financing activities .......... 899,797 1,376,397
------------ --------------
Net increase (decrease) in cash and cash equivalents 78,280 (75,835)
CASH AND CASH EQUIVALENTS, beginning of period .......... -- 78,280
------------ --------------
CASH AND CASH EQUIVALENTS, end of period ................. $ 78,280 $ 2,445
============ ==============
SUPPLEMENTAL INFORMATION:
Cash paid for interest .................................. $ -- $ 35,798
============ ==============
</TABLE>
The accompanying notes to financial statements are an integral part
of these statements.
F-47
<PAGE>
FIRST SPORTS CAPITAL DEVELOPMENT ASSOCIATES LTD., INC.
NOTES TO FINANCIAL STATEMENTS
DECEMER 31, 1994 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
First Sports Capital Development Associates Ltd., Inc. (the "Company") is
a New Jersey corporation engaged in the operation of golf driving ranges,
golf instruction center and a golf pro shop. The Company operates its
facilities in Toms River, New Jersey.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less at the date of purchase to be cash
equivalents.
INVENTORIES
Inventories consist primarily of golf clubs, clothing and various other
golfers' supplies. Inventories are stated at the lower of cost, using the
first-in, first-out method ("FIFO"), or net realizable value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Property and equipment are depreciated using the straight-line method over
the estimated useful lives of the assets ranging from five to thirty-seven
years.
REVENUE RECOGNITION
Revenues include fees received for use of the Company's various
facilities. Golf instruction revenues are recognized concurrent with the time
services are provided. Merchandise sales are recognized at the time of sale.
INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires
that deferred income taxes be recognized for the tax consequences in future
years of differences between the tax basis of assets and liabilities and
their financial reporting basis at rates based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires disclosure of the fair value
of certain financial instruments. Cash and cash equivalents, inventories,
prepaid expenses, accounts payable, accrued liabilities and long-term debt
are reflected in the accompanying financial statements at cost which
approximates fair value.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
F-48
<PAGE>
FIRST SPORTS CAPITAL DEVELOPMENT ASSOCIATES LTD., INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMER 31, 1994 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those esimates.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1995
----------- -------------
<S> <C> <C>
Building ....................................... $425,288 $1,221,014
Site improvements .............................. 498,633 959,896
Furniture, fixtures and equipment .............. 17,457 205,680
----------- -------------
941,378 2,386,590
Less: Accumulated depreciation and amortization -- (71,512)
----------- -------------
$941,378 $2,315,078
=========== =============
</TABLE>
3. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
---------- ----------
<S> <C> <C>
Accrued legal costs ..................... $ 3,987 33,692
Accrued payroll taxes ................... 1,788 9,342
Accrued interest on stockholder advances 16,161 36,000
Accrued rent ............................ -- 44,600
Other ................................... -- 34,282
---------- ----------
$21,936 $157,916
========== ==========
</TABLE>
4. DUE TO STOCKHOLDERS
"Due to stockholders" represents amounts advanced by the Company's
stockholders primarily for payment of operating expenses. Of the total
balance outstanding, $300,000 is repayable from profits of the business or
sale and bear interest at prime plus 4%. See Note 8. The remaining balance is
non-interest bearing and has no fixed repayment terms.
49
<PAGE>
FIRST SPORTS CAPITAL DEVELOPMENT ASSOCIATES LTD., INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMER 31, 1994 AND 1995
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
-------- -----------
<S> <C> <C>
Loan payable to a bank bearing interest at prime plus 2% (10.75%
at December 31, 1995); monthly principal payments of $1,677, plus
interest through 2021; secured by property and equipment ........ $ -- $500,000
Loan payable to stockholder, bearing interest at 9%; quarterly
payments of $3,000 including interest; secured by equipment ..... -- 47,194
-------- -----------
-- 547,194
Less: Current portion ............................................ -- 27,604
-------- -----------
$-- $519,590
======== ===========
</TABLE>
Future maturities of long-term debt as of December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, AMOUNT
- ------------------------ ----------
<S> <C>
1996 ................. $ 27,604
1997 ................. 28,000
1998 ................. 28,700
1999 ................. 47,500
2000 ................. 20,000
Thereafter ........... 395,390
----------
$547,194
==========
</TABLE>
6. INCOME TAXES
A reconciliation of the tax provision at the statutory rate of 34% to the
effective tax rate is as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION FOR THE
(JUNE 13, 1994) YEAR ENDED
TO DECEMBER 31, DECEMBER 31,
1994 1995
---------------- ---------------
<S> <C> <C>
Tax provision at the statutory rate $(5,500) $(26,000)
State income taxes ................. (1,000) (5,000)
Net operating loss carried forward 6,500 31,000
---------------- ---------------
$ -- $ --
================ ===============
</TABLE>
Deferred income taxes consist primarily of available net operating loss
carryforwards in the amount of approximately $94,000 which have been fully
reserved as their net realizability is not more likely than not.
F-50
<PAGE>
FIRST SPORTS CAPITAL DEVELOPMENT ASSOCIATES LTD., INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMER 31, 1994 AND 1995
7. COMMITMENTS AND CONTINGENCIES
EMPLOYMENT AGREEMENTS
During 1994, the Company entered into employment agreements with two of
its stockholder/ officers. Such agreements provide, among other things, for
aggregate annual compensation of $350,000. The agreements have no fixed
termination date.
OPERATING LEASES
The Company leases land under operating leases which expire through 2044.
Future annual minimum payments under operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, AMOUNT
- ------------------------ ------------
<S> <C>
1996 ................. $ 107,040
1997 ................. 107,040
1998 ................. 107,040
1999 ................. 107,040
2000 ................. 107,040
Thereafter ........... 4,683,400
------------
$5,218,600
============
</TABLE>
Lease expense of approximately $44,600 was incurred in 1995.
8. SUBSEQUENT EVENT
Subsequent to year-end, the Company entered into an interim management
agreement with Golden Bear Golf Centers, Inc. ("Golf Centers"), an
unaffiliated entity. Golf Centers has also entered into an agreement with the
Company to sublease certain property and to purchase certain assets. The
lease is for an initial term of 20 years and may be extended for two
additional five-year terms. The purchase price for the assets is $1.9 million
dollars, of which $500,000 will be paid at closing with the remainder of the
purchase price to be evidenced by a promissory note for a term of three years
at an interest rate of prime plus one and one half percent. As of June 21,
1996, the asset purchase had not been consummated.
F-51
<PAGE>
DALLAS HIGHLANDER, LTD.
FINANCIAL STATEMENTS
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners of
Dallas Highlander, Ltd.:
We have audited the accompanying balance sheets of Dallas Highlander, Ltd.
(a Texas limited partnership) as of December 31, 1995 and March 31, 1996, and
the related statements of operations, partners' capital and cash flows for
the year ended December 31, 1995 and the three months ended March 31, 1996.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dallas Highlander, Ltd.
as of December 31, 1995 and March 31, 1996, and the results of its operations
and its cash flows for the year ended December 31, 1995 and the three months
ended March 31, 1996, in conformity with generally accepted accounting
principles.
Miami, Florida,
July 14, 1996.
F-53
<PAGE>
DALLAS HIGHLANDER, LTD.
BALANCE SHEETS
DECEMBER 31, 1995 AND MARCH 31, 1996
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................. $ 51,674 $ 61,210
Inventories ................................ 217,625 240,244
Due from affiliate ......................... 19,740 19,740
Other current assets ....................... 1,557 699
------------- -------------
Total current assets ..................... 290,596 321,893
PROPERTY AND EQUIPMENT, net ................. 1,436,687 1,433,712
------------- -------------
Total assets ............................. $1,727,283 $1,755,605
============= =============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable ........................... $ 47,719 $ 97,636
Accrued liabilities ........................ 104,598 29,130
Due to affiliates .......................... 132,705 303,451
Deposits and other current liabilities .... 25,448 17,391
------------- -------------
Total current liabilities ................ 310,470 447,608
------------- -------------
COMMITMENTS AND CONTINGENCIES (Notes 6
and 7)
PARTNERS' CAPITAL:
General partner ............................ (19,755) (25,196)
Limited partners ........................... 1,437,568 1,334,193
Note receivable from limited partner ...... (1,000) (1,000)
------------- -------------
Total partners' capital .................. 1,416,813 1,307,997
------------- -------------
Total liabilities and partners' capital . $1,727,283 $1,755,605
============= =============
</TABLE>
The accompanying notes to financial statements are an integral part
of these balance sheets.
F-54
<PAGE>
DALLAS HIGHLANDER, LTD.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1995 1996
--------------- ---------------
<S> <C> <C>
REVENUES:
Range and instruction fees ........... $ 315,227 $ 118,003
Pro shop sales ....................... 296,075 87,724
--------------- ---------------
Total revenues ..................... 611,302 205,727
--------------- ---------------
OPERATING COSTS AND EXPENSES:
Cost of pro shop sales ............... 222,185 60,814
Operating costs ...................... 678,541 208,557
Depreciation and amortization ....... 115,045 47,241
--------------- ---------------
Total operating costs and expenses 1,015,771 316,612
--------------- ---------------
Operating loss ..................... (404,469) (110,885)
--------------- ---------------
OTHER INCOME (EXPENSE):
Interest expense ..................... (4,235) --
Other ................................ 7,827 2,069
--------------- ---------------
Total other income (expense) ...... 3,592 2,069
--------------- ---------------
Net loss ........................... $ (400,877) $(108,816)
=============== ===============
</TABLE>
The accompanying notes to financial statements are an integral part
of these statements.
F-55
<PAGE>
DALLAS HIGHLANDER, LTD.
STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
------------ ------------- ------------
<S> <C> <C> <C>
BALANCE, December 31, 1994 ......................... $ 289 $ 4,492 $ 4,781
Partners' capital contribution .................... -- 1,812,909 1,812,909
Net loss for the year ended December 31, 1995 .... (20,044) (380,833) (400,877)
------------ ------------- ------------
BALANCE, December 31, 1995 ......................... (19,755) 1,436,568 1,416,813
------------ ------------- ------------
Net loss for the three months ended March 31, 1996 (5,441) (103,375) (108,816)
------------ ------------- ------------
BALANCE, March 31, 1996 ............................ $(25,196) $1,333,193 $1,307,997
============ ============= ============
</TABLE>
The accompanying notes to financial statements are an integral part
of these statements.
F-56
<PAGE>
DALLAS HIGHLANDER, LTD.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1995 1996
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................... $ (400,877) $(108,816)
Adjustments to reconcile net loss to net cash used
in operating activities--
Depreciation and amortization ................ 115,045 47,241
Changes in assets and liabilities:
Inventories .................................... (217,625) (22,619)
Other current assets ........................... (1,557) 858
Accounts payable ............................... 47,719 49,917
Accrued liabilities ............................ 104,598 (75,468)
Deposits and other current liabilities ........ 21,688 (8,057)
--------------- ---------------
Net cash used in operating activities ........ (331,009) (116,944)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .............................. (1,499,821) (44,266)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES: ..............
Net increase in due to/from affiliates ............ 65,734 170,746
Capital contributions ............................. 1,812,909 --
--------------- ---------------
Net cash provided by financing activities .... 1,878,643 170,746
--------------- ---------------
Net increase in cash and cash equivalents .... 47,813 9,536
--------------- ---------------
CASH AND CASH EQUIVALENTS, beginning of year ...... 3,861 51,674
--------------- ---------------
CASH AND CASH EQUIVALENTS, end of year ............. $ 51,674 $ 61,210
=============== ===============
SUPPLEMENTAL INFORMATION:
Cash paid for interest ............................ $ -- $ 4,235
=============== ===============
</TABLE>
The accompanying notes to financial statements are an integral part
of these statements.
F-57
<PAGE>
DALLAS HIGHLANDER, LTD.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Dallas Highlander, Ltd. (the "Company") is a Texas limited partnership
engaged in the operation of a golf driving range, a miniature golf course, a
golf pro shop and a golf school. The Company operates its facilities in
Carrollton, Texas.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less at the date of purchase to be cash
equivalents. Included in cash and cash equivalents at December 31, 1995 and
March 31, 1996 are interest bearing deposits of $16,641 and $21,692,
respectively.
INVENTORIES
Inventories consist primarily of golf clubs, clothing and various other
golfer's supplies. Inventories are stated at the lower of cost, using a
weighted-average cost method, or net realizable value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation
and amortization. Property and equipment are depreciated and amortized using
a straight-line method over the estimated useful lives ranging from five to
ten years, or over the lease term, whichever is shorter.
REVENUE RECOGNITION
Revenues include fees received for use of the Company's various
facilities. Golf instruction revenues are recognized concurrent with the time
services are provided. Merchandise sales are recognized at the time of sale.
INCOME TAXES
The Partnership is not a taxable entity. Losses of the Partnership are
included in the income tax returns of its corporate, partnership and
individual partners. Accordingly, no provision for income taxes has been made
in the accompanying financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires disclosure of the fair value
of certain financial instruments. Cash and cash equivalents, inventories,
other current assets, accounts payable, accrued liabilities and deposits and
other current liabilities are reflected in the accompanying financial
statements at cost which approximates fair value.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
F-58
<PAGE>
DALLAS HIGHLANDER, LTD.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2. DUE FROM AFFILIATE
Due from affiliate represents noninterest bearing advances due from
Highlander Towngate, Ltd., due on demand.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
--------------- ------------
<S> <C> <C>
Building ........................................ $ 488,652 $ 488,652
Furniture, fixtures and equipment ............... 253,426 266,969
Leasehold improvements .......................... 809,654 840,377
--------------- ------------
1,551,732 1,595,998
Less: Accumulated depreciation and amortization (115,045) (162,286)
$1,436,687 $1,433,712
=============== ============
</TABLE>
4. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
--------------- ------------
<S> <C> <C>
Accrued license fees ............. $ 28,581 $ 3,879
Accrued payroll .................. 3,880 9,251
Accrued sales and property taxes 62,987 5,955
Other ............................ 9,150 10,045
--------------- ------------
$104,598 $29,130
=============== ============
</TABLE>
5. DUE TO AFFILIATES
Due to affiliates represents noninterest bearing amounts owed to Genus
Holdings, Ltd. and interest bearing amounts owed to Highlander Golf Corp.
primarily for advances of and reimbursement of operating expenses paid by the
affiliated entities on behalf of the Company. Such amounts are due on demand.
See Note 8.
6. COMMITMENTS
The Company entered into a license agreement with Golden Bear Golf
Centers, Inc. ("Golf Centers"), an unaffiliated entity, on May 20, 1995, to
utilize the Golf Center's licensed marks in
F-59
<PAGE>
DALLAS HIGHLANDER, LTD.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. COMMITMENTS--(CONTINUED)
developing and operating its facilities. The Company agreed to pay a $20,000
facility development fee upon execution of the agreement and a monthly
service fee, calculated as a percentage of the previous month's revenues (as
defined) or a minimum annual service fee of $50,000, prorated in 1995 for
months of actual operation.
Future annual minimum payments under the license agreement are as follows:
<TABLE>
<CAPTION>
YEAR ENDED AMOUNT
- --------------- ----------
<S> <C>
1996 ......... $ 37,000
1997 ......... 50,000
1998 ......... 50,000
1999 ......... 50,000
2000 ......... 50,000
Thereafter .. 224,000
----------
$461,000
==========
</TABLE>
Service fee payments to the Golf Centers were approximately $22,000 and
$13,000 for the year ended December 31, 1995 and the three months ended March
31, 1996, respectively. The license agreement expires May 20, 2005.
The Company has a lease with Trinity Mills-Midway Partners, Ltd. ("Trinity
Mills"), an affiliated entity, for the rental of the land upon which the
Company operates its facilities. Lease payments are based on a percentage of
gross sales, (as defined), or a minimum annual rent. The minimum annual rent
increases on the first and second anniversaries from the rental commencement
date. Upon termination of the lease by expiration of the term or otherwise,
the building and leasehold improvements shall become and remain the absolute
property of Trinity Mills at no additional cost or expense. Future annual
minimum payments under this lease are as follows:
<TABLE>
<CAPTION>
YEAR ENDED AMOUNT
- --------------- ----------
<S> <C>
1996 ......... $ 67,450
1997 ......... 105,970
1998 ......... 100,000
1999 ......... 100,000
2000 ......... 100,000
Thereafter .. 416,667
----------
$890,087
==========
</TABLE>
Lease payments to Trinity Mills' were $70,833 and $22,083 for the year
ended December 31, 1995 and for the three months ended March 31, 1996,
respectively. The lease agreement expires February 28, 2005. The Company
subleases a portion of the building to an unaffiliated entity. The rental
income under the sublease agreement is based on a percentage of gross sales,
as defined, or a minimum monthly rent.
7. SUBSEQUENT EVENT
The Company entered into a letter agreement with Golf Centers for the sale
of various assets of the Company. The purchase price of the land and assets
is anticipated to be $2,250,000, of which
F-60
<PAGE>
DALLAS HIGHLANDER, LTD.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
$1,500,000 will be paid at closing and the balance will be evidenced by an 8
percent promissory note due in five years. As of July 14, 1996, the terms of
the acquisition had not been finalized.
8. RELATED-PARTY TRANSACTIONS
The Company entered into a promissory note with Highlander Golf Corp., an
affiliated entity, for a maximum loan amount of $300,000, which expires on
December 31, 1997. The Company draws on the note from time to time and pays
interest on the unpaid principal balance at a rate of 4.35 percent per annum.
At December 31, 1995 and at March 31, 1996, the loan balance of $125,000
under the promissory note is included in "due to affiliates" in the
accompanying balance sheets.
The Company's overhead costs for accounting, systems and general
administration are supported by Highlander Golf Corp. and the Fritz Duda
Company, affiliated entities. As a result, the accompanying financial
statements do not include such overhead costs.
F-61
<PAGE>
SUGAR CREEK GOLF COURSE, INC. AND MAGIC CASTLE, INC.
COMBINED FINANCIAL STATEMENTS
F-62
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
Sugar Creek Golf Course, Inc. and Magic Castle, Inc.:
We have audited the accompanying combined balance sheets of Sugar Creek Golf
Course, Inc. (an Ohio corporation) and Magic Castle, Inc. (an Ohio corporation)
as of December 31, 1995 and June 30, 1996, and the related combined statements
of operations, stockholders' equity and cash flows for the year ended December
31, 1995 and the six months ended June 30, 1996. These financial statements are
the responsibility of the Companies' management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Sugar Creek Golf
Course, Inc. and Magic Castle, Inc. as of December 31, 1995 and June 30, 1996,
and the results of their combined operations and their combined cash flows for
the year ended December 31, 1995 and the six months ended June 30, 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
West Palm Beach, Florida,
July 16, 1996.
F-63
<PAGE>
SUGAR CREEK GOLF COURSE, INC. AND MAGIC CASTLE, INC.
COMBINED BALANCE SHEETS
DECEMBER 31, 1995 AND JUNE 30, 1996
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................................. $ 22,604 $ 9,685
Inventories ................................................ 134,077 195,953
Prepaid expenses and other current assets .................. 8,437 11,120
Accounts receivable ........................................ 2,226 4,915
------------- -------------
Total current assets ..................................... 167,344 221,673
PROPERTY AND EQUIPMENT, net ................................. 2,893,721 2,865,171
INTANGIBLE ASSETS ........................................... 388,619 383,619
------------- -------------
Total assets ............................................. $3,449,684 $3,470,463
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ........................................... $ 181,065 $ 199,361
Accrued liabilities ........................................ 58,784 53,921
Short-term debt ............................................ 250,000 250,000
Current portion of long-term debt .......................... 168,492 159,994
Due to stockholders ........................................ 244,674 365,709
------------- -------------
Total current liabilities ................................ 903,015 1,028,985
------------- -------------
LONG-TERM DEBT, net of current portion ...................... 2,203,450 2,150,955
------------- -------------
COMMITMENT (Note 8)
STOCKHOLDERS' EQUITY:
Sugar Creek Golf Course, Inc., Common stock, no par value,
600 shares authorized, issued and outstanding ............ 361,466 361,466
Magic Castle, Inc., Common stock, no par value, 1,000
shares authorized, issued and outstanding ................ 1,000 1,000
Accumulated deficit ........................................ (19,247) (71,943)
------------- -------------
Total stockholders' equity ............................... 343,219 290,523
------------- -------------
Total liabilities and stockholders' equity ............... $3,449,684 $3,470,463
============= =============
</TABLE>
The accompanying notes to combined financial statements are an
integral part of these combined balance sheets.
F-64
<PAGE>
SUGAR CREEK GOLF COURSE, INC. AND MAGIC CASTLE, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
--------------- ------------
<S> <C> <C>
REVENUES .............................. $1,806,608 $ 870,483
------------ ------------
OPERATING COSTS AND EXPENSES:
Operating costs ...................... 1,029,450 516,206
Cost of pro shop and food sales ..... 440,533 194,829
Depreciation and amortization ....... 132,371 70,941
--------------- ------------
Total operating costs and expenses 1,602,354 781,976
--------------- ------------
Operating income ................... 204,254 88,507
--------------- ------------
OTHER INCOME (EXPENSE):
Interest expense ..................... (240,640) (142,095)
Other income, net .................... 799 892
--------------- ------------
Total other income (expense) ...... (239,841) (141,203)
--------------- ------------
Net loss ........................... $ (35,587) $ (52,696)
=============== ============
</TABLE>
The accompanying notes to combined financial statements are an
integral part of these combined statements.
F-65
<PAGE>
SUGAR CREEK GOLF COURSE, INC. AND MAGIC CASTLE, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SUGAR CREEK
GOLF COURSE, INC. MAGIC CASTLE, INC.
COMMON STOCK COMMON STOCK
---------------------- --------------------
ACCUMULATED
SHARES AMOUNT SHARES AMOUNT DEFICIT TOTAL
--------- ----------- --------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1994 ........ 600 $361,466 1,000 $1,000 $ 16,340 $ 378,806
Net loss for the year ended
December 31, 1995 ............ -- -- -- -- (35,587) (35,587)
--------- ----------- --------- --------- -------------- -----------
BALANCE, December 31, 1995 ..... 600 361,466 1,000 1,000 (19,247) 343,219
--------- ----------- --------- --------- -------------- -----------
Net loss for the six months
ended
June 30, 1996 ................ -- -- -- -- (52,696) (52,696)
--------- ----------- --------- --------- -------------- -----------
BALANCE, June 30, 1996 .......... 600 $361,466 1,000 $1,000 $(71,943) $ 290,523
========= =========== ========= ========= ============== ===========
</TABLE>
The accompanying notes to combined financial statements are an
integral part of these combined statements.
F-66
<PAGE>
SUGAR CREEK GOLF COURSE, INC. AND MAGIC CASTLE, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
--------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................... $ (35,587) $(52,696)
Adjustments to reconcile net loss to net cash provided
by
(used in) operating activities--
Depreciation and amortization ..................... 132,372 70,941
Changes in assets and liabilities:
Accounts receivable ................................. (1,727) (2,689)
Inventories ......................................... (27,035) (61,876)
Prepaid expenses and other current assets .......... 272 (2,683)
Accounts payable .................................... (54,540) 18,296
Accrued liabilities ................................. 22,463 (4,863)
Increase in intangible assets ....................... (16,493) --
--------------- ------------
Net cash provided by (used in) operating activities 19,725 (35,570)
--------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................... (484,589) (37,391)
-------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing under short-term debt ........................ 250,000 --
Borrowings under (repayments of) long-term debt ....... 33,886 (60,993)
Increase in due to stockholders ........................ 194,229 121,035
--------------- ------------
Net cash provided by financing activities ......... 478,115 60,042
--------------- ------------
Net increase (decrease) in cash and cash
equivalents ...................................... 13,251 (12,919)
--------------- ------------
CASH AND CASH EQUIVALENTS, beginning of period ......... 9,353 22,604
--------------- ------------
CASH AND CASH EQUIVALENTS, end of period ................ $ 22,604 $ 9,685
=============== ============
SUPPLEMENTAL INFORMATION:
Cash paid for interest ................................. $ 233,485 $129,596
</TABLE>
The accompanying notes to combined financial statements are an
integral part of these combined statements.
F-67
<PAGE>
SUGAR CREEK GOLF COURSE, INC. AND MAGIC CASTLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND JUNE 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Sugar Creek Golf Course, Inc. ("Sugar Creek") and Magic Castle, Inc.
("Magic Castle") (collectively, the "Companies") are engaged in the operation
of a golf driving range, a miniature golf course, a golf pro shop, a golf
school and a family entertainment center. The Companies operate their
facilities in Dayton, Ohio.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities
of three months or less at the date of purchase to be cash equivalents.
INVENTORIES
Inventories consist primarily of golf accessories and food items. Inventories
are stated at the lower of cost, using first-in, first-out ("FIFO") method, or
net realizable value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Property and equipment are depreciated using accelerated methods over the
estimated useful lives of the assets ranging from five to forty years.
REVENUE RECOGNITION
Revenues include fees received from the public for use of the Companies'
facilities. Golf instruction revenues are recognized concurrent with the time
services are provided. Merchandise sales are recognized at the time of sale.
INCOME TAXES
Sugar Creek has elected to report its earnings and losses under the
provisions of Subchapter S of the U.S. Internal Revenue Code. Taxable income and
loss is reported by the individual stockholders on their personal income tax
returns. Accordingly, no provision for income taxes has been made in the
accompanying combined financial statements.
Magic Castle has reported net operating losses since its inception in July
1994. These net operating loss carryovers are not expected to be offset against
future taxable income. Accordingly, a valuation allowance has been recorded
equal to the net deferred tax asset and no provision or benefit for income taxes
has been made in the accompanying combined financial statements.
INTANGIBLE ASSETS
During 1993, the Companies purchased a golf course from an unaffiliated
entity. The excess of the cost over the fair value of net assets of the
purchased business is recorded as goodwill and is being amortized on a
straight-line basis, over 40 years.
F-68
<PAGE>
SUGAR CREEK GOLF COURSE, INC. AND MAGIC CASTLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS-(Continued)
DECEMBER 31, 1995 AND JUNE 30, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-(Continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments," requires disclosure of the fair value of
certain financial instruments. Cash and cash equivalents, inventories, prepaid
expenses and other current assets, accounts payable, accrued liabilities and
deposits and other current liabilities are reflected in the accompanying
combined financial statements at cost which approximates fair value.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
DECEMBER 31, JUNE 30,
1995 1996
--------------- ------------
Land .............................. $ 600,000 $ 600,000
Land improvements ................. 313,787 317,367
Mini course ....................... 539,936 541,995
Buildings ......................... 866,955 874,866
Games ............................. 530,061 542,822
Furniture, fixtures and equipment 244,899 255,976
Auto .............................. 31,748 31,748
--------------- ------------
3,127,386 3,164,774
Less: Accumulated depreciation .. (233,665) (299,603)
--------------- ------------
$2,893,721 $2,865,171
=============== ============
F-69
<PAGE>
SUGAR CREEK GOLF COURSE, INC. AND MAGIC CASTLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS-(Continued)
DECEMBER 31, 1995 AND JUNE 30, 1996
(3) DUE TO STOCKHOLDERS
Due to stockholders represents amounts owed to stockholders primarily for
reimbursement of operating expenses paid by stockholders on behalf of the
Companies. Due to stockholders consists of the following as of December 31, 1995
and June 30, 1996:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
--------------- -----------
<S> <C> <C>
Notes payable, 12% interest, no stated maturity $219,813 $307,300
Other advances from stockholders, noninterest bearing 24,861 58,409
--------------- -----------
$244,674 $365,709
=============== ===========
</TABLE>
During 1995 and 1996, the Companies recorded approximately $22,000 and
$17,000 of interest expense related to these notes. As of December 31, 1995 and
June 30, 1996, approximately $12,000 and $27,000 of accrued interest due to
stockholders was included in accrued liabilities in the accompanying combined
balance sheets.
(4) SHORT-TERM DEBT
The Companies borrowed $600,000 from a bank in 1994 to finance the
construction of a building. The terms of the loan were interest only at the rate
of 1.5 percent over prime and the loan was payable on April 1, 1996. During
1994, the Companies paid interest in the amount of $29,653. The loan was
personally guaranteed by the stockholders. During 1995, the loan was refinanced
with another bank.
During 1995, the Companies borrowed under two short-term notes totaling
$250,000 from a bank. The terms of the notes are interest only at the rate of 1
percent over prime and the loans were due in June 1996 and are in the process of
being renegotiated. These notes are personally guaranteed by the stockholders.
F-70
<PAGE>
SUGAR CREEK GOLF COURSE, INC. AND MAGIC CASTLE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS-(Continued)
DECEMBER 31, 1995 AND JUNE 30, 1996
(5) LONG-TERM DEBT
Long-term debt at December 31, 1995 and June 30, 1996, consist of the
following:
<TABLE>
<CAPTION>
1995 1996
------------- ------------
<S> <C> <C>
Note payable to Bank, 7.95% fixed rate, guaranteed by SBA,
interest only for first year with monthly installments
of $7,146 commencing on April 1994 through March 2009,
secured by substantially all assets ...................... $ 703,767 $ 688,686
Note payable to Bank, variable rate (7.25% as of June 30,
1996) payable in monthly installments of $6,846 commencing
on April 1994 through March 2009,
secured by substantially all assets ...................... 701,267 685,413
Note payable to Bank, 1% over prime rate adjustable,
payable in monthly installments of $9,751 commencing on
June 1995 through July 2001, secured by substantially all
assets ................................................... 887,766 870,957
Note payable to vendor ..................................... 67,338 54,642
Note payable to Bank, 5.99% fixed rate, secured by
automobile, payable in monthly installments of $622
through August 1997 ...................................... 11,804 11,251
------------- ------------
2,371,942 2,310,949
Less-Current portion ....................................... 168,492 159,994
------------- ------------
$2,203,450 $2,150,955
============= ============
</TABLE>
Maturities on long-term debt for the next five years are as follows:
YEAR ENDED AMOUNT
- -------------- ------------
1997 ........ $ 159,994
1998 ........ 75,004
1999 ........ 76,473
2000 ........ 82,488
2001 ........ 88,975
Thereafter . 1,828,015
------------
$2,310,949
============
(6) SUBSEQUENT EVENTS
The Companies entered into a letter agreement with Golden Bear Golf Centers,
Inc. ("Golf Centers"), an unaffiliated entity, for the lease of various assets
of the Company. The proposed terms of the lease provide for a term of twenty
years, an initial payment of $1.1 million and annual rental payments of $325,000
at year one, $350,000 at year two, $375,000 at years three through thirteen,
$300,000 at year fourteen and $200,000 at years fifteen through twenty. Golf
Centers will, under the proposed terms, grant the right of first refusal with
respect to proposed sales of the leased premises throughout the term of the
lease.
F-71
<PAGE>
EAST COAST GOLF CENTERS, INC.,
EAST COAST GOLF CENTERS OF COLUMBUS, LTD.
AND
EAST COAST GOLF CENTERS OF FORT LAUDERDALE, INC.
COMBINED FINANCIAL STATEMENTS
F-72
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
East Coast Golf Centers, Inc.,
East Coast Golf Centers of Columbus, Ltd. and
East Coast Golf Centers of Fort Lauderdale, Inc.:
We have audited the accompanying combined balance sheets of East Coast Golf
Centers, Inc., (a Delaware corporation), East Coast Golf Centers of Columbus,
Ltd. (an Ohio corporation) and East Coast Golf Centers of Fort Lauderdale, Inc.
(a Florida corporation) as of December 31, 1995 and March 31, 1996, and the
related combined statements of operations, stockholders' equity and cash flows
for the year ended December 31, 1995 and the three months ended March 31, 1996.
These financial statements are the responsibility of the Companies' management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of East Coast Golf
Centers, Inc., East Coast Golf Centers of Columbus, Ltd. and East Coast Golf
Centers of Fort Lauderdale, Inc., as of December 31, 1995 and March 31, 1996,
and the combined results of their operations and their cash flows for the year
ended December 31, 1995 and three months ended March 31, 1996, in conformity
with generally accepted accounting principles.
DRAFT--TO BE FILED BY AMENDMENT
F-73
<PAGE>
EAST COAST GOLF CENTERS, INC.,
EAST COAST GOLF CENTERS OF COLUMBUS, LTD. AND
EAST COAST GOLF CENTERS OF FORT LAUDERDALE, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
--------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................................... $1,093,645 $ 534,181
Inventories ......................................................... 102,963 147,606
Prepaid expenses and other current assets ........................... 16,149 7,179
--------------- -------------
Total current assets ............................................. 1,212,757 688,966
PROPERTY AND EQUIPMENT, net .......................................... 1,794,298 2,560,324
INTANGIBLE ASSETS, net ............................................... 416,778 409,945
--------------- -------------
Total assets ..................................................... $3,423,833 $3,659,235
=============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .................................................... $ 203,129 $ 468,540
Accrued payroll ..................................................... -- 8,025
--------------- -------------
Total current liabilities ........................................ 203,129 476,565
LONG-TERM DEBT ....................................................... 1,000,000 1,000,000
NOTES PAYABLE TO STOCKHOLDERS ........................................ 870,000 999,980
COMMITMENTS (Notes 5 and 6) ..........................................
STOCKHOLDERS' EQUITY:
ECGC common stock, $1 par value, 3,000 shares authorized, 445 shares
issued and outstanding ............................................ 445 445
Ft. Lauderdale common stock, $.01 par value, 10,000 shares
authorized, 2,000 shares issued and outstanding in 1996 ........... -- 20
Columbus capital .................................................... 1,002,000 922,000
Additional paid-in capital .......................................... 999,605 999,605
Accumulated deficit ................................................. (651,346) (739,380)
--------------- -------------
Total stockholders' equity ....................................... 1,350,704 1,182,690
Total liabilities and stockholders' equity ....................... $3,423,833 $3,659,235
=============== =============
</TABLE>
The accompanying notes to combined financial statements are an
integral part of these combined statements.
F-74
<PAGE>
EAST COAST GOLF CENTERS, INC.,
EAST COAST GOLF CENTERS OF COLUMBUS, LTD.
AND
EAST COAST GOLF CENTERS OF FORT LAUDERDALE, INC.
COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
1995 1996
--------------- -------------------
REVENUES ............................... $ 548,854 $135,758
OPERATING COSTS AND EXPENSES:
Operating costs ....................... 804,588 136,139
Cost of pro shop sales ................ 186,679 40,187
Depreciation and amortization ......... 103,294 47,466
--------------- -------------------
Total operating costs and expenses 1,094,561 223,792
Net loss ........................... $ (545,707) $(88,034)
=============== ===================
The accompanying notes to combined financial statements are an
integral part of these combined statements.
F-75
<PAGE>
EAST COAST GOLF CENTERS, INC.,
EAST COAST GOLF CENTERS OF COLUMBUS, LTD. AND
EAST COAST GOLF CENTERS OF FORT LAUDERDALE, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ECGC FT.LAUDERDALE ADDITIONAL
COMMON STOCK COMMON STOCK PAID-IN COLUMBUS ACCUMULATED
CAPITAL CAPITAL DEFICIT TOTAL
SHARES AMOUNT SHARES AMOUNT
--------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994. 300 $300 -- $-- $599,605 $ -- $(105,639) $
494,266
Issuance of stock and
capital contributions ..... 145 145 -- -- 400,000 1,002,000 --
1,402,145
Net loss .................... -- -- -- -- -- -- (545,707)
(545,707)
--------- --------- --------- --------- ------------- ------------ --------------
------------
Balance, December 31, 1995. 445 445 -- -- 999,605 1,002,000 (651,346)
1,350,704
Capital distribution ........ -- -- 2,000 20 -- (130,000) --
(129,980)
Issuance of stock and
capital contributions .... -- -- -- -- -- 50,000 --
50,000
Net loss ................... -- -- -- -- -- -- (88,034)
(88,034)
--------- --------- --------- --------- ------------- ------------ --------------
------------
Balance, March 31, 1996 ... 445 $445 2,000 $20 $999,605 $ 922,000 $(739,380)
$1,182,690
</TABLE>
The accompanying notes to combined financial statements are an
integral part of these combined statements.
F-76
<PAGE>
EAST COAST GOLF CENTERS, INC.,
EAST COAST GOLF CENTERS OF COLUMBUS, LTD.
AND
EAST COAST GOLF CENTERS OF FORT LAUDERDALE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
1995 1996
--------------- -------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .............................................. $ (545,707) $ (88,034)
Adjustments to reconcile net loss to net cash
provided by operating activities--
Depreciation and amortization ..................... 103,294 47,466
Changes in assets and liabilities:
Inventories ......................................... (102,963) (44,643)
Prepaid expenses and other current assets .......... (16,149) 8,970
Accounts payable .................................... 196,172 265,411
Accrued payroll ..................................... -- 8,025
--------------- -------------------
Net cash provided by (used in) operating activities (365,353) 197,195
--------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .................................. (1,712,379) (806,659)
Cash paid for acquisition of Able Golf Center ........ (435,000) --
--------------- -------------------
Net cash used in investing activities .............. (2,147,379) --
--------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long-term debt ....................... 1,000,000 --
Capital contributions ................................. 1,402,145 50,000
Capital distribution .................................. -- (129,980)
Increase in notes payable to stockholders ............. 870,000 129,980
--------------- -------------------
Net cash provided by financing activities ......... 3,272,145 50,000
Net increase (decrease) in cash .................... 759,413 (559,464)
CASH AND CASH EQUIVALENTS, beginning of year .......... 334,377 1,093,645
--------------- -------------------
CASH AND CASH EQUIVALENTS, end of year ................. $ 1,093,645 $ 534,181
=============== ===================
SUPPLEMENTAL INFORMATION:
Cash paid for interest expense ......................... $ 16,687
</TABLE>
The accompanying notes to combined financial statements are an
integral part of these combined statements.
F-77
<PAGE>
EAST COAST GOLF CENTERS, INC.,
EAST COAST GOLF CENTERS OF COLUMBUS, LTD.
AND
EAST COAST GOLF CENTERS OF FORT LAUDERDALE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND MARCH 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
East Coast Golf Centers, Inc. ("ECGC"), East Coast Golf Centers of
Columbus, Ltd. ("Columbus") and East Coast Centers of Fort Lauderdale, Inc.
("Fort Lauderdale"), (collectively, the "Companies") are engaged in the
operation of a golf driving range, a miniature golf course, a golf pro shop
and a golf school. The Companies operate in Uniondale, New York, Columbus,
Ohio and Fort Lauderdale, Florida.
CASH AND CASH EQUIVALENTS
The Companies consider all highly liquid investments with original maturities
of three months or less at the date of purchase to be cash equivalents. Included
in the cash and cash equivalents balance as of December 31, 1995 and March 31,
1996 are interest bearing deposits of $125,000 and $415,000, respectively.
INVENTORIES
Inventories consist primarily of golf clubs, clothing and various other
golfer's supplies. Inventories are stated at the lower of cost, using first-in,
first-out method ("FIFO"), or net realizable value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and
amortization. Property and equipment are depreciated and amortized using
accelerated methods over the estimated useful lives of the assets ranging from
five to forty years.
REVENUE RECOGNITION
Revenues include fees received from use of the Companies' facilities. Golf
instruction revenues are recognized concurrent with the time services are
provided. Merchandise sales are recognized at the time of sale.
INCOME TAXES
ECGC and Fort Lauderdale have elected to report their earnings under the
provisions of Chapter S of the U.S. Internal Reserve Code. Columbus is a limited
liability corporation which is subject to taxation as a partnership. Taxable
income and loss is reported by the individual stockholders' on their personal
income tax returns. Accordingly, no provision or benefit for income taxes has
been made in the accompanying combined financial statements.
INTANGIBLE ASSETS
During 1995, Columbus purchased a golf course from an unaffiliated entity.
The excess of the cost over the fair value of net assets of the purchased
business is recorded as goodwill and is being amortized on a straight-line basis
over 39 1/2 years.
F-78
<PAGE>
EAST COAST GOLF CENTERS, INC.,
EAST COAST GOLF CENTERS OF COLUMBUS, LTD.
AND
EAST COAST GOLF CENTERS OF FORT LAUDERDALE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS-(Continued)
DECEMBER 31, 1995 AND MARCH 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-(Continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments," requires disclosure of the fair value of
certain financial instruments. Cash and cash equivalents, inventories, prepaid
expenses and other current assets, accounts payable, accrued payroll and debt
are reflected in the accompanying combined financial statements at cost which
approximates fair value.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
--------------- -------------
<S> <C> <C>
Construction in progress ......................... $ 730,943 $1,530,319
Batting cages .................................... 113,059 113,059
Miniature golf course ............................ 121,408 121,408
Golf center ...................................... 748,708 748,708
Machinery and equipment .......................... 108,287 107,071
Furniture and fixtures ........................... 24,063 25,173
Computer equipment ............................... 33,000 39,145
--------------- -------------
1,879,468 2,684,883
Less: Accumulated depreciation and amortization (85,170) (124,559)
--------------- -------------
$1,794,298 $2,560,324
=============== =============
</TABLE>
3. NOTES PAYABLE TO STOCKHOLDERS
Notes payable to stockholders represents notes bearing interest at prime plus
two percent payable quarterly. The notes mature April 28, 2000. Under certain
provisions, as defined in the Columbus Operating Agreement, these loans may be
converted into equity shares in Columbus.
4. LONG-TERM DEBT
Long-term debt consists of a note payable to a bank bearing interest at prime
plus one percent, payable monthly. The note matures April 1, 2001, at which time
the entire principal balance is due.
F-79
<PAGE>
EAST COAST GOLF CENTERS, INC.,
EAST COAST GOLF CENTERS OF COLUMBUS, LTD.
AND
EAST COAST GOLF CENTERS OF FORT LAUDERDALE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS-(Continued)
DECEMBER 31, 1995 AND MARCH 31, 1996
4. LONG-TERM DEBT-(Continued)
Substantially, all of the Companies' assets serve as collateral under the terms
of the note. The note is also guaranteed by the Companies' shareholders.
5. COMMITMENTS
The Companies have lease agreements for each of the facilities. Future annual
minimum lease payments under these leases are as follows:
YEAR ENDED AMOUNT
- -------------- -------------
1997 ........ $ 617,500
1998 ........ 631,200
1999 ........ 641,000
2000 ........ 651,200
2001 ........ 651,200
Thereafter .. 7,091,800
-------------
$10,283,900
=============
6. SUBSEQUENT EVENTS
Subsequent to March 31, 1996, the Companies entered into letters of intent to
sell substantially all of the Companies' assets for approximately $5.8 million
in cash and stock. Consummation of the transaction is subject to a number of
conditions.
The Companies have also entered into a letter agreement outlining the terms
of a proposed joint venture agreement among the Companies and Golden Bear, Inc.
pursuant to which the joint venture shall enter into an exclusive five year
agreement to develop and operate Golden Bear Golf Centers in certain territories
in North Carolina and South Carolina and a nonexclusive development agreement
for territories in Florida (excluding Palm Beach County), Ohio and Long Island,
New York. The rights and obligations of the parties in the joint venture will be
defined in and subject to the execution of a binding definitive agreement. There
is no assurance that a definitive joint venture agreement will be executed or,
if executed, that any Golden Bear Golf Center will ever be developed or operated
by the joint venture.
Subsequent to March 31, 1996, the Companies entered into a bank loan
agreement for $1,250,000, with an interest rate based on the prime rate plus one
percent.The loan matures in approximately 6 years and is secured by the personal
property of the Companies.
7. RELATED PARTY TRANSACTION
EEGC rents office space from a shareholder. Total rent payments to this
shareholder equalled $3,250 during the year ended December 31, 1995, and $1,950
during the three months ended March 31, 1996.
F-80
NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF
GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY THE CLASS A COMMON STOCK IN ANY JURISDICTION WHERE, OR TO
ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT
BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
-------------------------------------------------------------------------
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary ......................... 3
Risk Factors ............................... 7
The Company ................................ 14
Use of Proceeds ............................ 18
Dividend Policy ............................ 18
Dilution ................................... 19
Capitalization ............................. 20
Selected Historical Combined
Financial Data ........................... 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations ............................ 22
Business ................................... 29
Management ................................. 43
Principal Shareholders ..................... 49
Certain Relationships and Related
Transactions ............................... 51
Description of Capital Stock ............... 58
Shares Eligible for Future Sale ............ 61
Certain U.S. Federal Tax Considerations for
Non-U.S. Holders of Class A Common Stock . 62
Underwriting ............................... 65
Legal Matters .............................. 67
Experts .................................... 67
Additional Information ..................... 67
Index to Combined Financial Statements .... F-1
Pro Forma Financial Information ............ P-1
</TABLE>
- -----------------------------------------------------------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING
TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT
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.
1,800,000 SHARES
[LOGO]
GOLDEN BEAR GOLF, INC.
CLASS A COMMON STOCK
- -----------------------------------------------------------------------------
PROSPECTUS
- -----------------------------------------------------------------------------
Merrill Lynch & Co.
William Blair & Company
Dean Witter Reynolds Inc.
, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a list of the estimated expenses (other than underwriting
discounts and commissions) to be paid by the Registrant in connection with the
issuance and distribution of the securities being registered herein.
<TABLE>
<CAPTION>
<S> <C>
SEC REGISTRATION FEE ............................ $ 11,421
NASD Filing Fee ................................. 3,812
NASDAQ National Market Quotation Fee ............ 15,200
Legal Fees and Expenses* ........................ 500,000
Registrar and Transfer Agent Fees and Expenses* 10,000
Accounting Fees and Expenses* ................... 200,000
Printing and Engraving Expenses* ................ 100,000
Blue Sky Qualification Fees and Expenses ....... 25,000
Miscellaneous* .................................. 85,000
----------
Total* ........................................ $950,433
==========
</TABLE>
- ------------
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 607.0831 of the Florida Business Corporation Act (the "Florida Act")
provides that a director is not personally liable for monetary damages to the
corporation or any person for any statement, vote, decision or failure to act
regarding corporate management or policy, by a director, unless: (a) the
director breached or failed to perform his duties as a director; and (b) the
director's breach of, or failure to perform, those duties constitutes: (i) a
violation of criminal law unless the director had reasonable cause to believe
his conduct was lawful or had no reasonable cause to believe his conduct was
unlawful; (ii) a transaction from which the director derived an improper
personal benefit, either directly or indirectly; (iii) a circumstance under
which the director is liable for an improper distribution; (iv) in a proceeding
by, or in the right of the corporation to procure a judgment in its favor or by
or in the right of a shareholder, conscious disregard for the best interests of
the corporation, or willful misconduct; or (v) in a proceeding by or in the
right of someone other than the corporation or a shareholder, recklessness or an
act or omission which was committed in bad faith or with malicious purpose or in
a manner exhibiting wanton and willful disregard of human rights, safety or
property.
Section 607.0850 of the Florida Act provides that a corporation shall have
the power to indemnify any person who was or is a party to any proceeding (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 or employee or agent of the corporation
against liability incurred in connection with such 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.
Section 607.0850 also provides that a corporation shall have the power to
indemnify any person, who was or is a party to any proceeding 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, against expenses and amounts paid in settlement not exceeding, in
the judgment of the board of directors, the estimated expense of litigating the
proceeding to conclusion, actually and reasonably incurred in connection with
the defense or settlement of such proceeding, including any appeal thereof.
Under Section 607.0850, indemnification is authorized if such person acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the corporation, except that no indemnification may be
made in respect of any claim, issue, or matter as to
II-1
<PAGE>
which such person is adjudged to be liable unless, and only to the extent that,
the court in which such proceeding was brought, or any other court of competent
jurisdiction, shall determine upon application that, despite the adjudication of
liability, but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such court deems
proper. To the extent that a director, officer, employee or agent has been
successful on the merits or otherwise in defense of any of the foregoing
proceedings, or in defense of any claim, issue or matter therein Section
607.0850 provides that, he shall be indemnified against expenses actually and
reasonably incurred by him in connection therewith. Under Section 607.0850, any
indemnification, unless pursuant to a determination by a court, shall be made by
the corporation only as authorized in the specific case upon a determination
that the indemnification of the director, officer, employee or agent is proper
under the circumstances because he has met the applicable standard of conduct.
Notwithstanding the failure of a corporation to provide indemnification, and
despite any contrary determination by the corporation in a specific case,
Section 607.0850 permits a director, officer, employee or agent of the
corporation who is or was a party to a proceeding to apply for indemnification
to the appropriate court and such court may order indemnification if it
determines that such person is entitled to indemnification under the applicable
standard.
Section 607.0850 also provides that a corporation has the power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation against any liability asserted
against him and incurred by him in any such capacity or arising out of his
status as such, whether or not the corporation would have the power to indemnify
him against such liability under the provisions of Section 607.0850.
The Registrant's bylaws provide that it shall indemnify its officers and
directors and former officers and directors to the full extent permitted by law.
The Registrant has entered into indemnification agreements with its directors
and certain of its officers. The indemnification agreements generally provide
that the Registrant will pay certain amounts incurred by an officer or director
in connection with any civil or criminal action or proceeding and specifically
including actions by or in the name of the Registrant (derivative suits) where
the individual's involvement is by reason of the fact that he was or is an
officer or director. Under the indemnification agreements, an officer or
director will not receive indemnification if such person is found not to have
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Registrant. The agreements provide a number
of procedures and presumptions used to determine the officer's or director's
right to indemnification and include a requirement that in order to receive an
advance of expenses, the officer or director must submit an undertaking to repay
any expenses advanced on his behalf that are later determined he was not
entitled to receive.
The Registrant's directors and officers are covered by insurance policies
indemnifying them against certain liabilities, including liabilities under the
federal securities laws (other than liability under Section 16(b) of the
Exchange Act), which might be incurred by them in such capacities.
The Underwriting Agreement, filed as Exhibit 1.1 to this Registration
Statement, provides for indemnification by the Underwriters of the Registrant's
directors, officers and controlling persons against certain liabilities that may
be incurred in connection with the offering, including liabilities under the
Securities Act of 1933, as amended.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Pursuant to the Agreement and Plan of Reorganization, dated as of June 7,
1996, between the Registrant, Golden Bear International, Inc., a Florida
corporation ("GBI"), Jack W. Nicklaus, the Jack W. Nicklaus, II Trust, the
Steven Nicklaus Trust, the Nancy J. Nicklaus O'Leary Trust, the Gary T.
Nicklaus Trust, the Michael S. Nicklaus Trust, Richard P. Bellinger, Mark F.
Hesemann, Thomas P. Hislop and Jack P. Bates (collectively, the
"Shareholders"), and John G. Hines ("Hines"), upon the closing of the
Offering contemplated by this Registration Statement, the Registrant will
issue to
II-2
<PAGE>
(i) GBI, 444 shares of its Class B Common Stock in exchange for certain assets
and the assumption of certain related liabilities of GBI and (ii) the
Shareholders, an aggregate of 556 shares of its Class A Common Stock and Class B
Common Stock in exchange for the contribution by the Shareholders of their
shares in each of Paragon Golf Construction, Inc. ("Paragon") and Golden Bear
Golf Centers, Inc. ("GBGC"). The Shareholders currently own all of the issued
and outstanding capital stock of Paragon and GBGC and Mr. Nicklaus and the
above-named Family Controlled Trusts currently own all of the issued and
outstanding capital stock of GBI. GBI and the Shareholders currently own all of
the issued and outstanding capital stock of the Registrant. The transactions
contemplated by the Reorganization Agreement are exempt from registration under
the Securities Act by virtue of the provisions of Section 3(a)(9) and/or Section
4(2) of the Securities Act. None of the transactions contemplated by the
Reorganization Agreement involved any general solicitation and no commissions
were paid.
In , 1996, the Company issued to its current shareholders for no additional
consideration shares of its Class B Common Stock in connection with a
3,000-for-1 forward stock split. Such shares were issued pursuant to the
exemption set forth in Section 3(a)(9) of the Securities Act.
ITEM 16. EXHIBITS
The following exhibits either are filed herewith or incorporated by reference
to documents previously filed or will be filed by amendment, as indicated below:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement
2.1 Agreement and Plan of Reorganization*
3.1 Articles of Incorporation of the Registrant*
3.2 Bylaws of the Registrant*
4.1 Form of Class A Common Stock Certificate**
5.1 Form of Opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.
10.1 Form of Nicklaus Family Registration Rights Agreement
10.2 The Golden Bear Golf, Inc. 1996 Stock Option Plan
10.3 Form of Employment Agreement, between Golden Bear Golf, Inc. and Jack W. Nicklaus
10.4 Form of Employment Agreement, between Golden Bear Golf, Inc. and Richard P. Bellinger
10.5 Form of Employment Agreement, between Golden Bear Golf, Inc. and Mark F. Hesemann
10.6 Form of Employment Agreement, between Golden Bear Golf, Inc. and Thomas P. Hislop
10.7 Form of Employment Agreement, between Golden Bear Golf, Inc. and Jack P. Bates
10.8 Form of Indemnification Agreement between Golden Bear Golf, Inc. and each of its Directors.
10.9 Form of Indemnification Agreement between Golden Bear Golf, Inc. and each of its Executive Officers
10.10 Amended and Restated Joint Venture Agreement, dated June 1, 1994 of Jack Nicklaus Apparel International
("JNAI"), a joint venture between Seaford Clothing Co. and Golden Bear International, Inc.
10.11 Master Apparel Agreement, dated June 1, 1993, by and between Gold Bear International, Inc., Hart
Schaffner & Marx and Hartmarx Corporation.
II-3
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ---------------------------------------------------------------------------------------------------------
10.12 Form of Trademark License Agreement, between Golden Bear Golf, Inc. and Golden Bear International,
Inc.
10.13 Form of Design Services Marketing Agreement, between Golden Bear Golf, Inc. and Golden Bear
International, Inc.
10.14 Form of Personal Services Management Agreement, between Golden Bear Golf, Inc. and Golden Bear
International, Inc.
10.15 Form of Marketing Consulting and Cooperation Agreement, between Golden Bear Golf, Inc. and Golden
Bear International, Inc.
10.16 Form of Office Staff and Equipment Service Agreement, between Golden Bear Golf, Inc. and Golden
Bear International, Inc.
10.17 Form of Sublease and Sharing Agreement, between Golden Bear Golf, Inc. and Golden Bear International, Inc.
10.18 Lease Agreement, dated April 15, 1996, between Golden Bear Golf Centers, Inc. and McDain Golf
Center of Monroeville.
10.19 Purchase and Sale Agreement, dated June 17, 1996, among Cool Springs, Inc., William T. Duckworth
and Golden Bear Golf Centers, Inc.
10.20 Purchase and Sale Agreement, dated April 26, 1996, between First Sports Capital Development Associates,
Ltd. and Golden Bear Golf Centers, Inc.
10.21 Form of Shareholders' Agreement among Nicklaus Family Members and Golden Bear Golf, Inc.
10.22 Form of Shareholders' Agreement among certain executives of Golden Bear Golf, Inc., Mr. Nicklaus
and Golden Bear Golf, Inc.
10.23 Promissory Note of Golden Bear Golf, Inc. payable to Jack W. Nicklaus.
21.1 Subsidiaries of the Registrant
23.1 Consent of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.
23.2 Consent of Arthur Andersen LLP
23.3 Consent of National Golf Foundation
24.1 Power of Attorney (included with signature pages to this Registration Statement)*
27.1 Financial Data Schedule*
</TABLE>
- ------------
* Previously filed.
** To be filed by amendment.
II-4
<PAGE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities 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 Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities 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 Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities 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 therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such name as required by the Underwriters to
permit prompt delivery to each purchaser.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
North Palm Beach, State of Florida, on the day of July, 1996.
GOLDEN BEAR GOLF, INC.
By: /s/ RICHARD P. BELLINGER
----------------------------------------
Richard P. Bellinger
President and Chief Executive Offider
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons
in the capacity and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -----------------------------------------------------------------------------
<S> <C> <C>
* Director and Chairman July , 1996
Jack W. Nicklaus of the Board
- -----------------------------
/s/ RICHARD P. BELLINGER Director, President and July , 1996
- ----------------------------- Chief Executive Officer
Richard P. Bellinger
/s/ JACK P. BATES Senior Vice President and July , 1996
- ----------------------------- Chief Financial Officer
Jack P. Bates (Principal Financial and
Accounting Officer)
* Director and Senior July , 1996
Mark F. Hesemann Vice President
* Director and Senior July , 1996
Thomas P. Hislop Vice President
* By /s/ RICHARD P. BELLINGER
- -----------------------------
(Attorney-in-fact pursuant
to power of attorney)
</TABLE>
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<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE
To the Boards of Directors of
Golden Bear Golf Centers, Inc.,
Paragon Golf Construction, Inc. and
Golden Bear International, Inc.:
We have audited, in accordance with generally accepted auditing standards,
the financial statements of Golden Bear Golf Centers, Inc., Paragon Golf
Construction, Inc. and Certain Operations of Golden Bear International, Inc.
(Florida corporations) as of December 31, 1994 and 1995 and for each of the
three years in the period ended December 31, 1995 included in this registration
statement, and have issued our report thereon dated April 17, 1996. Our audit
was made for the purpose of forming an opinion on the basic financial statements
taken as a whole. The accompanying Schedule II is the responsibility of the
companies' management and is presented for purposes of complying with the
Securities and Exchange Commissions rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states, in all material respects, the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
West Palm Beach, Florida,
April 17, 1996.
S-1
<PAGE>
SCHEDULE II
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC., AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
SCHEDULE II -VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
------------- --------------
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AMOUNT AT END
DESCRIPTION OF PERIOD EXPENSES WRITTEN-OFF OF PERIOD
- --------------------------------------- ------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
1993
Allowance for uncollectible accounts $ -- $ 96,037 $ -- $ 96,037
============= ============= ============== ============
1994
Allowance for uncollectible accounts $ 96,037 $476,962 $ -- $572,999
============= ============= ============== ============
1995
Allowance for uncollectible accounts $572,999 $ 98,046 $159,212 $511,833
============= ============= ============== ============
</TABLE>
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<PAGE>
GOLDEN BEAR GOLF, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
P-1
<PAGE>
GOLDEN BEAR GOLF, INC.
INTRODUCTION TO
UNAUDITED PRO FORMA FINANCIAL INFORMATION
GENERAL
The following Unaudited Pro Forma Consolidated Balance Sheet as of March 31,
1996 and the Unaudited Pro Forma Consolidated Statements of Operations for the
three months ended March 31, 1996 and for the year ended December 31, 1995
reflect adjustments to Golden Bear Golf, Inc.'s ("Golden Bear" or the "Company")
historical financial position and results of operations to give effect to the
transactions discussed below as if such transactions had been consummated at
March 31, 1996 for balance sheet purposes, or at the beginning of the period
presented for income statement purposes.
Golden Bear was formed on June 7, 1996 to enter into an exchange agreement
which will be consummated only upon the closing of a proposed initial public
offering of Golden Bear's Class A Common Stock. Parties to the plan of
reorganization include Golden Bear's affiliates, Golden Bear Golf Centers, Inc.
("Golf Centers"), Paragon Golf Construction, Inc. (collectively, the
"Companies") and Golden Bear International, Inc. ("GBI"). Pursuant to the
exchange agreement, Golden Bear will acquire all of the outstanding common stock
of the Companies in exchange for an aggregate of 1,668,000 (after the proposed
3,000-for-1 stock split) shares of its Class A and Class B Common Stock. In
addition Golden Bear will acquire certain assets and assume certain liabilities
of GBI in exchange for 1,332,000 (after the proposed 3,000-for-1 stock split)
shares of Class B Common Stock.
If the exchange agreement is consummated and Golden Bear closes its initial
public offering, the transaction will be accounted for on a historical cost
basis in a manner similar to a pooling of interests as Golden Bear and the
Companies have common stockholders and management.
The pro forma financial statements do not reflect the effect of expected
increases in levels of expenses as a result of an upgrade to Golden Bear's
management information systems, the addition of accounting and personnel to
support its growth strategy and increased costs associated with operating the
Company as a separate public company. Such increases are not reflected because
they are not currently factually determinable or estimable.
The pro forma financial statements have been prepared by Golden Bear based,
in part, on the audited financial statements of certain of the businesses
acquired and to be acquired as required under the Securities Act, which
financial statements are included elsewhere in this Prospectus, and the
unaudited financial statements of other businesses acquired, which financial
statements are not included herein, adjusted where necessary, with respect to
pre-acquisition periods, to the basis of accounting used in Golden Bear's
historical financial statements. These pro forma financial statements are not
intended to be indicative of the results that would have occurred on the dates
indicated or which may be realized in the future.
THE OFFERING
The pro forma financial statements reflect the Offering and the application
of the net proceeds therefrom, as if the Offering had occurred on March 31,
1996, or at the beginning of the period presented, as applicable. See "Use of
Proceeds."
BUSINESSES TO BE ACQUIRED
Subsequent to year-end, the Companies entered into the following agreements
and letters of intent pursuant to which it acquired two golf practice and
instruction facilities, one by purchase and the other pursuant to a long-term
lease and proposes to acquire subject to the satisfaction of certain conditions,
five other existing golf practice and instruction facilities (one of which it
currently manages) and two facilities currently under development.
P-2
<PAGE>
MCDAIN GOLF CENTER
On April 15, 1996, the Company entered into a long-term lease agreement with
McDain Golf Center of Monroeville, a Pennsylvania limited partnership, for the
lease of an existing golf practice and instruction facility in the greater
Pittsburgh area and has begun operating the facility as a GOLDEN BEAR GOLF
CENTER. The lease is for a term of twenty-nine years and calls for annual
payments of $325,000 with annual cost of living increases commencing after the
fifth year. The Company has been granted an option to purchase the leased
premises for $2,000,000 in 2001. The Company has not yet determined whether it
will acquire the leased premises pursuant to the option.
For financial statement purposes, the portion of the long-term lease
attributable to building and improvements is considered a capital lease as the
net present value of the future payments exceeds 90% of the fair value of the
properties.
TOMS RIVER GOLF CENTER
On April 26, 1996, the Company entered into an agreement, subject to certain
conditions, with First Sports Capital Development Associates, Ltd. ("FSCDA") to
lease certain real property and to purchase certain assets utilized in
connection with an existing golf practice and instruction facility located in
Toms River, New Jersey. The lease is for a term of 20 years and may be extended
for two five-year terms. The purchase price for the assets is $1.9 million, of
which $500,000 will be paid at closing with the remainder of the purchase price
to be evidenced by a promissory note for a term of three years at an interest
rate equal to the prime rate of interest, plus one and one half percent (1 1/2
%).
The Company also entered into an interim management agreement with FSCDA to
manage the facility pending closing of the above-described transaction. In the
event this transaction is not consummated, the Company has agreed to enter into
a GOLDEN BEAR GOLF CENTER franchise agreement with FSCDA with respect to the
facility. The consummation of this transaction is subject to a number of
conditions, including the satisfactory completion of due diligence by the
Company. There is no assurance that this transaction will be consummated.
COOL SPRINGS GOLF CENTER
On June 17, 1996, the Company purchased an existing golf practice and
instruction facility on 40.833 acres of land in Pittsburgh, Pennsylvania
pursuant to purchase and sale agreements with Cool Springs, Inc. and William T.
Duckworth. The purchase price for the land and assets was $2.9 million.
EAST COAST FACILITIES
On June 11, 1996, the Company entered into letters of intent with each of
East Coast Golf Centers of Columbus, Ltd., East Coast Golf Centers of Fort
Lauderdale, Inc. and East Coast Golf Centers, Inc. ("East Coast"), providing for
the proposed purchase and/or assumption of lease of an existing GOLDEN BEAR GOLF
CENTER located in Columbus, Ohio and two GOLDEN BEAR GOLF CENTERS currently
under development in Fort Lauderdale, Florida and Charlotte, North Carolina
(collectively, the "East Coast Facilities"). The facility in Fort Lauderdale,
Florida is expected to open in August, 1996. Construction of the facility in
Charlotte, North Carolina has not yet commenced and opening of the facility is
not expected until late in the second quarter of 1997. The purchase price for
the East Coast Facilities is anticipated to be approximately $5.8 million, of
which $5.2 million will be paid in cash at the closing and the remainder will be
payable in either cash or restricted shares of the Company's Class A Common
Stock valued at the initial public offering price set forth on the cover page
hereof. It is anticipated that the Company will acquire each of these facilities
by assumption of the existing leases for the real property and purchase of the
assets relating to or utilized in the operation or development of the
facilities. The Company has also agreed to grant to East Coast certain
registration rights if shares of the Class A Common Stock are issued in
connection with the transaction. Pursuant to such rights, during the two-year
period following consummation of the acquisition of the East Coast Facilities,
the
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<PAGE>
Company will, subject to various restrictions and limitations, (i) at any time
after the date which is one year following consummation of the Offering, if and
when requested by East Coast, file with the Securities and Exchange Commission
(the "SEC") a registration statement for the proposed sale from time to time by
East Coast of all or any portion of such shares of Class A Common Stock and (ii)
provide East Coast with the opportunity to participate in certain registration
statements filed with the SEC by the Company for the offering of Class A Common
Stock. The rights and obligations of each of the above parties in the
above-described transactions will be defined in and subject to the execution of
definitive purchase and sale agreements. Consummation of each of these
transactions is subject to a number of conditions, including the satisfactory
completion of due diligence by the Company. There is no assurance that the
above-described transactions will be consummated.
The Company has also entered into a letter agreement with East Coast
outlining the terms of a proposed joint venture agreement among the Company and
East Coast pursuant to which the joint venture shall enter into an exclusive
five year agreement to develop and operate GOLDEN BEAR GOLF CENTERS in certain
territories in North Carolina and South Carolina and a non-exclusive development
agreement for territories in Florida (excluding Palm Beach County), Ohio and
Long Island, New York. The rights and obligations of the parties in the joint
venture will be defined in and subject to the execution of a binding definitive
agreement. There is no assurance that a definitive joint venture agreement will
be executed or, if executed, that any GOLDEN BEAR GOLF CENTER will ever be
developed or operated by the joint venture.
HIGHLANDER FACILITIES
On July 16, 1996 the Company entered into letters of intent with Highlander
Golf Corp. Ltd. ("Highlander") to acquire the GOLDEN BEAR GOLF CENTER located in
Carrollton, Texas and to lease the GOLDEN BEAR GOLF CENTER located in Moreno
Valley, California. It is anticipated that the purchase price for the Texas
facility will be $2.25 million, of which $1.5 million will be paid at closing,
with the remainder of the purchase price to be evidenced by a promissory note.
The note will require payments of interest only for five years at a rate of 8%
per annum, with the entire principal amount due in five years. The Company will
enter into a ground lease for the underlying real property of the Texas facility
with an entity affiliated with Highlander. The ground lease will be for a term
of 15 years, and will be renewable for two additional 5-year terms. The annual
rent under the ground lease will equal to 8% of the gross sales attributable to
the facility for years one through five and 10% of gross sales for years six
through fifteen. The minimum rent under the ground lease will be $122,500 per
year, increasing 3% per year. The Company will have a right of first refusal
with respect to proposed sales of the leased premises throughout the term of the
lease.
The lease of the facility located in California provides for a ground lease
of the real property and an operating lease of the facility. Both the ground
lease and the operating lease will be for a period of ten years, renewable for
two additional five year terms. The annual rent due under the ground lease will
be equal to 10% of the gross revenues attributable to the facility with a
minimum rent of $65,000 per year. The annual rent due under the operating lease
will be $50,000. The annual rent under the operating lease and the minimum rent
under the ground lease will increase 3% annually, effective every fifth lease
year. The rights and obligations of the parties in this transaction will be
defined in and subject to the execution of definitive agreements. Consummation
of the acquisitions of these facilities will be subject to the satisfaction of a
number of conditions, including the satisfactory completion of due diligence by
the Company. There is no assurance that either of these transactions will be
consummated.
The Company has also entered into a letter agreement with Highlander
outlining the terms of a proposed joint venture agreement between the Company
and Highlander pursuant to which the joint venture will enter into an exclusive
five year agreement to develop and operate GOLDEN BEAR GOLF CENTERS in certain
territories in Dallas/Ft. Worth, Texas, Orange and San Diego Counties,
California and Chicago, Illinois and a non-exclusive development agreement for
certain territories in Nevada and northern California. The rights and
obligations of the parties in the joint venture will be defined in and subject
to the execution of a binding definitive agreement. There is no assurance that
the definitive joint
P-4
<PAGE>
venture agreement will ever be executed or, if executed, that any GOLDEN BEAR
GOLF CENTER will ever be developed or operated by the joint venture.
ROLLANDIA GOLF PARK PLUS
On July 17, 1996, the Company entered into a letter agreement with Sugar
Creek Golf Course, Inc. ("Sugar Creek") outlining the terms of a proposed
long-term lease of an existing golf practice and instruction facility in the
Dayton, Ohio area. The proposed terms of the lease provide for a term of twenty
years, with an initial up-front payment of $1.1 million and annual rental
payments of $325,000 in year one, $350,000 in year two, $375,000 in years three
through thirteen, $300,000 in year fourteen and $200,000 in years fifteen
through twenty. The Company will also commit to invest at least $750,000 in
improvements to the property within the first two years of the term of the
lease. The Company will also retain Sugar Creek as a consultant for a period of
one year for a fee of $60,000. The Company will be granted the right of first
refusal with respect to proposed sales of the leased premises throughout the
term of the lease. The rights and obligations of the parties in this transaction
will be defined in and subject to the execution of a definitive lease agreement.
Consummation of the lease transaction will be subject to the satisfaction of a
number of conditions, including the satisfactory completion of due diligence by
the Company and there can be no assurance that this transaction will be
consummated.
For financial statement purposes, the portion of the long-term lease
attributable to building and improvements is considered a capital lease as the
net present value of the future payments exceeds 90% of the fair value of the
properties.
P-5
<PAGE>
GOLDEN BEAR GOLF, INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
FOR BUSINESS ACQUIRED
REORGANIZATION -----------------------------------------------------------
AND SALE OF COOL TOM'S EAST
STOCK MCDAIN SPRINGS RIVER HIGHLANDER ROLLANDIA COAST
------------- -------- --------- ------- ---------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 1,800 $ 1 $ 162 $ 2 $ 61 $ 10 $ 534
RESTRICTED CASH 52 -- -- -- --
ACCOUNTS RECEIVABLE, NET 5,287 48 -- -- 5 --
DUE FROM AFFILIATE 254 -- -- 20 -- --
COSTS AND ESTIMATED EARNINGS IN
EXCESS OF BILLINGS ON UNCOMPLETED
CONTRACTS 870 -- -- -- -- -- --
INVENTORIES -- 17 19 7 240 196 148
PREPAID EXPENSES AND OTHER CURRENT
ASSETS 363 31 36 6 1 11 7
------------- -------- --------- ------- ---------- --------- -----
TOTAL CURRENT ASSETS 8,626 97 217 15 322 222 689
PROPERTY AND EQUIPMENT, NET 567 1,791 719 2,315 1,434 2,865 2,560
OTHER ASSETS 195 51 -- 33 -- 383 410
------------- -------- --------- ------- ---------- --------- ------
TOTAL ASSETS $ 9,388 $1,939 $ 936 $2,363 $1,756 $3,470 $3,659
============= ======== ========= ======= ========== ========= ======
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 3,464 $ 161 8 44 98 $ 199 $ 468
ACCRUED EXPENSES 1,594 -- 35 158 29 54 8
BILLINGS IN EXCESS OF COSTS AND
ESTIMATED EARNINGS ON UNCOMPLETED
CONTRACTS 846 -- -- -- --
DEFERRED REVENUE 1,145 -- -- -- --
CURRENT PORTION OF LONG
TERM
DEBT 674 81 -- 28 -- 410 --
PROVISION FOR ESTIMATED LOSSES ON
CONSTRUCTION CONTRACTS IN PROCESS 67 -- -- -- -- -- --
DUE TO STOCKHOLDER AND AFFILIATES -- -- 356 375 304 366 1,000
OTHER CURRENT LIABILITIES -- 152 21 -- 17 -- --
------------- -------- --------- ------- ---------- --------- -----
TOTAL CURRENT LIABILITIES 7,790 394 420 605 448 1,029 1,476
------------- -------- --------- ------- ---------- --------- -----
LONG TERM DEBT, NET OF CURRENT
PORTION 25 1,401 -- 520 -- 2,151 1,000
------------- -------- --------- ------- ---------- --------- -----
MINORITY INTEREST (207) -- -- -- -- 207)
------------- -------- --------- ------- ---------- --------
SHAREHOLDERS' EQUITY:
COMMON STOCK 30 -- 15 -- -- -- --
ADDITIONAL PAID-IN CAPITAL 3,790 144 12 1,354 1,308 362 1,922
RETAINED EARNINGS (2,040) -- 553 (116) -- (72) (739)
LESS-TREASURY STOCK -- -- (64) -- -- -- --
------------- -------- --------- ------- ---------- --------- --------
TOTAL STOCKHOLDERS' EQUITY 1,780 -- 516 1,238 -- 290 1,183
------------- -------- --------- ------- ---------- --------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 9,388 $1,939 $ 936 $2,363 $1,756 $ 3,470 $ 3,659
============= ======== ========= ======= ========== ========= ========
</TABLE>
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<PAGE>
PRO FORMA
ACQUISITION FOR
ADJUSTMENTS ACQISITIONS
------------ -----------
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS (770)(C) $ 50
(1,750)(J)
RESTRICTED CASH 52
ACCOUNTS RECEIVABLE, NET (53)(C) 5,287
DUE FROM AFFILIATE (20) 254
COSTS AND ESTIMATED EARNINGS IN
EXCESS OF BILLINGS ON UNCOMPLETED
CONTRACTS 870
INVENTORIES (627)(C) --
PREPAID EXPENSES AND OTHER CURRENT
ASSETS (92)(C) 363
------- --------
TOTAL CURRENT ASSETS (3,312) 6,876
PROPERTY AND EQUIPMENT, NET 1,454 (B) 13,705
OTHER ASSETS 3,247 (B) 3,442
(877)(C)
------- --------
TOTAL ASSETS 512 $ 24,023
======= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ (978)(C) $ 3,464
ACCRUED EXPENSES (284)(C) 1,594
BILLINGS IN EXCESS OF COSTS AND
ESTIMATED EARNINGS ON UNCOMPLETED
CONTRACTS 846
DEFERRED REVENUE 1,145
CURRENT PORTION OF LONG
TERM 1,650 (K)
DEBT (519)(C) 2,324
PROVISION FOR ESTIMATED LOSSES ON
CONSTRUCTION CONTRACTS IN PROCESS -- 67
DUE TO STOCKHOLDER AND AFFILIATES (2,401)(C) --
OTHER CURRENT LIABILITIES (190)(C) --
------- --------
TOTAL CURRENT LIABILITIES (2,722) 9,440
------- --------
LONG TERM DEBT, NET OF CURRENT
PORTION (5,072)(C) 13,010
------- --------
12,985 (H)
MINORITY INTEREST 207
--------
SHAREHOLDERS' EQUITY:
COMMON STOCK (15)(C) 30
ADDITIONAL PAID-IN CAPITAL (5,102)(C) 3,790
RETAINED EARNINGS 374 (C) (2,040)
LESS-TREASURY STOCK 64 (C) --
------- --------
TOTAL STOCKHOLDERS' EQUITY (4,679) 1,780
------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 512 $ 24,023
======= ========
P-6 (CONT'D)
<PAGE>
GOLDEN BEAR GOLF, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
BUSINESSS ACQUIRED
--------------------------------------------------------------------- A
COOL TOM'S EAST
ACTUAL SPRINGS(I) MCDAIN(I) RIVER(I) HIGHLANDER ROLLANDIA COAST IONS
--------- ----------- ---------- --------- ------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
GOLF DIVISION $ 2,590 $-- $-- $-- $ 206 $ 435 $ 151 $ 3,382
MARKETING DIVISION 2,382 -- -- -- -- --
--- ----- --- ------- ------- ------- -------
4,972 -- -- -- 206 435
--- ----- ----- ------- ------- ------- -------
OPERATING COSTS AND EXPENSES:
GOLF DIVISION 2,392 -- -- -- 270 356 168 $
MARKETING DIVISION 1,307 -- -- -- -- --
CORPORATE OVERHEAD 750 -- -- -- -- --
DEPRECIATION AND AMORTIZATION 73 -- -- -- 47 36
--- ----- --- ------- ------- ------- -------
4,522 -- -- -- 317 392
--- ----- --- ------- ------- ------- -------
OPERATING INCOME 450 -- -- -- 43 (88)
OTHER EXPENSE (321) -- -- -- 2 (68)
68 (C)
INCOME (LOSS) BEFORE FOREIGN
AND PRO FORMA PROVISION
FOR INCOME TAXES 129 -- -- -- (25) (88)
ACTUAL AND PRO FORMA
TAX PROVISIONS 50 -- -- -- (10) (34)
--- ------- ------- ------- -------
NET INCOME (LOSS) $ 79 $-- $-- $-- $ (66) $ (15) $ (54) $ (225)
=== ===== === ======= ======= ======= =======
NET INCOME PER SHARE
WEIGHTED AVERAGE NUMBER OF
COMMON STOCK AND COMMON
STOCK EQUIVALENTS OUTSTANDING 3,000
=======
</TABLE>
P-7
<PAGE>
PRO FORMA
ACQUISITION FOR
ADJUSTMENTS ACQUISITI
-------------- -------------
REVENUES:
GOLF DIVISION 3,382
MARKETING DIVISION -- 2,382
------- -------
151 5,764
------ -------
OPERATING COSTS AND EXPENSES:
GOLF DIVISION 76 (E) 3,262
MARKETING DIVISION -- 1,307
CORPORATE OVERHEAD -- 750
DEPRECIATION AND AMORTIZATION 35 (D) 262
----- -------
111 5,581
------- -------
OPERATING INCOME (111) 183
OTHER EXPENSE (325)(G) (644)
------- -------
INCOME (LOSS) BEFORE FOREIGN
AND PRO FORMA PROVISION
FOR INCOME TAXES (368) (461)
ACTUAL AND PRO FORMA
TAX PROVISIONS (143) (f) (180)
------- -------
NET INCOME (LOSS) $ (225) $ (281)
------- -------
NET INCOME PER SHARE $ (.09)
-------
WEIGHTED AVERAGE NUMBER OF
COMMON STOCK AND COMMON
STOCK EQUIVALENTS OUTSTANDING 3,000
=======
P-7 (CONT'D)
<PAGE>
<TABLE>
<CAPTION>
BUSINESSS ACQUIRED
---------------------------------------------------------------------
COOL TOM'S DALLAS EAST
ACTUAL MCDAIN SPRINGS(I) RIVER(I) HIGHLANDER ROLLANDIA COAST
--------- ----------- --------- --------- ------------------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
GOLF DIVISION $21,475 469 1,523 $ 424 $ 611 $1,807 $549
MARKETING DIVISION 10,070 -- -- -- -- -- --
31,545 469 1,523 424 611 1,807 549
OPERATING COSWTS
AND EXPENSES
GOLF DIVISION ................. 19,389 450 1,397 402 901 1,470 992
MARKETING DIVISION ............ 5,533 -- -- -- -- -- --
CORPORATE OVERHEAD ............ 3,121 -- -- -- -- -- --
DEPRECIATION AND AMORTIZATION 233 67 60 72 115 132 103
28,276 517 1,457 474 1,016 1,602 1,095
---------- --------- --------- -------- ------------- ----------- -------
OPERATING INCOME (LOSS) .... 3,269 (48) 66 (50) (405) 205 (546)
OTHER INCOME (EXPENSE) ......... (1,025) (110) 12 (46) (4) (241) --
397 (L)
---------- --------- ---------- -------- ------------- -------- --------
INCOME (LOSS) BEFORE FOREIGN
AND PRO FORMA PROVISION
FOR INCOME TAXES .......... 2,244 (158) 78 (96) (409) (36) (546)
ACTUAL AND PRO FORMA
TAX PROVISIONS ............... 875 (62) 36 (37) (156) (14) --
---------- --------- ---------- -------- ------------- --------- --------
NET INCOME (LOSS) ........... $ 1,369 $ (96) $ 42 $(59) $ (253) $ (22) $ (546)
========== ========= ========== ======== ========== ========= =========
NET INCOME PER SHARE ........... $ 0.46
WEIGHTED AVERAGE NUMBER OF
COMMON STOCK AND COMMON
STOCK EQUIVALENTS OUTSTANDING 3,000
</TABLE>
P-8
<PAGE>
PRO FORMA
ACQUISITION FOR
ADJUSTMENTS ACQUISITI
------------ -----------
REVENUES:
GOLF DIVISION $ 26,858
MARKETING DIVISION 10,070
---------
36,928
OPERATING COSTS
AND EXPENSES
GOLF DIVISION $ 304 (E) 25,305
MARKETING DIVISION 5,533
CORPORATE OVERHEAD 3,121
DEPRECIATION AND AMORTIZATION 141 (D) 923
445 34,882
OPERATING INCOME (LOSS) (445) 2,046
OTHER INCOME (EXPENSE) (1,295)(H) (2,312)
------------ -----------
397 (L)
------------ -----------
INCOME (LOSS) BEFORE FOREIGN
AND PRO FORMA PROVISION
FOR INCOME TAXES (1,343) (266)
------------ -----------
ACTUAL AND PRO FORMA
TAX PROVISIONS (746)(G) (104)
------------ -----------
NET INCOME (LOSS) $ (597) $ (162)
------------ -----------
NET INCOME PER SHARE $ (0.05)
WEIGHTED AVERAGE NUMBER OF
COMMON STOCK AND COMMON
STOCK EQUIVALENTS OUTSTANDING 3,000
===========
P-8 (CONT'D)
<PAGE>
GOLDEN BEAR GOLF, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(a) Reflects the sale of capital stock of Golf Centers to members of
management and certain Nicklaus Family Members which occurred in June 1996
for aggregate proceeds of $1,500,000. The shares were sold to members of
management for $600,000. The fair value of the shares sold to management at
the date of issuance was $2,050,000, resulting in the recognition of
compensation expense in the amount of $1,450,000.
Because the Reorganization is between entities under common control and
will be accounted for on a historical cost basis the consummation of the
Reorganization will not have an impact on the historical accounts.
(b) Represents the purchase of golf centers and the recording of goodwill as
follows (in thousands):
FAIR VALUE OF
PURCHASE NET ASSETS
PRICE ACQUIRED GOODWILL
----------- ---------------- -----------
McDain ......... $ 1,526 $ 1,526 $ --
Cool Springs .. 2,900 2,069 831
Tom's River ... 1,900 1,900 --
Highlander ..... 2,250 1,434 816
Rollandia ...... 2,309 2,309 --
East Coast ..... 5,800 4,200 1,600
----------- ---------------- -----------
$16,685 $13,438 $3,247
=========== ================ ===========
(c) Represents assets, liabilities and equity which are excluded from the
various acquisitions but which are included in the historical financial
statements of the acquired entities.
(d) Represents amortization expense related to goodwill resulting from the
acquisitions as follows:
THREE MONTHS
YEAR ENDED ENDED
AMORTIZATION DECEMBER 31, MARCH 31,
AMOUNT PERIOD 1995 1996
--------- --------------- --------------- ---------------
Cool Springs .. $ 831 30 years $ 28 $ 7
Highlander ..... 816 25 years 33 8
East Coast ..... 1,600 20 years 80 20
--------- --------------- ---------------
$3,247 $141 $35
========= =============== ===============
(e) Represents the impact of employment agreements to be entered into upon
consummation of the offering. Historically, Jack Nicklaus, Richard
Bellinger, Jack Bates and Mark Hesemann spent approximately 50% of their
efforts in connection with the businesses included in the Reorganization.
Accordingly, approximately 50% of their employment costs were included in
the Company's historical financial statements and 50% were allocated to
GBI. Upon consummation of the Offering, these individuals will have fixed
employment contracts as more fully described in "Management--Employment
Agreements."
(f) Represents the tax effect of the pro forma adjustments at an effective
rate of 39%.
(g) Represents debt to be incurred in connection with the acquisitions. See
Note (h).
P-9
<PAGE>
(h) Represents interest expense on debt resulting from the acquisitions as
follows (in thousands):
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
DEBT RATE 1995 1996
---------- ------- --------------- ---------------
McDain .......... $ 1,226 9% $ 110 $ 28
Tom's River ..... 1,400 9% 126 32
East Coast ...... 5,800 9% 522 131
Highlander ...... 2,250 8% 180 45
Rolandia ........ 2,309 9% 208 52
Nicklaus Note(k) 1,650 9% 149 37
------- --------------- ---------------
$14,635 $1,295 $325
========== ===============
(i) The operations of the acquired business is insignificant during the
months of January through March due to the seasonality of the acquired
golf center's business which is located in the Northeastern United
States.
(j) Represents cash used to fund the acquisitions of Cool Springs ($2.9
million) and McDain ($0.5 million).
(k) Represents a note from Jack Nicklaus, the proceeds of which were used to
fund the Cool Springs acquisition.
(l) Represents the elimination of interest expense on debt of the acquired
entity which will not be assumed in the acquisition.
P-10
Golden Bear Golf, Inc.
(a Florida corporation)
1,800,000 Shares of Common Stock
PURCHASE AGREEMENT
Dated: July __, 1996
<PAGE>
TABLE OF CONTENTS
PURCHASE AGREEMENT..........................................................1
SECTION 1. Representations and Warranties.............................3
(a)Representations and Warranties by the Company................3
(i)Compliance with Registration Requirements.........3
(ii) Independent Accountants.........................4
(iii)Financial Statements............................4
(iv) No Material Adverse Change in Business..........5
(v)Good Standing of the Company......................5
(vi) Good Standing of Subsidiaries...................6
(vii)Capitalization..................................6
(viii) Authorization of Agreements.................6
(ix) Authorization and Description of Securities.....7
(x)Absence of Defaults and Conflicts.................7
(xi) Absence of Labor Dispute........................8
(xii)Absence of Proceedings..........................8
(xiii) Accuracy of Exhibits........................9
(xiv)Possession of Intellectual Property.............9
(xv) Absence of Further Requirements.................9
(xvi)Possession of Licenses and Permits..............10
(xvii) Title to Property...........................10
(xviii) Compliance with Cuba Act....................10
(xix)Investment Company Act..........................11
(xx) Environmental Laws..............................11
(xxi)Accounting Controls.............................11
(xxii) Related Party Transactions..................12
(xxiii) Registration Rights.........................12
(xxiv) Reorganization..............................12
(xxv)Insurance.......................................12
(xxvi) Dilutive Rights.............................12
(b)Officer's Certificates.......................................13
(c)Representations and Warranties by GBI........................13
(i)Authorization of Agreements.......................13
(ii) Absence of Defaults and Conflicts...............13
(iii)Absence of Further Requirements.................14
(iv) Absence of Proceedings..........................14
(v)Reorganization....................................14
(vi) Accuracy of Exhibits............................14
(vii)Compliance with Registration Requirements.......14
SECTION 2. Sale and Delivery to Underwriters; Closing.................15
(a)Initial Securities...........................................15
i
<PAGE>
(b)Option Securities............................................15
(c)Payment......................................................16
(d)Denominations; Registration..................................16
SECTION 3. Covenants of the Company...................................17
(a)Compliance with Securities Regulations and Commission
Requests.............................................17
(b)Filing of Amendments.........................................17
(c)Delivery of Registration Statements..........................17
(d)Delivery of Prospectuses.....................................18
(e)Continued Compliance with Securities Laws....................18
(f)Blue Sky Qualifications......................................19
(g)Rule 158.....................................................19
(h)Use of Proceeds..............................................19
(i)Listing .....................................................19
(j)Restriction on Sale of Securities............................19
(k)Reporting Requirements.......................................20
(l)Form SR..................................................... 20
(m) Reserve Share Program.......................................20
SECTION 4. Payment of Expenses........................................20
(a) Expenses....................................................20
(b)Termination of Agreement.....................................21
SECTION 5. Conditions of Underwriters' Obligations....................21
(a)Effectiveness of Registration Statement......................21
(b)Opinion of Counsel for Company...............................22
(c)Opinion of Counsel for Underwriters..........................22
(d)Officers' Certificates.......................................22
(e)Accountant's Comfort Letter..................................23
(f)Bring-down Comfort Letter....................................23
(g)Approval of Listing..........................................23
(h)No Objection.................................................23
(i)Lock-up Agreements...........................................23
(j)Reorganization Agreement.....................................23
(k)Consents.....................................................24
(l)Conditions to Purchase of Option Securities..................24
(m) Additional Documents........................................24
(n)Termination of Agreement.....................................25
SECTION 6. Indemnification............................................25
(a)Indemnification of Underwriters..............................25
(b)Indemnification of Company, Directors and Officers...........26
(c)Actions against Parties; Notification........................27
(d)Settlement without Consent if Failure to Reimburse...........27
(e)Reserve Share Program Indemnity..............................27
ii
<PAGE>
SECTION 7. Contribution...............................................28
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery................................................ 29
SECTION 9. Termination of Agreement...................................29
(a)Termination; General.........................................29
(b)Liabilities..................................................30
SECTION 10. Default by One or More of the Underwriters................30
SECTION 11. Notices...................................................31
SECTION 12. Parties...................................................31
SECTION 13. GOVERNING LAW AND TIME....................................32
SECTION 14. Effect of Headings........................................32
iii
<PAGE>
Draft of 7/2
Golden Bear Golf, Inc.
(a Florida corporation)
1,800,000 Shares of Common Stock
(Par Value $.01 Per Share)
PURCHASE AGREEMENT
July __, 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
William Blair & Company L.L.C.
Dean Witter Reynolds, Inc.
as Representative of the several Underwriters
C/O MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Golden Bear Golf, Inc., a Florida corporation (the "Company"), and
Golden Bear International, a Florida corporation ("GBI"), confirm their
agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and each of the other Underwriters named in
Schedule A hereto (collectively, the "Underwriters," which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch, William Blair & Company, L.L.C. and Dean Witter
Reynolds, Inc. are acting as representatives (in such capacity, the
"Representatives"), with respect to the issue and sale by the Company and the
purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of shares of Common Stock, par value $.01 per share, of the
Company ("Common Stock") set forth in said Schedule A, and with respect to the
grant by the Company to the Underwriters, acting severally and not jointly, of
the option described in Section 2(b) hereof to purchase all or any part of
270,000 additional shares of Common Stock to cover over-allotments, if any. The
aforesaid 1,800,000 shares of Common Stock (the "Initial Securities") to be
purchased by the Underwriters and all or any part of the 270,000 shares of
Common
<PAGE>
Stock subject to the option described in Section 2(b) hereof (the "Option
Securities") are hereinafter called, collectively, the "Securities".
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representatives deem advisable after
this Agreement has been executed and delivered.
The Company and the Underwriters agree that up to 90,000 shares of the
Securities to be purchased by the Underwriters (the "Reserved Securities") shall
be reserved for sale by the Underwriters to certain eligible employees, persons
having business relationships with the Company and certain other individuals
designated by the Company (the "Designated Participants"), as part of the
distribution of the Securities by the Underwriters, subject to the terms of this
Agreement, the applicable rules, regulations and interpretations of the National
Association of Securities Dealers, Inc. and all other applicable laws, rules and
regulations, including the laws of foreign jurisdiction where the Reserved
Securities may be offered. To the extent that such Reserved Securities are not
so purchased by such Designated Participants by the end of the first Business
Day after either (a) the latter of the date on which the original Registration
Statement or any 462(b) Registration Statement has become effective or (b) if
the Company has elected to rely on Rule 430A, the date of this Agreement, such
Reserved Securities may be offered to the public as part of the public offering
contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-05581) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). The
information included in such prospectus or in such Term Sheet, as the case may
be, that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information." Each prospectus used before such
registration statement became effective, and any prospectus that omitted, as
applicable, the Rule 430A Information or the Rule 434 Information, that was used
after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits and any schedules, at the time it became
effective and including the Rule 430A Information and the Rule 434 Information,
as applicable, is
2
<PAGE>
herein called the "Registration Statement." Any registration statement
filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to
as the "Rule 462(b) Registration Statement," and after such filing the term
"Registration Statement" shall include the Rule 462(b) Registration Statement.
The final prospectus in the form first furnished to the Underwriters for use in
connection with the offering of the Securities is herein called the
"Prospectus." If Rule 434 is relied on, the term "Prospectus" shall refer to the
preliminary prospectus dated July __, 1996 together with the Term Sheet and all
references in this Agreement to the date of the Prospectus shall mean the date
of the Term Sheet. For purposes of this Agreement, all references to the
Registration Statement, any preliminary prospectus, the Prospectus or any Term
Sheet or any amendment or supplement to any of the foregoing shall be deemed to
include the copy filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval system ("EDGAR").
SECTION 1. REPRESENTATIONS AND WARRANTIES
(A) REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if any) referred to in Section 2(b) hereof, and agrees with each Underwriter,
as follows:
(i) COMPLIANCE WITH REGISTRATION REQUIREMENTS. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information has
been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any Option Securities
are purchased, at the Date of Delivery), the Registration Statement, the
Rule 462(b) Registration Statement and any amendments and supplements
thereto complied and will comply in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations and did not
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading. Neither the Prospectus nor any
amendments or supplements thereto, at the time the Prospectus or any
such amendment or supplement was issued and at the Closing Time (and, if
any Option Securities are purchased, at the Date of Delivery), included
or will include an untrue statement of a material fact or omitted or
will omit to state a material fact
3
<PAGE>
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading and to the
Company's knowledge, the Prospectus and any Preliminary Prospectus
comply or will comply in all material respects with any applicable laws
or regulations of foreign jurisdictions in which the Prospectus or the
Preliminary Prospectus, as amended or supplemented, if applicable, are
distributed in connection with the Reserve Share Program. If Rule 434 is
used, the Company will comply with the requirements of Rule 434 and the
Prospectus shall not be "materially different," as such term is used in
Rule 434, from the Prospectus included in the Registration Statement at
the time it became effective. The representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement or Prospectus.
Each preliminary prospectus and the prospectus filed as part of
the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and, if applicable, each preliminary prospectus and the
Prospectus delivered to the Underwriters for use in connection with this
offering was identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(ii) INDEPENDENT ACCOUNTANTS. The accountants who certified the
financial statements and supporting schedules included in the
Registration Statement are independent public accountants, entities for
which financial statements are included in the Registration Statement as
required by the 1933 Act and the 1933 Act Regulations.
(iii) FINANCIAL STATEMENTS. The financial statements included in
the Registration Statement and the Prospectus, together with the related
schedules and notes, present fairly the financial position of the
combined entity consisting of Golden Bear Golf Centers, Inc., Paragon
Golf Construction, Inc. and certain operations of GBF (the "Combined
Entity") and its consolidated subsidiaries at the dates indicated and
the statement of operations, stockholders' equity and cash flows of the
Combined Entity and its consolidated subsidiaries for the periods
specified assuming the Reorganization had occurred as described in the
Prospectus; said financial statements have been prepared in conformity
with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved. The supporting
schedules, if any, included in the Registration Statement present fairly
in accordance with GAAP the information required to be stated therein.
The selected financial data and the summary
4
<PAGE>
financial information included in the Prospectus present fairly the
information shown therein and have been compiled on a basis consistent
with that of the audited or unaudited, as the case may be, financial
statements included in the Registration Statement. The pro forma
financial statements and the related notes thereto included in the
Registration Statement and the Prospectus present fairly the information
shown therein, have been prepared in accordance with the Commission's
rules and guidelines with respect to pro forma financial statements and
have been properly compiled on the bases described therein, and the
assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the
transactions and circumstances referred to therein.
(iv) NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectus, and assuming that the Reorganization has been
consummated, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, (financial or otherwise),
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business (a "Material Adverse Effect"), (B) there
have been no transactions entered into by the Company or any of its
subsidiaries or by GBI, with respect to the operations and assets of GBI
to be contributed to the Company as part of the reorganization (the
"Company Assets") or by Paragon Golf Construction, Inc. or Golden Bear
Golf Centers, Inc. (together the "Acquired Subsidiaries") which are
material with respect to the Company and its subsidiaries considered as
one enterprise, and (C) there has been no dividend or distribution of
any kind declared, paid or made by the Company on any class of its
capital stock.
(v) GOOD STANDING OF THE COMPANY. The Company is (a) a newly
formed corporation with minimal operating history other than as
described in the Prospectus and (b) has not entered into any material
transactions other than as described in the Prospectus. The Company has
been duly organized and is validly existing as a corporation in good
standing under the laws of the state of Florida and has corporate power
and authority to own, lease and operate its properties and to conduct
its business as contemplated to be conducted as described in the
Prospectus and to enter into and perform its obligations under this
Agreement; and the Company is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership
or leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a
Material Adverse Effect.
(v) GOOD STANDING OF SUBSIDIARIES. Each entity which will be a
subsidiary of the Company (each a "Subsidiary" and, collectively, the
5
<PAGE>
"Subsidiaries") upon consummation of the Reorganization, has been duly
organized and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has corporate
power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus and is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct
of business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect; except as
otherwise disclosed in the Registration Statement, all of the issued and
outstanding capital stock of each such Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and upon
consummation of the Reorganization will be owned by the Company,
directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity; none of
the outstanding shares of capital stock of any Subsidiary was issued in
violation of the preemptive or similar rights of any securityholder of
such Subsidiary. As of the date hereof, the Company does not have any
subsidiaries. The only subsidiaries of the Company upon consummation of
the Reorganization will be Paragon Golf Construction, Inc. and Golden
Bear Golf Centers, Inc.
(vii) CAPITALIZATION. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus (assuming
the consummation of the Reorganization) in the column entitled "Actual"
under the caption "Capitalization" (except for subsequent issuances, if
any, pursuant to this Agreement, pursuant to reservations, agreements or
employee benefit plans referred to in the Prospectus or pursuant to the
exercise of options referred to in the Prospectus). The shares of issued
and outstanding capital stock to be outstanding after the Reorganization
have been duly authorized and validly issued and upon consummation of
the Reorganization will be fully paid and non-assessable; none of the
outstanding shares of capital stock of the Company or any shares to be
issued in the Reorganization were issued in violation of the preemptive
or other similar rights of any securityholder of the Company arising by
operation of law, under the charter or by-laws of the Company, under any
agreement to which the Company or any of its subsidiaries is a party or
otherwise.
(viii) AUTHORIZATION OF AGREEMENTS. This Agreement and the
Agreement and Plan of Reorganization, dated as of June 7, 1996 by and
among Golden Bear International, Inc., Golden Bear Golf, John Hines and
the individuals and entities listed on Schedule 1 thereto (the
"Reorganization Agreement") have been duly authorized, executed and
delivered by the Company. The Company has all requisite corporate power
and authority to execute, deliver and perform its obligations under this
Agreement and the Reorganization Agreement, the Trademark License
Agreement, Sublease and Sharing Agreement, Personal
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Services Management Agreement, Design Services Marketing Agreement,
Marketing, Consulting and Cooperation Agreement and Registration Rights
Agreement (each as defined in the Registration Statement and together
the "Intercompany Agreements"); the Intercompany Agreements will be in
the form delivered to you prior to the date hereof; the Reorganization
Agreement constitutes, and the Intercompany Agreements when executed and
delivered by the Company will constitute, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
terms. At the Closing Time, the Company and GBI shall have duly executed
and delivered the Intercompany Agreements and the Intercompany
Agreements will conform in all material respects to the descriptions
thereof contained in the Prospectus.
(ix) AUTHORIZATION AND DESCRIPTION OF SECURITIES. The Securities
have been duly authorized for issuance and sale to the Underwriters
pursuant to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement against payment of the consideration set
forth herein, will be validly issued and fully paid and non-assessable;
the Common Stock conforms to all statements relating thereto contained
in the Prospectus and such description conforms to the rights set forth
in the instruments defining the same; no holder of the Securities will
be subject to personal liability by reason of being such a holder; and
the issuance of the Securities is not subject to preemptive or other
similar rights of any securityholder of the Company.
(x)ABSENCE OF DEFAULTS AND CONFLICTS . Neither the Company nor any
of the Acquired Subsidiaries is in violation of its charter or by-laws.
Neither the Company nor any of the Acquired Subsidiaries nor GBI with
respect to the Company Assets is in default in the performance or
observance of any obligation, agreement, covenant or condition contained
in any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which the
Company or any of the Acquired Subsidiaries or GBI with respect to the
Company Assets is a party or by which it or any of them may be bound, or
to which any of the property or assets of the Company or any of the
Acquired Subsidiaries or the Company Assets is subject (collectively,
"Agreements and Instruments") except for such defaults that would not
result in a Material Adverse Effect; and the execution, delivery and
performance of this Agreement, the Reorganization Agreement and the
Intercompany Agreements and the consummation of the transactions
contemplated herein therein and in the Registration Statement (including
the issuance and sale of the Securities and the use of the proceeds from
the sale of the Securities as described in the Prospectus under the
caption "Use of Proceeds" and the Reorganization as described in the
Prospectus under the caption "Reorganization") and compliance by the
Company, the Acquired Subsidiaries, and GBI with respect to the Company
Assets with their obligations hereunder and thereunder have been duly
authorized by all necessary
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corporate action and do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or constitute
a breach of, or default or Repayment Event (as defined below) under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any Acquired Subsidiary or
GBI with respect to the Company Assets pursuant to, the Agreements and
Instruments, nor will such action result in any violation of the
provisions of the charter or by-laws of the Company or any Acquired
Subsidiary or any applicable law, statute, rule, regulation, judgment,
order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company or any
Acquired Subsidiary or GBI with respect to the Company Assets or any of
their assets, properties or operations. As used in this Agreement, a
"Repayment Event" means any event or condition which gives the holder of
any note, debenture or other evidence of indebtedness (or any person
acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any Acquired Subsidiary or GBI with respect to the Company
Assets.
(xi) ABSENCE IF LABOR DISPUTE. No labor dispute with persons who
will be employees of the Company or any Acquired Subsidiary at the time
of the Closing exists or, to the knowledge of the Company, is imminent,
and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its or any subsidiary's principal
suppliers, manufacturers, customers or contractors, which, in either
case, may reasonably be expected to result in a Material Adverse Effect.
(xii) ABSENCE OFPROCEEDINGS. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge
of the Company, threatened, against or affecting the Company or any
Acquired Subsidiary, or with respect to the Company Assets, GBI which is
required to be disclosed in the Registration Statement (other than as
disclosed therein), or which might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to
materially and adversely affect the properties or assets thereof or the
consummation of this Agreement, the Reorganization Agreement (as defined
in the Prospectus), the Intercompany Agreements or the performance by
the Company and GBI of their obligations hereunder or thereunder; the
aggregate of all pending legal or governmental proceedings to which the
Company or any Acquired Subsidiary or GBI with respect to the Company
Assets is a party or of which any of their respective property or assets
is the subject which are not described in the Registration Statement,
including ordinary routine litigation incidental to the business, could
not reasonably be expected to result in a Material Adverse Effect.
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(xiii) ACCURACY OF EXHIBITS. There are no contracts or documents
which are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits thereto which have not been so
described and filed as required.
(xiv) POSSESSION OF INTELLECTUAL PROPERTY. The Company and the
Acquired Subsidiaries as of the Closing will own, possess, have licensed
the rights to or can acquire on reasonable terms, adequate patents,
patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service
marks, trade names or other intellectual property (collectively,
"Intellectual Property") necessary to carry on the business to be
operated by them as described in the Prospectus, and neither the
Company, GBI nor any of the Acquired Subsidiaries has received any
notice or is otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any Intellectual Property or
of any facts or circumstances which would render any Intellectual
Property invalid or inadequate to protect the interest of the Company or
any of the Acquired Subsidiaries therein upon consummation of the
Reorganization, and which infringement or conflict (if the subject of
any unfavorable decision, ruling or finding) or invalidity or
inadequacy, singly or in the aggregate, would result in a Material
Adverse Effect.
(xv)ABSENCE OF FURTHER REQUIREMENTS . No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance or
sale of the Securities hereunder or the consummation of the transactions
contemplated by this Agreement, the Reorganization Agreement and the
Intercompany Agreements except such as have been already obtained under
the 1933 Act or the 1933 Act Regulations or state securities laws and
such as have been obtained under the securities laws and regulations of
foreign jurisdictions in which Reserved Securities are distributed in
connection with the Reserve Share Program.
(xvi) POSSESSION OF LICENSES AND PERMITS. The Company and the
Acquired Subsidiaries as of the Closing will possess such permits,
licenses, approvals, consents and other authorizations (collectively,
"Governmental Licenses") issued by the appropriate federal, state, local
or foreign regulatory agencies or bodies necessary to conduct the
business to be operated by them as described in the Prospectus; the
Company and the Acquired Subsidiaries and GBI with respect to the
Company Assets are in compliance with the terms and conditions of all
such Governmental Licenses, except where the failure so to comply would
not, singly or in the aggregate, have a Material Adverse Effect; all of
the Governmental Licenses are valid and in full force and effect, except
when the invalidity of such
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Governmental Licenses or the failure of such Governmental Licenses to be
in full force and effect would not have a Material Adverse Effect; and
neither the Company nor any of the Acquired Subsidiaries nor GBI with
respect to the Company Assets has received any notice of proceedings
relating to the revocation or modification of any such Governmental
Licenses which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a Material
Adverse Effect.
(xvii) TITLE TO PROPERTY. The Company and the Acquired
Subsidiaries have or will have at the Closing Time good and marketable
title to all real property owned by the Company and the Acquired
Subsidiaries and good title to all other properties owned by them, in
each case after giving effect to the Reorganization in all instances,
free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (a) are
described in the Prospectus or (b) do not, singly or in the aggregate,
materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company or
any of the Acquired Subsidiaries; and all of the leases and subleases
material to the business of the Company and the Acquired Subsidiaries,
considered as one enterprise, and under which the Company or any of the
Acquired Subsidiaries holds or will hold properties described in the
Prospectus, are in full force and effect, and none of the Company or the
Acquired Subsidiaries or GBI with respect to the Company Assets has any
notice of any material claim of any sort that has been asserted by
anyone adverse to the rights of the Company, the Acquired Subsidiaries
or GBI with respect to the Company Assets under any of the leases or
subleases mentioned above, or affecting or questioning the rights of the
Company or the Acquired Subsidiaries or GBI with respect to the Company
to the continued possession of the leased or subleased premises under
any such lease or sublease.
(xviii) COMPLIANCE WITH CUBA ACT. The Company has complied with,
and is and will be in compliance with, the provisions of that certain
Florida act relating to disclosure of doing business with Cuba, codified
as Section 517.075 of the Florida statutes, and the rules and
regulations thereunder (collectively, the "Cuba Act") or is exempt
therefrom.
(xix) INVESTMENT COMPANY ACT. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus
will not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 Act").
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(xx) ENVIRONMENTAL LAWS. Except as described in the Registration
Statement and except such violations as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) none of the Company
or the Acquired Subsidiaries or GBI with respect to the Company Assets
is in violation of any federal, state, local or foreign statute, law,
rule, regulation, ordinance, code, policy or rule of common law and any
judicial or administrative interpretation thereof including any judicial
or administrative order, consent, decree or judgment, relating to
pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata) or wildlife, including, without
limitation, laws and regulations relating to the release or threatened
release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of Hazardous Materials (collectively, "Environmental Laws"), (B) the
Company and the Acquired Subsidiaries and GBI with respect to the
Company Assets have all permits, authorizations and approvals required
under any applicable Environmental Laws and are each in compliance with
their requirements, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against
the Company or the Acquired Subsidiaries or GBI with respect to the
Company Assets and (D) there are no events or circumstances that might
reasonably be expected to form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company or any of
the Acquired Subsidiaries or GBI with respect to the Company Assets
relating to any Hazardous Materials or the violation of any
Environmental Laws.
(xxi) ACCOUNTING CONTROLS. The Company and each of the Acquired
Subsidiaries as of the Closing Time will maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability
for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
(xxii) RELATED PARTY TRANSACTIONS. There are no business
relationships or related party transactions of the nature described in
Item 404 of Regulation S-K involving the Company or any of the Acquired
Subsidiaries and any person
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described in such Item that are required to be disclosed in the
Registration Statement and which have not been so disclosed.
(xxiii) REGISTRATION RIGHTS. Except as described in the
Registration Statement, there are no persons with registration or other
similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the
1933 Act.
(xxiv) REORGANIZATION. The representations and warranties of the
Company contained in the Reorganization Agreement are true and correct
as of the date hereof. The assets and capital stock to be transferred to
the Company have been placed in escrow on or prior to the date hereof
and as of the Closing all of such assets and capital stock have been
transferred to the Company and the escrow agreement entered into in
connection therewith has been duly authorized, executed and delivered
and is enforceable against the parties thereto in accordance with its
terms.
(xxv) INSURANCE. The Company and each of the Subsidiaries maintain
insurance of the types and in the amounts that are reasonable for the
business operated by them, including, but not limited to, insurance
covering real and personal property owned or leased by the Company and
the Subsidiaries against theft, damage, destruction, acts of vandalism,
liability and malpractice, all of which insurance is in full force and
effect.
(xxvi) DILUTIVE RIGHTS. Except as described in the Prospectus,
there are no outstanding options, warrants or other rights calling for
issuance of, and no commitments, plans or arrangements to issue, any
shares of capital stock of the Company or any of the Acquired
Subsidiaries or any security convertible into or exchangeable for
capital stock of the Company or any of the Acquired Subsidiaries.
(B) OFFICER'S CERTIFICATES. Any certificate signed by any officer of the
Company or any Acquired Subsidiary delivered to the Representatives or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to each Underwriter as to the matters covered thereby. Any
certificate signed by an officer of GBI delivered to the Representatives or to
counsel for the Underwriters shall be deemed a representation and warranty by
GBI to each Underwriter as to the matters covered thereby.
(C) REPRESENTATIONS AND WARRANTIES BY GBI. GBI represents and warrants
to each Underwriter as of the date hereof, as of Closing Time referred to in
Section 2(c) hereof, and as of each Date of Delivery (if any) referred to in
Section 2(b) hereof and agrees with each Underwriter as follows:
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(i) AUTHORIZATION OF AGREEMENTS. GBI has all requisite corporate
power and authority to execute, deliver and perform its obligations
under this Agreement, the Reorganization Agreement and the Intercompany
Agreements; the Intercompany Agreements will be substantially in the
form delivered to you; the Reorganization Agreement and the Intercompany
Agreements when executed and delivered by GBI will constitute valid and
binding obligations of GBI, enforceable against GBI in accordance with
their terms. At the Closing Time, GBI shall have duly executed and
delivered the Intercompany Agreements and the Intercompany Agreements
will conform in all material respects to the descriptions thereof
contained in the Prospectus.
(ii) ABSENCE OF DEFAULTS AND CONFLICTS. The execution, delivery
and performance of this Agreement, the Reorganization Agreements, the
Intercompany Agreements and the consummation of the transactions
contemplated therein and in the Registration Statement (including the
Reorganization as described in the Prospectus under the caption
"Reorganization") and the compliance by GBI with its obligations
hereunder and thereunder has been duly authorized by all necessary
corporate action and does not and will not, whether with or without the
giving of notice or passage of time, or both, conflict with or
constitute a breach of, or default or Repayment Event under, or result
in the creation or imposition of any lien, charge of encumbrance upon
any of the Company Assets under any contract, indenture, mortgage, deed
of trust, loan or credit agreement, note, lease or other agreement or
instrument to which GBI is a party or is bound or to which any of its
property or assets is subject (except for such conflicts, breaches, or
defaults or has charges or encumbrances that would not result in a
Material Adverse Effect), nor will such action result in any violation
of the provisions of the charter or by-laws of GBI or any applicable
law, statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over GBI or any of its assets, properties or
operations.
(iii) ABSENCE OF FURHTER REQUIREMENTS. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by GBI of its
obligations hereunder, in connection with the offering, issuance or sale
of the Securities hereunder or the consummation of the transactions
contemplated by this Agreement, the Reorganization Agreement and the
Intercompany Agreements except such as have been already obtained under
the state securities laws and such as have been obtained under the
securities laws and regulations of foreign jurisdictions in which
Reserved Securities are distributed in connection with the Reserve Share
Program.
(iv) ABSENCE OF PROCEEDINGS. There is no action, suit or
proceeding before or by any government, governmental instrumentality or
court, domestic or
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foreign, now pending or, to the knowledge of GBI, threatened against or
affecting GBI that is required to be disclosed in the Registration
Statement or Prospectus or that, if determined adversely to GBI or any
of its subsidiaries, might reasonably be expected to materially and
adversely affect the consummation of the transactions contemplated in
this Agreement, the Reorganization Agreement, the Intercompany
Agreements and the Prospectus.
(v) REORGANIZATION. The representations and warranties of GBI
contained in the Reorganization Agreement are true and correct as of the
date hereof.
(vi) ACCURACY OF EXHIBITS. There are no contracts or documents to
which GBI is a party of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits
thereto that are not described and filed as required.
(vii) COMPLIANCE WITH REGISTRATION REQUIREMENTS. At the respective
times the Registration Statement, any Rule 462(b) Registration Statement
and any post-effective amendments thereto became effective and at the
Closing Time (and, if any Option Securities are purchased, at the Date
of Delivery), the Registration Statement, the Rule 462(b) Registration
Statement and any amendments and supplements thereto complied and will
comply in all material respects with the requirements of the 1933 Act
and the 1933 Act Regulations and did not and will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading. Neither the Prospectus nor any amendments or supplements
thereto, at the time the Prospectus or any such amendment or supplement
was issued and at the Closing Time (and, if any Option Securities are
purchased, at the Date of Delivery), included or will include an untrue
statement of a material fact or omitted or will omit to state a material
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading and to
GBI's knowledge, the Prospectus and any Preliminary Prospectus comply or
will comply in all material respects with any applicable laws or
regulations of foreign jurisdiction in which the Prospectus or the
Preliminary Prospectus, as amended or supplemented, if applicable are
distributed in connection with the Reserve Share Program. If Rule 434 is
used, the Company will comply with the requirements of Rule 434 and the
Prospectus shall not be "materially different," as such term is used in
Rule 434, from the Prospectus included in the Registration Statement at
the time it became effective. The representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by any
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Underwriter through Merrill Lynch expressly for use in the Registration
Statement or Prospectus.
SECTION 2. SALE AND DELIVERY TO UNDERWRITERS; CLOSING.
(A) INITIAL SECURITIES. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, severally and not
jointly, and each Underwriter, severally and not jointly, agrees to purchase
from the Company, at the price per share set forth in Schedule B, the number of
Initial Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(B) OPTION SECURITIES. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the Underwriters, severally
and not jointly, to purchase up to an additional 270,000 shares of Common Stock
at the price per share set forth in Schedule B, less an amount per share equal
to any dividends or distributions declared by the Company and payable on the
Initial Securities but not payable on the Option Securities. The option hereby
granted will expire 30 days after the date hereof and may be exercised in whole
or in part from time to time only for the purpose of covering over-allotments
which may be made in connection with the offering and distribution of the
Initial Securities upon notice by the Representatives to the Company setting
forth the number of Option Securities as to which the several Underwriters are
then exercising the option and the time and date of payment and delivery for
such Option Securities. Any such time and date of delivery (a "Date of
Delivery") shall be determined by the Representatives, but shall not be later
than seven full business days after the exercise of said option, nor in any
event prior to the Closing Time, as hereinafter defined. If the option is
exercised as to all or any portion of the Option Securities, each of the
Underwriters, acting severally and not jointly, will purchase that proportion of
the total number of Option Securities then being purchased which the number of
Initial Securities set forth in Schedule A opposite the name of such Underwriter
bears to the total number of Initial Securities, subject in each case to such
adjustments as the Representatives in their discretion shall make to eliminate
any sales or purchases of fractional shares.
(C) PAYMENT. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the office of Fried,
Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, NY 10004, or at
such other place as shall be agreed upon by the Representatives and the Company,
at 10:00 A.M. (Eastern Time) on the third (fourth, if the pricing occurs after
4:30 P.M. (Eastern time) on any given day) business day after the date hereof
(unless postponed in accordance with the provisions of Section 10), or such
other time not later than ten business days after such date as shall be
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agreed upon by the Representatives and the Company (such time and date of
payment and delivery being herein called "Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Representatives
and the Company, on each Date of Delivery as specified in the notice from the
Representatives to the Company. Payment shall be made to the Company by
certified or official bank check or checks drawn in New York Clearing House
funds or similar next day funds payable to the order of the Company, against
delivery to the Representatives for the respective accounts of the Underwriters
of certificates for the Securities to be purchased by them. It is understood
that each Underwriter has authorized the Representatives, for its account, to
accept delivery of, receipt for, and make payment of the purchase price for, the
Initial Securities and the Option Securities, if any, which it has agreed to
purchase. Merrill Lynch, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial Securities or the Option Securities, if any, to be
purchased by any Underwriter whose check has not been received by the Closing
Time or the relevant Date of Delivery, as the case may be, but such payment
shall not relieve such Underwriter from its obligations hereunder.
(D) DENOMINATIONS; REGISTRATION. Certificates for the Initial Securities
and the Option Securities, if any, shall be in such denominations and registered
in such names as the Representatives may request in writing at least one full
business day before the Closing Time or the relevant Date of Delivery, as the
case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in The City of New York not later than 10:00 A.M. (Eastern Time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.
SECTION 3. COVENANTS OF THE COMPANY. The Company covenants with each
Underwriter as follows:
(A) COMPLIANCE WITH SECURITIOES REGULATIONS AND COMMISSION
REQUESTS. The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A and will notify the Representatives
immediately, and confirm the notice in writing, (i) when any
post-effective amendment to the Registration Statement, shall become
effective, or any supplement to the Prospectus or any amended Prospectus
shall have been filed, (ii) of the receipt of any comments from the
Commission, (iii) of any request by the Commission for any amendment to
the Registration Statement or any amendment or supplement to the
Prospectus or for additional information, and (iv) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order
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preventing or suspending the use of any preliminary prospectus, or of
the suspension of the qualification of the Securities for offering or
sale in any jurisdiction, or of the initiation or threatening of any
proceedings for any of such purposes. The Company will promptly effect
the filings necessary pursuant to Rule 424(b) and will take such steps
as it deems necessary to ascertain promptly whether the form of
prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will
promptly file such prospectus. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order
is issued, to obtain the lifting thereof at the earliest possible
moment.
(B) FILING OF AMENDMENTS. The Company will give the
Representatives notice of its intention to file or prepare any amendment
to the Registration Statement (including any filing under Rule 462(b)),
any Term Sheet or any amendment, supplement or revision to either the
prospectus included in the Registration Statement at the time it became
effective or to the Prospectus will furnish the Representatives with
copies of any such documents a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file or use any
such document to which the Representatives or counsel for the
Underwriters shall object.
(C) DELIVERY OF REGISTRATION STATEMENT. The Company has furnished
or will deliver to the Representatives and counsel for the Underwriters,
without charge, signed copies of the Registration Statement as
originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein) and signed copies of all
consents and certificates of experts, and will also deliver to the
Representatives, without charge, a conformed copy of the Registration
Statement as originally filed and of each amendment thereto (without
exhibits) for each of the Underwriters. If applicable, the copies of the
Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
(D) DELIVERY OF PROSPECTUSES. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary
prospectus as such Underwriter reasonably requested, and the Company
hereby consents to the use of such copies for purposes permitted by the
1933 Act. The Company will furnish to each Underwriter, without charge,
during the period when the Prospectus is required to be delivered under
the 1933 Act or the Securities Exchange Act of 1934 (the "1934 Act"),
such number of copies of the Prospectus (as amended or supplemented) as
such Underwriter may reasonably request. If applicable, the Prospectus
and any amendments or supplements thereto furnished to the Underwriters
will be identical to the electronically transmitted copies
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thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
(E) CONTINUED COMPLIANCE WITH SECURITIES LAWS. The Company will
comply with the 1933 Act and the 1933 Act Regulations so as to permit
the completion of the distribution of the Securities as contemplated in
this Agreement and in the Prospectus. If at any time when a prospectus
is required by the 1933 Act to be delivered in connection with sales of
the Securities, any event shall occur or condition shall exist as a
result of which it is necessary, in the opinion of counsel for the
Underwriters or for the Company, to amend the Registration Statement or
amend or supplement the Prospectus in order that the Prospectus will not
include any untrue statements of a material fact or omit to state a
material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of
such counsel, at any such time to amend the Registration Statement or
amend or supplement the Prospectus in order to comply with the
requirements of the 1933 Act or the 1933 Act Regulations, the Company
will promptly prepare and file with the Commission, subject to Section
3(b), such amendment or supplement as may be necessary to correct such
statement or omission or to make the Registration Statement or the
Prospectus comply with such requirements, and the Company will furnish
to the Underwriters such number of copies of such amendment or
supplement as the Underwriters may reasonably request.
(F) BLUE SKY QUALIFICATIONS. The Company will use its best
efforts, in cooperation with the Underwriters, to qualify the Securities
for offering and sale under the applicable securities laws of such
states and other jurisdictions (domestic or foreign) as the
Representatives may designate and to maintain such qualifications in
effect for a period of not less than one year from the later of the
effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is
not otherwise so subject. In each jurisdiction in which the Securities
have been so qualified, the Company will file such statements and
reports as may be required by the laws of such jurisdiction to continue
such qualification in effect for a period of not less than one year from
the effective date of the Registration Statement and any Rule 462(b)
Registration Statement.
(G) RULE 158. The Company will timely file such reports pursuant
to the 1934 Act as are necessary in order to make generally available to
its security holders as soon as practicable an earnings statement for
the purposes of, and to
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provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
(H) USE OF PROCEEDS. The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified
in the Prospectus under "Use of Proceeds."
(I) LISTING. The Company will use its best efforts to effect and
maintain the quotation of the Securities on the Nasdaq National Market
and will file with the Nasdaq National Market all documents and notices
required by the Nasdaq National Market of companies that have securities
that are traded in the over-the-counter market and quotations for which
are reported by the Nasdaq National Market.
(J) RESTRICTION ON SALE OF SECURITIES. During a period of 180 days
from the date of the Prospectus, the Company will not, without the prior
written consent of Merrill Lynch, (i) directly or indirectly, offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of any share of
Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or file any registration statement under
the 1933 Act with respect to any of the foregoing or (ii) enter into any
swap or any other agreement or any transaction that transfers, in whole
or in part, directly or indirectly, the economic consequence of
ownership of the Common Stock, whether any such swap or transaction
described in clause (i) or (ii) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise. The
foregoing sentence shall not apply to (A) the Securities to be sold
hereunder, (B) any shares of Common Stock issued by the Company upon the
exercise of an option or warrant or the conversion of a security
outstanding on the date hereof and referred to in the Prospectus, (C)
any shares of Common Stock issued or options to purchase Common Stock
granted pursuant to existing employee benefit plans of the Company
referred to in the Prospectus or (D) any shares of Common Stock issued
pursuant to any non-employee director stock plan.
(K) REPORTING REQUIREMENTS. The Company, during the period when
the Prospectus is required to be delivered under the 1933 Act or the
1934 Act, will file all documents required to be filed with the
Commission pursuant to the 1934 Act within the time periods required by
the 1934 Act and the rules and regulations of the Commission thereunder.
(L) FORM SR. The Company will file with the Commission such
reports on Form SR as may be required pursuant to Rule 463 of the 1933
Act Regulations.
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(M) RESERVE SHARE PROGRAM. The Company hereby agrees that it will
ensure that the Reserved Securities sold to persons pursuant to the
Reserve Share Program will be restricted as required by the NASD or the
NASD rules, from sale, transfer, assignment, pledge or hypothecation for
a period of three months following the date of the effectiveness of the
Registration Statement. The Underwriters will notify the Company as to
which persons will need to be so restricted. At the request of the
Underwriters, the Company will direct the transfer agent to place a stop
transfer restriction upon such securities for such period of time.
Should the Company release, or seek to release, from such restrictions
any securities sold pursuant to the Reserve Share Program that are
subject to a resale restriction, the Company agrees to reimburse the
Underwriters for any reasonable expenses including, without limitation,
legal expenses they incur directly in connection with such release.
SECTION 4. PAYMENT OF EXPENSES. The Company will pay all expenses
incident to the performance of its obligations under this Agreement, including
(i) the preparation, printing and filing of the Registration Statement
(including financial statements and exhibits) as originally filed and of each
amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement, any Agreement among Underwriters and such other
documents as may be required in connection with the offering, purchase, sale and
delivery of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Underwriters, including any stock or
other transfer taxes or duties payable upon the sale of the Securities to the
Underwriters, (iv) the fees and disbursements of the Company's counsel,
accountants and other advisors, (v) the qualification of the Securities under
securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the preparation
of the Blue Sky Survey and any supplement thereto, (vi) the printing and
delivery to the Underwriters of copies of each preliminary prospectus, any Term
Sheets and of the Prospectus and any amendments or supplements thereto, (vii)
the preparation, printing and delivery to the Underwriters of copies of the Blue
Sky Survey and any supplement thereto, (viii) the fees and expenses of any
transfer agent or registrar for the Securities, (ix) the filing fees incident
to, and the reasonable fees and disbursements of counsel to the Underwriters in
connection with, the review by the National Association of Securities Dealers,
Inc. (the "NASD") of the terms of the sale of the Securities, (x) the fees and
expenses incurred in connection with the inclusion of the Securities in the
Nasdaq National Market and (xi) all costs and expenses of the Underwriters,
including, without limitation (A) the fees and disbursements of counsel for the
Underwriters and (B) stamp duties or similar taxes or duties in connection with
matters related to the Reserved Securities which are designated by the Company
for sale in connection with the Reserve Share Program.
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(B) TERMINATION OF AGREEMENT. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the Underwriters for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
SECTION 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company or GBI or any Acquired Subsidiary
delivered pursuant to the provisions hereof, to the performance by the Company
or GBI of their covenants and other obligations hereunder, and to the following
further conditions:
(A) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective
on the date hereof and at Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued under
the 1933 Act or proceedings therefor initiated or threatened by the
Commission, and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction
of counsel to the Underwriters. A prospectus containing the Rule 430A
Information shall have been filed with the Commission in accordance with
Rule 424(b) (or a post-effective amendment providing such information
shall have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon
Rule 434, a Term Sheet shall have been filed with the Commission in
accordance with Rule 424(b).
(B) OPINION OF COUNSEL FOR COMPANY. At Closing Time the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Stearns Weaver Miller Weissler Alhadeff & Sitterson,
P.A. etc., counsel for the Company, in form and substance satisfactory
to counsel for the Underwriters, together with signed or reproduced
copies of such letter for each of the other Underwriters to the effect
set forth in Exhibit A hereto and to such further effect as counsel to
the Underwriters may reasonably request.
(C) OPINION OF COUNSEL FOR UNDERWRITERS. At Closing Time the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Fried, Frank, Harris, Shriver & Jacobson, counsel for
the Underwriters, together with signed or reproduced copies of such
letter for each of the other Underwriters with respect to the matters
set forth in (i), (v), (viii), (x) and (xi) inclusive, and the
penultimate paragraph of Exhibit A hereto. In giving such opinion such
counsel may rely, as to all matters governed by the laws of the State of
Florida, upon the opinions of Stearns Weaver Miller Weissler Alhaddef &
Sitterson, P.A. Such counsel may also state that, insofar as such
opinion involves
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factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiaries and
certificates of public officials.
(D) OFFICERS' CERTIFICATES. At Closing Time there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, any material adverse change in
the condition, (financial or otherwise), earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business (a
"Material Adverse Change"), and the Representatives shall have received
a certificate of the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company, dated as
of Closing Time, to the effect that (i) there has been no such Material
Adverse Change, (ii) the representations and warranties in Section l(a)
hereof are true and correct with the same force and effect as though
expressly made at and as of Closing Time, (iii) the Company has complied
with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to Closing Time, and (iv) no stop
order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted or
are pending or are contemplated by the Commission.
At the Closing Time there shall not have been, since the date
hereof or since the respective dates as of which information is given in
the Prospectus, any Material Adverse Change and the Representative shall
have received a certificate of the President as Vice President of GBI
and of the chief financial or chief accounting officer of GBI, dated as
of closing time to the effect that (i) there has been no such Material
Adverse Change, (ii) the representations and warranties in Section 1(c)
hereof are true and correct with the same force and effect as thought
expressly made at and as of Closing Time, and (iii) GBI has complied
with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to closing time.
(E) ACCOUNTANT'S COMFORT LETTER. At the time of the execution of
this Agreement, the Representatives shall have received from Arthur
Andersen, LLP a letter dated such date, in form and substance
satisfactory to the Representatives, together with signed or reproduced
copies of such letter for each of the other Underwriters containing
statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus.
(F) BRING-DOWN COMFORT LETTER. At Closing Time, the
Representatives shall have received from Arthur Andersen, LLP a letter,
dated as of Closing Time, to the effect that they reaffirm the
statements made in the letter furnished pursuant
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to subsection (e) of this Section, except that the specified date
referred to shall be a date not more than three business days prior to
Closing Time.
(G) APPROVAL OF LISTING. At the Closing Time, the Securities shall
have been approved for inclusion in the Nasdaq National Market, subject
only to official notice of issuance.
(H) NO OBJECTION. The NASD shall not have raised any objection
with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(I) LOCK-UP AGREEMENTS. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the
form of Exhibit B hereto signed by the persons listed on Schedule C
hereto.
(J) REORGANIZATION AGREEMENT. The Reorganization as described in
the Prospectus shall have been consummated in accordance with the terms
of the Reorganization Agreement and there has been no amendment or
modification to the Reorganization Agreement since the date of its
execution.
(K) CONSENTS. The Company has received consents to the transfer of
licensing agreements to the Company from the parties to licensing
agreements representing at least 95% of the licensing revenues of the
Combined Entity as reflected in the 1995 annual and 1996 first quarter
financial statements, which consents do not contain any material
conditions or requirements to such transfer.
(L) CONDITIONS TO PURCHASE OF OPTION SECURITIES. In the event that
the Underwriters exercise their option provided in Section 2(b) hereof
to purchase all or any portion of the Option Securities, the
representations and warranties of the Company contained herein and the
statements in any certificates furnished by the Company hereunder shall
be true and correct as of each Date of Delivery and, at the relevant
Date of Delivery, the Representative(s) shall have received:
(i) OFFICERS' CERTIFICATE. A certificate, dated such Date of
Delivery, of the President or a Vice President of the Company and
of the chief financial or chief accounting officer of the Company
confirming that the certificate delivered at the Closing Time
pursuant to Section 5(d) hereof remains true and correct as of
such Date of Delivery.
(ii) OPINION OF COUNSEL FOR COMPANY. The favorable opinion of
Stearns Weaver Miller Weissler Alhadeff & Sittersson, P.A.,
counsel for the Company, in form and substance satisfactory to
counsel for the Underwriters, dated such Date of Delivery,
relating to the Option Securities
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to be purchased on such Date of Delivery and otherwise to the
same effect as the opinion required by Section 5(b) hereof.
(iii)OPINION OF COUNSEL FOR UNDERWRITERS. The favorable opinion
of Fried, Frank, Harris, Shriver & Jacobson, counsel for the
Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise
to the same effect as the opinion required by Section 5(c)
hereof.
(iv) BRING-DOWN COMFORT LETTER. A letter from Arthur Andersen
LLP, in form and substance satisfactory to the Representatives
and dated such Date of Delivery, substantially in the same form
and substance as the letter furnished to the Representatives
pursuant to Section 5(f) hereof, except that the "specified date"
in the letter furnished pursuant to this paragraph shall be a
date not more than five days prior to such Date of Delivery.
(M) ADDITIONAL DOCUMENTS . At Closing Time and at each Date of
Delivery counsel for the Underwriters shall have been furnished with
such documents and opinions as they May require for the purpose of
enabling them to pass upon the issuance and sale of the Securities as
herein contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company
in connection with the issuance and sale of the Securities as herein
contemplated shall be satisfactory in form and substance to the
Representatives and counsel for the Underwriters.
(N) TERMNATION OF AGREEMENT. If any condition specified in this
Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the
purchase of Option Securities, on a Date of Delivery which is after the
Closing Time, the obligations of the several Underwriters to purchase
the relevant Option Securities, may be terminated by the Representatives
by notice to the Company at any time at or prior to Closing Time or such
Date of Delivery as the case may be, and such termination shall be
without liability of any party to any other party except as provided in
Section 4 and except that Sections 1, 6 and 7 shall survive any such
termination and remain in full force and effect.
SECTION 6. INDEMNIFICATION.
(A) INDEMNIFICATION OF UNDERWRITERS. The Company and GBI, jointly and
severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act as follows:
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(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto), or the omission
or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expenses whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact or omission or alleged
omission of a material fact contained in any supplied used in a foreign
jurisdiction in connection with the reservation and sale of the Reserved
Securities;
(iii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or proceeding
by an governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission; provided that (subject to
Section 6(d) below) any such settlement is effected with the written
consent of the Company; and
(iv) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such
expense is not paid under (i), (ii) or (iii) above;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto), including the 430A Information and the
Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
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(B) INDEMNIFICTION OF COMPANY, DIRECTORS AND OFFICERS. Each Underwriter
severally agrees to indemnify and hold harmless the Company, its directors, each
of its officers who signed the Registration Statement, and each person, if any,
who controls the Company within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such Underwriter through Merrill
Lynch expressly for use in the Registration Statement (or any amendment thereto)
or such preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(C) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
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(D) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(iii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(E) RESERVE SHARE PROGRAM. In connection with the Reserve Share Program,
the Company and GBI, jointly and severally, agree to indemnify and hold harmless
the Underwriters from and against any and all losses, expenses and liabilities
incurred by them, as incurred, as a result of (i) the failure of the Designated
Participants to pay for and accept delivery of shares which, at any time
following the effectiveness of the Registration Statement, were subject to a
properly confirmed agreement to purchase and (ii) the violation of any laws of
foreign jurisdictions where Reserved Securities have been offered pursuant to
the Reserve Share Program.
SECTION 7. CONTRIBUTION. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any such losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and GBI on
the one hand and the Underwriters on the other hand from the offering of the
Securities and the transactions contemplated by this Agreement or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and GBI on the
one hand and of the Underwriters on the other hand in connection with the
statements or omissions, or in connection with any failure of the nature
referred to in Section 6(a)(ii)(A) and 6(e) hereof, which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company and GBI on the one hand
and the Underwriters on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Underwriters, in
each case as set forth on the cover of the Prospectus, or,
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if Rule 434 is used, the corresponding location on the Term Sheet bear to the
aggregate initial public offering price of the Securities as set forth on such
cover.
The relative fault of the Company and GBI on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or GBI on the one hand or by the Underwriters on the
other hand and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission or any failure
of the nature referred to in Section 6(a)(ii)(A) and 6(e) hereof.
The Company, GBI and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission or any failure of the
nature referred to in Section 6(a)(ii)(A) 6(e) hereof.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Initial Securities set forth opposite their
respective names in Schedule A hereto and not joint.
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SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or GBI submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any Underwriter or controlling
person, or by or on behalf of the Company or GBI, and shall survive delivery of
the Securities to the Underwriters.
SECTION 9. TERMINATION OF AGREEMENT.
(A) TERMINATION. general The Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time (i)
if there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the Prospectus, any
Material Adverse Change, or (ii) if there has occurred any material adverse
change in the financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the
Representatives, impracticable to market the Securities or to enforce contracts
for the sale of the Securities, or (iii) if trading in any securities of the
Company has been suspended or limited by the Commission or the Nasdaq National
Market, or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the Nasdaq National Market has been suspended or limited,
or minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the National Association of Securities Dealers, Inc. or
any other governmental authority, or (iv) if a banking moratorium has been
declared by any Federal, New York or Florida authority.
(B) LIABILITIES. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6 and 7 shall survive such termination and remain in full force and effect.
29
<PAGE>
SECTION 10 DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one or more
of the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representatives shall have the right, within
24 hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representative(s) shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of
the number of Securities to be purchased on such date, each of the
non-defaulting Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that
their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
number of Securities to be purchased on such date, this Agreement or,
with respect to any Date of Delivery which occurs after the Closing
Time, the obligation of the Underwriters to purchase and of the Company
to sell the Option Securities to be purchased and sold on such Date of
Delivery shall terminate without liability on the part of any
non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after the
Closing Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company to sell the relevant Option Securities,
as the case may be, either the Representative(s) or the Company shall have the
right to postpone Closing Time or the relevant Date of Delivery, as the case may
be, for a period not exceeding seven days in order to effect any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements. As used herein, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 10.
SECTION 11. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at North Tower, World
Financial Center, New York, New York 10281-1201, attention of James Hislop; with
a copy to Valerie Ford Jacob, Esq., Fried, Frank, Harris, Shriver and Jacobson,
One New York Plaza, New York, New York 10004; and
30
<PAGE>
notices to the Company shall be directed to it at Golden Bear Golf, Inc., 11780
U.S. Highway #1, North Palm Beach, Florida, 33408, attention of Richard P.
Bellinger; with copies to Alison W. Miller, Stearns Weaver Miller Weissler
Alhadeff & Sitterson, P.A., Museum Tower, Suite 2200, 150 West Flagler Street,
Miami, Florida 33130 and to Joseph Fleming, Fleming, Haile, Shaw and Gundlach,
11780 U.S. Highway One, Suite 300, North Palm Beach, Florida 33408.
SECTION 12. PARTIES. This Agreement shall each inure to the benefit of
and be binding upon the underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters and the Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the Underwriters and the Company and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Securities from any Underwriter
shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. EFFECT OF HEADINGS. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
31
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriters and the Company in accordance with its terms.
Very truly yours,
Golden Bear Golf, Inc.
By
-----------------------------
Title:
Golden Bear International, Inc.
By
------------------------------
Title:
CONFIRMED AND ACCEPTED
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
WILLIAM BLAIR & COMPANY L.L.C.
DEAN WITTER RENYOLDS, INC.
BY: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
-------------------------------------------
Authorized Signatory
For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.
32
<PAGE>
SCHEDULE A
Number of
Initial
NAME OF UNDERWRITER Securities
-------------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...........................
WILLIAM BLAIR & COMPANY, L.L.C.
DEAN WITTER REYNOLDS, INC.............................
----------------
Total.................................................. 1,800,000
================
<PAGE>
SCHEDULE B
Golden Bear Golf, Inc.
1,800,000 Shares of Common Stock
(Par Value $.01 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $ /bullet/.
2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $ /bullet/, being an amount equal to the initial
public offering price set forth above less $ /bullet/ per share; provided that
the purchase price per share for any Option Securities purchased upon the
exercise of the over-allotment option described in Section 2(b) shall be reduced
by an amount per share equal to any dividends or distributions declared by the
Company and payable on the Initial Securities but not payable on the Option
Securities.
Sch B-1
<PAGE>
[SCHEDULE C]
[List of persons and entities
subject to lock-up]
Jack W. Nicklaus
Golden Bear International Inc.
Richard P. Bellinger and Barbara P. Nicklaus as co-trustees of Trusts for the
benefit of Mr. and Mrs. Nicklaus' children
Richard P. Bellinger
Mark F. Hesemann
Thomas P. Hislop
Jack P. Bates
Sch C-1
<PAGE>
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
[Letterhead of Stearns Weaver Miller
Weissler Alhaddef & Sitterson, P.A.]
July __, 1996
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
William Blair & Company, LLC
Dean Witter Reynolds Inc.
As Representatives of the Several Underwriters
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1201
Ladies and Gentlemen:
We have acted as special counsel to Golden Bear Golf, Inc. (the
"Company") and Golden Bear International, Inc. ("GBI") in connection with the
underwritten public offering of 2,070,000 shares (the "Shares") of common stock,
par value $.01 per share (the "Common Stock"), of the Company, of which 270,000
shares will be sold pursuant to the exercise of over-allotment options. This
opinion is delivered to you pursuant to Section 5(b) of the Purchase Agreement
among the Underwriters named in Schedule A thereto, the Company and GBI (the
"Purchase Agreement"). All capitalized terms used herein that are defined in, or
by reference in, the Purchase Agreement have the meanings assigned to such terms
therein, or by reference therein, unless defined herein. All references herein
to the Registration Statement refer solely to the Registration Statement (File
No. 333-5581).
In connection with this opinion, we have examined originals or certified,
conformed or reproduction copies of such agreements, instruments, documents and
records of the Company, the Acquired Subsidiaries, GBI, such certificates of
public officials and such other documents, and (iii) received such information
from officers and
A-1
<PAGE>
representatives of the Company, the Acquired Subsidiaries, GBI and others as we
have deemed necessary or appropriate for the purposes of this opinion.
In all such examinations, we have assumed the genuineness of all
signatures, the authenticity of original and certified documents and the
conformity to original or certified copies submitted to us as conformed or
reproduction copies. As to various questions of fact relevant to the opinions
expressed herein, we have relied upon, and assume the accuracy of,
representations and warranties contained in the Purchase Agreement and
certificates and oral or written statements and other information of or from
representatives of the Company, the Acquired Subsidiaries and GBI and others and
assume compliance on the part of all parties to the Agreements with their
covenants and agreements contained therein.
Based upon the foregoing, and subject to the limitations, qualifications
and assumptions set forth herein, we are of the opinion that:
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of Florida. GBI has
been duly incorporated and is validly existing as a corporation in good standing
under the laws of the state of Florida.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as contemplated to be
conducted as described in the Prospectus, and each of the Company and GBI have
the corporate power and authority to enter into and perform their obligations
under the Purchase Agreement.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus in the column entitled "Actual" under the
caption "Capitalization" (except for subsequent issuances, if any, pursuant to
the Purchase Agreement or pursuant to reservations, agreements or employee
benefit plans referred to in the Prospectus or pursuant to the exercise of
convertible securities or options referred to in the Prospectus); the shares of
issued and outstanding capital stock of the Company have been duly authorized
and validly issued and are fully paid and non-assessable; and none of the
outstanding shares of capital stock of the Company was issued in violation of
the preemptive or other similar rights of any securityholder of the Company.
(v) The Securities have been duly authorized for issuance and sale to
the Underwriters pursuant to the Purchase Agreement and, when issued and
delivered by Tthe
A-2
<PAGE>
Company pursuant to the Purchase Agreement against payment of the consideration
st forth in the Purchase Agreement, will be validly issued and fully paid and
non-assessable and no holder of the Securities is or will be subject to
personal liability by reason of being such a holder.
(vi) The issuance of the Securities is not subject to preemptive or
other similar rights of any securityholder of the Company.
(vii) Each Acquired Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Registration
Statement and is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect; except as otherwise
disclosed in the Registration Statement, all of the issued and outstanding
capital stock of each Acquired Subsidiary has been duly authorized and validly
issued, is fully paid and non-assessable and, to the best of our knowledge and
information, is owned by the Company, directly or through subsidiaries, free and
clear of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; none of the outstanding shares of capital stock of any Acquired
Subsidiary was issued in violation of the preemptive or similar rights of any
securityholder of such Acquired Subsidiary.
(viii) The Purchase Agreement has been duly authorized, executed and
delivered by the Company and GBI.
(ix) The Company and GBI have all requisite corporate power and
authority to execute, deliver and perform their obligations under the
Reorganization Agreement and the Intercompany Agreements; the Reorganization
Agreement and the Intercompany Agreements have been duly authorized and validly
executed by the Company and constitute valid and binding obligations of the
Company and GBI, enforceable against the Company and GBI in accordance with
their terms, except as such enforceability may be initiated by (i) bankruptcy,
insolvency, reorganization moratorium of other similar laws affecting creditors
rights generally and (ii) general principles of equity (regardless of whether
such enforceability is considered in a preceding in equity or at law). The
Intercompany Agreements and the Intercompany Agreements conform in all material
respects to the descriptions thereof contained in the Prospectus.
(x) The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the Prospectus pursuant to Rule 424(b) has been made in the manner and within
the time period required by Rule 424(b); and, to the best of our my knowledge
and information, no
A-3
<PAGE>
stop order suspending the effectiveness of the Registration Statement has been
issued under the 1933 Act or proceedings therefor initiated or threatened by the
Commission.
(xi) The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 434 Information and the Rule 434 Information, as applicable,
the Prospectus and each amendment or supplement to the Registration Statement
and Prospectus as of their respective effective or issue dates (other than the
financial statements and supporting schedules included therein or omitted
therefrom, as to which no opinion need be rendered) complied as to form in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations.
(xii) If Rule 434 has been relied upon, the Prospectus was not
"materially different," as such term is used in Rule 434, from the prospectus
included in the Registration Statement at the time it became effective.
(xiii) The form of certificate used to evidence the Common Stock
complies in all material respects with all applicable statutory requirements,
with any applicable requirements of the charter and by-laws of the Company and
the requirements of the Nasdaq National Market.
(xiv) To the best of our knowledge, there is not pending or threatened
any action, suit, proceeding, inquiry or investigation, to which the Company or
any Acquired Subsidiary or GBI with respect to the Company Assets is a party, or
to which the property of the Company or any Acquired Subsidiary or GBI with
respect to the Company Assets is subject, before or brought by any court or
governmental agency or body, domestic or foreign, which might reasonably be
expected to result in a Material Adverse Effect, or which might reasonably be
expected to materially and adversely affect the properties or assets thereof or
the consummation of the Purchase Agreement or the performance by the Company or
GBI of their obligations thereunder.
(xv) The information in the Prospectus under "Description of Capital
Stock--Common Stock," "Business--Property," "Business--Litigation," "Description
of Capital Stock--Preferred Stock," "Certain Federal Income Tax Considerations"
and "Certain Relationships and Related Transactions" and in the Registration
Statement under item 15, to the extent that it constitutes matters of law,
summaries of legal matters, the Company's charter and bylaws or legal
proceedings, or legal conclusions, has been reviewed by them and is correct in
all material respects and fairly summarize the matters described therein.
(xvi) To the best of our knowledge, there are no statutes or regulations
that are required to be described in the Prospectus that are not described as
required.
(xvii) All descriptions in the Prospectus of contracts and other
documents to which the Company, the Acquired Subsidiaries or GBI with respect to
the Company Assets are a party are accurate in all material respects; to the
best of our knowledge, there
A-4
<PAGE>
are no franchises, contracts, indentures, mortgages, loan agreements, notes,
leases or other instruments required to be described or referred to in the
Registration Statement or to be filed as exhibits thereto other than those
described or referred to therein or filed as exhibits thereto, and the
descriptions thereof or references thereto are correct in all material respects.
(xviii)No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than under the 1933 Act and the
1933 Act Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we need express
no opinion) is necessary or required in connection with the due authorization,
execution and delivery of the Purchase Agreement, the Reorganization Agreement
and the Intercompany Agreements or for the offering, issuance or sale of the
Securities or the Reorganization.
(xix) The execution, delivery and performance of the Purchase Agreement
the Reorganization Agreement and the Intercompany Agreements and the
consummation of the transactions contemplated in the Purchase Agreement, the
Reorganization Agreement and the Intercompany Agreements and in the Registration
Statement (including the issuance and sale of the Securities and the use of the
proceeds from the sale of the Securities as described in the Prospectus under
the caption "Use Of Proceeds") and compliance by the Company and GBI with their
obligations under the Purchase Agreement will not, whether with or without the
giving of notice or lapse of time or both, conflict with or constitute a breach
of, or default or Repayment Event (as defined in Section 1 (a)(x) of the
Purchase Agreement) under or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any Acquired
Subsidiary or GBI with respect to the Company Assets, pursuant to any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any
other agreement or instrument, known to us, to which the Company or any Acquired
Subsidiary or GBI is a party or by which it or any of them may be bound, or to
which any of the property or assets of the Company or any Acquired Subsidiary or
GBI with respect to the Company Assets is subject, nor will such action result
in any violation of the provisions of the charter or by-laws of the Company or
any Acquired Subsidiary or GBI, or any applicable law, statute, rule,
regulation, judgment, order, writ or decree, known to us, of any government,
government instrumentality or court, domestic or foreign, having jurisdiction
over the Company or any Acquired Subsidiary or GBI or any of their respective
properties, assets or operations.
(xx) To the best of their knowledge and information, there are no
Persons with registration or other similar rights to have any securities
registered pursuant to the Registration Statement or otherwise registered by the
Company under the 1933 Act.
A-5
<PAGE>
(xxi) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
(xxii) Except as disclosed in the Prospectus, the Company and the
Acquired Subsidiaries together own or have rights to use the trademarks
Nicklaus, Jack Nicklaus and Golden Bear (the "Principal Trademarks") in their
businesses as described in the Prospectus, without any conflict, including any
claims whether threatened or pending, actions, suits, oppositions, cancellations
or other proceedings (collectively, "Claims") known to such counsel with any
intellectual property rights of third parties that would, individually or in the
aggregate, have a Material Adverse Effect and to such counsel's knowledge, there
is no infringement by others of the Principal Trademarks, that would,
individually or in the aggregate, have a Material Adverse Effect. GBI, the
Company and the Acquired Subsidiaries have taken all necessary and desirable
action to maintain and protect the Principal Trademarks that they own or use
relating to the businesses of the Company or the Acquired Subsidiaries including
registration in the name of the Company, GBI or its Acquired Subsidiaries in the
United States Patent and Trademark Office or any foreign equivalent. Such
Principal Trademark that the Company and its Acquired Subsidiaries own or under
which they are licensed are valid, enforceable, in good standing and uncontested
and not subject to any liens or encumbrances or rights thereto or therein by
third parties, other than the license agreements entered into by the Company and
its Acquired Subsidiaries, nor are there any Claims challenging or questioning
the validity, ownership or enforceability of the Principal Trademark or any
license or agreement related thereto, nor to our knowledge is any such Claim
threatened nor is there a valid basis for any such Claim except for exceptions
to the foregoing that are not expected to have a Material Adverse Effect on the
Company or its Acquired Subsidiaries.
Nothing has come to our attention that would lead us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we make no statement), at the time such Registration
Statement or any such amendment became effective, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which such counsel need make no statement), at the time the
Prospectus was issued, at the time any such amended or supplemented prospectus
was issued or at the Closing Time, included or includes an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
A-6
<PAGE>
The opinions expressed herein are limited to the laws of the United
States of America, the laws of the State of New York, and the laws of the State
of Florida, as currently in effect.
The opinions expressed herein are solely for your benefit in connection
with the Purchase Agreement and may not be relied on in any manner or for any
purpose by any other person or entity and may not be quoted in whole or in part
without our prior written consent. Such opinion shall not state that it is
governed or qualified by, or that it is otherwise subject to, any treatise,
written policy or other document relating to legal opinions, including without
limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991).
Very truly yours,
Stearns Weaver Miller Weissler
Alhaddef & Sitterson, P.A.
A-7
<PAGE>
[FORM OF LOCK-UP FROM DIRECTORS, OFFICERS OR OTHER STOCKHOLDERS PURSUANT TO
SECTION 5(I)]
Exhibit B
July __, 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
WILLIAM BLAIR & COMPANY L.L.C.
DEAN WITTER REYNOLDS, INC.
as Representative(s) of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
C/O MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
North Tower
World Financial Center
New York, New York 10281-1209
Re: PROPOSED PUBLIC OFFERING BY GOLDEN BEAR GOLF, INC.
--------------------------------------------------
Dear Sirs:
The undersigned, a stockholder [and an officer and/or director]1 of
[Golden Bear Golf, Inc., a Florida corporation (the "Company"), understands that
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") William Blair & Company L.L.C., Dean Witter Reynolds, Inc.
propose to enter into a Purchase Agreement (the "Purchase Agreement") with the
Company providing for the public offering of shares (the "Securities") of the
Company's common stock, par value $[.01] per share (the "Common Stock"). In
recognition of the benefit that such an offering will confer upon the
undersigned as a stockholder [and an officer and/or director] of the Company,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the undersigned agrees with each underwriter to
be named in the Purchase Agreement that, during a period of 180 days from the
date of the Purchase Agreement, the undersigned will not, without the prior
written consent of Merrill Lynch, directly or indirectly, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant for the sale of,
- --------------------------------
1 Delete or revise bracketed language as appropriate.
B-1
<PAGE>
or otherwise dispose of or transfer any shares of the Company's Common Stock or
any securities convertible into or exchangeable or exercisable for Common Stock,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition, or
file any registration statement under the Securities Act of 1933, as amended,
with respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Stock, whether
any such swap or transaction described in clause (i) or (ii) above is to be
settled by delivery of Common Stock or other securities, in cash or otherwise,
Very truly yours,
Signature:
---------------------------------
Print Name:
---------------------------------
<PAGE>
Annex A
[FORM OF ACCOUNTANTS' COMFORT LETTER PURSUANT TO SECTION 5(e)]
We are independent public accountants with respect to the Combined Entity
within the meaning of the 1933 Act and the applicable published 1933 Act
Regulations
(i) in our opinion, the audited financial statements and the
related financial statement schedules included in the Registration
Statement and the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act and the
published rules and regulations thereunder;
(ii) on the basis of procedures (but not an examination in
accordance with generally accepted auditing standards) consisting of a
reading of the unaudited interim consolidated financial statements for
the three month periods ended March 31, 1996 and March 31, 1995,
included in the Registration Statement and the Prospectus (collectively,
the "Quarterly Financials"), a reading of the minutes of all meetings of
the stockholders and directors of the Company, GBI and the Acquired
Subsidiaries and the Committees of GBI, the Company and the Acquired
Subsidiaires, Boards of Directors and any subsidiary committees since
January 1, 1996, inquiries of certain officials of the Company, the
Acquiried Subsidiaries and GBI responsible for financial and accounting
matters, a review of interim financial information in accordance with
standards established by the American Institute of Certified Public
Accountants in Statement on Auditing Standards No. 71, Interim Financial
Information ("SAS 71"), with respect to the three month periods ended
March 31, 1995 and March 31, 1996 and such other inquiries and
procedures as may be specified in such letter, nothing came to our
attention that caused us to believe that:
(A) the unaudited consolidated financial statement included in
the Registration Statement and the Prospectus do not comply as to form
in all material respects with the applicable accounting requirements of
the 1933 Act and the 1933 Act Regulations or any material modifications
should be made to the unaudited consolidated financial statements
included in the Registration Statement and the Prospectus for them to be
in conformity with generally accepted accounting principles;
(B) at June 30, 1996 and at a specified date not more than five
days prior to the date of this Agreement, there was any change in the
dollar amount of capital stock or paid-in capital, of the Company and
its subsidiaries or any increase in the long-term debt of the Company
and its subsidiaries or any decrease in the net current assets or
shareholders equity of the Company and its subsidiaries, in each
M-1
case as compared with amounts shown in the latest balance sheet
included in the Registration Statement, except in each case for changes,
decreases or increases that the Registration Statement discloses have
occurred or may occur; or
(C) for the period from June 30, 1996 to a specified date not
more than five days prior to the date of this Agreement, there was any
decrease in total net revenues, operating income or pro forma net
income, in each case as compared with the comparable period in the
preceding year, except in each case for any decreases that the
Registration Statement discloses have occurred or may occur;
(iii) based upon the procedures set forth in clause (ii) above
and a reading of the Selected Financial Data included in the
Registration Statement, nothing came to our attention that caused us to
believe that the Selected Financial Data included in the Registration
Statement do not comply as to form in all material respects with the
disclosure requirements of Item 301 of Regulation S-K of the 1933 Act,
that the amounts included in the Selected Financial Data are not in
agreement with the corresponding amounts in the audited consolidated
financial statements for the respective periods, or that the financial
statements not included in the Registration Statement from which certain
of such data were derived are not in conformity with generally accepted
accounting principles;
(iv) we have compared the information in the Registration
Statement under selected captions with the disclosure requirements of
Regulation S-K of the 1933 Act and on the basis of limited procedures
specified herein. nothing came to our attention that caused us to
believe that this information does not comply as to form in all material
respects with the disclosure requirements of Items 302, 402 and 503(d),
respectively, of Regulation S-K;
(v) we are unable to and do not express any opinion on the Pro
Forma Combining Statement of Operations (the "Pro Forma Statement")
included in the Registration Statement or on the pro forma adjustments
applied to the historical amounts included in the Pro Forma Statement;
however, for purposes of this letter we have:
(A) read the Pro Forma Statement;
(B) performed an audit of the annual financial statements to
which the pro forma adjustments were applied and a review in
accordance with SAS 71 of the quarterly financial statements as
to which the pro forma adjustments were applied;
(C) made inquiries of certain officials of GBI, the Company and
the Acquired Subsidiaries, who have responsibility for financial
and accounting matters about the basis for their determination of
the pro forma adjustments
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and whether the Pro Forma Statement complies as to form in all
material respects with the applicable accounting requirements of
Rule 11-02 of Regulation S-X; and
(D) proved the arithmetic accuracy of the application of the pro
forma adjustments to the historical amounts in the Pro Forma
Statement; and
on the basis of such procedures and such other inquiries and
procedures as specified herein, nothing came to our attention that
caused us to believe that the Pro Forma Statement included in the
Registration Statement does not comply as to form in all material
respects with the applicable requirements of Rule 11-02 of Regulation
S-X or that the pro forma adjustments have not been properly applied to
the historical amounts in the compilation of those statements; and
(vi) in addition to the procedures referred to in clause (ii)
above, we have performed other procedures, not constituting an audit,
with respect to certain amounts, percentages, numerical data and
financial information appearing in the Registration Statement, which are
specified herein, and have compared certain of such items with, and have
found such items to be in agreement with, the accounting and financial
records of the Combined Entity.
EXHIBIT 5.1
, 1996
THE FOLLOWING OPINION IS INTENDED TO BE RENDERED UPON THE
TRANSACTIONS DESCRIBED HEREIN IN SUBSTANTIALLY THE FORM
PRESENTED, ASSUMING NO CHANGE IN THE FACTS OR THE LAW UPON
WHICH SUCH OPINION IS BASED, AND SUBJECT TO THE RECEIPT,
REVIEW AND APPROVAL OF FINAL DOCUMENTS.
Mr. Richard P. Bellinger
President and Chief Executive Officer
Golden Bear Golf, Inc.
11780 U.S. Highway #1
North Palm Beach, Florida 33408
RE: GOLDEN BEAR GOLF, INC.
OFFERING OF SHARES OF CLASS A COMMON STOCK
Dear Mr. Bellinger:
As counsel to Golden Bear Golf, Inc. (the "Corporation"), we have
examined the Articles of Incorporation and Bylaws of the Corporation as well
as such other documents and proceedings as we have considered necessary for the
purposes of this opinion. We have also examined and are familiar with the
proceedings taken by the Corporation to authorize the issuance of up to
2,070,000 shares of Class A Common Stock of the Corporation (the "Class A
Common Stock"). In addition, we have examined a copy of the Prospectus included
in the Corporation's Registration Statement on Form S-1, File No. 333-05581,
pursuant to which the Class A Common Stock will be registered under the
Securities Act of 1933, as amended.
In rendering this opinion, we have assumed, without independent
investigation: (i) the authenticity of all documents submitted to us as
originals; (ii) the conformity to original documents of all documents submitted
to us as certified or photostatic copies; and (iii) the genuineness of all
signatures. In addition, as to questions of fact material to the opinions
expressed herein, we have relied upon such certificates of public officials,
corporate agents and officers of the Corporation and such other certificates as
we deemed relevant.
<PAGE>
Mr. Richard P. Bellinger
, 1996
Page 2
Based upon the foregoing, and having regard to legal considerations
which we deem relevant, we are of the opinion that following the issuance and
delivery of the Class A Common Stock against payment of adequate consideration
therefore in accordance with the terms of such Prospectus, the Class A Common
Stock will be validly issued, fully paid and non-assessable.
Very truly yours,
STEARNS WEAVER MILLER WEISSLER
ALHADEFF & SITTERSON, P.A.
EXHIBIT 10.1
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is made and entered into as
of July ___, 1996, by and among Golden Bear Golf, Inc. (the "Company") and those
individuals and entities listed on the Signature Page hereto (the
"Shareholders").
PRELIMINARY STATEMENTS
A. The Company and certain of the Shareholders have entered
into that certain Agreement and Plan of Reorganization, dated June 7, 1996,
pursuant to which, among other things, the Shareholders have agreed to
contribute certain assets and other rights to the Company in exchange for shares
of the Company's Class B Common Stock, par value $.01 per share (the "Class B
Common Stock").
B. Each share of Class B Common Stock will automatically
convert into one share of Class A Common Stock, par value $.01 per share (the
"Class A Common Stock").
C. The parties anticipate that the Company will consummate an
initial public offering of the Company's Class A Common Stock (the "Offering").
D. The Company has agreed to grant to the Shareholders certain
registration rights for their Registrable Securities (as defined below) after
the Offering.
AGREEMENT
In consideration of the preliminary recitals and the
respective mutual agreements, covenants, representations and warranties herein
contained, the parties hereto agree as set forth below.
1. CERTAIN DEFINITIONS. In addition to terms defined elsewhere
in this Agreement, when utilized in this Agreement the following terms shall
have the meanings indicated below, which meanings shall be equally applicable to
both the singular and plural forms of such terms:
"AFFILIATE" shall have the meaning specified in Rule 144
promulgated by the Commission under the Securities Act.
"BUSINESS DAY" shall mean any day on which commercial banks
are open for business in New York, New York.
"COMMISSION" shall mean the Securities and Exchange
Commission.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
<PAGE>
"PERSON" shall mean any natural person, corporation,
unincorporated organization, partnership, association, limited liability
company, joint stock company, joint venture, trust or government, or any agency
or political subdivision of any government, or any other entity.
"PROSPECTUS" shall mean the prospectus included in any
Registration Statement, as amended or supplemented by any prospectus supplement
with respect to the terms of the offering of any portion of the Registrable
Securities and by all other amendments and supplements to the prospectus,
including post-effective amendments and all material incorporated by reference
in such prospectus.
"REGISTRABLE SECURITIES" shall mean (i) the Class A Common
Stock held by each Shareholder and (ii) any securities of the Company that may
be issued or distributed with respect to, or in exchange for such Class A Common
Stock (or other Registrable Securities that can be traced directly or indirectly
to such Class A Common Stock), pursuant to a stock dividend or distribution,
stock split, combination of shares, recapitalization, reclassification, merger,
consolidation, reorganization, conversion right or otherwise, including, without
limitation, shares of Class A Common Stock issued or issuable upon conversion of
shares of Class B Common Stock.
"REGISTRATION STATEMENT" shall mean any registration statement
of the Company that covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective amendments,
all exhibits and all material incorporated by reference in such Registration
Statement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" shall
mean a registration in which securities of the Company are sold to an
underwriter for reoffering to the public.
2. DEMAND REGISTRATION RIGHTS.
(a) Except as provided herein, following the
consummation of the Offering, any Shareholder (a "Requesting Holder") may make a
written request to the Company, for registration under the Securities Act of all
or part of the Registrable Securities he, she or it then owns ("a "Demand
Registration"); PROVIDED, HOWEVER that the Company shall not be obligated to
register any Registrable Securities if the aggregate number of Registrable
Securities subject to the Requesting Holders request is less than 33% of the
aggregate number of shares of the Registrable Securities then outstanding. Any
such request by a
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Requesting Holder shall specify the aggregate amount of Registrable Securities
to be registered and also shall specify the intended method of disposition
thereof. Within ten Business Days after receipt of such registration request the
Company shall commence the preparation of the registration of the specified
number of shares of Registrable Securities; PROVIDED, HOWEVER, that the Company
may, upon written notice to the Requesting Holder given within such ten Business
Day period, delay such commencement for a reasonable period of time, but not for
more than 90 calendar days from the Company's receipt of the request for such
Demand Registration, (x) as is necessary to prepare audited financial statements
of the Company for its most recently completed fiscal year or other audited
financial statements reasonably required in the Registra- tion Statement or (y)
if the Company would be required to disclose in such Registration Statement the
existence of any fact relating to a proposed acquisition, financing or other
material corporate development not otherwise required to be disclosed and the
Board of Directors of the Company shall have in good faith determined that such
disclosure would be materially adverse to the Company. Such notice of delay
shall explain in reasonable detail the reasons for such delay. If the Company
shall so delay commencement of the preparation of such Demand Registration, the
Requesting Holder may, within 30 calendar days after receipt of the notice of
delay, notify the Company that it is withdrawing its request for registration
and such Demand Registration shall be deemed to be withdrawn and such request
shall be deemed not to have been exercised for purposes hereof. In addition, if
the Requesting Holder so notifies the Company of his, her or its determination
to withdraw its request for registration and, within the 60 calendar days
immediately following the end of the 90-day deferral period, makes a written
request to the Company for registration of Registrable Securities that were
subject to the registration withdrawn pursuant to the preceding sentence, the
Company shall have no right to defer such registration pursuant to this Section
2(a).
(b) Except as provided by Section 2(d) below and
subject to the hold-back restrictions set forth in Section 7 hereof, each of the
Shareholders shall be entitled to three Demand Registrations; PROVIDED, HOWEVER,
that the Company shall not be required to comply with this Section 2(b) more
than once in any 12 calendar month period.
(c) The offering of the Registrable Securities
sought to be registered pursuant to any such Demand Registration shall be in the
form of an Underwritten Offering if requested by the Requesting Holder. If the
managing underwriter or underwriters determine in good faith that the total
number of shares of Registrable Securities proposed to be included in such
offering is such as to materially adversely affect the success of such offering,
then the number of shares of Registrable Securities shall be reduced or limited
to the number that, in the reasonable opinion
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of such managing underwriter or underwriter, can be sold without materially
adversely affecting the success of such offering.
(d) If (i) more than one-third of any Requesting
Holder's Registrable Securities sought to be registered in the Demand
Registration is not included in such registration pursuant to Section 2(c); (ii)
a Demand Registration is delayed pursuant to Section 2(a) hereof and does not
become effective within 120 days following the 90 days referred to in Section
2(a) hereof; (iii) a Demand Registration is not delayed pursuant to Section 2(a)
hereof and the Registration Statement filed in respect of such Demand
Registration does not for any reason become effective within 90 days after such
Requesting Holder's demand for registration hereunder; (iv) such Registration
Statement, after it has become effective, is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court by reason of an act or omission by the Company or any of its
subsidiaries or (v) the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration are not satisfied because of an act or omission by the Company or
any of its subsidiaries (other than by reason of facts or circumstances not
within the control of the Company or any such subsidiary), then in each such
case such Demand Registration shall not be counted for purposes of calculating
the number of demand rights exercised by such Requesting Holder in Section 2(b).
(e) The Company shall be entitled to include in
any registration statement filed pursuant to Section 2(a): (A) securities of the
Company held by any other shareholder of the Company; and (B) securities of the
Company to be sold by the Company for its own account; except, in either case,
to the extent that the Company is advised by the managing underwriter that the
inclusion of such securities may, in the opinion of such underwriter, materially
adversely affect the successful marketing of all the Registrable Securities
sought to be offered by the Requesting Holders, in which case, the number of
securities to be included in the offering by the Company or such other
shareholders of the Company shall be reduced to the extent necessary as shall be
reasonably determined by such underwriter, in good faith.
3. PIGGYBACK REGISTRATION RIGHTS.
(a) PIGGYBACK REGISTRATION. Subject to the
limitations set forth in Section 3(c), if the Company shall propose to issue and
register shares of its equity securities on its own behalf or to register equity
securities on behalf of any holder of its equity securities under the Securities
Act, the Company shall give written notice as promptly as possible of such
registration to each of the Shareholders (which notice shall include the
anticipated filing date of the Registration Statement and the number of its
equity securities proposed to be included in the Registration Statement), and
will use its best efforts to include
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in the offering such amount of the Registrable Securities as any Shareholder (a
"Participating Holder") shall request to be included by written notice to the
Company received within fifteen days after receipt of the Company's notice, upon
the same terms (including the method of distribution) as the equity securities
being sold by the Company or any such holder pursuant to any such offering (a
"Piggyback Registration").
(b) REQUIREMENTS OF REQUEST. Each request
delivered to the Company pursuant to Section 3(a) shall: (i) specify the amount
of Registrable Securities intended to be offered and sold by the Participating
Holder; and (ii) contain the undertaking of the Participating Holder to provide
all such information and materials and take all such action as may be required
in order to permit the Company to comply with all applicable requirements of the
Commission and state securities and "blue sky" laws and to obtain acceleration
of the effective date of the Registration Statement.
(c) LIMITATIONS ON INCIDENTAL REGISTRATIONS.
The obligations of the Company to cause Registrable Securities to be registered
pursuant to this Section 3 are subject to each of the following limitations,
conditions and qualifications:
(i) The Company shall not be required to
give notice or include Registrable Securities in any registration if the
proposed registration is primarily: (A) a registration of a stock option,
thrift, employee benefit or compensation plan or of securities issued or
issuable pursuant to any such plan; (B) a registration of securities proposed to
be issued in connection with a dividend reinvestment plan or stock purchase
plan; (C) a registration of securities proposed to be issued in exchange for
securities or assets of, or in connection with a merger or consolidation with,
another corporation or other entity; (D) a registration of securities to be
offered by the Company to its then existing security holders; or (E) a
registration of securities which is a combination of any of the above.
(ii) If the Company is advised by the
managing underwriter or its investment banking firm if the offering is not
underwritten, that the inclusion of Registrable Securities may, in the opinion
of such underwriter or investment banking firm, as the case may be, materially
adversely affect the successful marketing of the securities proposed to be
offered by the Company, the number of shares of Registrable Securities to be
included in the offering shall be reduced or eliminated to the extent necessary
as shall be reasonably determined by such underwriter or investment banker, as
the case may be, in good faith; provided that as to the Participating Holders,
such reduction shall be pro rata with respect to all securities to be sold by
persons other than the Company; and, PROVIDED, FURTHER, that in such event, the
Participating Holder shall have the right to withdraw their requests to
participate in the offering.
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(iii) If any Participating Holder elects
not to participate in any offering in which it had previously requested the
registration described in Section 3(a), the Participating Holder may elect to
withdraw therefrom by delivering written notice to the Company and the managing
underwriter or underwriters, if any, at least 30 days prior to the planned
effective date of such Piggyback Registration.
(iv) The Company may, in its sole
discretion and without the consent of or prior notice to any Participating
Holder, withdraw such registration statement and abandon the proposed offering
in which the Participating Holder had requested to participate at any time.
4. CERTAIN OBLIGATIONS OF THE COMPANY. In
connection with any registration of Registrable Securities undertaken by
the Company hereunder, the Company shall:
(a) prepare and file with the Commission, as
soon as practicable after receipt of the registration request referred to in
Section 2 or 3 hereof, and use its best efforts to have declared effective, a
Registration Statement relating to the Demand Registration or Piggyback
Registration on any appropriate form under the Securities Act, which form shall
be available for the sale of the Registrable Securities in accordance with the
intended method or methods of distribution thereof and shall include all
financial statements required by the Commission to be filed therewith, and
cooperate and assist in any filings required to be made with any national stock
exchange or national or computerized market system on which the Registrable
Securities sought to be registered are to be listed or quoted; PROVIDED,
HOWEVER, that before filing a Registration Statement or Prospectus or any
amendments or supplements thereto, the Company shall furnish to each Requesting
Holder and Participating Holder and the managing underwriter or underwriters, if
any, copies of all such documents proposed to be filed, which documents shall be
subject to the reasonable review of such Shareholder and the managing
underwriter or underwriters, if any, and the Company shall not file any
Registration Statement or amendment thereto or any Prospectus or any supplement
thereto to which the managing underwriter or underwriters, if any, or such
Shareholders shall reasonably object in writing;
(b) cause the Prospectus to be supplemented by
any required Prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 under the Securities Act and comply with the provisions of the
Securities Act with respect to the disposition of all the Registrable Securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the Requesting
Holder or Participating Holder set forth in such Registration Statement or
supplement to the Prospectus; PROVIDED, HOWEVER, that any actions taken by the
Company in good faith and for valid business reasons,
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including, without limitation, the acquisition or divestiture of assets, shall
not violate the foregoing so long as the Company promptly thereafter complies
with the requirements of Section 4(k) hereof, if applicable;
(c) notify each Requesting Holder and
Participating Holder and the managing underwriter or underwriters, if any, and
(if requested by any such Person) confirm such notice in writing: (i) when the
Registration Statement or any amendment thereto or the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective, and to furnish each such Shareholder and underwriter
with copies thereof, (ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus or for additional
information, (iii) of the issuance by the Commission of any stop order or
similar order suspending the effectiveness of the Registration Statement or the
use of any preliminary Prospectus or Prospectus or the initiation or threatening
of any proceedings for that purpose, (iv) if at any time the representations and
warranties of the Company contemplated by Section 4(1) below cease to be true
and correct, (v) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the Registrable Securities for
offering or sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose and (vi) of the happening of any event that makes
any statement made in the Registration Statement, the Prospectus or any document
incorporated in the Registration Statement, the Prospectus or any document
incorporated therein by reference untrue or that requires the making of any
changes in the Registration Statement, the Prospectus or any document
incorporated therein by reference in order to make the statements therein not
misleading.
(d) make every reasonable effort to obtain the
withdrawal of any stop order or other order suspending the effectiveness of the
Registration Statement or the use of any preliminary Prospectus or Prospectus,
at the earliest possible moment;
(e) if requested by any Requesting Holder or
Participating Holder or the managing underwriter or underwriters, if any,
incorporate in a Prospectus supplement or post-effective amendment such
information as such Shareholder or the managing underwriter or underwriters, if
any, reasonably agree should be included therein relating to the plan of
distribution with respect to the Registrable Securities; and make all required
filings of such Prospectus supplement or post-effective amendment as soon as
notified of the matters to be incorporated in such Prospectus supplement or
post-effective amendment; PROVIDED, HOWEVER, that the Company shall not be
required to take any actions in this Section 4(e) that would not, in the written
opinion of counsel for the Company delivered to each Requesting Holder and
Participating Holder, be in compliance with applicable law;
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(f) furnish to each Requesting Holder and
Participating Holder and each managing underwriter or underwriters, if any,
without charge, at least one executed copy and as many conformed copies as they
may reasonably request of the Registration Statement and any post-effective
amendments thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those incorporated
by reference);
(g) deliver to each Requesting Holder and
Participating Holder and the managing underwriter or underwriters, if any,
without charge, as many copies of the Prospectus (including each preliminary
prospectus) and any amendment or supplement thereto as such Persons may
reasonably request; it being understood and agreed that the Company consents to
the use of the Prospectus or any amendment or supplement thereto by each such
Shareholder and the managing underwriter or underwriters, if any, in connection
with the offering and sale of the Registrable Securities covered by the
Prospectus or any amendment or supplement thereto;
(h) prior to any public offering of Registrable
Securities covered by a Registration Statement, use its best efforts to register
or qualify, and cooperate with each Requesting Holder and Participating Holder,
the managing underwriter or underwriters, if any, and respective counsel in
connection with the registration or qualification of, such Registrable
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions as each such Shareholder or underwriter reasonably requests in
writing and do any and all other acts or things necessary or advisable to enable
the disposition in such jurisdictions of the Registrable Securities covered by
the Registration Statement; PROVIDED, HOWEVER, that the Company shall not be
required: (i) to qualify generally to do business in any jurisdiction where it
is not then so qualified or (ii) to take any action that would subject it to
general service of process in any such jurisdiction where it is not then so
subject or subject the Company to any tax in any such jurisdiction where it is
not then so subject;
(i) (i) cooperate with each Requesting Holder
and Participating Holder and the managing underwriter or underwriters, if any,
to facilitate the timely preparation and delivery of certificates representing
the Registrable Securities covered by a Registration Statement to be sold; and
(ii) enable the Registrable Securities covered by a Registration Statement to be
in such denominations and registered in such names as the managing underwriter
or underwriters may request at least two Business Days prior to any sale of such
Registrable Securities to the underwriters;
(j) use its best efforts to cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or
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authorities as may be necessary to enable each Requesting Holder and
Participating Holder or the managing underwriter or underwriters, if any, to
consummate the disposition of such Registrable Securities; PROVIDED, HOWEVER,
that the Company shall not be required to register the Registrable Securities
covered by a Registration Statement in any jurisdiction where such registration
would subject the Company to general service of process where it is not then so
subject, or subject the Company to any tax in any such jurisdiction where it is
not then so subject;
(k) upon the occurrence of any event
contemplated by clause (vi) of Section 4(c) above, prepare a supplement or post-
effective amendment to the Registration Statement or the related Prospectus or
any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Securities covered by a Registration Statement, the Prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(l) enter into such customary agreements
(including an underwriting agreement) on terms reasonably acceptable to the
Company and use its best efforts to take all such actions in order to facilitate
the disposition of the Registrable Securities covered by the Registration
Statement and, in such connection, whether or not an underwriting agreement is
entered into and whether or not the registration is an underwritten registration
(i) make such representations and warranties to each Requesting Holder and
Participating Holder and the managing underwriter or underwriters, if any, in
form, substance and scope, as are customarily made by issuers to underwriters in
similar underwritten offerings (ii) obtain opinions of counsel to the Company
and updates thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriter or underwriters, if
any, and not objected to by any Requesting Holder or Participating Holder)
addressed to each Requesting Holder and Participating Holder and the managing
underwriter or underwriters, if any, covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as may be
reasonably requested by any such holder and the underwriters, (iii) obtain "cold
comfort" letters and updates thereof from the Company's independent certified
public accounts addressed to each Requesting Holder and Participating Holder and
the managing underwriter or underwriters, if any, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters by accountants in connection with underwritten offerings, (iv)
if an underwriting agreement is entered into, the same shall set forth certain
indemnification provisions and procedures with respect to all parties to be
indemnified pursuant thereto, which provisions and procedures shall be normal
and customary in the investment banking and/or financial services industry, and
(v) deliver such documents and certificates as may be reasonably requested by
each Requesting Holder and
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Participating Holder and the managing underwriter or underwriters, if any, to
evidence compliance with Section 4(k) above and with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Company. Each of the above shall be done at each closing under such underwriting
or similar agreement or as and to the extent required thereunder;
(m) otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission and make generally
available to holders of Registrable Securities covered by a Registration
Statement, earnings statements satisfying the provisions of Section 11(a) of the
Securities Act, no later than 45 calendar days after the end of any 12-month
period (or 90 calendar days, if such period is a fiscal year); (i) commencing at
the end of any fiscal quarter in which the Registrable Securities covered by a
Registration Statement is sold to underwriters in a firm or best efforts
underwritten offering or (ii) if not sold to underwriters in such an offering,
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of the Registration Statement, which statement shall
cover said 12-month periods; and
(n) make available for inspection by any holder
of Registrable Securities covered by a Registration Statement any underwriter
participating in any disposition pursuant to such registration statement and any
attorney, accountant or other professional retained by any such holder or
underwriter (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any Inspectors in
connection with such Registration Statement. Records which the Company
determines in good faith to be confidential and which it notifies the Inspectors
are confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in such Registration Statement or (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction. Each such holder of Registrable Securities covered by a
Registration Statement agrees that information obtained by it as a result of
such inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company or its
Affiliates unless and until such is made generally available to the public. Each
such holder of Registrable Securities covered by a Registration Statement
further agrees that it will, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction, give notice to the Company and
allows the Company, at its expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential.
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The Company may require each Requesting Holder and Participating Holder
to furnish to the Company such information regarding the distribution of the
Registrable Securities sought to be registered as the Company may from time to
time reasonably request in writing and the Company may exclude from registration
the Registrable Securities of any such Shareholder if it fails to furnish such
information within a reasonable time after receiving such request.
Each Requesting Holder and Participating Holder agrees that upon
receipt of any notice from the Company of the happening of any event of the kind
described in clause (iii), (v) or (vi) of Section 4(c) hereof, such holder shall
forthwith discontinue disposition of the Registrable Securities until it
receives copies of the supplemented or amended Prospectus contemplated by
Section 4(k) hereof, or until it is advised in writing by the Company that the
use of the Prospectus may be resumed and has received copies of any additional
or supplemental filings which are incorporated by reference in the Prospectus,
and, if so directed by the Company, each Requesting Holder and Participating
Holder will deliver to the Company all copies other than permanent file copies
then in such Shareholder's possession, of the Prospectus covering such
Registrable Securities at the time of receipt of such notice.
5. REGISTRATION EXPENSES.
(a) Except as set forth in Section 5(c) hereof,
all expenses incident to the Company's performance of or compliance with this
Agreement pursuant to any Demand Registration or any Piggyback Registration,
including, without limitation, all (i) registration and filing fees including
National Association of Securities Dealers' fees and fees and expenses
associated with filings required to be made with a national securities exchange
or national computerized market system, (ii) fees and expenses of compliance
with state securities or blue sky laws (including reasonable fees and
disbursements of counsel for underwriters in connection with blue sky
qualifications of the Registrable Securities covered by the Registration
Statement and determination of eligibility for investment under the laws of such
jurisdictions designated by the managing underwriter or underwriters, if any),
(iii) printing expenses (including expenses of printing certificates for the
Registrable Securities covered by the Registration Statement in a form eligible
for deposit with the Depositary Trust Company and of printing prospectuses) and
the expenses related to copying any documents or agreements related to such
registration, (iv) fees and disbursements of counsel for the Company of all
independent certified public accountants of the Company (including the expenses
of any special audit and "cold comfort" letters required by or incident to such
performance) and of all underwriters and (v) fees and expenses of other Persons,
such as any transfer agent or registrar, retained by the Company in connection
with such registration shall be borne by the Company, regardless of whether the
Registration Statement becomes effective.
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<PAGE>
(b) The Company shall, under either a Piggyback
or Demand Registration, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit and the fees and
expenses of any Person (other than legal counsel), including special experts,
retained by the Company, regardless of whether the Registration Statement
becomes effective.
(c) The Requesting Holder or Participating
Holder shall bear the following expenses in connection with any Demand or
Piggyback Registration regardless of whether the Registration Statement becomes
effective: (i) all discounts commissions or fees of underwriters, selling
brokers, dealer managers, or similar securities industry professionals relating
to the distribution of the Registrable Securities of such holder, (ii) all legal
and accounting fees and expenses of such holder and (iii) all taxes of such
holder.
6. INDEMNIFICATION.
(a) INDEMNIFICATION BY COMPANY. The Company
agrees to indemnify and hold harmless, to the full extent permitted by law, each
Requesting Holder and Participating Holder, its trustees, beneficiaries,
employees, directors and officers and each Person who controls any such
Shareholder (within the meaning of Section 15 of the Securities Act) from and
against all losses, claims, damages, liabilities, and reasonable expenses
arising out of or based upon any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus or preliminary
Prospectus or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in any
information furnished to the Company in writing by such Shareholder specifically
for use therein; PROVIDED, HOWEVER, that the Company shall not be liable in any
such case to the extent that any such loss, claim, damage, liability or expense
of such Shareholder arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any such
preliminary Prospectus if (i) such Shareholder or its agents failed to deliver a
copy of the Prospectus to the Person asserting such loss, claim, damage,
liability, or expense after the Company had furnished such Shareholder with a
sufficient number of copies of the same and (ii) the Prospectus corrected such
untrue statement or omission; and, PROVIDED, FURTHER, that the Company shall not
be liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission in the Prospectus, if
such untrue statement or alleged untrue statement or omission or alleged
omission is corrected in an amendment or supplement to the Prospectus and such
Shareholder or its agent thereafter fails to deliver such Prospectus as so
amended or supplemented prior to or concurrently with the sale of the
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<PAGE>
Registrable Securities covered by a Registration Statement to the Person
asserting such loss, claim, damage, liability or expense after the Company had
furnished such Shareholder with a sufficient number of copies thereof in a
manner and at a time sufficient to permit delivery of the same. The Company will
also indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, their
officers and directors, and each Person who controls such Persons (within the
meaning of Section 15 of the Securities Act), as then customary in connection
with similar transactions, if requested, including an exception relating to any
information furnished to the Company in writing by such underwriters, selling
brokers, dealer managers and similar securities industry professionals.
(b) INDEMNIFICATION BY SHAREHOLDERS. In
connection with each Demand Registration and Piggyback Registration hereunder,
each Requesting Holder and Participating Holder, respectively, shall furnish to
the Company in writing such information as the Company reasonably requests for
use in connection with any Registration Statement or Prospectus, and agrees,
severally but not jointly, to indemnify and hold harmless, to the full extent
permitted by law, the Company, its officers, directors and employees and each
Person who directly or indirectly controls the company (within the meaning of
Section 15 of the Securities Act), from and against any losses, claims, damages,
liabilities, and reasonable expenses resulting from any untrue statement of a
material fact or any omission of a material fact required to be stated in the
Registration Statement or Prospectus or preliminary Prospectus or necessary to
make the statements therein not misleading, to the extent but only to the extent
that such untrue statement or omission is contained in such information so
furnished by such Shareholder to the Company specifically for inclusion in such
Registration Statement or Prospectus. The Company shall be entitled to receive
indemnities from underwriters, selling brokers, dealer managers, and similar
securities industry professionals participating in the distribution, to the same
extent as provided above with respect to information so furnished in writing by
such Persons specifically for inclusion in any Prospectus or Registration
Statement. The amount payable by any Requesting Holder or Participating Holder
with respect to the indemnification set forth in this subsection (b) in
connection with any Demand Registration or Piggyback Registration shall not
exceed the amount of gross proceeds received by such Requesting Holder or
Participating Holder, as the case may be, from the sale of Registrable
Securities sold in the offering made pursuant to such Demand Registration or
Piggyback Registration, as the case may be.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any
Person entitled to indemnification hereunder shall: (i) give prompt written
notice to the indemnifying party of any written claim with respect to which it
seeks indemnification and (ii) permit such indemnifying party to assume the
defense of such claim with counsel
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<PAGE>
reasonably satisfactory to the indemnified party; PROVIDED, HOWEVER, that any
Person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such Person unless: (x)
the indemnifying party has agreed in writing to pay such fees or expenses, (y)
the indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such Person or (z) in the reasonable
judgment of any such Person, based upon written advice of its counsel, a
conflict of interest may exist between such Person and the indemnifying party
with respect to such claims (in which case, if the Person notifies the
indemnifying party in writing that such Person elects to employ separate counsel
at the expense of the indemnifying party, the indemnifying party shall not have
the right to assume the defense of such claim on behalf of such Person). If such
defense is not assumed by the indemnifying party, the indemnifying party will
not be subject to any liability for any settlement made without its consent (but
such consent will not be unreasonably withheld). No indemnifying party shall,
without the written consent of the indemnified party, effect the settlement of,
or consent to the entry of any judgment with respect to, any claim in respect of
which indemnification or contribution may be sought hereunder unless such
settlement or judgment (i) includes an unconditional release of the indemnified
party from all liability arising out of such claim and (ii) does not include a
statement as to or an admission of fault by or on behalf of the indemnified
party. An indemnifying party who is not entitled to, or elects not to, assume
the defense of a claim will not be obligated to pay the fees and expenses of
more than one counsel (together with appropriate local counsel) for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party, based upon written advice of
counsel, a conflict of interest may exist between such indemnified party and any
other of such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels.
(d) CONTRIBUTION. If for any reason the
indemnification provided for in the preceding Sections 6(a) and 6(b) is
unavailable to an indemnified party or insufficient to hold it harmless as
contemplated by the preceding Sections 6(a) and 6(b), then the indemnifying
party shall contribute to the amount paid or payable by the indemnified party as
a result of such loss, claim, damage, or liability in such proportion as is
appropriate to reflect not only the relative benefits received by the
indemnified party and the indemnifying party, but also the relative fault of the
indemnified party and the indemnifying party, as well as any other relevant
equitable considerations. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
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<PAGE>
7. HOLDBACK AGREEMENT; PRESS RELEASES.
(a) The Shareholders agree not to effect any
public sale or distribution of Registrable Securities, including sales pursuant
to Rule 144 of the Commission promulgated under the Securities Act, during the
fourteen days prior to, and during the 90-day period beginning on, the effective
date of any registration statement filed in connection with a registration (in
which the Shareholder participates) under Sections 2 or 3 of this Agreement (or
such longer periods, not to exceed 180 days, as may be requested by the
underwriter or underwriters of such offering), except as part of such
registration, if and to the extent requested by the Company in the case of a
non-underwritten offering or if and to the extent requested by the managing
underwriter or underwriters in the case of an underwritten offering.
(b) Before any Requesting Holder or
Participating Holder shall disseminate or announce publicly any information
concerning a proposed offering pursuant to Section 2 or 3 hereof that is
intended for or may result in public knowledge thereof, such holder shall so
advise the Company and shall not disseminate or announce publicly such
information without the Company's consent, unless such information is otherwise
publicly available or the dissemination thereof is required by applicable law.
(c) Notwithstanding anything to the contrary
contained herein, the parties hereto agree not to exercise any registration
rights provided herein without the prior written consent of Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") until 180 days after the
date of the prospectus used in connection with the Offering.
8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
(a) If any of the Registrable Securities covered
by a Registration Statement is to be used in an Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Company; PROVIDED, HOWEVER, that
in a Demand Registration, such selection shall be subject to the consent of the
Requesting Holders, which consent shall not be unreasonably withheld.
(b) No Person may participate in any
Underwritten Registration hereunder unless such Person (i) agrees to sell such
Person's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements, and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements, and other documents required
under the terms of such underwriting arrangements. Nothing in this Section 8
shall be construed to create any additional rights regarding the registration of
Registrable Securities in any Person otherwise than as set forth herein.
-15
<PAGE>
9. EFFECTIVENESS AND TERMINATION. The rights and obligations
under this Agreement shall become effective upon consummation of the Offering
and, except for continuing obligations pursuant to Sections 5 or 6, shall
automatically terminate with respect to each Shareholder upon the sale or other
disposition by such Shareholder of all his, her or its Registrable Securities.
10. MISCELLANEOUS.
(a) NOTICE. Any notice, demand, claim or other
communication under this Agreement shall be in writing and shall be deemed to
have been given upon the delivery, mailing or transmission thereof, as the case
may be, if delivered personally or sent by certified mail, return receipt
requested, postage prepaid, or sent by prepaid courier, or sent by facsimile to
the parties at the addresses set forth below their names on the signature pages
of this Agreement (or at such other addresses as shall be specified by the
parties by like notice).
(b) ENTIRE AGREEMENT. This Agreement contains
every obligation and understanding between the parties relating to the subject
matter hereof and merges and supersedes all prior discussions, negotiations and
agreements (both oral and written), if any, between them, and none of the
parties shall be bound by any conditions, definitions, understandings,
warranties or representations other than as expressly provided or referred to
herein.
(c) BINDING EFFECT. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors, heirs, personal representatives, legal representatives, and
permitted assigns.
(d) ASSIGNMENT. Except as provided in this
Section 10(d), neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by any of the parties hereto, except, in
the case of the Company, by operation of law. Each party hereto (other than the
Company) who is a Permitted Transferee (as defined below) may assign his, her or
its rights and obligations hereunder to another Permitted Transferee; PROVIDED,
that in order to exercise such rights, the assignee must be a Permitted
Transferee at the time of exercise of any such rights. An assignee's exercise of
any rights assigned to him, her or it hereunder is evidence of its agreement to
be bound, as to him, her or it, to the same obligations as are applicable
hereunder to the assignor. For purposes hereof, "Permitted Transferee" shall
have the meaning ascribed to it in the Company's Articles of Incorporation. This
Agreement will be binding upon, and will inure to the benefit of and be
enforceable by the parties and their permitted successors (which shall include,
in the case of an individual, such individual's estate, guardian, conservator,
committee and assigns).
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<PAGE>
(e) NO THIRD PARTY BENEFICIARY. Other than
Merrill Lynch pursuant to the provisions of Section 7(c), nothing expressed or
implied in this Agreement is intended, or shall be construed, to confer upon or
give any person other than the parties hereto and their respective heirs,
personal representatives, legal representatives, successors and permitted
assigns, any rights or remedies under or by reason of this Agreement.
(f) HEADINGS. The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of any provisions of this Agreement.
(g) COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.
(h) GOVERNING LAW. This Agreement has been
entered into and shall be construed and enforced in accordance with the laws of
the State of Florida without reference to the choice of law principles thereof.
(i) ENFORCEMENT. Each party hereto hereby
agrees that the remedy at law for any breach of this Agreement is inadequate and
that should any dispute arise concerning the sale or disposition of any
Registrable Securities or any other matter hereunder, this Agreement shall be
enforceable in a court of equity by an injunction or a decree of specific
performance. Such remedies shall, however, be cumulative and non-exclusive, and
shall be in addition to any other remedies which the parties may have.
(j) TRUSTEES' CAPACITY. With respect to
obligations of trustees who are parties hereto in their capacity as trustees of
one or more trusts, this Agreement shall be binding upon such trustees only in
their capacities as trustees, not individually, and not with respect to any
Registrable Securities other than Registrable Securities held by them in their
capacity as trustee of such trust.
IN WITNESS WHEREOF, the parties hereto have each executed and
delivered this Agreement as of the day and year first above written.
THE COMPANY
GOLDEN BEAR GOLF, INC.
By:
------------------------------
Address:
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<PAGE>
THE SHAREHOLDERS
GOLDEN BEAR INTERNATIONAL, INC.
By:
------------------------------
Address:
JACK W. NICKLAUS
--------------------------------
Address:
JACK W. NICKLAUS, II TRUST u/a
By:
------------------------------
Barbara B. Nicklaus, As Trustee
and not Individually
By:
------------------------------
Richard P. Bellinger, As Trustee
and not Individually
Address:
STEVEN NICKLAUS TRUST u/a
By:
------------------------------
Barbara B. Nicklaus, As Trustee
and not Individually
By:
------------------------------
Richard P. Bellinger, As Trustee
and not Individually
Address:
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<PAGE>
NANCY J. NICKLAUS O'LEARY TRUST u/a
By:
------------------------------
Barbara B. Nicklaus, As Trustee
and not Individually
By:
------------------------------
Richard P. Bellinger, As Trustee
and not Individually
Address:
GARY T. NICKLAUS TRUST u/a/
By:
------------------------------
Barbara B. Nicklaus, As Trustee
and not Individually
By:
------------------------------
Richard P. Bellinger, As Trustee
and not Individually
Address:
MICHAEL S. NICKLAUS TRUST u/a
By:
------------------------------
Barbara B. Nicklaus, As Trustee
and not Individually
By:
------------------------------
Richard P. Bellinger, As Trustee
and not Individually
Address:
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EXHIBIT 10.2
GOLDEN BEAR GOLF, INC. 1996 STOCK OPTION PLAN
1. PURPOSES. The purposes of this 1996 Stock Option Plan (the "Plan")
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to the Employees of
the Company or its Subsidiaries as well as other individuals who perform
services for the Company or its Subsidiaries, and to promote the success of the
Company's business. Options granted hereunder may be either Incentive Stock
Options or Nonqualified Stock Options, at the discretion of the Committee and as
reflected in the terms of the written option agreement.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "BOARD OF DIRECTORS" shall mean the Board of
Directors of the Company.
(b) "CLASS A COMMON STOCK" shall mean the Class A common
stock, par value $.01 per share, of the Company.
(c) "CODE" shall mean the Internal Revenue Code of
1986, as amended.
(d) "COMPANY" shall mean Golden Bear Golf, Inc., a
Florida corporation, and its successors and assigns.
(e) "COMMITTEE" shall mean the Committee appointed by
the Board of Directors in accordance with paragraph (a) of
Section 4 of the Plan.
(f) "CONTINUOUS STATUS AS AN EMPLOYEE" shall mean the
absence of any interruption or termination of service as an Employee. Continuous
Status as an Employee shall not be considered interrupted in the case of sick
leave, military leave, or any other leave of absence approved by the Committee.
(g) "EMPLOYEE" shall mean any person, including officers
and directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be sufficient
to constitute "employment" by the Company.
(h) "EXCHANGE ACT" shall mean the Securities Exchange
Act of 1934, as amended.
(i) "INCENTIVE STOCK OPTION" shall mean a stock option
intended to qualify as an "incentive stock option" within the meaning of
Section 422 of the Code.
(j) "NONQUALIFIED STOCK OPTION" shall mean a stock
option not intended to qualify as an Incentive Stock Option.
<PAGE>
(k) "OPTION" shall mean a stock option granted
pursuant to the Plan.
(l) "OPTIONED STOCK" shall mean the Class A Common
Stock subject to an Option.
(m) "OPTIONEE" shall mean the recipient of an Option.
(n) "PARENT" shall mean a "parent corporation" of the
Company, whether now or hereafter existing, as defined in
Section 424(e) of the Code.
(o) "RULE 16B-3" shall mean Rule 16b-3 promulgated by
the Securities and Exchange Commission under the Exchange Act or any successor
rule.
(p) "SHARE" shall mean a share of the Class A Common
Stock, as adjusted in accordance with Section 13 of the Plan.
(q) "SUBSIDIARY" shall mean a "subsidiary corporation"
of the Company, whether now or hereafter existing, as defined in Section 424(f)
of the Code.
(r) "TRANSFEREE" shall mean a "transferee" of the
Optionee as defined in Section 12 of the Plan.
3. STOCK. Subject to the provisions of Section 13 of the Plan, the
maximum aggregate number of Shares which may be issued under the Plan is
675,000. If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
further grant under the Plan.
4. ADMINISTRATION.
(a) COMMITTEE. The Plan at all times shall be
administered by a Committee appointed by the Board of Directors.
The Committee shall consist of not less than two members of the Board of
Directors, each of whom must be a "disinterested person" as defined in Rule
16b-3 and an "outside director" as defined for purposes of Section 162(m) of the
Code.
(b) POWERS OF THE COMMITTEE. Subject to the provisions of the
Plan, the Committee shall have the authority, in its discretion: (i) to grant
Incentive Stock Options or Nonqualified Stock Options; (ii) to determine the
fair market value of the Class A Common Stock; (iii) to determine the exercise
price per Share of Options to be granted; (iv) to determine the persons to whom,
and the time or times at which, Options shall be granted and the number of
Shares to be represented by each Option; (v) to determine the vesting schedule
of Options to be granted; (vi) to prescribe, amend
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<PAGE>
and rescind rules and regulations relating to the Plan; (vii) to determine the
terms and provisions of each Option granted under the Plan (which need not be
identical); (viii) to accelerate the exercise date of any Option; (ix) to
authorize any person to execute on behalf of the Company any instrument required
to effectuate the grant of an Option previously granted by the Committee; (x)
subject to the provisions of the Plan and subject to such additional limitations
and restrictions as the Committee may impose, to delegate to specific members of
management or to a committee of management personnel the authority to determine:
(A) the persons to whom, and the time and times at which, Options shall be
granted and the number of Shares to be represented by each Option; (B) the
vesting schedule of Options; (C) the term of Options; and (D) other terms and
conditions of any Options, provided that the Committee shall not have the
authority to delegate such matters with respect to awards to be granted to any
person subject to Section 16 of the Exchange Act or any "covered employee" under
Section 162(m) of the Code; and (xi) to interpret the Plan and make all other
determinations deemed necessary or advisable for the administration of the Plan.
The Committee may require the voluntary surrender of all or any portion of any
Option granted under the Plan as a condition precedent to a grant of a new
Option to such Optionee. Subject to the provisions of the Plan, such new Option
shall be exercisable at the price, during the period and on such other terms and
conditions as are specified by the Committee at the time the new Option is
granted. Upon surrender, the Options surrendered shall be unexercisable and the
Shares previously subject to such Options shall be available for the grant of
other Options.
(c) EFFECT OF THE COMMITTEE'S DECISION. All decisions,
determinations and interpretations of the Committee shall be final and binding
on all Optionees or Transferees, if applicable.
5. ELIGIBILITY. Incentive Stock Options may be granted only to
Employees. Nonqualified Stock Options may be granted to Employees, non-Employee
directors (in accordance with the provisions of Section 6 of the Plan),
independent contractors and agents. Any person who has been granted an Option
may, if he is otherwise eligible, be granted an additional Option or Options.
Subject to the provisions of Section 13 of the Plan, the maximum number of
Shares with respect to which Options may be granted under the Plan to any
Employee in any calendar year is 200,000 Shares.
Except as otherwise provided under the Code, to the extent that the
aggregate fair market value of stock for which Incentive Stock Options (under
all stock option plans of the Company and of any Parent or Subsidiary) are
exercisable for the first time by an Employee during any calendar year exceeds
$100,000, such Options shall be treated as Nonqualified Stock Options. For
purposes of this limitation, (a) the fair market value of stock is determined as
of the time the Option is granted and (b) the limitation is
-3-
applied by taking into account Options in the order in which they were granted.
The Plan shall not confer upon any Optionee any right with respect to
continuation of employment, nor shall it interfere in any way with his right or
the Company's right to terminate his employment at any time.
6. AUTOMATIC GRANT OF OPTION TO NON-EMPLOYEE DIRECTORS. Subject to
Section 3 of the Plan, each person who is a non-Employee director of the Company
on the effective date of the Plan and each person who is a non-Employee director
of the Company on the first business day following any annual meeting of
shareholders of the Company shall automatically receive on such date an Option
to acquire 1,000 Shares, as adjusted in accordance with the provisions of
Section 13 of the Plan. The exercise price for the Shares to be issued pursuant
to Options granted under this Section 6 shall be as set forth in Section 9
(a)(ii) of the Plan. The Options granted pursuant to this Section 6 shall have a
term of ten years from the date of grant. The foregoing formula may not be
amended more than once every six months other than to comport with changes in
the Code, the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder. Non-Employee directors shall have the right, if they so
wish, to decline receipt of any Options to be granted under this Section 6.
7. TERM OF PLAN. The Plan shall become effective upon its adoption by
the Board of Directors; provided that, if the Plan is not approved by the
shareholders of the Company in accordance with Section 18 of the Plan within
twelve months after the date of adoption by the Board of Directors, the Plan and
any Options granted thereunder shall terminate and become null and void. The
Plan shall continue in effect until April 30, 2006 unless sooner terminated in
accordance with Section 15 of the Plan.
8. TERM OF OPTION. The term of each Option shall be ten years from the
date of grant thereof or such shorter term as may be determined by the
Committee; provided, however, that the term of each Option granted under Section
6 of the Plan shall be ten years from the date of grant. However, in the case of
an Incentive Stock Option granted to an Employee who, immediately before the
Incentive Stock 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 Incentive Stock Option shall be five years from
the date of grant thereof or such shorter time as may be determined by the
Committee.
9. EXERCISE PRICE AND CONSIDERATION.
(a) PRICE. The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be such price
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<PAGE>
as determined by the Committee, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
which is: (A) granted to an Employee who, immediately before 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; and (B) granted to any other
Employee, the per share exercise price shall be no less than the fair market
value per Share on the date of grant.
(ii) In the case of a Nonqualified Stock Option,
the per Share exercise price shall be no less than the fair market value per
Share on the date of grant and, with respect to Options granted to non-Employee
directors as provided in Section 6 of the Plan, shall be equal to the fair
market value per Share on the date of the grant.
(b) CERTAIN CORPORATE TRANSACTIONS. Notwithstanding Section
9(a) of the Plan, in the event the Company substitutes an Option for a stock
option issued by another corporation in connection with a corporate transaction,
such as a merger, consolidation, acquisition of property or stock, separation
(including a spin-off or other distribution of stock or property),
reorganization (whether or not such reorganization comes within the definition
of such term in Section 368 of the Code) or partial or complete liquidation
involving the Company and such other corporation, the exercise price of such
substituted Option shall be as determined by the Committee in its discretion
(subject to the provisions of Section 424(a) of the Code in the case of a stock
option that was intended to qualify as an "incentive stock option") to preserve,
on a per share basis immediately after such corporate transaction, the same
ratio of fair market value per option share to exercise price per share which
existed immediately prior to such corporate transaction under the option issued
by such other corporation.
(c) DETERMINATION OF FAIR MARKET VALUE. The fair market value
per share shall be determined by the Committee in its discretion; provided,
however, that where there is a public market for the Class A Common Stock, the
fair market value per Share shall be (i) if the Class A Common Stock is listed
or admitted for trading on any United States national securities exchange, or if
actual transactions are otherwise reported on a consolidated transaction
reporting system, the closing price of Class A Common Stock on such exchange or
reporting system, as the case may be, on the date of grant of the Option, as
reported in any newspaper of general circulation, or (ii) if the Class A Common
Stock is quoted on the National Association of Securities Dealers Automated
Quotations ("NASDAQ") System, or any similar system of automated
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<PAGE>
dissemination of quotations of securities prices in common use, the mean between
the closing bid and asked quotations for Class A Common Stock on the date of
grant, as reported by a generally recognized reporting service.
(d) PAYMENT. 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 Committee and may consist entirely of cash, check, promissory
note, or other shares of the Company's capital stock having a fair market value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised, or any combination of such methods of
payment, or such other consideration and method of payment for the issuance of
Shares to the extent permitted under Florida law and by the Committee. When
payment of the exercise price for the Shares to be issued upon exercise of an
Option consists of shares of the Company's capital stock, such shares will not
be accepted as payment unless the Optionee or Transferee, if applicable, has
held such shares for the requisite period necessary to avoid a charge to the
Company's earnings for financial reporting purposes.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE. Any Option granted hereunder shall
be exercisable at such times and under such conditions as determined by the
Committee, including performance criteria with respect to the Company and/or the
Optionee, and as shall be permissible under the terms of the Plan. 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 full payment for the Shares with respect to which the Option is
exercised has been received by the Company. Full payment may, as authorized by
the Committee, consist of any consideration and method of payment allowable
under Section 9(d) of the Plan.
(b) RIGHTS AS A SHAREHOLDER. Until the issuance of the stock
certificate evidencing such Shares (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company),
which in no event will be delayed more than thirty (30) days from the date of
the exercise of the Option, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the 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 the Plan. Exercise of an Option in
any manner shall result in a decrease in the number of Shares which thereafter
may be available, both for purposes of the Plan and for sale under
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the Option, by the number of Shares as to which the Option is exercised.
11. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OF STATUS AS AN EMPLOYEE. Unless
otherwise determined by the Committee, if any Employee ceases to be in
Continuous Status as an Employee, other than (i) by reason of retirement or (ii)
as a result of a termination by the Company for deliberate, willful or gross
misconduct, any Option held by such Employee or Transferee, if applicable, shall
be exercisable within twelve months after the date said Employee ceases to be in
Continuous Status as an Employee (or such longer period as the Committee shall
determine) to the extent the Employee or Transferee, if applicable, was entitled
to exercise such Option as of the date of such Employee's termination of
employment.
(b) RETIREMENT OF OPTIONEE. If any Employee ceases to be in
Continuous Status as an Employee by reason of such Employee's retirement, any
Option held by such Employee or Transferee, if applicable, shall be exercisable
within thirty-six months after the date said Employee ceases to be in Continuous
Status as an Employee to the extent that the Employee or Transferee, if
applicable, was entitled to exercise such Option as of the date of such
Employee's retirement. For purposes of the Plan, "retirement" means termination
of services as an Employee at or after age 65 other than as a result of
deliberate, willful or gross misconduct.
(c) TERMINATION FOR MISCONDUCT. If any Employee ceases to be
in Continuous Status as an Employee as a result of a termination by the Company
for deliberate, willful or gross misconduct, any Option held by such Employee or
Transferee, if applicable, shall terminate immediately and automatically on the
date of said Employee's termination as an Employee unless otherwise determined
by the Committee.
(d) DEATH OF OPTIONEE. Unless otherwise determined by the
Committee, subject to the provisions of the Plan, any Option held by an Optionee
or Transferee, if applicable, at the time of the Optionee's death may be
subsequently exercised by either the legal representative of the Optionee's
estate, the person or persons who acquired the right to exercise the Option by
bequest or inheritance, or such Transferee, as the case may be, but only to the
extent the Optionee or Transferee was entitled to exercise such Option as of the
date of Optionee's death. In the event of the death of an Optionee during the
final three months of the time period specified in Section 11(a) or 11(b), as
applicable, the Option may be exercised, at any time within three months
following the date of his death, by either the Optionee's estate, a person or
persons who acquired the right to exercise the Option by bequest or inheritance
or a Transferee, as the case may be, but only to the
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extent the Optionee or Transferee was entitled to exercise such Option as of the
date of the Optionee's death.
(e) EXPIRATION OF OPTIONS. None of the events described above
in this Section 11 shall extend the period of exercisability of the Option
beyond the expiration date thereof. Unless otherwise determined by the
Committee, to the extent that an Optionee or Transferee, if applicable, was not
entitled to exercise an Option on the date said Optionee ceased to be in
Continuous Status as an Employee or the date of the Optionee's death, or if the
Optionee or Transferee does not exercise such Option (which they were entitled
to exercise) within the time period specified in this Section 11, the Option
shall terminate and become null and void. Notwithstanding the provisions of
Section 11(a), 11(b) or 11(d) of the Plan, no Options shall be exercisable after
an Optionee ceases to be in Continuous Status as an Employee in the event the
Optionee shall have, during the time period in which his Options are
exercisable, engaged in deliberate action which, as determined by the Committee,
causes substantial harm to the interests of the Company or constitutes a breach
of any obligation of the Optionee to the Company. In such event, the Optionee or
Transferee, if applicable, shall forfeit all rights to any unexercised Option as
of the date of such deliberate action.
12. NON-TRANSFERABILITY OF OPTIONS. During an Optionee's lifetime, an
Option may be exercisable only by the Optionee and an Option granted under the
Plan and the rights and privileges conferred thereby shall not be subject to
execution, attachment or similar process and may not be sold, pledged, assigned,
hypothecated, transferred or otherwise disposed of in any manner (whether by
operation of law or otherwise) other than by will or by the laws of descent and
distribution. Notwithstanding the foregoing, to the extent permitted by
applicable law and Rule 16b- 3, the Committee may grant Nonqualified Stock
Options that permit an Optionee to transfer such Options to any of the
following: (1) a spouse or lineal descendant of the Optionee; (2) a trust
established primarily for the benefit of the Optionee and/or a spouse or lineal
descendant of said Optionee; or (3) any charitable organization exempt from
income tax under Section 501(c)(3) of the Code (collectively, the "Transferee").
Any other attempt to sell, pledge, assign, hypothecate, transfer or otherwise
dispose of any Option under the Plan or of any right or privilege conferred
thereby, contrary to the provisions of the Plan, or the sale or levy or any
attachment or similar process upon the rights and privileges conferred hereby,
shall be null and void.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CHANGE IN
CONTROL; DISSOLUTION.
(a) Subject to any required action by the shareholders of the
Company, each of (i) the number of shares of Class A Common Stock covered by
each outstanding Option, (ii) the number of shares
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of Class A Common Stock which have been authorized for issuance under the Plan
but as to which no Options have yet been granted or which have been returned to
the Plan upon cancellation or expiration of an Option, (iii) the price per share
of Class A Common Stock covered by each such outstanding Option, (iv) the number
of shares of Class A Common Stock to be granted to non- Employee directors
pursuant to Section 6 of the Plan, and (v) the maximum number of Shares with
respect to which Options may be granted to any Employee, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Class A Common Stock resulting from a stock split or the payment of a
stock dividend with respect to the Class A Common Stock or any other increase or
decrease in the number of issued shares of Class A Common Stock effected without
receipt of consideration by the Company; provided, however, that (a) each such
adjustment with respect to an Incentive Stock Option shall comply with the rules
of Section 424(a) of the Code (or any successor provision) and (b) in no event
shall any adjustment be made which would render any Incentive Stock Option
granted hereunder other than an "incentive stock option" as defined in Section
422 of the Code; and provided further, 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
Committee, 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 Class A Common Stock subject to an
Option.
(b) If: (1) any person (as defined for purposes of Section
13(d) and 14(d) of the Exchange Act, but excluding any holder of the Company's
Class B Common Stock, par value $.01 per share, the Company and any of its
wholly-owned subsidiaries) acquires direct or indirect ownership of 50% or more
of the combined voting power of the then outstanding securities of the Company
as a result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise; or (2) the shareholders of the Company
approve (A) any consolidation or merger of the Company in which the Company is
not the surviving corporation (other than a merger of the Company in which the
holders of the Company's outstanding voting securities immediately prior to the
merger have the same proportionate ownership of the surviving corporation
immediately after the merger), or (B) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company to an entity which is not a
wholly-owned subsidiary of the Company, then the exercisability of each Option
outstanding under the Plan shall be automatically accelerated so that each such
Option shall, immediately prior to the specified effective date of any of the
foregoing transactions, become fully
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<PAGE>
exercisable with respect to the total number of Shares subject to such Option
and may be exercisable for all or any portion of such Shares. Upon the
consummation of any of such transactions (other than a transaction specified in
Section 13(b)(i)), all outstanding Options under the Plan shall, to the extent
not previously exercised, terminate and cease to be outstanding.
(c) In the event of the proposed dissolution or liquidation of the
Company, all outstanding Options will terminate immediately prior to the
consummation of such proposed transaction, unless otherwise provided by the
Committee.
14. TIME FOR GRANTING OPTIONS. The date of grant of an Option shall be
the date on which the Committee makes the determination granting such Option or
such later date as the Committee may specify. Notice of the determination shall
be given to each Employee to whom an Option is so granted within a reasonable
time after the date of such grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) COMMITTEE ACTION; SHAREHOLDERS' APPROVAL. Subject to the
limitations set forth in Section 6 of the Plan, the Committee may amend or
terminate the Plan from time to time in such respects as the Committee may deem
advisable; provided that, the following revisions or amendments shall require
approval of the Company's shareholders in accordance with Section 18 of the
Plan: (i) any increase in the number of Shares subject to the Plan, other than
in connection with an adjustment under Section 13 of the Plan; (ii) any change
in the designation of the class of persons eligible to be granted Options; (iii)
any material increase in the benefits accruing to participants under the Plan;
or (iv) any increase in the maximum number of Shares with respect to which
Options may be granted to any Employee.
(b) EFFECT OF AMENDMENT OR TERMINATION. No amendment or
termination or modification of the Plan shall in any manner affect any Option
theretofore granted without the consent of the Optionee, except that the
Committee may amend or modify the Plan in a manner that does affect Options
theretofore granted upon a finding by the Committee that such amendment or
modification is in the best interest of shareholders or Optionees.
16. 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 upon which the Shares may
then be listed, and shall be further subject to the
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approval of counsel for the Company with respect to such compliance.
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.
17. STOCK OPTION AGREEMENTS. Options shall be evidenced by
written option agreements in such form as the Committee shall approve. Such
agreements shall contain such provisions, including, without limitation,
restrictions upon the exercise of the Option, as the Committee shall determine.
18. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company entitled to vote thereon within
twelve months after the date the Plan is adopted. Shareholder approval for the
continuance of the Plan or for any amendments to the Plan pursuant to Section
15(a) hereof shall be obtained by (i) the affirmative vote of the holders of a
majority of the outstanding shares of the Company present or represented and
entitled to vote thereon at any duly held shareholders meeting or (ii) to the
extent permitted by the Articles of Incorporation and Bylaws of the Company, the
written consent of a majority of the outstanding shares of the Company entitled
to vote thereon.
19. INDEMNIFICATION OF COMMITTEE MEMBERS. In addition to such other
rights of indemnification they may have as Directors, the members of the
Committee shall be indemnified by the Company against the reasonable expenses,
including attorneys' fees actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
thereon, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved to the extent required by and in the
manner provided by the Articles of Incorporation and Bylaws of the Company), or
paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Committee member did not act in good
faith and in a manner he reasonably believed to be in and not opposed to the
best interests of the Company; provided that within 60 days after institution of
any such action, suit or proceeding a Committee member shall in writing offer
the Company the opportunity, at its own expense, to handle and defend the same.
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<PAGE>
20. OTHER COMPENSATION PLANS. The adoption of the Plan shall not affect
any other stock option or incentive or other compensation plans in effect for
the Company or any Subsidiary, nor shall the Plan preclude the Company from
establishing any other forms of incentive or other compensation for employees
and directors of the Company or any Subsidiary.
21. SINGULAR, PLURAL; GENDER. Whenever used herein, nouns in
the singular shall include the plural, and the masculine pronoun shall include
the feminine gender.
22. HEADINGS. Headings of Articles and Sections hereof are
inserted for convenience and reference; they constitute no part of the Plan.
23. WITHHOLDINGS. The Company and any Subsidiary may, to the extent
permitted by law, deduct from any payments or transfers of any kind due to an
Optionee the amount of any federal, state, local or foreign taxes required by
any governmental regulatory authority to be withheld or otherwise deducted with
respect to the Options or the Optioned Stock.
24. GOVERNING LAW. The Plan, the Options granted hereunder and
all related matters shall be governed by, and construed and enforced in
accordance with, the laws of the State of Florida.
25. COMPLIANCE WITH RULE 16B-3. It is the intent of the Company that
this Plan comply in all respect with Rule 16b-3 (or any successor rule) in
connection with any Option granted to a person who is subject to Section 16 of
the Exchange Act. Accordingly, any provision of this Plan or any Option
agreement that does not comply with the requirements of Rule 16b-3 (or any
successor rule) as then applicable to any such person shall be construed or
deemed amended to the extent necessary to conform to such requirements, except
that such automatic amendment shall not apply to any other participant in the
Plan who is not (at the time of such application) subject to Section 16 of the
Exchange Act. Any action taken by the Committee pursuant to the Plan that does
not comply with the requirements of Rule 16b-3 (or any successor rule) shall be
null and void.
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EXHIBIT 10.3
[DRAFT: 7-11-96, lined from 6-27draft]
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), is dated as of ____________,
1996, between Golden Bear Golf, Inc., a Florida corporation (the "Company"), and
Jack W. Nicklaus ("Nicklaus").
WHEREAS, Nicklaus has been employed by certain predecessors of the
Company since August 1, 1970, in various capacities;
WHEREAS, pursuant to reorganization transactions contemplated in that
certain Agreement and Plan of Reorganization, dated June 7, 1996, the Company
will acquire certain of the businesses and operations of such predecessors;
WHEREAS, the proposed reorganization transactions will be consummated
only upon the closing of an initial public offering of the Company's Class "A"
Common Stock (such date being hereafter referred to as the "Effective Date");
and
WHEREAS, the Company desires to employ Nicklaus in an executive
capacity and Nicklaus desires to accept such employment, all upon the terms and
subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth in this Agreement, the Company and Nicklaus agree as
follows:
1. TERMS OF EMPLOYMENT. The Company shall employ Nicklaus, and
Nicklaus accepts such employment, on the terms and subject to the conditions set
forth in this Agreement, for a term beginning as of the Effective Date and
expiring on December 31, 2001. Such period is called the "Term".
2. SERVICES.
2.1 OFFICE AND DUTIES. During the Term, Nicklaus shall serve
as Chairman of the Board of the Company and shall have powers and authority
commensurate with such position as may be assigned to him by the Company's Board
of Directors. Nicklaus shall not be required to relocate his principal residence
from Palm Beach County, Florida or to operate out of any offices of the Company
other than its current principal executive offices without his prior written
consent.
2.2 SCOPE OF REQUIRED EFFORTS. During the Term, Nicklaus shall
devote reasonable efforts and energies to the business of the Company and shall
use his personal efforts, skills and abilities to promote the interests of the
Company.1 It is understood that Nicklaus will not be devoting his full time and
attention to the business of the Company, and that his other business
activities, including activities on behalf of Golden Bear International, Inc.
("GBI"), and as a professional golfer, will require the majority of his efforts
during the term of this Agreement and therefore, no minimum number of hours.
Nicklaus agrees to devote such time and attention to his position as Chairman of
the Board of the Company as a Director as he deems reasonable and prudent to the
fulfillment of his required duties , and Nicklaus shall have discretion to
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accept such additional duties as may be offered to him as a member of the Board
of Directors or any committee thereof. Nicklaus agrees to provide those personal
services reasonably required to fulfill commitments made by the Company for
certain of his services during the term of this Agreement, consistent with the
prior activities of Nicklaus on behalf of GBI, subject to the terms and
limitations set forth in Section 7, below.
3. COMPENSATION.
3.1 CASH COMPENSATION. During the Term, Nicklaus shall
receive an initial base salary at the annual rate of eighty-five thousand
dollars ($85,000) ("Base Salary"), payable in accordance with the Company's
normal payroll practices. The Base Salary shall be subject to increase from time
to time as may be determined upon a review of Nicklaus' performances to be
undertaken by the Compensation Committee of the Board of Directors at least once
annually ("Compensation Committee"). Any increase in Base Salary or other
compensation shall in no way limit or reduce any other obligation of the Company
under this Agreement, and, once established or increased, the Base Salary shall
not thereafter be reduced.
3.2 LONG-TERM INCENTIVE COMPENSATION. The Company shall grant
to Nicklaus options to purchase an aggregate of sixty-five thousand (65,000)
shares per year of Class "A" common stock of the Company at its then fair market
value pursuant to the Golden Bear Golf, Inc. 1996 Stock Option Plan (the
"Plan"). These options shall be issued in accordance with the terms of the Plan
and a related stock option agreement, and shall be freely assignable by Nicklaus
as provided therein.
3.3 ADDITIONAL COMPENSATION. Nothing in this Agreement shall
be deemed to prohibit the Compensation Committee from granting Nicklaus such
increased compensation, incentive awards or other benefits as the Compensation
Committee from time to time may determine, provided that the parties recognize
and acknowledge that the Compensation Committee shall be under no obligation to
grant any such increase and shall have full discretion in making any
determination with respect thereto.
4. REIMBURSEMENT OF EXPENSES; BENEFITS.
4.1 REIMBURSEMENT OF EXPENSES. Upon submission of appropriate
documentation and in specific accordance with such guidelines as may be
established from time to time by the Company's Board of Directors, the Company
shall reimburse Nicklaus for all reasonable business expenses actually and
necessarily incurred in the performance of his duties under this Agreement.
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4.2 EMPLOYEE BENEFIT PLANS AND PROGRAMS. During the Term,
Nicklaus shall be entitled to participate in all group life insurance, pension,
medical insurance, hospitalization, disability and other similar employee
benefit plans and programs of the Company, subject to eligibility and vesting
requirements from time to time in effect, which at any time during the Term may
be offered by the Company to its executive officers generally, provided that
nothing in this Agreement shall require the Company at any time to create or
continue any such plan or program or to fix, amend or retain eligibility
requirements so as to include Nicklaus.
4.3 VACATIONS. The parties acknowledge that the performance of
Nicklaus' duties under this Agreement will require a limited amount of his time
and attention, and that his Base Salary has been established at a rate which
reflects his limited time commitments to the Company during the term of this
Agreement. Nicklaus shall be entitled to schedule personal vacation during each
calendar year in his discretion without obtaining leave time from the Company,
taking into consideration the reasonable business needs of the Company and his
other professional commitments, and his Base Salary and other compensation under
this Agreement shall not be reduced as a result of his election to take
vacation.
4.4 SECRETARIAL ALLOWANCE. It is understood and agreed that Nicklaus'
personal staff shall remain employed by his affiliated company, GBI, and that
the Company shall not be required to provide Nicklaus with a secretary or other
staff commensurate with his position as Chairman of the Board. Nicklaus and the
Company agree that he will utilize the services of his personal staff for all
normal office support functions required by Nicklaus in connection with his
performance of this Agreement, including secretarial and administrative
assistant work required in connection with the performance of his customary work
activities and correspondence on behalf of the Company. In order to defray the
expenses to be incurred by GBI in providing the services of such staff on behalf
of Nicklaus, the Company agrees to pay a non-accountable staff allowance in the
amount of forty thousand dollars ($40,000) per annum, which allowance will be
paid to GBI in equal monthly installments on or before the 15th day of each
month during the term of this Agreement. It is understood that the allowance
provided under this Section is not intended to cover extraordinary staffing
needs created by special projects undertaken by Nicklaus as an executive of the
Company, or emergency needs created by natural disaster or other circumstances
beyond the reasonable control of the parties, in which event the Company shall
provide additional staff to Nicklaus, on a temporary basis, as reasonably
required to meet such contingencies.
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5. TERMINATION. The Executive's employment under this Agreement
may be terminated prior to the end of the Term by the Company or Nicklaus
without any breach of this Agreement only under the following circumstances:
5.1 DEATH. Nicklaus' employment under this Agreement
shall terminate upon his death.
5.2 DISABILITY. The Company may terminate Nicklaus'
employment if Nicklaus is unable to perform his services by reason of his
"Disability". "Disability" means Nicklaus' inability to perform his duties under
this Agreement by reason of any medically determinable physical or mental
impairment which reasonably can be expected to result in death or which has
lasted or reasonably can be expected to last for 120 days out of any 180 day
period.
5.3 CAUSE. Except as set forth in Sections 5.1 and 5.2, the
Company only may terminate Nicklaus' employment under this Agreement for
"Cause". "Cause" means: (a) action by Nicklaus involving willful misconduct,
dishonesty or gross neglect which has a materially adverse affect on the
business or reputation of the Company; or (b) the willful and repeated refusal
or failure of Nicklaus to discharge his duties under Section 2 in all material
respects, where such alleged refusal or failure is not remedied within 45 days
after the date of Nicklaus' being given a written demand from the Company to
remedy such alleged refusal or failure, which demand shall specify the
circumstances being relied upon for termination. The Executive's employment
under this Agreement shall be deemed terminated as of the date of the demand for
termination under clauses (a) and (b) above, unless, in the case of termination
under clause (b) above, such alleged breach is timely remedied within such 45
days.
5.4 GOOD REASON. Subject to Sections 5.2 and 5.3, Nicklaus may
terminate his employment under this Agreement for "Good Reason". "Good Reason"
means: (a) any assignment to Nicklaus of duties that are inconsistent, in a
material and adverse respect, with the scope of duties and responsibilities set
forth in Section 2; (b) any removal of Nicklaus from the position of Chairman of
the Board of the Company, or material diminution in his responsibilities or
authority to act on behalf of the Company; (c) a failure by the Company to pay
when due all compensation provided for in this Agreement within 10 days after it
becomes due; or (d) a material failure by the Company to comply with any of the
other material provisions of this Agreement; and any such event set forth in
clauses (a) through (d) above shall not be remedied within 45 days from the date
Nicklaus delivers written notice thereof to the Company specifically identifying
the nature of the facts constituting the Good Reason.
6. PAYMENTS TO EXECUTIVE DURING DISABILITY AND AFTER TERMINATION.
6.1 PAYMENTS AFTER DEATH. If Nicklaus' employment is
terminated under Section 5.1 above because of Nicklaus' death, his estate shall
receive the Base Salary through the date of termination in accordance with the
terms of this Agreement.
6.2 PAYMENTS PRIOR TO TERMINATION DURING DISABILITY. During
any period during the Term that Nicklaus is unable to perform his duties
hereunder by reason of his Disability, Nicklaus shall continue to receive the
Base Salary (payable by the Company only to the extent not payable by Company's
disability insurance carrier), until Nicklaus' employment is terminated pursuant
to Section 5.2 above.
6.3 PAYMENTS AFTER TERMINATION BECAUSE OF DISABILITy. If
Nicklaus' employment is terminated under Section 5.2 because of his Disability,
Nicklaus shall continue to receive the Base Salary (determined as of the date of
termination) through the remaining Term in accordance with the terms of this
Agreement; provided, that the Company's obligation to make such payments shall
be offset as of the date Nicklaus begins receiving payments or benefits from the
Company's disability insurance carrier or under any employee benefit plan or
program of the Company providing disability benefits or compensation, by the
amount of such payments, benefits or compensation.
6.4 PAYMENTS AFTER TERMINATION FOR CAUSE. If Nicklaus'
employment is terminated under Section 5.3 for Cause, Nicklaus shall receive the
Base Salary through the date of termination in accordance with the terms of this
Agreement.
6.5 PAYMENTS AFTER WRONGFUL TERMINATION.
(a) If the Company terminates Nicklaus'
employment other than because of Nicklaus' death or Disability, or for Cause, or
if Nicklaus shall terminate Nicklaus' employment for Good Reason pursuant to
Section 5.4 (any such termination being referred to as a "Wrongful
Termination"), then Nicklaus shall continue to receive the Base Salary through
the remaining Term in accordance with the terms hereof.
(b) Notwithstanding the terms of Section 6.5(a)
above, if a Wrongful Termination occurs within a period of one year after a
Change of Control (as defined below), Nicklaus shall be entitled within 30 days
after such termination to a lump sum payment equal to the greater of (i) the
Base Salary through the remaining Term, and (ii) 30 months of the Base Salary,
in each case, subject to Section 6.6 below.
A Change of Control will occur: (i) on the date of
the acquisition by any person, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities and Exchange Act of 1934, as amended),
excluding the Company, any of its subsidiaries or any holder of the Company's
Class "B" Common Stock, par value $.01 per share, of 40% or more of the then
outstanding voting securities entitled to vote generally in the election of
directors; (ii) on the date of any sale of the Company's or any of its
subsidiaries' assets which required approval of the Company's shareholders under
the Florida Business Corporation Act; or (iii) on the date of any consolidation
or merger to which the Company is a party or any stock exchange or similar
transaction as a result of which the holders of the Company's outstanding voting
securities immediately prior to such transaction do not continue to own voting
securities in the new or surviving entity entitling them to elect its Board of
directors.
6.6 CONTINUATION OF STOCK OPTIONS. The Company acknowledges
that the termination of this Agreement for any reasosn, including termination
for cause under Section 5.3, shall not affect the obligations of the Company to
grant to Nicklaus those stock options described in Section 3.2, above, during
the remainder of the original term of this Agreement, or the rights of Nicklaus
or any permitted assignee of such options to excercise such options according to
the terms of the Plan or the Stock Option Agreement. In the event this Agreement
is terminated due to the death or declaration of incompetency of Nicklaus, the
Company acknowledges that his rights under the Plan may be excercised in his
name by his legal representatives.
7. PERSONAL SERVICES AS MODEL, SPOKESMAN, AND ENDORSER. The parties
acknowledge that, prior to the effective date of this Agreement, Nicklaus
authorized GBI, as the Company's predecessor in interest, to provide his
personal services as a model, spokesman and celebrity endorser in support of its
licenses to market products and services under the Nicklaus(TM), Jack
Nicklaus(TM), Golden Bear(TM), and related brands, which licensing rights have
been assumed by the Company under the Trademark License as of the Effective Date
of this Agreement with respect to the Licensed Goods (as defined therein).
Nicklaus agrees to continue the performance of such services for existing
licensees of the Company under those agreements in force as of the Effective
Date (the "Existing Agreements"), and to permit the Company to enter into future
licensing agreements which require the Company to provide his personal services
as part of the Company's marketing support to its licensees, subject to the
terms and conditions of this Section 7, provided the scope of those services are
consistent with his prior commitment on behalf of GBI.
7.1 SERVICES AS A MODEL FOR COMMERCIAL PRODUCTION. Nicklaus
agrees to furnish his personal services as a model and performer for photography
and recording sessions for the purpose of producing broadcast commercials and
obtaining still photography to be used in production of media advertising and
promotional materials for the Licensed Goods under the Existing Agreements. The
Company will be responsible for scheduling Nicklaus' appearance at these
sessions at times and sites convenient to Nicklaus' other travel and business
commitments. It is understood that in the event that the parties are unable to
arrange a mutually convenient appearance by Nicklaus at a studio facility, or if
the photography or recording sessions otherwise require, production activities
may be conducted on location at a mutually convenient time and place. Unless
otherwise agreed by Nicklaus, in writing, the Company will obtain Nicklaus'
personal approval of concepts, storyboards, and scripts for materials to be
produced hereunder as a condition to the exercise of any approval rights granted
by the Company's licensees, and Nicklaus will have the right in any event to
approve all statements made by or attributed to Nicklaus in connection with such
materials. Except for such approval rights, Nicklaus shall work withthe
reasonable creative direction of the persons in charge of producing the
broadcast commercials or photography, and shall cooperate with the
representative of the Company and such persons as required to complete the
scheduled sessions.
7.2 OTHER PERSONAL SERVICE DAYS. Nicklaus further agrees to
make himself available for personal appearances as a spokesman and celebrity
endorser as reasonably necessary for the Company to fulfill its commitments
under the Existing Agreements. The Company will obtain Nicklaus' personal
approval of the services to be provided by him and the promotional concepts for
events at which such appearances are made as a condition to the exercise of any
approval rights granted by the Company's licensees over such matters, and
Nicklaus will have the right in any event to approve any appearances which he is
requested to make in conjunction with his attendance at a competitive golf
tournament. The Company will be responsible for scheduling Nicklaus' appearances
under this subsection at times and sites convenient to Nicklaus' other travel
and business commitments.
7.3 ADDITIONAL SERVICE COMMITMENTS. Subject to the limitations
set forth in subsection 7.4, below, Nicklaus agrees to make himself available
during the term of this Agreement for photography and recording sessions and
other personal appearances as reasonably required in order for the Company to
market, advertise and promote Licensed Goods under licensing agreements
concluded from and after the Effective Date. The parties agree that the terms
applicable to Nicklaus' appearances in support of the Existing Agreements under
subsections 7.1 and 7.2, above, shall apply to any license agreement concluded
under this subsection unless otherwise agreed in writing by Nicklaus and the
Company at the time such agreement is concluded. Prior to making any binding
commitment to a licensee to provide Nicklaus' personal services, the Company
will review the proposed arrangements with Nicklaus and provide Nicklaus with
such assurances as he may request that the proposed services will not conflict
with Nicklaus' other business or professional golf commitments, or create any
personal or professional embarrassment or annoyance to Nicklaus. The Company
acknowledges that, in accordance with FTC regulations, Nicklaus cannot provide a
personal commercial endorsement of any product or service if such endorsement
does not reflect his good faith personal belief, and Nicklaus shall not be
required by the Company to furnish any personal services under this Section 7
with respect to any such product or service.
7.4 TIME COMMITMENTS. The Company agrees that Nicklaus'
personal time requirements in connection with these sessions will not exceed two
(2) Service Days (as defined below) for any single licensee or product category,
unless otherwise agreed by Nicklaus in his sole discretion. The Company further
agrees that Nicklaus' total time commitments in any calendar year shall be
limited to a total of ten (10) Service Days, unless the parties have agreed that
Nicklaus will furnish additional days as provided in subsection 7.5, below. For
purposes of this subsection, a "Service Day" shall be any working day on which
Nicklaus is required to render services to the Company under this Section, and
shall not exceed eight (8) hours in duration, unless otherwise agreed by
Nicklaus. The duration of an appearance shall include all time when Nicklaus is
committed at the site of a session or personal appearance, including Nicklaus'
required participation in set up and rehearsals, customary performer and crew
break time, meals and social functions, and public relations activities.
7.5 OPTIONAL SERVICE DAYS. The Company may request Nicklaus to
provide Service Days in addition to those required under subsection 7.4 in
support of the Company's marketing activities for Licensed Goods, provided that
Nicklaus shall not be required to provide such Service Days in order to maintain
his employment under this Agreement. In the event that Nicklaus is willing to
provide additional Service Days to the Company, the parties shall negotiate in
good faith the additional compensation to be paid to Nicklaus in exchange for
his participation in such Service Days, which compensation shall not exceed one
hundred fifty thousand dollars ($150,000) for each additional Service Day
provided. Any commitment for Nicklaus to render such services shall be reflected
in a written addendum to this Agreement, which shall set forth the number of
additional Service Days to be provided, the compensation to be paid for such
services, and the duration of such commitment by Nicklaus, if other than for the
balance of the term of this Agreement.
8. NOTICES. All notices or other communications which any party to this
Agreement may desire or be required to give under this Agreement shall be deemed
to have been given the first business day after being delivered to a nationally
recognized overnight courier for next business day delivery to the address of
such party set forth below or such other address as either party may from time
to time give notice to the other in the aforesaid manner:
If to the Company: Golden Bear Golf, Inc.
11780 U.S. Highway No. 1
North Palm Beach, Florida 33408
Attn: _________________________
If to Nicklaus:
Jack W. Nicklaus
-------------------------------
-------------------------------
Attn: _______________________
Copy to Joseph W. Fleming, Esq.
Park Centre
Suite 100
400 Royal Palm Way
Palm Beach, FL 33480
9. MISCELLANEOUS.
9.1 ENTIRE AGREEMENT. This Agreement and all agreements and documents
referred to in this Agreement are intended to and do constitute the entire
agreement between the parties and supersede all prior oral or written agreements
or understandings of the parties with regard to the subject matter of this
Agreement. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter of this Agreement, have been made by
either party which are not expressly set forth in this Agreement.
9.2 NO ORAL MODIFICATIONS. No interpretation, change, termination or
waiver of any provision of this Agreement shall be binding upon a party unless
in writing and executed by the party or parties to be bound thereby.
9.3 NO ASSIGNMENT. Neither this Agreement nor any rights or obligations
under this Agreement may be assigned or delegated by the parties to this
Agreement, except for any assignment by the Company occurring by operation of
law.
9.4 BINDING EFFECT. This Agreement shall be binding upon the parties
and their respective successors and shall inure to the benefit of the parties
and their respective successors.
9.5 GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Florida without giving effect to any conflict of laws provision thereof.
9.6 PREVAILING PARTIES. In the event of a dispute regarding any of the
terms of this Agreement, the party prevailing in such dispute shall be paid its
legal costs, including reasonable attorneys' fees, incurred in connection with
the enforcement or interpretation of this Agreement, in litigation and in
preparation for litigation, and at trial and in connection with any appellate
action.
9.7 SEVERABILITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9.8 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which, together, will constitute
one and the same agreement. Any telecopied version of a manually executed
signature page delivered by one party to the other shall be deemed a manually
executed and delivered original.
9.9 NO WAIVER. Any waiver by either party of any provision of this
Agreement shall not be construed as a continuing waiver thereof or a waiver of
any other provision of this Agreement.
9.10 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
9.11 REMEDIES. Neither the termination of this Agreement, the provision
of a specific remedy, nor any other provision of this Agreement shall be
construed to prohibit any party from pursuing any remedy available at law or in
equity for the breach or violation of the provisions of this Agreement.
9.12 SURVIVAL. The terms of Sections 3, 6, 7, and of this Agreement
shall survive the expiration or termination of this Agreement.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement on
the date set forth above.
GOLDEN BEAR GOLF, INC.
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
Jack W. Nicklaus
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), is dated as of ____________,
1996, between Golden Bear Golf, Inc., a Florida corporation (the "Company"), and
Richard P. Bellinger (the "Executive").
WHEREAS, the Company intends to undertake to an initial public
offering of the Company's Class "A" Common Stock; and
WHEREAS, contingent upon the closing of the initial public offering,
the Company desires to employ the Executive in an executive capacity and the
Executive desires to accept such employment, all upon the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth in this Agreement, the Company and the Executive agree as
follows:
1. TERM OF EMPLOYMENT. The Company shall employ the Executive, and the
Executive accepts such employment, on the terms and subject to the conditions
set forth in this Agreement. The Executive shall be employed for an initial term
of a five (5) years beginning as of (the "Effective Date") and expiring on
____________ (the "Initial Term"); At the conclusion of the Initial Term, or any
Renewal Term (as defined below), the Executive's employment shall automatically
be extended for an additional term of two (2), unless at least one hundred and
eighty (180) days prior the expiration of the Initial Term or any Renewal Term
date either the Executive or the Company gives notice to the other that the
Executive or the Company does not wish to extend the. The Initial Term and any
Renewal Term shall be referred to herein as the "Term".
2. SERVICES.
2.2 BEST EFFORTS. During the Term, the Executive shall devote a
minimum of eighty percent (80%) of his time and energies during business hours
to the business of the Company and shall use his best efforts, skills and
abilities to promote the interests of the Company.
2.3 SERVICE FOR RELATED ENTITIES. The parties acknowledge that
during the Term of this Agreement that the Executive intends to devote
approximately twenty percent (20%) of his business time and efforts on behalf of
Golden Bear International, Inc. The Company acknowledges such activities shall
not violate
<PAGE>
any of the provisions of this Agreement, and the Company waives any claims
against the Executive arising from his performance of his duties on behalf of
the related entities.
3. COMPENSATION.
3.1 CASH COMPENSATION. During the Term, the Executive shall receive
an initial base salary at the annual rate of $450,000 ("Base Salary"), payable
in accordance with the Company's normal payroll practices. The Base Salary shall
be subject to increase from time to time as may be determined upon a review of
the Executive's performances to be undertaken by the Compensation Committee of
the Board of Directors at least once annually ("Compensation Committee")
3.2 INCENTIVE AWARD PAYMENTS. (a) For each fiscal year during the
Term, the Executive shall be entitled to receive a cash award (the "Bonus")
based on the Company's Annual Pre-tax Income relative to its Annual Pre-tax
Income shall projected in the Business Plan ("Business Plan") approved by the
Company's Board of Directors with respect to such fiscal year. For each fiscal
year, "Annual Pre-tax Income" means the "Income Before Provision for Income
Taxes and Extraordinary Items" set forth in the Company's audited Consolidated
Statement of Operations. The Compensation Committee shall set in advance of each
fiscal year the formula for determining the Bonus for such fiscal year, after
the Compensation Committee consults with the Executive and the Board of
Directors approves the Business Plan.
(b) If the Executive's employment with the Company shall terminate
after the commencement of, but prior to the expiration of, any fiscal year
(except for termination for Cause, as defined in Section 5.3 then the Bonus
payable to the Executive for services rendered during such fiscal year shall be
equal to the Bonus for such fiscal year determined as described above,
multiplied by a fraction, the numerator of which shall be the number of days
during such fiscal year that the Executive was an employee of the Company, and
the denominator of which shall be 360.
3.3 SUPPLEMENTAL INCENTIVE AWARD PAYMENTS. Each year during the
Term, the Compensation Committee may, but shall be under no obligation to,
establish a supplemental incentive award pool, consisting of a percentage of the
salaries of the executive officers of the Company determined by the Compensation
Committee after consulting with management of the Company, which is to be paid
out to executives of the Company provided the Company's performance meets or
exceeds annual objectives predetermined by the Compensation Committee. It is
anticipated that if such a pool is established, the objectives would consist
primarily of the Company's meeting operating income targets, but also may
consist of the Company's meeting sales targets, increasing its revenue base
and/or other factors. The Executive's payment from such an incentive award pool
relative to other Company executives is to be weighted based upon the
Executive's position in the Company and contribution towards the Company's
performance relative to the annual objectives. In the event the Compensation
Committee determines that such objectives are met for a fiscal year and that it
is appropriate to establish such a pool, the Chairman of the Board shall be
entitled to allocate the incentive award pool among the Executive and other
executive officers of the Company, provided that all such awards must be
approved by the Compensation Committee, which may revise the awards at its
discretion.
3.4 STOCK OPTIONS. On the Effective Date, The Company shall
grant to the Executive options to purchase ________ shares of the Class A
Common Stock of the
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Company pursuant to the terms of the Stock Option Agreement attached hereto as
Exhibit A and additional options to purchase _______ shares of the Class A
Common Stock of the Company pursuant to the Stock Option Agreement attached
hereto as Exhibit B, which shall conform to the terms of the Golden Bear Golf,
Inc. 1996 Stock Option Plan (the "Plan").
3.5 ADDITIONAL COMPENSATION. Nothing in this Agreement shall be
deemed to prohibit the Compensation Committee from granting the Executive such
increased compensation, incentive awards or other benefits as the Compensation
Committee from time to time may determine, provided that the parties recognize
and acknowledge that the Compensation Committee shall be under no obligation to
grant any such increase and shall have full discretion in making any
determination with respect thereto. The Compensation Committee shall also
determine what allowances to provide Executive, including without limitation,
auto allowance, allowance for membership in country clubs, and allowance for
increased and additional benefits, in addition to those benefits for which
Executive is eligible under section 4.2, below.
4. REIMBURSEMENT OF EXPENSES; BENEFITS.
4.1 REIMBURSEMENT OF EXPENSES. Upon submission of appropriate
documentation and in accordance with such guidelines as may be established from
time to time by the Company's Board of Directors, the Company shall reimburse
the Executive for all reasonable business expenses incurred by the Executive in
the performance of his duties under this Agreement.
4.2 EMPLOYEE BENEFIT PLANS AND PROGRAMS. (a) During the term, the
Executive shall be entitled to receive the benefits described on Schedule I to
this Agreement. [This should reflect the benefits listed on the Term Sheet
provided to Joe Fleming]. (b) During the Term, the Executive shall also be
entitled to participate in all other group life insurance, pension, medical
insurance, hospitalization, disability and other similar employee benefit plans
and programs of the Company, subject to eligibility and vesting requirements
from time to time in effect, which at any time during the Term may be offered by
the Company to its executive officers generally, provided that nothing in this
Agreement shall require the Company at any time to create or continue any such
plan or program or to fix, amend or retain eligibility requirements so as to
include the Executive.
4.3 VACATIONS. The Executive shall be entitled to that amount of
paid vacation during each calendar year as is the Company's policy for executive
employees, taking into consideration the reasonable business needs of the
Company. The Executive may take vacation at such times as the Executive elects,
upon reasonable advance notice to the Company, provided that the Executive takes
no more than two consecutive weeks of vacation and provided further that such
vacation does not affect the operations and business needs of the Company. The
Executive shall be permitted to accrue vacation time in accordance with the
Company's vacation accrual policy for executive employees in effect at the time
the vacation is accrued.
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<PAGE>
5. TERMINATION. The Executive's employment under this Agreement may
be terminated prior to the end of any Term by the Company or the Executive
without any breach of this Agreement under the following circumstances:
5.1 DEATH. The Executive's employment under this Agreement shall
terminate upon the Executive's death.
5.2 DISABILITY. The Company may terminate the Executive's
employment if the Executive due to physical or mental injury or illness, duties
under this Agreement) for an aggregate of 1351 days out of any 270 day period.
5.3 CAUSE The Company may also terminate the Executive's employmen
under this Agreement for "Cause"."Cause" shall mean the following: (a) action by
the Executive involving willful misconduct, dishonesty or gross neglect which
has a materially adverse affect on the business or reputation of the Company;
(b) Employee's conviction of a crime punishable by death or imprisonment of one
year or more under the laws of the jurisdiction in which convicted, or of a
crime involving theft, misappropriation of funds, fraud or deception, regardless
of the punishment; (c) Employee is charged or indicted for a crime for which, if
convicted, the Company would have the right to terminate Employee's employment
under (b) above; or (d) the refusal or failure of the Executive to discharge his
duties under Section 2 in all material respects, where such alleged refusal or
failure is not remedied within 15 days after the date of the Executive's being
given a written demand from the Company to remedy such alleged refusal or
failure, which demand shall specify the circumstances being relied upon for
termination.
5.4 GOOD REASON. The Executive may terminate his employment
under this Agreement for "Good Reason". "Good Reason" means: (a) any removal of
the Executive from the position of Senior Vice President of the Company; (b) a
failure by the Company to pay when due all compensation provided for in this
Agreement; or (c) a material failure by the Company to comply with any of the
other material provisions of this Agreement.
5.5 NOTICE OF TERMINATION. Any Termination of the Executive's
employment by the Company or by the Executive (other than termination pursuant
to Section 5.1 above) shall be communicated by written notice of termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement, relied upon, and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for
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<PAGE>
termination.
5.6 DATE OF TERMINATION. The "Date of Termination" shall mean:
(i) if the Executive's employment is terminated by his death, the date of death,
(ii) if the Executive's employment is terminated pursuant to Section 5.2 above,
30 days after Notice of Termination is given (provided that the Executive shall
not have returned to the performance of his duties on a full time basis during
such 30 day period), and (iii) if the Executive's employment is terminated for
any reason, the date on which a Notice of Termination is given.
6. PAYMENTS TO EXECUTIVE DURING DISABILITY AND AFTER TERMINATION.
6.1 COMPENSATION DURING DISABILITY. During any period that the
Executive fails to perform his duties hereunder as a result of incapacity due to
physical or mental injury or illness, the Executive shall continue to receive
the Base Salary, incentive compensation and benefits to which he is entitled
under this Agreement until his employment is termination pursuant to Section 5.2
hereof; provided that payments so made to the Executive during such period shall
be reduced to the extent of any amounts paid to the Executive under any
disability benefit plan of the Company.
6.2 COMPENSATION UPON TERMINATION FOR DEATH OR DISABILITY. If the
Executive's employment is terminated by his death under Section 5.1 or
disability under 5.2, the Company shall pay to the Executive, his spouse or his
estate, as applicable: (i) the incentive compensation to which he is entitled
under this Agreement through the Date of Termination; (ii) the Executive's Base
Salary as in effect on the Date of Termination, for a period of one year
following the Date of Termination, and (iii) the cost of health insurance
benefits for the Executive and his family for a period of 18 months following
the Date of Termination.
6.3 PAYMENTS AFTER TERMINATION FOR CAUSE. If the Executive's
employment is terminated under Section 5.3 for Cause, the Executive shall
receive his Base Salary through the Date of Termination
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<PAGE>
in accordance with the terms of this Agreement and thereafter Executive shall
not be entitled to receive any further compensation or benefits whatsoever.
(a) If: (i) the Company terminates the Executive's employment other
than because of the Executive's death, Disability, or for Cause; (ii) the
Company elects to terminate the Executive's employment as of the end of the
Initial Term or any Renewal Term; (iii) if the Executive shall terminate the
Executive's employment for Good Reason pursuant to Section 5.4 (any such
termination being referred to as a "Wrongful Termination"), then the the Company
shall pay to the Executive for a period equal to the greater of the remainder of
the current term or twenty-four (24) months,:1) the Base Salary, in effect on
the Date of Termination, for a period of equal to the greater of the remainder
of the current term or twenty four (24) months; 2) for the two years following
termination, an amount equal to the average annual Bonus, if any, received by
Executive prior to termination; and 3) the cost of health insurance benefits for
the Executive and his family for a period of 18 months.
A Change of Control will occur: (i) on the date of the acquisition
by any person, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities and Exchange Act of 1934, as amended), excluding the
Company, any of its subsidiaries or any holder of the Company's Class B Common
Stock, par value $.01 per share, of twenty-five percent (25%) or more of the
then outstanding voting securities entitled to vote generally in the election of
directors; (ii) on the date of any sale of the Company's or any of its
subsidiaries' assets which required approval of the Company's shareholders under
the Florida Business Corporation Act; or (iii) on the date of any consolidation
or merger to which the Company is a party or any stock exchange or similar
transaction as a result of which the holders of the Company's outstanding voting
securities immediately prior to such transaction do not continue to own voting
securities in the new or surviving entity entitling them to elect its Board of
directors.
6.4 MITIGATION. The parties agree that the provisions of this
Agreement requiring payments to the Executive upon or after the cessation of the
Executive's employment are not intended as a penalty on the Company, but instead
are part of an arm's length negotiation between the parties. The parties further
agree that the damages that the Executive may incur will be difficult to
estimate, particularly since, among other factors, the Executive may incur
consequential damages to his status and reputation as a result of a termination.
Accordingly, the amounts to be paid to Executive shall not be subject to
reduction or offset as a result of other income earned by the Executive.
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<PAGE>
(a) In the event any payment or benefit received or to be received
by the Executive in connection with the terms of this Agreement after
termination of employment ("Post-Termination Payments") would not be deductible
in whole or in part by the Company as a result of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), such Post-Termination Payments
shall be reduced until no portion of the Post Termination Payments is not
deductible. For purposes of this limitation: (i) no portion of the
Post-Termination Payments shall be taken into account which in the opinion of
tax counsel selected by the Company and acceptable to the Executive does not
constitute a parachute payment within the meaning of Section 280G(b)(2) of the
Code; and (ii) the value of any non-cash benefit or any deferred payment or
benefit included in the Post-Termination Payments shall be determined by the
Company's independent auditors in accordance with the principles of Sections
280G(d)(3) and (4) of the Code.
(b ) The timing of any payment or benefit received or to be
received by the Executive shall be in accordance with this Agreement, provided
that if the amounts of such payments, and the limitations on such payments set
forth in Section 6.6(a) above, cannot be determined finally on or before the
time such payments are due, the Company shall pay to the Executive on such due
date an estimate, as determined in good faith by the Company, of the amount of
such payments and shall pay the remainder of such payments, if any (together
with interest at the rate provided in Section 7872(f)(2) of the Code), as soon
as the amount thereof can be determined. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive, payable
upon demand by the Company (together with interest computed from the date of
payment at the rate provided in Section 7872(f)(2) of the Code).
7. CONFIDENTIALITY; INTELLECTUAL PROPERTY; NONCOMPETITION.
7.1 CONFIDENTIALITY. The Executive shall not, during the Term or
any time after the Term, use or divulge to any person any Confidential
Information (as defined below) relating to the Company or any of its
subsidiaries which may have come to the Executive's knowledge at any time during
the Executive's term of employment with the Company or during the time that
Executive was employed by Company's predecessor in interest, Golden Bear
International, Inc. "Confidential Information" shall mean any information not
generally available to the public concerning the Company or any of its
subsidiaries, including, but not limited to, methods of operation, methods of
doing business, sales, files, forms, lists and names of and the needs and
requirements of customers and suppliers, the nature and content of any
contracts, and any inventions, techniques, methods, products, devices, trade
secrets, copyrights, patents, other rights to and in all knowledge, information
and materials proprietary to the Company (including business plans and financial
information), which relate to or are used in connection with any business or
activity carried on by the Company or any of its subsidiaries. At or prior to
the termination of the Executive's employment with the Company, the Executive
shall deliver to the Company (i) all property of the Company in the possession
or under the control of the Executive and (ii) all written or printed material
and all other property (including, but not limited to, computerized data) in the
possession or under the control of the Executive relating to Confidential
Information.
7.2 OWNERSHIP OF CERTAIN INTELLECTUAL PROPERTY. The Executive
hereby sells, transfers and assigns to the Company or to any person or entity
designated by the Company, the Executive's entire, right, title and interest in
and to all inventions, ideas, disclosures, intellectual property rights and
improvements, whether patented or unpatented, and copyrightable material made or
conceived by the Executive, solely or jointly, during
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<PAGE>
the term of the Executive's employment, which relate to methods, apparatus,
designs, ideas, products, processes, items or devices, sold, leased, used or
under consideration or development by the Company or which otherwise relate or
pertain to the businesses, functions or operations of the Company. The Executive
shall communicate promptly and disclose to the Company, in such form as the
Executive may be requested to do so by the Company's Board of Directors, all
information, details and data pertaining to these matters and shall execute and
deliver to the Company such formal transfers and assignments and such other
papers and documents as may be requested of the Executive to permit the Company
or any person or entity designated by the Company to file and prosecute the
patent applications and as to copyrightable material to obtain copyright
thereof. The Executive irrevocably appoints the Company's designee as the
Executive's attorney-in-fact for the purpose of carrying out the terms of this
Section 7.2, and acknowledges that this appointment is irrevocable and coupled
with an interest.
7.3 NONCOMPETITION. During the Term and for a period of one year
(1) after the voluntary resignation of the Executive as an employee of the
Company or the termination by the Company of any such employment or engagement
for Cause pursuant to Section 5.3 or upon the expiration of the Term of this
Agreement, the Executive shall not engage or have an interest, anywhere in the
United States of America or any other geographic area where the Company or any
of its subsidiaries do business or in which its products are marketed, alone or
in association with others, as principal, officer, agent, employee, consultant,
independent contractor, director, partner or stockholder, or through the
investment of capital, lending of money or property, rendering of services or
otherwise, in any business competitive with the business engaged in by the
Company or any of its subsidiaries; provided, that the foregoing shall not be
construed to prohibit the Executive from owning, in the aggregate, less than 5%
of any class of securities listed on a national securities exchange or traded
publicly on the over-the-counter market. During the same period, the Executive
shall not, and shall not knowingly or intentionally permit, cause or authorize
any of his employees, agents or others under his control to, directly or
indirectly, on behalf of himself or any other Person, to recruit or otherwise
solicit or induce any person who is an employee of, or otherwise engaged by, the
Company, any subsidiary of the Company or any such successor to terminate his or
her employment or other relationship with the Company, any subsidiary of the
Company or such successor. The Executive shall not at any time, directly or
indirectly, use or purport to authorize any Person to use any name, mark, logo,
trade dress or other identifying words or images which are the same as or
similar to those used at any time by the Company or any subsidiary of the
Company in connection with any product or service, whether or not such use would
be in a business competitive with that of the Company or any subsidiary of the
Company.
7.4 REMEDIES. The restrictions set forth in this Section 7 are
considered by the parties to be reasonable for the purposes of protecting the
value of the business and goodwill of the Company. The Executive acknowledges
that the Company would be irreparably harmed and that monetary damages would not
provide an adequate remedy in the event of a breach of the provisions of this
Section 7. Accordingly, the
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Executive agrees that, in addition to any other remedies available to the
Company, the Company shall be entitled to injunctive and other equitable relief,
(without any bond or security being required to be posted) to secure the
enforcement of these provisions, and shall be entitled to receive reimbursement
from the Executive for all attorneys' fees and expenses incurred by the Company
in enforcing these provisions. If the Executive breaches the covenant set forth
in Section 7.3, the running of the noncompete period described therein (but not
his obligations) shall be tolled for so long as such breach continues. It is the
desire and intent of the parties that the provisions of Section 7 be enforced to
the fullest extent permissible under the laws and public policies of each
jurisdiction in which enforcement is sought. If any provisions of Section 7
relating to the time period, scope of activities or geographic area of
restrictions are declared by a court of competent jurisdiction to exceed the
maximum permissible time period, scope of activities or geographic area, the
maximum time period, scope of activities or geographic area, as the case may be,
shall be reduced to the maximum which such court deems enforceable. If any
provisions of Section 7 other than those described in the preceding sentence are
adjudicated to be invalid or unenforceable, the invalid or unenforceable
provisions shall be deemed amended (with respect only to the jurisdiction in
which such adjudication is made) in such manner as to render them enforceable
and to effectuate as nearly as possible the original intentions and agreement of
the parties.
8. NOTICES. All notices or other communications which any party to
this Agreement may desire or be required to give under this Agreement shall be
deemed to have been given the first business day after being delivered to a
nationally recognized overnight courier for next business day delivery to the
address of such party set forth below or such other address as either party may
from time to time give notice to the other in the aforesaid manner:
If to the Company: Golden Bear, Inc.
11780 U.S. Highway No. 1
North Palm Beach, Florida 33408
Attn: _________________________
If to the Executive: Richard P. Bellinger
-------------------------------
-------------------------------
Attn: _________________________
9. MISCELANEOUS
9.1 ENTIRE AGREEMENT. This Agreement and all agreements and
documents referred to in this Agreement are intended to and do constitute the
entire agreement between the parties and supersede all prior oral or written
agreements or understandings of the parties with regard to the subject matter of
this Agreement. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter of this Agreement, have been made by
either party which are not expressly set forth in this Agreement.
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<PAGE>
9.2 NO ORAL MODIFICATIONS. No interpretation, change, termination
or waiver of any provision of this Agreement shall be binding upon a party
unless in writing and executed by the party or parties to be bound thereby.
9.3 NO ASSIGNMENT. Neither this Agreement nor any rights or
obligations under this Agreement may be assigned or delegated by the parties to
this Agreement, except for any assignment by the Company occurring by operation
of law.
9.4 BINDING EFFECT. This Agreement shall be binding upon the
parties and their respective successors and shall inure to the benefit of the
parties and their respective successors.
9.5 GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Florida without giving effect to any conflict of laws provision thereof.
9.6 PREVAILING PARTIES. In the event of a dispute regarding any of
the terms of this Agreement, the party prevailing in such dispute shall be paid
its legal costs, including reasonable attorneys' fees, incurred in connection
with the enforcement or interpretation of this Agreement, in litigation and in
preparation for litigation, and at trial and in connection with any appellate
action.
9.7 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9.8 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original and all of which, together, will
constitute one and the same agreement. Any telecopied version of a manually
executed signature page delivered by one party to the other shall be deemed a
manually executed and delivered original.
9.9 NO WAIVER. Any waiver by either party of any provision of this
Agreement shall not be construed as a continuing waiver thereof or a waiver of
any other provision of this Agreement.
9.10 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
9.11 REMEDIES. Neither the termination of this Agreement, the
provision of a specific remedy, nor any other provision of this Agreement shall
be construed to prohibit any party from pursuing any remedy available at law or
in equity for the breach or violation of the provisions of this Agreement.
9.12 SURVIVAL. The terms of Sections 3, 6, 7, and 9 of this
Agreement shall survive the expiration or termination of this Agreement.
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IN WITNESS WHEREOF, the undersigned have entered into this
Agreement on the date set forth above.
GOLDEN BEAR, INC.:
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
EXECUTIVE:
By:
-----------------------------------
Name:Richard P. Bellinger
Title: President and Chief Executive Officer
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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), is dated as of ____________,
1996, between Golden Bear Golf, Inc., a Florida corporation (the "Company"), and
Mark Hesemann (the "Executive").
WHEREAS, the Executive has been employed by certain predecessors of the
Company since _______________, 19__, in various capacities;
WHEREAS, pursuant to reorganization transactions contemplated in that
certain Agreement and Plan of Reorganization, dated June 6, 1996, the Company
will acquire a portion of the businesses and operations of such predecessors;
WHEREAS, the proposed reorganization transactions will be consummated
only upon the closing of an initial public offering of the Company's Class "A"
Common Stock (such date being hereafter referred to as the "Effective Date");
and
WHEREAS, contingent upon the closing of the initial public offering,
the Company desires to employ the Executive in an executive capacity and the
Executive desires to accept such employment, all upon the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth in this Agreement, the Company and the Executive agree as
follows:
1. TERMS OF EMPLOYMENT. The Company shall employ the Executive, and the
Executive accepts such employment, on the terms and subject to the conditions
set forth in this Agreement, for a four and one-half (4-1/2) year term beginning
as of the Effective Date and expiring on ____________ (the "Initial Term");
provided, that at the conclusion of the Initial Term, this Agreement shall
automatically be extended for ________ additional years, unless at least one
hundred and eighty (180) days prior to such date either the Executive or the
Company, gives notice to the other that the Executive or the Company does not
wish to extend the Initial Term. The Initial Term and any extension thereof
shall be referred to herein as the "Term".
2. SERVICES.
2.1 OFFICE AND DUTIES. During the Term, the Executive shall
serve as Senior Vice President of the Company and shall have powers and
authority commensurate with such position as may be assigned to him by the
Company's Board of Directors or any committee thereof existing from time to
time.
2.2 BEST EFFORTS. During the Term, the Executive shall devote
the Executive's best efforts and a minimum of eighty percent (80%) of his time
and energies during business hours to the business of the Company and shall use
his best efforts, skills and abilities to promote the interests of the Company.
3. COMPENSATION.
3.1 CASH COMPENSATION. During the Term, the Executive shall
receive an initial base salary at the annual rate of $210,000 ("Base Salary"),
payable in accordance with the Company's normal payroll practices. The Base
Salary shall be subject to increase from time to time as may be determined upon
a review
<PAGE>
of the Executive's performances to be undertaken by the Compensation Committee
of the Board of Directors at least once annually ("Compensation Committee")
3.2 INCENTIVE AWARD PAYMENTS. For each fiscal year during the
Term, the Executive shall be entitled to receive a short-term incentive award
(the "Bonus")) based on the Company's Annual Pre-tax Income relative to its
Annual Pre-tax Income projected in the Business Plan ("Business Plan") approved
by the Company's Board of Directors with respect to such fiscal year. For each
fiscal year, "Annual Pre-tax Income" means the "Income Before Provision for
Income Taxes and Extraordinary Items" set forth in the Company's audited
Consolidated Statement of Operations. The Compensation Committee shall set in
advance of each fiscal year the formula for determining amounts payable as a
Bonus for such fiscal year, after the Compensation Committee consults with the
Executive and the Board of Directors approves the Business Plan.
If the Executive's employment with the Company shall terminate
after the commencement of, but prior to the expiration of, any fiscal year
(except for termination for Cause, as defined in Section 5.3, then the Bonus
payable to the Executive for services rendered during such fiscal year shall be
equal to the Bonus for such fiscal year determined as described above,
multiplied by a fraction, the numerator of which shall be the number of days
during such fiscal year that the Executive was an employee of the Company, and
the denominator of which shall be 360.
3.3 SUPPLEMENTAL INCENTIVE AWARD PAYMENTS. Each year during
the Term, the Compensation Committee may, but shall be under no obligation to,
establish a supplemental incentive award pool, consisting of a percentage of the
salaries of the executive officers of the Company determined by the Compensation
Committee after consulting with management of the Company, which is to be paid
out to executives of the Company provided the Company's performance meets or
exceeds annual objectives predetermined by the Compensation Committee. It is
anticipated that if such a pool is established, the objectives would consist
primarily of the Company's meeting operating income targets, but also may
consist of the Company's meeting sales targets, increasing its revenue base
and/or other factors. The Executive's payment from such an incentive award pool
relative to other Company executives is to be weighted based upon the
Executive's position in the Company and contribution towards the Company's
performance relative to the annual objectives. In the event the Compensation
Committee determines that such objectives are not met for a fiscal year and that
it is appropriate to establish such a pool, the Chairman of the Board shall be
entitled to allocate the incentive award pool among the Executive and other
executive officers of the Company, provided that all such awards must be
approved by the Compensation Committee, which may revise the awards at its
discretion.
3.4 LONG-TERM INCENTIVE COMPENSATION. The Company shall grant
to Executive, options to purchase _________ shares of the Common Stock of the
Company. In addition, the Company shall grant to the Executive options to
purchase an aggregate of _______ shares of common stock of the Company pursuant
to the Golden Bear Golf, Inc. 1996 Stock Option Plan (the "Plan"). The options
granted hereunder shall be subject to the provisions of the Stock Option
Agreement. Those issued pursuant to the Plan shall be issued in accordance with
the terms of the Plan.
3.5 ADDITIONAL COMPENSATION. Nothing in this Agreement shall
be deemed to prohibit the Compensation Committee from granting the Executive
such increased compensation, incentive awards or other benefits as the
Compensation Committee from time to time may determine, provided that the
parties recognize
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and acknowledge that the Compensation Committee shall be under no obligation to
grant any such increase and shall have full discretion in making any
determination with respect thereto. The Compensation Committee shall also
determine what allowances to provide Executive, including without limitation,
auto allowance, allowance for membership in country clubs, and allowance for
increased and additional benefits, in addition to those benefits for which
Executive is eligible under section 4.2, below.
4. REIMBURSEMENT OF EXPENSES; BENEFITS.
4.1 REIMBURSEMENT OF EXPENSES. Upon submission of appropriate
documentation and in accordance with such guidelines as may be established from
time to time by the Company's Board of Directors, the Company shall reimburse
the Executive for all reasonable business expenses actually and necessarily
incurred in the performance of his duties under this Agreement.
4.2 EMPLOYEE BENEFIT PLANS AND PROGRAMS. During the Term, the
Executive shall be entitled to participate in all group life insurance, pension,
medical insurance, hospitalization, disability and other similar employee
benefit plans and programs of the Company, subject to eligibility and vesting
requirements from time to time in effect, which at any time during the Term may
be offered by the Company to its executive officers generally, provided that
nothing in this Agreement shall require the Company at any time to create or
continue any such plan or program or to fix, amend or retain eligibility
requirements so as to include the Executive.
4.3 VACATIONS. The Executive shall be entitled to that amount
of paid vacation during each calendar year as is the Company's policy for
executive employees, taking into consideration the reasonable business needs of
the Company. The Executive may take vacation at such times as the Executive
elects, upon reasonable advance notice to the Company so long as the Executive
takes no more than _____ consecutive weeks of vacation and provided further that
such vacation does not effect the operations and business needs of the Company.
The Executive shall be permitted to accrue from all previous years of employment
no more than the amount of time specified in the Company's vacation accrual
policy for executive employees as exists at the time the vacation would be
accrued.
5. TERMINATION. The Executive's employment under this Agreement
may be terminated prior to the end of the Term by the Company or the Executive
without any breach of this Agreement under the following circumstances:
5.1 DEATH. The Executive's employment under this Agreement
shall terminate upon the Executive's death.
5.2 DISABILITY. The Company may terminate the Executive's
employment if the Executive is unable to perform the Executive's services by
reason of the Executive's "Disability". "Disability" means the Executive's
inability to perform the Executive's duties under this Agreement by reason of
any physical or mental impairment which reasonably can be expected to result in
death or which has lasted or reasonably can be expected to last for an aggregate
of 90 days out of any 180 day period.
5.3 CAUSE. In addition to the right to terminate this
Agreement as set forth in Sections 5.1 and 5.2, the Company may also terminate
the Executive's employment under this Agreement for "Cause".
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"Cause" shall include without limitation, the following: (a) action by the
Executive involving willful misconduct, dishonesty or gross neglect which has a
materially adverse affect on the business or reputation of the Company; (b)
Employee's conviction of a crime punishable by death or imprisonment of one year
or more under the laws of the jurisdiction in which convicted, or of a crime
involving theft, misappropriation of funds, fraud or deception, regardless of
the punishment; (c) Employee is charged or indicted for a crime for which, if
convicted, the Company would have the right to terminate Employee's employment
under (b) above; or (d) the refusal or failure of the Executive to discharge his
duties under Section 2 in all material respects, where such alleged refusal or
failure is not remedied within 15 days after the date of the Executive's being
given a written demand from the Company to remedy such alleged refusal or
failure, which demand shall specify the circumstances being relied upon for
termination. The Executive's employment under this Agreement shall be deemed
terminated as of the date of the demand for termination under clauses (a)
through (d) above, unless, in the case of termination under clause (d) above,
such alleged breach is timely remedied within such 15 days.
5.4 GOOD REASON. Subject to Sections 5.2 and 5.3, the
Executive may terminate his employment under this Agreement for "Good Reason".
"Good Reason" means: (a) any removal of the Executive without cause from the
position of of the Company; (b) a failure by the Company to pay when due all
compensation provided for in this Agreement within 10 days after it becomes due;
or (d) a material failure by the Company to comply with any of the other
material provisions of this Agreement; and any such event set forth in clauses
(a) and (b) above shall not be remedied within 45 days from the date the
Executive delivers written notice thereof to the Company specifically
identifying the nature of the facts constituting the Good Reason.
6. PAYMENTS TO EXECUTIVE DURING DISABILITY AND AFTER TERMINATION.
6.1 PAYMENTS AFTER DEATH. If the Executive's employment is
terminated under Section 5.1 above because of the Executive's death, the
Executive's estate shall receive the Base Salary and a prorated portion of the
Bonus, if any, through the date of termination in accordance with the terms of
this Agreement.
6.2 PAYMENTS PRIOR TO TERMINATION DURING DISABILITY. During
any period during the Term that the Executive is unable to perform his duties
hereunder by reason of the Executive's Disability, the Executive shall continue
to receive the Base Salary and Bonuses, if any, (payable by the Company only to
the extent not payable by Company's disability insurance carrier), until the
Executive's employment is terminated pursuant to Section 5.2 above.
6.3 PAYMENTS AFTER TERMINATION BECAUSE OF DISABILITy. If the
Executive's employment is terminated under Section 5.2 because of the
Executive's Disability, the Executive shall continue to receive the Base Salary
up through the date of termination and for a period of twelve (12) months
thereafter (determined as of the date of termination); provided, that the
Company's obligation to make such payments shall be offset as of the date the
Executive begins receiving payments or benefits from the Company's disability
insurance carrier or under any employee benefit plan or program of the Company
providing disability benefits or compensation, by the amount of such payments,
benefits or compensation.
6.4 PAYMENTS AFTER TERMINATION FOR CAUSE. If the Executive's
employment is terminated under Section 5.3 for Cause, the Executive shall
receive the Base Salary through the date of termination in
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accordance with the terms of this Agreement and thereafter Executive shall not
be entitled to receive any further compensation or benefits whatsoever.
6.5 PAYMENTS AFTER WRONGFUL TERMINATION.
(a) If the Company terminates the Executive's
employment other than because of the Executive's death, Disability, or for
Cause, or if the Executive shall terminate the Executive's employment for Good
Reason pursuant to Section 5.4 (any such termination being referred to as a
"Wrongful Termination"), then the Executive shall continue to receive:1) the
Base Salary, in effect on the termination date, for a period of twenty four (24)
months following the date of termination; 2) for the two years following
termination, an amount equal to the average annual Bonus, if any, received by
Executive prior to termination; and 3) and to the extent permitted by law and
the terms of any employee benefit plan, Executive shall continue to be eligible
to participate in the Company's employee benefit plans for the Term of the
Agreement.
(b) Notwithstanding the terms of Section 6.5(a
above, if a Wrongful Termination occurs within a period of one year after a
Change of Control (as defined below), the Executive shall be entitled within 30
days after such termination to a lump sum payment equal to the greater of (i)
the Base Salary and Bonuses, if any (in each case, determined as of the date of
termination), through the remaining Term, and (ii) 30 months of the Base Salary,
in each case, subject to Section 6.6 below.
A Change of Control will occur: (i) on the date of
the acquisition by any person, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities and Exchange Act of 1934, as amended),
excluding the Company, any of its subsidiaries or any holder of the Company's
Class B Common Stock, par value $.01 per share, of [40%] or more of the then
outstanding voting securities entitled to vote generally in the election of
directors; (ii) on the date of any sale of the Company's or any of its
subsidiaries' assets which required approval of the Company's shareholders under
the Florida Business Corporation Act; or (iii) on the date of any consolidation
or merger to which the Company is a party or any stock exchange or similar
transaction as a result of which the holders of the Company's outstanding voting
securities immediately prior to such transaction do not continue to own voting
securities in the new or surviving entity entitling them to elect its Board of
directors.
6.6 PARACHUTE PAYMENTS.
(a) In the event any payment or benefit received
or to be received by the Executive in connection with the terms of this
Agreement after termination of employment ("Post-Termination Payments") would
not be deductible in whole or in part by the Company as a result of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code"), such
Post-Termination Payments shall be reduced until no portion of the Post
Termination Payments is not deductible. For purposes of this limitation: (i) no
portion of the Post-Termination Payments shall be taken into account which in
the opinion of tax counsel selected by the Company and acceptable to the
Executive does not constitute a parachute payment within the meaning of Section
280G(b)(2) of the Code; and (ii) the value of any non-cash benefit or any
deferred payment or benefit included in the Post-Termination Payments shall be
determined by the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
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(b) The timing of any payment or benefit
received or to be received by the Executive shall be in accordance with this
Agreement, provided that if the amounts of such payments, and the limitations on
such payments set forth in Section 6.6(a) above, cannot be determined finally on
or before the time such payments are due, the Company shall pay to the Executive
on such due date an estimate, as determined in good faith by the Company, of the
amount of such payments and shall pay the remainder of such payments, if any
(together with interest at the rate provided in Section 7872(f)(2) of the Code),
as soon as the amount thereof can be determined. In the event that the amount of
the estimated payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to the Executive,
payable upon demand by the Company (together with interest computed from the
date of payment at the rate provided in Section 7872(f)(2) of the Code).
7. CONFIDENTIALITY; INTELLECTUAL PROPERTY; NONCOMPETITION.
7.1 CONFIDENTIALITY. The Executive shall not, during the Term
or any time after the Term, use or divulge to any person any Confidential
Information (as defined below) relating to the Company or any of its
subsidiaries which may have come to the Executive's knowledge at any time during
the Executive's term of employment with the Company or during the time that
Executive was employed by Company's predecessor in interest, Golden Bear
International, Inc. "Confidential Information" shall mean any information not
generally available to the public concerning the Company or any of its
subsidiaries, including, but not limited to, methods of operation, methods of
doing business, sales, files, forms, lists and names of and the needs and
requirements of customers and suppliers, the nature and content of any
contracts, and any inventions, techniques, methods, products, devices, trade
secrets, copyrights, patents, other rights to and in all knowledge, information
and materials proprietary to the Company (including business plans and financial
information), which relate to or are used in connection with any business or
activity carried on by the Company or any of its subsidiaries. At or prior to
the termination of the Executive's employment with the Company, the Executive
shall deliver to the Company (i) all property of the Company in the possession
or under the control of the Executive and (ii) all written or printed material
and all other property (including, but not limited to, computerized data) in the
possession or under the control of the Executive relating to Confidential
Information.
7.2 OWNERSHIP OF CERTAIN INTELLECTUAL PROPERTY. The Executive
hereby sells, transfers and assigns to the Company or to any person or entity
designated by the Company, the Executive's entire, right, title and interest in
and to all inventions, ideas, disclosures, intellectual property rights and
improvements, whether patented or unpatented, and copyrightable material made or
conceived by the Executive, solely or jointly, during the term of the
Executive's employment, which relate to methods, apparatus, designs, ideas,
products, processes, items or devices, sold, leased, used or under consideration
or development by the Company or which otherwise relate or pertain to the
businesses, functions or operations of the Company. The Executive shall
communicate promptly and disclose to the Company, in such form as the Executive
may be requested to do so by the Company's Board of Directors, all information,
details and data pertaining to these matters and shall execute and deliver to
the Company such formal transfers and assignments and such other papers and
documents as may be requested of the Executive to permit the Company or any
person or entity designated by the Company to file and prosecute the patent
applications and as to copyrightable material to obtain copyright thereof. The
Executive irrevocably appoints the Company's designee as the Executive's
attorney-in-fact for the purpose of carrying out the terms of this Section 7.2,
and acknowledges that this appointment is irrevocable and coupled with an
interest.
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7.3 NONCOMPETITION. So long as the Executive remains employed
or engaged by the Company (whether under this Agreement or any other written or
oral agreement or arrangement) and for a period of two years after the voluntary
resignation of the Executive as an employee of the Company or the termination by
the Company of any such employment or engagement for Cause pursuant to Section
5.3 or upon the expiration of the Term of this Agreement, the Executive shall
not engage or have an interest, anywhere in the United States of America or any
other geographic area where the Company or any of its subsidiaries do business
or in which its products are marketed, alone or in association with others, as
principal, officer, agent, employee, consultant, independent contractor,
director, partner or stockholder, or through the investment of capital, lending
of money or property, rendering of services or otherwise, in any business
competitive with the business engaged in by the Company or any of its
subsidiaries; provided, that the foregoing shall not be construed to prohibit
the Executive from owning, in the aggregate, less than 5% of any class of
securities listed on a national securities exchange or traded publicly on the
over-the-counter market. During the same period, the Executive shall not, and
shall not knowingly or intentionally permit, cause or authorize any of his
employees, agents or others under his control to, directly or indirectly, on
behalf of himself or any other Person, to (a) call upon, accept business from,
or solicit the business of any Person who is, or who had been at any time during
the preceding two years, a customer of the Company, any subsidiary of the
Company or any successor to the business of the Company or any subsidiary of the
Company, or otherwise divert or attempt to divert any business from the Company,
any subsidiary of the Company or any such successor, or (b) recruit or otherwise
solicit or induce any person who is an employee of, or otherwise engaged by, the
Company, any subsidiary of the Company or any such successor to terminate his or
her employment or other relationship with the Company, any subsidiary of the
Company or such successor, or hire or engage any person who has left the employ
of or engagement by the Company, any subsidiary of the Company or any such
successor during the preceding six months. The Executive shall not at any time,
directly or indirectly, use or purport to authorize any Person to use any name,
mark, logo, trade dress or other identifying words or images which are the same
as or similar to those used at any time by the Company or any subsidiary of the
Company in connection with any product or service, whether or not such use would
be in a business competitive with that of the Company or any subsidiary of the
Company.
7.4 REMEDIES. The restrictions set forth in this Section 7 are
considered by the parties to be reasonable for the purposes of protecting the
value of the business and goodwill of the Company. The Executive acknowledges
that the Company would be irreparably harmed and that monetary damages would not
provide an adequate remedy in the event of a breach of the provisions of this
Section 7. Accordingly, the Executive agrees that, in addition to any other
remedies available to the Company, the Company shall be entitled to injunctive
and other equitable relief, (without any bond or security being required to be
posted) to secure the enforcement of these provisions, and shall be entitled to
receive reimbursement from the Executive for all attorneys' fees and expenses
incurred by the Company in enforcing these provisions. If the Executive breaches
any of the provisions of this Section 7, in addition to its other rights and
remedies, the Company shall have the right to require the Executive to account
for and pay over to the Company all compensation, profits, money, accruals and
other benefits derived or received, directly or indirectly, by the Executive
from the action constituting such breach. If the Executive breaches the covenant
set forth in Section 7.3, the running of the noncompete period described therein
(but not his obligations) shall be tolled for so long as such breach continues.
It is the desire and intent of the parties that the provisions of Section 7 be
enforced to the fullest extent permissible under the laws and public policies of
each jurisdiction in which enforcement is sought. If any provisions of Section 7
relating to the time period, scope of activities
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or geographic area of restrictions are declared by a court of competent
jurisdiction to exceed the maximum permissible time period, scope of activities
or geographic area, the maximum time period, scope of activities or geographic
area, as the case may be, shall be reduced to the maximum which such court deems
enforceable. If any provisions of Section 7 other than those described in the
preceding sentence are adjudicated to be invalid or unenforceable, the invalid
or unenforceable provisions shall be deemed amended (with respect only to the
jurisdiction in which such adjudication is made) in such manner as to render
them enforceable and to effectuate as nearly as possible the original intentions
and agreement of the parties.
8. NOTICES. All notices or other communications which any party to this
Agreement may desire or be required to give under this Agreement shall be deemed
to have been given the first business day after being delivered to a nationally
recognized overnight courier for next business day delivery to the address of
such party set forth below or such other address as either party may from time
to time give notice to the other in the aforesaid manner:
If to the Company: Golden Bear, Inc.
11780 U.S. Highway No. 1
North Palm Beach, Florida 33408
Attn: _________________________
If to the Executive: Mark Hesemann
-------------------------------
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Attn: _________________________
9. Miscellaneous.
9.1 ENTIRE AGREEMENT. This Agreement and all agreements and
documents referred to in this Agreement are intended to and do constitute the
entire agreement between the parties and supersede all prior oral or written
agreements or understandings of the parties with regard to the subject matter of
this Agreement. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter of this Agreement, have been made by
either party which are not expressly set forth in this Agreement.
9.2 NO ORAL MODIFICATIONS. No interpretation, change,
termination or waiver of any provision of this Agreement shall be binding upon a
party unless in writing and executed by the party or parties to be bound
thereby.
9.3 NO ASSIGNMENT. Neither this Agreement nor any rights or
obligations under this Agreement may be assigned or delegated by the parties to
this Agreement, except for any assignment by the Company occurring by operation
of law.
9.4 BINDING EFFECT. This Agreement shall be binding upon the
parties and their respective successors and shall inure to the benefit of the
parties and their respective successors.
9.5 GOVERNING LAW. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
Florida without giving effect to any conflict of laws provision thereof.
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<PAGE>
9.6 PREVAILING PARTIES. In the event of a dispute regarding
any of the terms of this Agreement, the party prevailing in such dispute shall
be paid its legal costs, including reasonable attorneys' fees, incurred in
connection with the enforcement or interpretation of this Agreement, in
litigation and in preparation for litigation, and at trial and in connection
with any appellate action.
9.7 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9.8 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which,
together, will constitute one and the same agreement. Any telecopied version of
a manually executed signature page delivered by one party to the other shall be
deemed a manually executed and delivered original.
9.9 NO WAIVER. Any waiver by either party of any provision of
this Agreement shall not be construed as a continuing waiver thereof or a waiver
of any other provision of this Agreement.
9.10 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
9.11 REMEDIES. Neither the termination of this Agreement, the
provision of a specific remedy, nor any other provision of this Agreement shall
be construed to prohibit any party from pursuing any remedy available at law or
in equity for the breach or violation of the provisions of this Agreement.
9.12 SURVIVAL. The terms of Sections 3, 6, 7, and 9 of this
Agreement shall survive the expiration or termination of this Agreement.
IN WITNESS WHEREOF, the undersigned have entered into this
Agreement on the date set forth above.
GOLDEN BEAR, INC.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
EXECUTIVE
By:
---------------------------------
Name: Mark Hesemann
Title: Senior Vice Presiden
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EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), is dated as of ____________,
1996, between Golden Bear Golf, Inc., a Florida corporation (the "Company"), and
Thomas P. Hislop (the "Executive").
WHEREAS, the Executive has been employed by certain predecessors of the
Company since _______________, 19__, in various capacities;
WHEREAS, pursuant to reorganization transactions contemplated in that
certain Agreement and Plan of Reorganization, dated June 6, 1996, the Company
will acquire a portion of the businesses and operations of such predecessors;
WHEREAS, the proposed reorganization transactions will be consummated
only upon the closing of an initial public offering of the Company's Class "A"
Common Stock (such date being hereafter referred to as the "Effective Date");
and
WHEREAS, contingent upon the closing of the initial public offering,
the Company desires to employ the Executive in an executive capacity and the
Executive desires to accept such employment, all upon the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth in this Agreement, the Company and the Executive agree as
follows:
1. TERMS OF EMPLOYMENT. The Company shall employ the Executive, and the
Executive accepts such employment, on the terms and subject to the conditions
set forth in this Agreement, for a four and one-half (4-1/2) year term beginning
as of the Effective Date and expiring on ____________ (the "Initial Term");
PROVIDED, that at the conclusion of the Initial Term, this Agreement shall
automatically be extended for ________ additional years, unless at least one
hundred and eighty (180) days prior to such date either the Executive or the
Company, gives notice to the other that the Executive or the Company does not
wish to extend the Initial Term. The Initial Term and any extension thereof
shall be referred to herein as the "Term".
2. SERVICES.
2.1 OFFICE AND DUTIES. During the Term, the Executive shall
serve as Senior Vice President of the Company and shall have powers and
authority commensurate with such position as may be assigned to him by the
Company's Board of Directors or any committee thereof existing from time to
time.
2.2 BEST EFFORTS. During the Term, the Executive shall devote
the Executive's best efforts and a minimum of eighty percent (80%) of his time
and energies during business hours to the business of the Company and shall use
his best efforts, skills and abilities to promote the interests of the Company.1
3. COMPENSATION.
3.1 CASH COMPENSATION. During the Term, the Executive shall
receive an initial base salary at the annual rate of $210,000 ("Base Salary"),
payable in accordance with the Company's normal payroll practices. The Base
Salary shall be subject to increase from time to time as may be determined upon
a review
<PAGE>
of the Executive's performances to be undertaken by the Compensation
Committee of the Board of Directors at least once annually ("Compensation
Committee")
3.2 INCENTIVE AWARD PAYMENTS. For each fiscal year during the
Term, the Executive shall be entitled to receive a short-term incentive award
(the "Bonus")) based on the Company's Annual Pre-tax Income relative to its
Annual Pre-tax Income projected in the Business Plan ("Business Plan") approved
by the Company's Board of Directors with respect to such fiscal year. For each
fiscal year, "Annual Pre-tax Income" means the "Income Before Provision for
Income Taxes and Extraordinary Items" set forth in the Company's audited
Consolidated Statement of Operations. The Compensation Committee shall set in
advance of each fiscal year the formula for determining amounts payable as a
Bonus for such fiscal year, after the Compensation Committee consults with the
Executive and the Board of Directors approves the Business Plan.
If the Executive's employment with the Company shall terminate
after the commencement of, but prior to the expiration of, any fiscal year
(except for termination for Cause, as defined in Section 5.3, then the Bonus
payable to the Executive for services rendered during such fiscal year shall be
equal to the Bonus for such fiscal year determined as described above,
multiplied by a fraction, the numerator of which shall be the number of days
during such fiscal year that the Executive was an employee of the Company, and
the denominator of which shall be 360.
3.3 SUPPLEMENTAL INCENTIVE AWARD PAYMENTS. Each year during
the Term, the Compensation Committee may, but shall be under no obligation to,
establish a supplemental incentive award pool, consisting of a percentage of the
salaries of the executive officers of the Company determined by the Compensation
Committee after consulting with management of the Company, which is to be paid
out to executives of the Company provided the Company's performance meets or
exceeds annual objectives predetermined by the Compensation Committee. It is
anticipated that if such a pool is established, the objectives would consist
primarily of the Company's meeting operating income targets, but also may
consist of the Company's meeting sales targets, increasing its revenue base
and/or other factors. The Executive's payment from such an incentive award pool
relative to other Company executives is to be weighted based upon the
Executive's position in the Company and contribution towards the Company's
performance relative to the annual objectives. In the event the Compensation
Committee determines that such objectives are not met for a fiscal year and that
it is appropriate to establish such a pool, the Chairman of the Board shall be
entitled to allocate the incentive award pool among the Executive and other
executive officers of the Company, provided that all such awards must be
approved by the Compensation Committee, which may revise the awards at its
discretion.
3.4 LONG-TERM INCENTIVE COMPENSATION. The Company shall grant
to Executive, options to purchase _______ shares of the Common Stock of the
Company. In addition, the Company shall grant to the Executive options to
purchase an aggregate of _______ shares of common stock of the Company pursuant
to the Golden Bear Golf, Inc. 1996 Stock Option Plan (the "Plan"). The options
granted hereunder shall be subject to the provisions of the Stock Option
Agreement. Those issued pursuant to the Plan shall be issued in accordance with
the terms of the Plan.
3.5 ADDITIONAL COMPENSATION. Nothing in this Agreement shall
be deemed to prohibit the Compensation Committee from granting the Executive
such increased compensation, incentive awards or other benefits as the
Compensation Committee from time to time may determine, provided that the
parties recognize
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<PAGE>
and acknowledge that the Compensation Committee shall be under no obligation to
grant any such increase and shall have full discretion in making any
determination with respect thereto. The Compensation Committee shall also
determine what allowances to provide Executive, including without limitation,
auto allowance, allowance for membership in country clubs, and allowance for
increased and additional benefits, in addition to those benefits for which
Executive is eligible under section 4.2, below.
4. REIMBURSEMENT OF EXPENSES; BENEFITS.
4.1 REIMBURSEMENT OF EXPENSES. Upon submission of appropriate
documentation and in accordance with such guidelines as may be established from
time to time by the Company's Board of Directors, the Company shall reimburse
the Executive for all reasonable business expenses actually and necessarily
incurred in the performance of his duties under this Agreement.
4.2 EMPLOYEE BENEFIT PLANS AND PROGRAMS. During the Term, the
Executive shall be entitled to participate in all group life insurance, pension,
medical insurance, hospitalization, disability and other similar employee
benefit plans and programs of the Company, subject to eligibility and vesting
requirements from time to time in effect, which at any time during the Term may
be offered by the Company to its executive officers generally, provided that
nothing in this Agreement shall require the Company at any time to create or
continue any such plan or program or to fix, amend or retain eligibility
requirements so as to include the Executive.
4.3 VACATIONS. The Executive shall be entitled to that amount
of paid vacation during each calendar year as is the Company's policy for
executive employees, taking into consideration the reasonable business needs of
the Company. The Executive may take vacation at such times as the Executive
elects, upon reasonable advance notice to the Company so long as the Executive
takes no more than __________ consecutive weeks of vacation and provided further
that such vacation does not effect the operations and business needs of the
Company. The Executive shall be permitted to accrue from all previous years of
employment no more than the amount of time specified in the Company's vacation
accrual policy for executive employees as exists at the time the vacation would
be accrued.
5. TERMINATION. The Executive's employment under this Agreement
may be terminated prior to the end of the Term by the Company or the Executive
without any breach of this Agreement under the following circumstances:
5.1 DEATH. The Executive's employment under this Agreement
shall terminate upon the Executive's death.
5.2 DISABILITY. The Company may terminate the Executive's
employment if the Executive is unable to perform the Executive's services by
reason of the Executive's "Disability". "Disability" means the Executive's
inability to perform the Executive's duties under this Agreement by reason of
any physical or mental impairment which reasonably can be expected to result in
death or which has lasted or reasonably can be expected to last for an aggregate
of 90 days out of any 180 day period.
5.3 CAUSE. In addition to the right to terminate this
Agreement as set forth in Sections 5.1 and 5.2, the Company may also terminate
the Executive's employment under this Agreement for "Cause".
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<PAGE>
"Cause" shall include without limitation, the following: (a) action by the
Executive involving willful misconduct, dishonesty or gross neglect which has a
materially adverse affect on the business or reputation of the Company; (b)
Employee's conviction of a crime punishable by death or imprisonment of one year
or more under the laws of the jurisdiction in which convicted, or of a crime
involving theft, misappropriation of funds, fraud or deception, regardless of
the punishment; (c) Employee is charged or indicted for a crime for which, if
convicted, the Company would have the right to terminate Employee's employment
under (b) above; or (d) the refusal or failure of the Executive to discharge his
duties under Section 2 in all material respects, where such alleged refusal or
failure is not remedied within 15 days after the date of the Executive's being
given a written demand from the Company to remedy such alleged refusal or
failure, which demand shall specify the circumstances being relied upon for
termination. The Executive's employment under this Agreement shall be deemed
terminated as of the date of the demand for termination under clauses (a)
through (d) above, unless, in the case of termination under clause (d) above,
such alleged breach is timely remedied within such 15 days.
5.4 GOOD REASON. Subject to Sections 5.2 and 5.3, the
Executive may terminate his employment under this Agreement for "Good Reason".
"Good Reason" means: (a) any removal of the Executive without cause from the
position of Senior Vice President of the Company; (b) a failure by the Company
to pay when due all compensation provided for in this Agreement within 10 days
after it becomes due; or (d) a material failure by the Company to comply with
any of the other material provisions of this Agreement; and any such event set
forth in clauses (a) and (b) above shall not be remedied within 45 days from the
date the Executive delivers written notice thereof to the Company specifically
identifying the nature of the facts constituting the Good Reason.
6. PAYMENTS TO EXECUTIVE DURING DISABILITY AND AFTER TERMINATION.
6.1 PAYMENTS AFTER DEATH. If the Executive's employment is
terminated under Section 5.1 above because of the Executive's death, the
Executive's estate shall receive the Base Salary and a prorated portion of the
Bonus, if any, through the date of termination in accordance with the terms of
this Agreement.
6.2 PAYMENTS PRIOR TO TERMINATION DURING DISABILITY. During
any period during the Term that the Executive is unable to perform his duties
hereunder by reason of the Executive's Disability, the Executive shall continue
to receive the Base Salary and Bonuses, if any, (payable by the Company only to
the extent not payable by Company's disability insurance carrier), until the
Executive's employment is terminated pursuant to Section 5.2 above.
6.3 PAYMENTS AFTER TERMINATION BECAUSE OF DISABILITY. If the
Executive's employment is terminated under Section 5.2 because of the
Executive's Disability, the Executive shall continue to receive the Base Salary
up through the date of termination and for a period of twelve (12) months
thereafter (determined as of the date of termination); PROVIDED, that the
Company's obligation to make such payments shall be offset as of the date the
Executive begins receiving payments or benefits from the Company's disability
insurance carrier or under any employee benefit plan or program of the Company
providing disability benefits or compensation, by the amount of such payments,
benefits or compensation.
6.4 PAYMENTS AFTER TERMINATION FOR CAUSE. If the Executive's
employment is terminated under Section 5.3 for Cause, the Executive shall
receive the Base Salary through the date of termination in
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<PAGE>
accordance with the terms of this Agreement and thereafter Executive shall not
be entitled to receive any further compensation or benefits whatsoever.
6.5 PAYMENTS AFTER WRONGFUL TERMINATION.
(a) If the Company terminates the Executive's
employment other than because of the Executive's death, Disability, or for
Cause, or if the Executive shall terminate the Executive's employment for Good
Reason pursuant to Section 5.4 (any such termination being referred to as a
"Wrongful Termination"), then the Executive shall continue to receive:1) the
Base Salary, in effect on the termination date, for a period of twenty four (24)
months following the date of termination; 2) for the two years following
termination, an amount equal to the average annual Bonus, if any, received by
Executive prior to termination; and 3) and to the extent permitted by law and
the terms of any employee benefit plan, Executive shall continue to be eligible
to participate in the Company's employee benefit plans for the Term of the
Agreement.
(b) Notwithstanding the terms of Section 6.5(a)
above, if a Wrongful Termination occurs within a period of one year after a
Change of Control (as defined below), the Executive shall be entitled within 30
days after such termination to a lump sum payment equal to the greater of (i)
the Base Salary and Bonuses, if any (in each case, determined as of the date of
termination), through the remaining Term, and (ii) 30 months of the Base Salary,
in each case, subject to Section 6.6 below.
A Change of Control will occur: (i) on the date of
the acquisition by any person, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities and Exchange Act of 1934, as amended),
excluding the Company, any of its subsidiaries or any holder of the Company's
Class "B" Common Stock, par value $.01 per share, of [40%] or more of the then
outstanding voting securities entitled to vote generally in the election of
directors; (ii) on the date of any sale of the Company's or any of its
subsidiaries' assets which required approval of the Company's shareholders under
the Florida Business Corporation Act; or (iii) on the date of any consolidation
or merger to which the Company is a party or any stock exchange or similar
transaction as a result of which the holders of the Company's outstanding voting
securities immediately prior to such transaction do not continue to own voting
securities in the new or surviving entity entitling them to elect its Board of
directors.
6.6 PARACHUTE PAYMENTS.
(a) In the event any payment or benefit received
or to be received by the Executive in connection with the terms of this
Agreement after termination of employment ("Post-Termination Payments") would
not be deductible in whole or in part by the Company as a result of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code"), such
Post-Termination Payments shall be reduced until no portion of the Post
Termination Payments is not deductible. For purposes of this limitation: (i) no
portion of the Post-Termination Payments shall be taken into account which in
the opinion of tax counsel selected by the Company and acceptable to the
Executive does not constitute a parachute payment within the meaning of Section
280G(b)(2) of the Code; and (ii) the value of any non-cash benefit or any
deferred payment or benefit included in the Post-Termination Payments shall be
determined by the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
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<PAGE>
(b) The timing of any payment or benefit
received or to be received by the Executive shall be in accordance with this
Agreement, provided that if the amounts of such payments, and the limitations on
such payments set forth in Section 6.6(a) above, cannot be determined finally on
or before the time such payments are due, the Company shall pay to the Executive
on such due date an estimate, as determined in good faith by the Company, of the
amount of such payments and shall pay the remainder of such payments, if any
(together with interest at the rate provided in Section 7872(f)(2) of the Code),
as soon as the amount thereof can be determined. In the event that the amount of
the estimated payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to the Executive,
payable upon demand by the Company (together with interest computed from the
date of payment at the rate provided in Section 7872(f)(2) of the Code).
7. CONFIDENTIALITY; INTELLECTUAL PROPERTY; NONCOMPETITION.
7.1 CONFIDENTIALITY. The Executive shall not, during the Term
or any time after the Term, use or divulge to any person any Confidential
Information (as defined below) relating to the Company or any of its
subsidiaries which may have come to the Executive's knowledge at any time during
the Executive's term of employment with the Company or during the time that
Executive was employed by Company's predecessor in interest, Golden Bear
International, Inc. "Confidential Information" shall mean any information not
generally available to the public concerning the Company or any of its
subsidiaries, including, but not limited to, methods of operation, methods of
doing business, sales, files, forms, lists and names of and the needs and
requirements of customers and suppliers, the nature and content of any
contracts, and any inventions, techniques, methods, products, devices, trade
secrets, copyrights, patents, other rights to and in all knowledge, information
and materials proprietary to the Company (including business plans and financial
information), which relate to or are used in connection with any business or
activity carried on by the Company or any of its subsidiaries. At or prior to
the termination of the Executive's employment with the Company, the Executive
shall deliver to the Company (i) all property of the Company in the possession
or under the control of the Executive and (ii) all written or printed material
and all other property (including, but not limited to, computerized data) in the
possession or under the control of the Executive relating to Confidential
Information.
7.2 OWNERSHIP OF CERTAIN INTELLECTUAL PROPERTY. The Executive
hereby sells, transfers and assigns to the Company or to any person or entity
designated by the Company, the Executive's entire, right, title and interest in
and to all inventions, ideas, disclosures, intellectual property rights and
improvements, whether patented or unpatented, and copyrightable material made or
conceived by the Executive, solely or jointly, during the term of the
Executive's employment, which relate to methods, apparatus, designs, ideas,
products, processes, items or devices, sold, leased, used or under consideration
or development by the Company or which otherwise relate or pertain to the
businesses, functions or operations of the Company. The Executive shall
communicate promptly and disclose to the Company, in such form as the Executive
may be requested to do so by the Company's Board of Directors, all information,
details and data pertaining to these matters and shall execute and deliver to
the Company such formal transfers and assignments and such other papers and
documents as may be requested of the Executive to permit the Company or any
person or entity designated by the Company to file and prosecute the patent
applications and as to copyrightable material to obtain copyright thereof. The
Executive irrevocably appoints the Company's designee as the Executive's
attorney-in-fact for the purpose of carrying out the terms of this Section 7.2,
and acknowledges that this appointment is irrevocable and coupled with an
interest.
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<PAGE>
7.3 NONCOMPETITION. So long as the Executive remains employed
or engaged by the Company (whether under this Agreement or any other written or
oral agreement or arrangement) and for a period of two years after the voluntary
resignation of the Executive as an employee of the Company or the termination by
the Company of any such employment or engagement for Cause pursuant to Section
5.3 or upon the expiration of the Term of this Agreement, the Executive shall
not engage or have an interest, anywhere in the United States of America or any
other geographic area where the Company or any of its subsidiaries do business
or in which its products are marketed, alone or in association with others, as
principal, officer, agent, employee, consultant, independent contractor,
director, partner or stockholder, or through the investment of capital, lending
of money or property, rendering of services or otherwise, in any business
competitive with the business engaged in by the Company or any of its
subsidiaries; provided, that the foregoing shall not be construed to prohibit
the Executive from owning, in the aggregate, less than 5% of any class of
securities listed on a national securities exchange or traded publicly on the
over-the-counter market. During the same period, the Executive shall not, and
shall not knowingly or intentionally permit, cause or authorize any of his
employees, agents or others under his control to, directly or indirectly, on
behalf of himself or any other Person, to (a) call upon, accept business from,
or solicit the business of any Person who is, or who had been at any time during
the preceding two years, a customer of the Company, any subsidiary of the
Company or any successor to the business of the Company or any subsidiary of the
Company, or otherwise divert or attempt to divert any business from the Company,
any subsidiary of the Company or any such successor, or (b) recruit or otherwise
solicit or induce any person who is an employee of, or otherwise engaged by, the
Company, any subsidiary of the Company or any such successor to terminate his or
her employment or other relationship with the Company, any subsidiary of the
Company or such successor, or hire or engage any person who has left the employ
of or engagement by the Company, any subsidiary of the Company or any such
successor during the preceding six months. The Executive shall not at any time,
directly or indirectly, use or purport to authorize any Person to use any name,
mark, logo, trade dress or other identifying words or images which are the same
as or similar to those used at any time by the Company or any subsidiary of the
Company in connection with any product or service, whether or not such use would
be in a business competitive with that of the Company or any subsidiary of the
Company.
7.4 REMEDIES. The restrictions set forth in this Section 7 are
considered by the parties to be reasonable for the purposes of protecting the
value of the business and goodwill of the Company. The Executive acknowledges
that the Company would be irreparably harmed and that monetary damages would not
provide an adequate remedy in the event of a breach of the provisions of this
Section 7. Accordingly, the Executive agrees that, in addition to any other
remedies available to the Company, the Company shall be entitled to injunctive
and other equitable relief, (without any bond or security being required to be
posted) to secure the enforcement of these provisions, and shall be entitled to
receive reimbursement from the Executive for all attorneys' fees and expenses
incurred by the Company in enforcing these provisions. If the Executive breaches
any of the provisions of this Section 7, in addition to its other rights and
remedies, the Company shall have the right to require the Executive to account
for and pay over to the Company all compensation, profits, money, accruals and
other benefits derived or received, directly or indirectly, by the Executive
from the action constituting such breach. If the Executive breaches the covenant
set forth in Section 7.3, the running of the noncompete period described therein
(but not his obligations) shall be tolled for so long as such breach continues.
It is the desire and intent of the parties that the provisions of Section 7 be
enforced to the fullest extent permissible under the laws and public policies of
each jurisdiction in which enforcement is sought. If any provisions of Section 7
relating to the time period, scope of activities
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<PAGE>
or geographic area of restrictions are declared by a court of competent
jurisdiction to exceed the maximum permissible time period, scope of activities
or geographic area, the maximum time period, scope of activities or geographic
area, as the case may be, shall be reduced to the maximum which such court deems
enforceable. If any provisions of Section 7 other than those described in the
preceding sentence are adjudicated to be invalid or unenforceable, the invalid
or unenforceable provisions shall be deemed amended (with respect only to the
jurisdiction in which such adjudication is made) in such manner as to render
them enforceable and to effectuate as nearly as possible the original intentions
and agreement of the parties.
8. NOTICES. All notices or other communications which any party to this
Agreement may desire or be required to give under this Agreement shall be deemed
to have been given the first business day after being delivered to a nationally
recognized overnight courier for next business day delivery to the address of
such party set forth below or such other address as either party may from time
to time give notice to the other in the aforesaid manner:
If to the Company: Golden Bear, Inc.
11780 U.S. Highway No. 1
North Palm Beach, Florida 33408
Attn: _________________________
If to the Executive: Thomas P. Hislop
-------------------------------
-------------------------------
Attn: _________________________
9. MISCELLANEOUS.
9.1 ENTIRE AGREEMENT. This Agreement and all agreements and
documents referred to in this Agreement are intended to and do constitute the
entire agreement between the parties and supersede all prior oral or written
agreements or understandings of the parties with regard to the subject matter of
this Agreement. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter of this Agreement, have been made by
either party which are not expressly set forth in this Agreement.
9.2 NO ORAL MODIFICATIONS. No interpretation, change,
termination or waiver of any provision of this Agreement shall be binding upon a
party unless in writing and executed by the party or parties to be bound
thereby.
9.3 NO ASSIGNMENT. Neither this Agreement nor any rights or
obligations under this Agreement may be assigned or delegated by the parties to
this Agreement, except for any assignment by the Company occurring by operation
of law.
9.4 BINDING EFFECT. This Agreement shall be binding upon the
parties and their respective successors and shall inure to the benefit of the
parties and their respective successors.
9.5 GOVERNING LAW. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
Florida without giving effect to any conflict of laws
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<PAGE>
provision thereof.
9.6 PREVAILING PARTIES. In the event of a dispute regarding
any of the terms of this Agreement, the party prevailing in such dispute shall
be paid its legal costs, including reasonable attorneys' fees, incurred in
connection with the enforcement or interpretation of this Agreement, in
litigation and in preparation for litigation, and at trial and in connection
with any appellate action.
9.7 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9.8 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which,
together, will constitute one and the same agreement. Any telecopied version of
a manually executed signature page delivered by one party to the other shall be
deemed a manually executed and delivered original.
9.9 NO WAIVER. Any waiver by either party of any provision of
this Agreement shall not be construed as a continuing waiver thereof or a waiver
of any other provision of this Agreement.
9.10 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
9.11 REMEDIES. Neither the termination of this Agreement, the
provision of a specific remedy, nor any other provision of this Agreement shall
be construed to prohibit any party from pursuing any remedy available at law or
in equity for the breach or violation of the provisions of this Agreement.
9.12 SURVIVAL. The terms of Sections 3, 6, 7, and 9 of this
Agreement shall survive the expiration or termination of this Agreement.
IN WITNESS WHEREOF, the undersigned have entered into this
Agreement on the date set forth above.
GOLDEN BEAR, INC.:
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
EXECUTIVE:
By:
------------------------------
Name: Thomas P. Hislop
Title: Senior Vice President
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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), is dated as of ____________,
1996, between Golden Bear Golf, Inc., a Florida corporation (the "Company"), and
Jack P. Bates (the "Executive").
WHEREAS, the Executive has been employed by certain predecessors of the
Company since _______________, 19__, in various capacities;
WHEREAS, pursuant to reorganization transactions contemplated in that
certain Agreement and Plan of Reorganization, dated June 6, 1996, the Company
will acquire a portion of the businesses and operations of such predecessors;
WHEREAS, the proposed reorganization transactions will be consummated
only upon the closing of an initial public offering of the Company's Class "A"
Common Stock (such date being hereafter referred to as the "Effective Date");
and
WHEREAS, contingent upon the closing of the initial public offering,
the Company desires to employ the Executive in an executive capacity and the
Executive desires to accept such employment, all upon the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth in this Agreement, the Company and the Executive agree as
follows:
1. TERMS OF EMPLOYMENT. The Company shall employ the Executive, and the
Executive accepts such employment, on the terms and subject to the conditions
set forth in this Agreement, for a three and one-half (3-1/2) year term
beginning as of the Effective Date and expiring on ____________ (the "Initial
Term"); PROVIDED, that at the conclusion of the Initial Term, this Agreement
shall automatically be extended for ________ additional years, unless at least
one hundred and eighty (180) days prior to such date either the Executive or the
Company, gives notice to the other that the Executive or the Company does not
wish to extend the Initial Term. The Initial Term and any extension thereof
shall be referred to herein as the "Term".
2. SERVICES.
2.1 OFFICE AND DUTIES. During the Term, the Executive shall
serve as President and Chief Financial Officer of the Company and shall have
powers and authority commensurate with such position as may be assigned to him
by the Company's Board of Directors or any committee thereof existing from time
to time.
2.2 BEST EFFORTS. During the Term, the Executive shall devote
the Executive's best efforts and a minimum of eighty percent (80%) of his time
and energies during business hours to the business of the Company and shall use
his best efforts, skills and abilities to promote the interests of the Company.
3. COMPENSATION.
3.1 CASH COMPENSATION. During the Term, the Executive shall
receive an initial base salary at the annual rate of $160,000 ("Base Salary"),
payable in accordance with the Company's normal payroll practices. The Base
Salary shall be subject to increase from time to time as may be determined upon
a review
<PAGE>
of the Executive's performances to be undertaken by the Compensation
Committee of the Board of Directors at least once annually ("Compensation
Committee")
3.2 INCENTIVE AWARD PAYMENTS. For each fiscal year during the
Term, the Executive shall be entitled to receive a short-term incentive award
(the "Bonus")) based on the Company's Annual Pre-tax Income relative to its
Annual Pre-tax Income projected in the Business Plan ("Business Plan") approved
by the Company's Board of Directors with respect to such fiscal year. For each
fiscal year, "Annual Pre-tax Income" means the "Income Before Provision for
Income Taxes and Extraordinary Items" set forth in the Company's audited
Consolidated Statement of Operations. The Compensation Committee shall set in
advance of each fiscal year the formula for determining amounts payable as a
Bonus for such fiscal year, after the Compensation Committee consults with the
Executive and the Board of Directors approves the Business Plan.
If the Executive's employment with the Company shall terminate
after the commencement of, but prior to the expiration of, any fiscal year
(except for termination for Cause, as defined in Section 5.3, then the Bonus
payable to the Executive for services rendered during such fiscal year shall be
equal to the Bonus for such fiscal year determined as described above,
multiplied by a fraction, the numerator of which shall be the number of days
during such fiscal year that the Executive was an employee of the Company, and
the denominator of which shall be 360.
3.3 SUPPLEMENTAL INCENTIVE AWARD PAYMENTS. Each year during
the Term, the Compensation Committee may, but shall be under no obligation to,
establish a supplemental incentive award pool, consisting of a percentage of the
salaries of the executive officers of the Company determined by the Compensation
Committee after consulting with management of the Company, which is to be paid
out to executives of the Company provided the Company's performance meets or
exceeds annual objectives predetermined by the Compensation Committee. It is
anticipated that if such a pool is established, the objectives would consist
primarily of the Company's meeting operating income targets, but also may
consist of the Company's meeting sales targets, increasing its revenue base
and/or other factors. The Executive's payment from such an incentive award pool
relative to other Company executives is to be weighted based upon the
Executive's position in the Company and contribution towards the Company's
performance relative to the annual objectives. In the event the Compensation
Committee determines that such objectives are not met for a fiscal year and that
it is appropriate to establish such a pool, the Chairman of the Board shall be
entitled to allocate the incentive award pool among the Executive and other
executive officers of the Company, provided that all such awards must be
approved by the Compensation Committee, which may revise the awards at its
discretion.
3.4 LONG-TERM INCENTIVE COMPENSATION. The Company shall grant
to Executive, options to purchase ____________ shares of the Common Stock of the
Company. In addition, the Company shall grant to the Executive options to
purchase an aggregate of _______ shares of common stock of the Company pursuant
to the Golden Bear Golf, Inc. 1996 Stock Option Plan (the "Plan"). The options
granted hereunder shall be subject to the provisions of the Stock Option
Agreement. Those issued pursuant to the Plan shall be issued in accordance with
the terms of the Plan.
3.5 ADDITIONAL COMPENSATION. Nothing in this Agreement shall
be deemed to prohibit the Compensation Committee from granting the Executive
such increased compensation, incentive awards or other benefits as the
Compensation Committee from time to time may determine, provided that the
parties recognize
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<PAGE>
and acknowledge that the Compensation Committee shall be under no obligation to
grant any such increase and shall have full discretion in making any
determination with respect thereto. The Compensation Committee shall also
determine what allowances to provide Executive, including without limitation,
auto allowance, allowance for membership in country clubs, and allowance for
increased and additional benefits, in addition to those benefits for which
Executive is eligible under section 4.2, below.
4. REIMBURSEMENT OF EXPENSES; BENEFITS.
4.1 REIMBURSEMENT OF EXPENSES. Upon submission of appropriate
documentation and in accordance with such guidelines as may be established from
time to time by the Company's Board of Directors, the Company shall reimburse
the Executive for all reasonable business expenses actually and necessarily
incurred in the performance of his duties under this Agreement.
4.2 EMPLOYEE BENEFIT PLANS AND PROGRAMS. During the Term, the
Executive shall be entitled to participate in all group life insurance, pension,
medical insurance, hospitalization, disability and other similar employee
benefit plans and programs of the Company, subject to eligibility and vesting
requirements from time to time in effect, which at any time during the Term may
be offered by the Company to its executive officers generally, provided that
nothing in this Agreement shall require the Company at any time to create or
continue any such plan or program or to fix, amend or retain eligibility
requirements so as to include the Executive.
4.3 VACATIONS. The Executive shall be entitled to that amount
of paid vacation during each calendar year as is the Company's policy for
executive employees, taking into consideration the reasonable business needs of
the Company. The Executive may take vacation at such times as the Executive
elects, upon reasonable advance notice to the Company so long as the Executive
takes no more than ______ consecutive weeks of vacation and provided further
that such vacation does not effect the operations and business needs of the
Company. The Executive shall be permitted to accrue from all previous years of
employment no more than the amount of time specified in the Company's vacation
accrual policy for executive employees as exists at the time the vacation would
be accrued.
5. TERMINATION. The Executive's employment under this
Agreement may be terminated prior to the end of the Term by the Company or the
Executive without any breach of this Agreement under the following
circumstances:
5.1 DEATH. The Executive's employment under this Agreement
shall terminate upon the
Executive's death.
5.2 DISABILITY. The Company may terminate the Executive's
employment if the Executive is unable to perform the Executive's services by
reason of the Executive's "Disability". "Disability" means the Executive's
inability to perform the Executive's duties under this Agreement by reason of
any physical or mental impairment which reasonably can be expected to result in
death or which has lasted or reasonably can be expected to last for an aggregate
of 90 days out of any 180 day period.
5.3 CAUSE. In addition to the right to terminate this
Agreement as set forth in Sections 5.1 and 5.2, the Company may also terminate
the Executive's employment under this Agreement for "Cause".
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<PAGE>
"Cause" shall include without limitation, the following: (a) action by the
Executive involving willful misconduct, dishonesty or gross neglect which has a
materially adverse affect on the business or reputation of the Company; (b)
Employee's conviction of a crime punishable by death or imprisonment of one year
or more under the laws of the jurisdiction in which convicted, or of a crime
involving theft, misappropriation of funds, fraud or deception, regardless of
the punishment; (c) Employee is charged or indicted for a crime for which, if
convicted, the Company would have the right to terminate Employee's employment
under (b) above; or (d) the refusal or failure of the Executive to discharge his
duties under Section 2 in all material respects, where such alleged refusal or
failure is not remedied within 15 days after the date of the Executive's being
given a written demand from the Company to remedy such alleged refusal or
failure, which demand shall specify the circumstances being relied upon for
termination. The Executive's employment under this Agreement shall be deemed
terminated as of the date of the demand for termination under clauses (a)
through (d) above, unless, in the case of termination under clause (d) above,
such alleged breach is timely remedied within such 15 days.
5.4 GOOD REASON. Subject to Sections 5.2 and 5.3, the
Executive may terminate his employment under this Agreement for "Good Reason".
"Good Reason" means: (a) any removal of the Executive without cause from the
position of Senior Vice President and Chief Financial Officer of the Company;
(b) a failure by the Company to pay when due all compensation provided for in
this Agreement within 10 days after it becomes due; or (d) a material failure by
the Company to comply with any of the other material provisions of this
Agreement; and any such event set forth in clauses (a) and (b) above shall not
be remedied within 45 days from the date the Executive delivers written notice
thereof to the Company specifically identifying the nature of the facts
constituting the Good Reason.
6. PAYMENTS TO EXECUTIVE DURING DISABILITY AND AFTER TERMINATION.
6.1 PAYMENTS AFTER DEATH. If the Executive's employment is
terminated under Section 5.1 above because of the Executive's death, the
Executive's estate shall receive the Base Salary and a prorated portion of the
Bonus, if any, through the date of termination in accordance with the terms of
this Agreement.
6.2 PAYMENTS PRIOR TO TERMINATION DURING DISABILITY. During
any period during the Term that the Executive is unable to perform his duties
hereunder by reason of the Executive's Disability, the Executive shall continue
to receive the Base Salary and Bonuses, if any, (payable by the Company only to
the extent not payable by Company's disability insurance carrier), until the
Executive's employment is terminated pursuant to Section 5.2 above.
6.3 PAYMENTS AFTER TERMINATION BECAUSE OF DISABILITY. If the
Executive's employment is terminated under Section 5.2 because of the
Executive's Disability, the Executive shall continue to receive the Base Salary
up through the date of termination and for a period of twelve (12) months
thereafter (determined as of the date of termination); PROVIDED, that the
Company's obligation to make such payments shall be offset as of the date the
Executive begins receiving payments or benefits from the Company's disability
insurance carrier or under any employee benefit plan or program of the Company
providing disability benefits or compensation, by the amount of such payments,
benefits or compensation.
6.4 PAYMENTS AFTER TERMINATION FOR CAUSE. If the Executive's
employment is terminated under Section 5.3 for Cause, the Executive shall
receive the Base Salary through the date of termination in
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<PAGE>
accordance with the terms of this Agreement and thereafter Executive shall not
be entitled to receive any further compensation or benefits whatsoever.
6.5 PAYMENTS AFTER WRONGFUL TERMINATION.
(a) If the Company terminates the Executive's
employment other than because of the Executive's death, Disability, or for
Cause, or if the Executive shall terminate the Executive's employment for Good
Reason pursuant to Section 5.4 (any such termination being referred to as a
"Wrongful Termination"), then the Executive shall continue to receive:1) the
Base Salary, in effect on the termination date, for a period of twenty four (24)
months following the date of termination; 2) for the two years following
termination, an amount equal to the average annual Bonus, if any, received by
Executive prior to termination; and 3) and to the extent permitted by law and
the terms of any employee benefit plan, Executive shall continue to be eligible
to participate in the Company's employee benefit plans for the Term of the
Agreement.
(b) Notwithstanding the terms of Section 6.5(a)
above, if a Wrongful Termination occurs within a period of one year after a
Change of Control (as defined below), the Executive shall be entitled within 30
days after such termination to a lump sum payment equal to the greater of (i)
the Base Salary and Bonuses, if any (in each case, determined as of the date of
termination), through the remaining Term, and (ii) 30 months of the Base Salary,
in each case, subject to Section 6.6 below.
A Change of Control will occur: (i) on the date of
the acquisition by any person, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities and Exchange Act of 1934, as amended),
excluding the Company, any of its subsidiaries or any holder of the Company's
Class B Common Stock, par value $.01 per share, of [40%] or more of the then
outstanding voting securities entitled to vote generally in the election of
directors; (ii) on the date of any sale of the Company's or any of its
subsidiaries' assets which required approval of the Company's shareholders under
the Florida Business Corporation Act; or (iii) on the date of any consolidation
or merger to which the Company is a party or any stock exchange or similar
transaction as a result of which the holders of the Company's outstanding voting
securities immediately prior to such transaction do not continue to own voting
securities in the new or surviving entity entitling them to elect its Board of
directors.
6.6 PARACHUTE PAYMENTS.
(a) In the event any payment or benefit received
or to be received by the Executive in connection with the terms of this
Agreement after termination of employment ("Post-Termination Payments") would
not be deductible in whole or in part by the Company as a result of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code"), such
Post-Termination Payments shall be reduced until no portion of the Post
Termination Payments is not deductible. For purposes of this limitation: (i) no
portion of the Post-Termination Payments shall be taken into account which in
the opinion of tax counsel selected by the Company and acceptable to the
Executive does not constitute a parachute payment within the meaning of Section
280G(b)(2) of the Code; and (ii) the value of any non-cash benefit or any
deferred payment or benefit included in the Post-Termination Payments shall be
determined by the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
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<PAGE>
(b) The timing of any payment or benefit
received or to be received by the Executive shall be in accordance with this
Agreement, provided that if the amounts of such payments, and the limitations on
such payments set forth in Section 6.6(a) above, cannot be determined finally on
or before the time such payments are due, the Company shall pay to the Executive
on such due date an estimate, as determined in good faith by the Company, of the
amount of such payments and shall pay the remainder of such payments, if any
(together with interest at the rate provided in Section 7872(f)(2) of the Code),
as soon as the amount thereof can be determined. In the event that the amount of
the estimated payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to the Executive,
payable upon demand by the Company (together with interest computed from the
date of payment at the rate provided in Section 7872(f)(2) of the Code).
7. CONFIDENTIALITY; INTELLECTUAL PROPERTY; NONCOMPETITION.
7.1 CONFIDENTIALITY. The Executive shall not, during the Term
or any time after the Term, use or divulge to any person any Confidential
Information (as defined below) relating to the Company or any of its
subsidiaries which may have come to the Executive's knowledge at any time during
the Executive's term of employment with the Company or during the time that
Executive was employed by Company's predecessor in interest, Golden Bear
International, Inc. "Confidential Information" shall mean any information not
generally available to the public concerning the Company or any of its
subsidiaries, including, but not limited to, methods of operation, methods of
doing business, sales, files, forms, lists and names of and the needs and
requirements of customers and suppliers, the nature and content of any
contracts, and any inventions, techniques, methods, products, devices, trade
secrets, copyrights, patents, other rights to and in all knowledge, information
and materials proprietary to the Company (including business plans and financial
information), which relate to or are used in connection with any business or
activity carried on by the Company or any of its subsidiaries. At or prior to
the termination of the Executive's employment with the Company, the Executive
shall deliver to the Company (i) all property of the Company in the possession
or under the control of the Executive and (ii) all written or printed material
and all other property (including, but not limited to, computerized data) in the
possession or under the control of the Executive relating to Confidential
Information.
7.2 OWNERSHIP OF CERTAIN INTELLECTUAL PROPERTY. The Executive
hereby sells, transfers and assigns to the Company or to any person or entity
designated by the Company, the Executive's entire, right, title and interest in
and to all inventions, ideas, disclosures, intellectual property rights and
improvements, whether patented or unpatented, and copyrightable material made or
conceived by the Executive, solely or jointly, during the term of the
Executive's employment, which relate to methods, apparatus, designs, ideas,
products, processes, items or devices, sold, leased, used or under consideration
or development by the Company or which otherwise relate or pertain to the
businesses, functions or operations of the Company. The Executive shall
communicate promptly and disclose to the Company, in such form as the Executive
may be requested to do so by the Company's Board of Directors, all information,
details and data pertaining to these matters and shall execute and deliver to
the Company such formal transfers and assignments and such other papers and
documents as may be requested of the Executive to permit the Company or any
person or entity designated by the Company to file and prosecute the patent
applications and as to copyrightable material to obtain copyright thereof. The
Executive irrevocably appoints the Company's designee as the Executive's
attorney-in-fact for the purpose of carrying out the terms of this Section 7.2,
and acknowledges that this appointment is irrevocable and coupled with an
interest.
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<PAGE>
7.3 NONCOMPETITION. So long as the Executive remains employed
or engaged by the Company (whether under this Agreement or any other written or
oral agreement or arrangement) and for a period of two years after the voluntary
resignation of the Executive as an employee of the Company or the termination by
the Company of any such employment or engagement for Cause pursuant to Section
5.3 or upon the expiration of the Term of this Agreement, the Executive shall
not engage or have an interest, anywhere in the United States of America or any
other geographic area where the Company or any of its subsidiaries do business
or in which its products are marketed, alone or in association with others, as
principal, officer, agent, employee, consultant, independent contractor,
director, partner or stockholder, or through the investment of capital, lending
of money or property, rendering of services or otherwise, in any business
competitive with the business engaged in by the Company or any of its
subsidiaries; provided, that the foregoing shall not be construed to prohibit
the Executive from owning, in the aggregate, less than 5% of any class of
securities listed on a national securities exchange or traded publicly on the
over-the-counter market. During the same period, the Executive shall not, and
shall not knowingly or intentionally permit, cause or authorize any of his
employees, agents or others under his control to, directly or indirectly, on
behalf of himself or any other Person, to (a) call upon, accept business from,
or solicit the business of any Person who is, or who had been at any time during
the preceding two years, a customer of the Company, any subsidiary of the
Company or any successor to the business of the Company or any subsidiary of the
Company, or otherwise divert or attempt to divert any business from the Company,
any subsidiary of the Company or any such successor, or (b) recruit or otherwise
solicit or induce any person who is an employee of, or otherwise engaged by, the
Company, any subsidiary of the Company or any such successor to terminate his or
her employment or other relationship with the Company, any subsidiary of the
Company or such successor, or hire or engage any person who has left the employ
of or engagement by the Company, any subsidiary of the Company or any such
successor during the preceding six months. The Executive shall not at any time,
directly or indirectly, use or purport to authorize any Person to use any name,
mark, logo, trade dress or other identifying words or images which are the same
as or similar to those used at any time by the Company or any subsidiary of the
Company in connection with any product or service, whether or not such use would
be in a business competitive with that of the Company or any subsidiary of the
Company.
7.4 REMEDIES. The restrictions set forth in this Section 7 are
considered by the parties to be reasonable for the purposes of protecting the
value of the business and goodwill of the Company. The Executive acknowledges
that the Company would be irreparably harmed and that monetary damages would not
provide an adequate remedy in the event of a breach of the provisions of this
Section 7. Accordingly, the Executive agrees that, in addition to any other
remedies available to the Company, the Company shall be entitled to injunctive
and other equitable relief, (without any bond or security being required to be
posted) to secure the enforcement of these provisions, and shall be entitled to
receive reimbursement from the Executive for all attorneys' fees and expenses
incurred by the Company in enforcing these provisions. If the Executive breaches
any of the provisions of this Section 7, in addition to its other rights and
remedies, the Company shall have the right to require the Executive to account
for and pay over to the Company all compensation, profits, money, accruals and
other benefits derived or received, directly or indirectly, by the Executive
from the action constituting such breach. If the Executive breaches the covenant
set forth in Section 7.3, the running of the noncompete period described therein
(but not his obligations) shall be tolled for so long as such breach continues.
It is the desire and intent of the parties that the provisions of Section 7 be
enforced to the fullest extent permissible under the laws and public policies of
each jurisdiction in which enforcement is sought. If any provisions of Section 7
relating to the time period, scope of activities
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<PAGE>
or geographic area of restrictions are declared by a court of competent
jurisdiction to exceed the maximum permissible time period, scope of activities
or geographic area, the maximum time period, scope of activities or geographic
area, as the case may be, shall be reduced to the maximum which such court deems
enforceable. If any provisions of Section 7 other than those described in the
preceding sentence are adjudicated to be invalid or unenforceable, the invalid
or unenforceable provisions shall be deemed amended (with respect only to the
jurisdiction in which such adjudication is made) in such manner as to render
them enforceable and to effectuate as nearly as possible the original intentions
and agreement of the parties.
8. NOTICES. All notices or other communications which any party to this
Agreement may desire or be required to give under this Agreement shall be deemed
to have been given the first business day after being delivered to a nationally
recognized overnight courier for next business day delivery to the address of
such party set forth below or such other address as either party may from time
to time give notice to the other in the aforesaid manner:
If to the Company: Golden Bear, Inc.
11780 U.S. Highway No. 1
North Palm Beach, Florida 33408
Attn: _________________________
If to the Executive: Jack P. Bates
-------------------------------
-------------------------------
Attn: _________________________
9. MISCELLANEOUS.
9.1 ENTIRE AGREEMENT. This Agreement and all agreements and
documents referred to in this Agreement are intended to and do constitute the
entire agreement between the parties and supersede all prior oral or written
agreements or understandings of the parties with regard to the subject matter of
this Agreement. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter of this Agreement, have been made by
either party which are not expressly set forth in this Agreement.
9.2 NO ORAL MODIFICATIONS. No interpretation, change,
termination or waiver of any provision of this Agreement shall be binding upon a
party unless in writing and executed by the party or parties to be bound
thereby.
9.3 NO ASSIGNMENT. Neither this Agreement nor any rights or
obligations under this Agreement may be assigned or delegated by the parties to
this Agreement, except for any assignment by the Company occurring by operation
of law.
9.4 BINDING EFFECT. This Agreement shall be binding upon the
parties and their respective successors and shall inure to the benefit of the
parties and their respective successors.
9.5 GOVERNING LAW. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
Florida without giving effect to any conflict of laws provision thereof.
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<PAGE>
9.6 PREVAILING PARTIES. In the event of a dispute regarding
any of the terms of this Agreement, the party prevailing in such dispute shall
be paid its legal costs, including reasonable attorneys' fees, incurred in
connection with the enforcement or interpretation of this Agreement, in
litigation and in preparation for litigation, and at trial and in connection
with any appellate action.
9.7 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9.8 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which,
together, will constitute one and the same agreement. Any telecopied version of
a manually executed signature page delivered by one party to the other shall be
deemed a manually executed and delivered original.
9.9 NO WAIVER. Any waiver by either party of any provision of
this Agreement shall not be construed as a continuing waiver thereof or a waiver
of any other provision of this Agreement.
9.10 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
9.11 REMEDIES. Neither the termination of this Agreement, the
provision of a specific remedy, nor any other provision of this Agreement shall
be construed to prohibit any party from pursuing any remedy available at law or
in equity for the breach or violation of the provisions of this Agreement.
9.12 SURVIVAL. The terms of Sections 3, 6, 7, and 9 of this
Agreement shall survive the expiration or termination of this Agreement.
IN WITNESS WHEREOF, the undersigned have entered into this
Agreement on the date set forth above.
GOLDEN BEAR, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
EXECUTIVE
By:
--------------------------------
Name: Jack P. Bates
Title: Senior Vice President and Chief
Financial Officer
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EXHIBIT 10.8
DIRECTOR INDEMNIFICATION AGREEMENT
This Agreement, dated as of _____________, is entered into between
Golden Bear Golf, Inc., a corporation organized under the laws of the State of
Florida (the "Company"), and name~ (the "Director").
RECITALS
A. Highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors or as executive officers unless they are
provided with adequate protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them arising out of their
service to, and activities on behalf of, the corporation.
B. The current impracticability of obtaining adequate insurance
and the uncertainties relating to indemnification have increased the difficulty
of attracting and retaining such persons.
C. The Bylaws of the Company presently provide, among other
things, that the Company shall indemnify its directors and officers to the full
extent permitted by law.
D. The Board has determined that the difficulty in attracting
and retaining highly competent persons is detrimental to the best interests of
the Company's shareholders and that the Company should act to assure such
persons that there will be increased certainty of protection against risks of
such claims and actions against them in the future.
E. It is reasonable, prudent, and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified.
F. The Director is willing to serve or continue to serve as a
director of the Company on the condition that the Director be so indemnified.
AGREEMENT
In consideration of the recitals and the covenants contained herein,
the Company and the Director covenant and agree as follows:
1. DEFINITIONS. As used in this Agreement the
following terms shall have the meanings indicated below:
(a) "Related Party" shall refer to (i) any other
corporation in which the Company has an equity interest of at least
<PAGE>
fifty percent (50%) and (ii) any other corporation or any limited liability
company, partnership, joint venture, trust, employee benefit plan or any other
enterprise or association in which the Director has served in any Indemnified
Position, at the request of the Company or for the convenience of the Company or
to represent the Company's interest. Any entity or plan described in Section
l(a)(ii) in which the Company has any interest or which is established in whole
or in part for the benefit of the Company or any other Related Party or the
Company or Related Party's employees shall be presumed to be a Related Party.
(b) "Indemnified Position" shall refer to any
position held by the Director, or pursuant to which the Director acts, as an
officer, director, employee, partner, trustee, fiduciary, administrator or agent
of the Company or a Related Party.
(c) "Indemnified Event" shall mean any claim
asserted against the Director, whether civil, criminal, administrative or
investigative in nature, for monetary or other relief; or any Proceeding to
which the Director is named as a party or is a subject of or witness in, or with
respect to which he or she is threatened to be named as a party, subject or
witness, brought against the Director by reason of his or her serving or acting
in any Indemnified Position or arising or allegedly arising directly or
indirectly out of, or otherwise relating to, any action, omission, occurrence or
event involving the Director in any Indemnified Position, including any
Proceeding, formal or informal or otherwise, conducted or brought by the
Securities and Exchange Commission or other governmental agency, or The National
Association of Securities Dealers, Inc., a national stock exchange or similar
organization.
(d) "Proceeding" shall mean any pending,
threatened or completed action, suit, investigation, inquiry, arbitration,
alternative dispute resolution mechanism or any other proceeding (or any appeals
therefrom), whether civil, criminal, administrative or investigative in nature
and whether in a court or arbitration, or before or involving a governmental,
administrative or private entity (including, but not limited to, an
investigation initiated by the Company, any Related Party or any affiliate
thereof, or the board of directors, fiduciaries or partners of any thereof).
(e) "Indemnification Amount" shall refer to the
amount of losses, claims, demands, costs, damages, liabilities (joint and
several), judgments, fines (including any excise tax assessed with respect to an
employee benefit plan), settlements, and other amounts (including Witness
Liabilities), including interest on any of the foregoing, which the Director is
liable to pay or has paid in connection with an Indemnified Event and amounts
proposed to be paid in settlement by the Director in connection with any
Indemnified Event.
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(f) "Witness Liabilities" shall mean all
Indemnification Amounts incurred by the Director in connection with his or her
preparation to serve or service as a witness in any Proceeding in any way
relating to the Company, any Related Party or any affiliate (as defined in Rule
405 under the Securities Act of 1933, as amended) of any of them (a "Securities
Act Affiliate"), any associate (as defined in such Rule 405) of any of them or
of any Securities Act Affiliate, or any Indemnified Event (including, but not
limited to, the investigation, defense or appeal in connection with any such
Proceeding).
(g) "Expenses" shall refer to all disbursements,
costs or expenses of any nature reasonably incurred by the Director directly or
indirectly in connection with any Indemnified Event, or Witness Liabilities,
including, but not limited to, fees and disbursements of counsel, accountants or
other experts employed by the Director in connection with any Indemnified Event,
including all such expenses, disbursements and costs of investigation in
connection with or prior to the initiation of any Proceeding relating to an
Indemnified Event.
(h) "Indemnify" or "Indemnification" shall refer
to the obligation of the Company herein to pay Expenses or
Indemnification Amounts.
(i) "Change of Control" shall be deemed to have
occurred if (A) any "Person" (as that term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended), but excluding the Company
and any of its wholly-owned subsidiaries, is or becomes (except in a transaction
approved in advance by the Board) the beneficial owner (as defined in Rule 13d-3
under such Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities or (B) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board cease for
any reason to constitute at least a majority thereof unless the election, or the
nomination for election by the Company's shareholders, of each new director was
approved by a vote of at least two-thirds of the directors still in office who
were directors at the beginning of the period, or (C) the shareholders of the
Company should approve any one of the following transactions: (x) any
consolidation or merger of the Company in which the Company is not the surviving
corporation, other than a merger of the Company in which the holders of the
Company's common stock immediately prior to the merger have the same
proportionate ownership of the surviving corporation immediately after the
merger; or (y) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, the assets of
the Company.
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(j) "Final Disposition" shall refer to any judgment,
order or award rendered in any Proceeding after the expiration of all rights of
appeal.
2. SERVICES TO THE COMPANY. The Director will serve, and/or
continue to serve, as a director of the Company, so long as he or she is duly
elected and qualified in accordance with the provisions of the Articles of
Incorporation and Bylaws of the Company, or in any other Indemnified Position,
at the will of the Company (or under separate contract, if any); provided that
the Director may at any time and for any reason resign from such Indemnified
Position (subject to any contractual obligations which the Director shall have
assumed apart from this Agreement) but the obligations provided for herein shall
continue after such termination.
3. INDEMNITY. The Company hereby agrees to indemnify the
Director and hold the Director harmless to the full extent permitted or
authorized by the provisions of current Florida legislation (including Sections
607.0850(7) and (9) of the Florida Business Corporation Act) or future Florida
legislation or, if broader indemnification is available, by current or future
judicial or administrative decisions (but, in the case of any such future
legislation or decisions, only to the extent that it permits the Company to
provide broader indemnification rights than permitted prior to such legislation
or decisions), and such Indemnification shall be made unless prohibited by
Florida law. Without limiting the generality of the foregoing, the Company
agrees to indemnify the Director and hold the Director harmless from and
against, and pay any and all, Expenses and Indemnification Amounts, including
Witness Liabilities.
Notwithstanding the foregoing, except with respect to
the indemnification specified in the second and third sentences of Section 7 or
in Section 10 or Section 13(b) of this Agreement, the Company shall indemnify
the Director in connection with a Proceeding (or part thereof) initiated by the
Director only if authorization for the Proceeding (or part thereof) was not
denied by the Board of Directors of the Company prior to the earlier of (i) 60
days after receipt of notice thereof from the Director and (ii) a Change of
Control.
4. PAYMENT OF EXPENSES. The Company shall advance all Expenses
within thirty (30) days after the receipt by the Company of a statement or
statements from the Director requesting such advance payment or payments from
time to time. Such statement or statements shall identify the nature and amount
of the Expenses to be advanced with reasonable specificity. The Director agrees
to repay any Expenses advanced if it shall ultimately be determined (which shall
only be made after the Final Disposition of the Proceeding related to an
Indemnified Event, as hereinafter provided) that the Director was not entitled
to reimbursement of
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Expenses in connection with the Indemnified Event for which such Expenses were
made.
5. INTERVAL PROTECTION. During the interval between the
Company's receipt of the Director's request for indemnification or advances and
the latest to occur of (a) payment in full to the Director of the
indemnification or advances to which he or she is entitled hereunder, or (b) a
final adjudication that the Director is not entitled to indemnification
hereunder, the Company shall provide "Interval Protection" which, for purposes
of this Agreement, shall mean the taking of the necessary steps (whether or not
such steps require expenditures to be made by the Company at that time) to stay,
pending a final determination of the Director's entitlement to indemnification
(and, if the Director is so entitled, the payment thereof), the execution,
enforcement or collection of any Indemnified Amount or Expenses or any other
amounts for which the Director may be liable (and as to which the Director has
requested indemnification hereunder) in order to avoid the Director's being or
becoming in default with respect to any such amounts (such necessary steps to
include, but not be limited to, the procurement of a surety bond to achieve such
stay or the loan to the Director (unsecured and with interest payable at the
prime rate) of amounts necessary to satisfy the Indemnified Amount or Expenses
or other amounts for which the Director may be liable and as to which a stay of
execution as aforesaid cannot be obtained, the Company by executing this
Agreement having made the judgment that, in general, such loan or similar
assistance may reasonably be expected to benefit the Company), within three days
after receipt of the Director's written request therefor, together with a
written undertaking by the Director to repay, no later than 120 days following
receipt of a statement therefor from the Company, amounts (if any) expended by
the Company for such purpose, if it is ultimately determined in a final
adjudication that the Director is not entitled to be indemnified against such
Indemnified Amounts or Expenses or other amounts.
6. INDEMNIFICATION BY COURT. Notwithstanding any other
provision of this Agreement including without limitation the fourth sentence of
Section 7, indemnification and advances shall also be made to the extent a
Florida circuit court, or another court of competent jurisdiction, or the court
in which a Proceeding was brought, shall determine that the Director, in view of
all the circumstances of the case, is fairly and reasonably entitled to
indemnification and/or advances for such Expenses as such court shall deem
proper.
7. INDEMNIFICATION PROCEDURE. Any Indemnification or advance
under this Agreement (other than Interval Protection) shall be made promptly and
in any event within thirty (30) days upon the written request of the Director
delivered to the Company. The right to Indemnification or advances as granted
under this Agreement shall be enforceable by the Director in any court of
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competent jurisdiction if the Company denies such request, in whole or in part,
or if no disposition thereof is made within thirty (30) days. The Director's
costs and expenses incurred in connection with successfully establishing his or
her right to indemnification or advances, in whole or in part, in any such
action shall also be indemnified by the Company. It shall be a defense to any
such action that there has been a judgment or other final adjudication adverse
to the Director which established that the Director failed to meet the standard
of conduct, if any, required for indemnification by current legislation or, if
applicable in accordance with Section 3 hereof, future legislation or current or
future judicial or administrative decisions, but the burden of proving such
defense shall be on the Company. Neither the failure of the Company (including
the Board or any committee thereof, its independent counsel and its
shareholders) to have made a determination prior to the commencement of such
action that indemnification of the Director is proper in the circumstances
because he or she has met the applicable standard of conduct described in the
preceding sentence, if any, nor the fact that there has been an actual
determination by the Company (including the Board or any committee thereof, its
independent counsel and its shareholders) that the Director has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
8. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
(a) The Director shall be presumed entitled to
Indemnification hereunder unless clearly not entitled to such Indemnification by
clear and convincing proof that such payment shall be unlawful.
(b) If the Company shall not have responded to
the Director's request for Indemnification pursuant to Section 7 hereof within
thirty (30) days after receipt by the Company of such request therefor, the
Director shall be deemed to be entitled to such Indemnification.
(c) The termination of any Proceeding relating
to an Indemnified Event or of any claim, issue, or matter therein by judgment,
order, settlement, or conviction, or upon a plea of nolo contendere or its
equivalent, shall not of itself adversely affect the right of the Director to
Indemnification or create a presumption that the Director did not meet any
applicable standard of conduct.
(d) Notwithstanding any other provision of this
Agreement, the Director shall in no event be required to repay any Expense
payments advanced to the Director and no defense can or shall be raised by the
Company to a request for Indemnification pursuant to Section 7 to the extent the
Director has been
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successful on the merits or otherwise in defense of any Proceeding related to an
Indemnified Event, or in defense of any claim, issue or matter involved in any
Indemnified Event therein, whether as a result of the initial adjudication or on
appeal or the abandonment thereof by a party.
9. NON-EXCLUSIVITY: DURATION OF AGREEMENT; INSURANCE;
SUBROGATION.
(a) The rights of Indemnification and to receive
advancement of Expenses as provided by this Agreement shall not be deemed
exclusive of any other rights to which the Director may at any time be entitled
under applicable law, the Articles of Incorporation, the By-laws, any other
agreement, or any vote or consent of directors or shareholders or otherwise.
(b) This Agreement shall continue until and
terminate upon the later of: (i) ten (10) years after the date that the Director
shall have ceased to serve in any Indemnified Position; or (ii) the Final
Disposition of all Indemnified Events.
(c) This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of the
Director and his or her heirs, devisees, executors, and administrators or other
legal representatives.
(d) To the extent that the Company maintains an
insurance policy or policies providing liability insurance for directors or
executive officers of the Company or for any person serving in any other
Indemnified Position, the Director shall be covered by such policy or policies
in accordance with its or their terms to the maximum extent of the coverage
available for any such director or executive officer or person serving in such
position under such policy or policies.
10. PROCEEDINGS.
(a) The parties hereto agree that except as
otherwise provided for herein, any disputes arising with respect to the
interpretation or enforcement of any provision hereof shall be submitted, at the
sole election of the Director, either to arbitration or to judicial
determination. Any arbitration shall be conducted in the County of Palm Beach,
Florida in accordance with the then existing rules of the American Arbitration
Association ("AAA"). In any arbitration pursuant to this Agreement, the award or
decision shall be rendered by a majority of the members of an arbitration panel
consisting of three members chosen in accordance with the then existing rules of
the AAA. The award or decision of the arbitration panel pursuant to this Section
10 shall be binding and conclusive on the parties, provided that enforcement of
such award or decision may be obtained in any court having jurisdiction over the
party against whom such enforcement is sought. The
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<PAGE>
Company hereby agrees to bear all fees, costs and expenses imposed by the AAA,
in connection with the arbitration, irrespective of the determination thereof.
The provisions of Section 10(c) shall govern with respect to the proceedings
referred to therein.
(b) In the event that, for any reason, the
Company fails to pay any Indemnification or advance demanded, or the Company
requests repayment of any Expenses advanced, the Director shall nevertheless be
entitled, at his or her sole option, to a final judicial determination or may
seek arbitration of his or her entitlement to Indemnification hereunder in
respect of such claim. In the event the Director seeks a judicial determination,
the Director shall commence an action in a court of the State of Florida. In the
event the Director seeks an award in arbitration, (i) such arbitration shall be
conducted in Palm Beach County, Florida pursuant to Section 10(a), and (ii) the
arbitrator shall notify the parties of his or her decision within sixty (60)
days following the initiation of such arbitration (or such other period
proscribed by the rules of AAA). The Company further agrees that its execution
of this Agreement shall constitute a stipulation by which it shall be bound in
any court or arbitration in which such proceeding shall have been commenced,
continued or appealed that (i) it shall not oppose the Director's right to seek
any such adjudication or award in arbitration or any other claim by reason of
any prior determination made by the Company with respect to the Director's right
to Indemnification under this Agreement on such claim or any other claim, or,
except in good faith, raise any objections not specifically relating to the
merits of the Director's claim; and (ii) for purposes of this Agreement any such
adjudication or arbitration shall be conducted de novo and without prejudice by
reason of any prior determination that the Director is not entitled to
Indemnification.
(c) Whether or not the court or arbitrators
shall determine that the Director is entitled to payment of Indemnification
Amounts or has to return the payment of Expenses or otherwise finds against the
Director, the Company shall within thirty (30) days after written request
therefor (and submission of reasonable evidence of the nature and amount
thereof), and unless there is a specific judicial finding that the Director's
suit or arbitration was frivolous, pay all Expenses incurred by the Director in
connection with such adjudication or arbitration (including, but not limited to,
any appellate proceedings).
11. SEVERABILITY. If any provision or provisions of this
Agreement shall be held to be invalid, illegal, or unenforceable for any reason
whatsoever: (a) the validity, legality, and enforceability of the remaining
provisions of this Agreement (including without limitation, each portion of any
Section, paragraph or clause of this Agreement containing any such provision
held to be invalid, illegal, or unenforceable, that is not itself invalid,
illegal, or unenforceable) shall not in any way
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<PAGE>
be affected or impaired thereby; and (b) to the fullest extent possible, the
provisions of this Agreement (including, without limitation, each portion of any
Section, paragraph or clause of this Agreement containing any such provision
held to be invalid, illegal, or unenforceable, that is not itself invalid,
illegal, or unenforceable) shall be deemed revised, and shall be construed, so
as to give effect to the intent manifested by this Agreement (including the
provision held invalid, illegal, or unenforceable).
12. MERGER OR CONSOLIDATION OF THE COMPANY. In the event that
the Company shall be a constituent corporation in a consolidation or merger,
whether or not the Company is the resulting or surviving corporation, the
Director shall stand in the same position under this Agreement with respect to
the Company if its separate existence had continued.
13. ENFORCEMENT.
(a) The Company unconditionally and irrevocably
stipulates and agrees that its execution of this Agreement shall also constitute
a stipulation by which it shall be bound in any court or arbitration in which a
proceeding by the Director for enforcement of his or her rights shall have been
commenced, continued or appealed, that the obligations of the Company set forth
herein are unique and special, and that failure of the Company to comply with
the provisions of this Agreement will cause irreparable and irremediable injury
to the Director, for which a remedy at law will be inadequate. As a result, in
addition to any other right or remedy he or she may have at law or in equity
with respect to a violation of this Agreement, the Director shall be entitled to
injunctive or mandatory relief directing specific performance by the Company of
its obligations under this Agreement.
(b) In the event that the Director is subject to
or intervenes in any legal action in which the validity or enforceability of
this Agreement is at issue or institutes any legal action, for specific
performance or otherwise, to enforce his or her rights under, or to recover
damages for breach of, this Agreement, the Director shall, within thirty (30)
days after written request to the Company therefor (and submission of reasonable
evidence of the amount thereof), and unless there is a specific judicial finding
that the Director's suit was frivolous, be indemnified by the Company against
all Expenses incurred by him or her in connection therewith.
14. NOTIFICATION AND DEFENSE OF CLAIM. The Director agrees to
promptly notify the Company in writing upon being served with any summons,
citation, subpoena, complaint, indictment, information or other document
relating to any Proceeding involving an Indemnification Event; provided,
however, that the failure of the Director to give such notice to the Company
shall not adversely affect the Director's rights under this Agreement except to
the
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extent the Company shall have been materially prejudiced by such failure.
Nothing in this Agreement shall constitute a waiver of the Company's right to
seek participation, at its own expense, in any Proceeding which may give rise to
Indemnification hereunder.
15. HEADINGS. The headings of the Sections and paragraphs of
this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
16. MODIFICATION AND WAIVER. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
17. NOTICES. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand, or sent via telecopy or facsimile
transmission, in each case receipted for by the party to whom said notice or
other communication shall have been directed or transmitted, or (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed, or (iii) delivered by overnight courier
service:
(a) If to the Director, to:
name~
address~
(b) If to the Company, to:
Golden Bear Golf, Inc.
11780 U.S. Highway, # 1
North Palm Beach, FL 33408
Attention: President and
Chief Executive Officer
or to such other address as may have been furnished to either party by the other
party.
18. ENTIRE AGREEMENT. All prior and contemporaneous
agreements and understandings between the parties with respect to the subject
matter of this Agreement are superseded by this Agreement, and this Agreement
constitutes the entire understanding between the parties. This Agreement may not
be modified, amended, changed or discharged except by a writing signed by the
parties hereto, and then only to the extent therein set forth.
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19. NONASSIGNMENT. This Agreement may not be assigned
by either of the parties hereto.
20. GOVERNING LAW. This Agreement, including its
validity, interpretation and effect, and the relationship of the parties shall
be governed by, and construed in accordance with, the laws of the State of
Florida.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the day and year first above written.
GOLDEN BEAR GOLF, INC.
By:
--------------------------------
DIRECTOR
By:
--------------------------------
name~
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EXHIBIT 10.9
OFFICER INDEMNIFICATION AGREEMENT
This Agreement, dated as of _____________, is entered into between
Golden Bear Golf, Inc., a corporation organized under the laws of the State of
Florida (the "Company"), and name~ (the "Officer").
RECITALS
A. Highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors or as executive officers unless they are
provided with adequate protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them arising out of their
service to, and activities on behalf of, the corporation.
B. The current impracticability of obtaining adequate insurance
and the uncertainties relating to indemnification have increased the difficulty
of attracting and retaining such persons.
C. The Bylaws of the Company presently provide, among other
things, that the Company shall indemnify its directors and officers to the full
extent permitted by law.
D. The Board has determined that the difficulty in attracting
and retaining highly competent persons is detrimental to the best interests of
the Company's shareholders and that the Company should act to assure such
persons that there will be increased certainty of protection against risks of
such claims and actions against them in the future.
E. It is reasonable, prudent, and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified.
F. The Officer is willing to serve or continue to serve as an
officer of the Company on the condition that the Officer be so indemnified.
AGREEMENT
In consideration of the recitals and the covenants contained herein,
the Company and the Officer covenant and agree as follows:
1. DEFINITIONS. As used in this Agreement the
following terms shall have the meanings indicated below:
(a) "Related Party" shall refer to (i) any other
corporation in which the Company has an equity interest of at least fifty
percent (50%) and (ii) any other corporation or any limited liability company,
partnership, joint venture, trust, employee
<PAGE>
benefit plan or any other enterprise or association in which the Officer has
served in any Indemnified Position, at the request of the Company or for the
convenience of the Company or to represent the Company's interest. Any entity or
plan described in Section l(a)(ii) in which the Company has any interest or
which is established in whole or in part for the benefit of the Company or any
other Related Party or the Company or Related Party's employees shall be
presumed to be a Related Party.
(b) "Indemnified Position" shall refer to any
position held by the Officer, or pursuant to which the Officer acts, as an
officer, director, employee, partner, trustee, fiduciary, administrator or agent
of the Company or a Related Party.
(c) "Indemnified Event" shall mean any claim
asserted against the Officer, whether civil, criminal, administrative or
investigative in nature, for monetary or other relief; or any Proceeding to
which the Officer is named as a party or is a subject of or witness in, or with
respect to which he or she is threatened to be named as a party, subject or
witness, brought against the Officer by reason of his or her serving or acting
in any Indemnified Position or arising or allegedly arising directly or
indirectly out of, or otherwise relating to, any action, omission, occurrence or
event involving the Officer in any Indemnified Position, including any
Proceeding, formal or informal or otherwise, conducted or brought by the
Securities and Exchange Commission or other governmental agency, or The National
Association of Securities Dealers, Inc., a national stock exchange or similar
organization.
(d) "Proceeding" shall mean any pending,
threatened or completed action, suit, investigation, inquiry, arbitration,
alternative dispute resolution mechanism or any other proceeding (or any appeals
therefrom), whether civil, criminal, administrative or investigative in nature
and whether in a court or arbitration, or before or involving a governmental,
administrative or private entity (including, but not limited to, an
investigation initiated by the Company, any Related Party or any affiliate
thereof, or the board of directors, fiduciaries or partners of any thereof).
(e) "Indemnification Amount" shall refer to the
amount of losses, claims, demands, costs, damages, liabilities (joint and
several), judgments, fines (including any excise tax assessed with respect to an
employee benefit plan), settlements, and other amounts (including Witness
Liabilities), including interest on any of the foregoing, which the Officer is
liable to pay or has paid in connection with an Indemnified Event and amounts
proposed to be paid in settlement by the Officer in connection with any
Indemnified Event.
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(f) "Witness Liabilities" shall mean all
Indemnification Amounts incurred by the Officer in connection with his or her
preparation to serve or service as a witness in any Proceeding in any way
relating to the Company, any Related Party or any affiliate (as defined in Rule
405 under the Securities Act of 1933, as amended) of any of them (a "Securities
Act Affiliate"), any associate (as defined in such Rule 405) of any of them or
of any Securities Act Affiliate, or any Indemnified Event (including, but not
limited to, the investigation, defense or appeal in connection with any such
Proceeding).
(g) "Expenses" shall refer to all disbursements,
costs or expenses of any nature reasonably incurred by the Officer directly or
indirectly in connection with any Indemnified Event, or Witness Liabilities,
including, but not limited to, fees and disbursements of counsel, accountants or
other experts employed by the Officer in connection with any Indemnified Event,
including all such expenses, disbursements and costs of investigation in
connection with or prior to the initiation of any Proceeding relating to an
Indemnified Event.
(h) "Indemnify" or "Indemnification" shall refer
to the obligation of the Company herein to pay Expenses or Indemnification
Amounts.
(i) A "Change of Control" shall be deemed to
have occurred if (A) any "Person" (as that term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended), but excluding the
Company and any of its wholly-owned subsidiaries, is or becomes (except in a
transaction approved in advance by the Board) the beneficial owner (as defined
in Rule 13d-3 under such Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the Company's
then outstanding securities or (B) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board cease for
any reason to constitute at least a majority thereof unless the election, or the
nomination for election by the Company's shareholders, of each new director was
approved by a vote of at least two-thirds of the directors still in office who
were directors at the beginning of the period, or (C) the shareholders of the
Company should approve any one of the following transactions: (x) any
consolidation or merger of the Company in which the Company is not the surviving
corporation, other than a merger of the Company in which the holders of the
Company's common stock immediately prior to the merger have the same
proportionate ownership of the surviving corporation immediately after the
merger; or (y) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, the assets of
the Company.
(j) "Final Disposition" shall refer to any judgment,
order or award rendered in any Proceeding after the expiration of all rights of
appeal.
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2. SERVICES TO THE COMPANY. The Officer will serve, and/or
continue to serve, as an officer of the Company, so long as he or she is duly
elected and qualified in accordance with the provisions of the Articles of
Incorporation and Bylaws of the Company, or in any other Indemnified Position,
at the will of the Company (or under separate contract, if any); provided that
the Officer may at any time and for any reason resign from such Indemnified
Position (subject to any contractual obligations which the Officer shall have
assumed apart from this Agreement) but the obligations provided for herein shall
continue after such termination.
3. INDEMNITY. The Company hereby agrees to indemnify the
Officer and hold the Officer harmless to the full extent permitted or authorized
by the provisions of current Florida legislation (including Sections 607.0850(7)
and (9) of the Florida Business Corporation Act) or future Florida legislation
or, if broader indemnification is available, by current or future judicial or
administrative decisions (but, in the case of any such future legislation or
decisions, only to the extent that it permits the Company to provide broader
indemnification rights than permitted prior to such legislation or decisions),
and such Indemnification shall be made unless prohibited by Florida law. Without
limiting the generality of the foregoing, the Company agrees to indemnify the
Officer and hold the Officer harmless from and against, and pay any and all,
Expenses and Indemnification Amounts, including Witness Liabilities.
Notwithstanding the foregoing, except with respect
to the indemnification specified in the second and third sentences of Section 7
or in Section 10 or Section 13(b) of this Agreement, the Company shall indemnify
the Officer in connection with a Proceeding (or part thereof) initiated by the
Officer only if authorization for the Proceeding (or part thereof) was not
denied by the Board of Directors of the Company prior to the earlier of (i) 60
days after receipt of notice thereof from the Officer and (ii) a Change of
Control.
4. PAYMENT OF EXPENSES. The Company shall advance all Expenses
within thirty (30) days after the receipt by the Company of a statement or
statements from the Officer requesting such advance payment or payments from
time to time. Such statement or statements shall identify the nature and amount
of the Expenses to be advanced with reasonable specificity. The Officer agrees
to repay any Expenses advanced if it shall ultimately be determined (which shall
only be made after the Final Disposition of the Proceeding related to an
Indemnified Event, as hereinafter provided) that the Officer was not entitled to
reimbursement of Expenses in connection with the Indemnified Event for which
such Expenses were made.
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<PAGE>
5. INTERVAL PROTECTION. During the interval between the
Company's receipt of the Officer's request for indemnification or advances and
the latest to occur of (a) payment in full to the Officer of the indemnification
or advances to which he or she is entitled hereunder, or (b) a final
adjudication that the Officer is not entitled to indemnification hereunder, the
Company shall provide "Interval Protection" which, for purposes of this
Agreement, shall mean the taking of the necessary steps (whether or not such
steps require expenditures to be made by the Company at that time) to stay,
pending a final determination of the Officer's entitlement to indemnification
(and, if the Officer is so entitled, the payment thereof), the execution,
enforcement or collection of any Indemnified Amount or Expenses or any other
amounts for which the Officer may be liable (and as to which the Officer has
requested indemnification hereunder) in order to avoid the Officer's being or
becoming in default with respect to any such amounts (such necessary steps to
include, but not be limited to, the procurement of a surety bond to achieve such
stay or the loan to the Officer (unsecured and with interest payable at the
prime rate) of amounts necessary to satisfy the Indemnified Amount or Expenses
or other amounts for which the Officer may be liable and as to which a stay of
execution as aforesaid cannot be obtained, the Company by executing this
Agreement having made the judgment that, in general, such loan or similar
assistance may reasonably be expected to benefit the Company), within three days
after receipt of the Officer's written request therefor, together with a written
undertaking by the Officer to repay, no later than 120 days following receipt of
a statement therefor from the Company, amounts (if any) expended by the Company
for such purpose, if it is ultimately determined in a final adjudication that
the Officer is not entitled to be indemnified against such Indemnified Amounts
or Expenses or other amounts.
6. INDEMNIFICATION BY COURT. Notwithstanding any other
provision of this Agreement including without limitation the fourth sentence of
Section 7, indemnification and advances shall also be made to the extent a
Florida circuit court, or another court of competent jurisdiction, or the court
in which a Proceeding was brought, shall determine that the Officer, in view of
all the circumstances of the case, is fairly and reasonably entitled to
indemnification and/or advances for such Expenses as such court shall deem
proper.
7. INDEMNIFICATION PROCEDURE. Any Indemnification or advance
under this Agreement (other than Interval Protection) shall be made promptly and
in any event within thirty (30) days upon the written request of the Officer
delivered to the Company. The right to Indemnification or advances as granted
under this Agreement shall be enforceable by the Officer in any court of
competent jurisdiction if the Company denies such request, in whole or in part,
or if no disposition thereof is made within thirty (30) days. The Officer's
costs and expenses incurred in connection with successfully establishing his or
her right to indemnification or advances, in whole or in part, in any such
action shall also be
-5-
<PAGE>
indemnified by the Company. It shall be a defense to any such action that there
has been a judgment or other final adjudication adverse to the Officer which
established that the Officer failed to meet the standard of conduct, if any,
required for indemnification by current legislation or, if applicable in
accordance with Section 3 hereof, future legislation or current or future
judicial or administrative decisions, but the burden of proving such defense
shall be on the Company. Neither the failure of the Company (including the Board
or any committee thereof, its independent counsel and its shareholders) to have
made a determination prior to the commencement of such action that
indemnification of the Officer is proper in the circumstances because he or she
has met the applicable standard of conduct described in the preceding sentence,
if any, nor the fact that there has been an actual determination by the Company
(including the Board or any committee thereof, its independent counsel and its
shareholders) that the Officer has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
8. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
(a) The Officer shall be presumed entitled to
Indemnification hereunder unless clearly not entitled to such Indemnification by
clear and convincing proof that such payment shall be unlawful.
(b) If the Company shall not have responded to
the Officer's request for Indemnification pursuant to Section 7 hereof within
thirty (30) days after receipt by the Company of such request therefor, the
Officer shall be deemed to be entitled to such Indemnification.
(c) The termination of any Proceeding relating
to an Indemnified Event or of any claim, issue, or matter therein by judgment,
order, settlement, or conviction, or upon a plea of nolo contendere or its
equivalent, shall not of itself adversely affect the right of the Officer to
Indemnification or create a presumption that the Officer did not meet any
applicable standard of conduct.
(d) Notwithstanding any other provision of this
Agreement, the Officer shall in no event be required to repay any Expense
payments advanced to the Officer and no defense can or shall be raised by the
Company to a request for Indemnification pursuant to Section 7 to the extent the
Officer has been successful on the merits or otherwise in defense of any
Proceeding related to an Indemnified Event, or in defense of any claim, issue or
matter involved in any Indemnified Event therein, whether as a result of the
initial adjudication or on appeal or the abandonment thereof by a party.
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<PAGE>
9. NON-EXCLUSIVITY; DURATION OF AGREEMENT; INSURANCE:
SUBROGATION.
(a) The rights of Indemnification and to receive
advancement of Expenses as provided by this Agreement shall not be deemed
exclusive of any other rights to which the Officer may at any time be entitled
under applicable law, the Articles of Incorporation, the Bylaws, any other
agreement, or any vote or consent of directors or shareholders or otherwise.
(b) This Agreement shall continue until and
terminate upon the later of: (i) ten (10) years after the date that the Officer
shall have ceased to serve in any Indemnified Position; or (ii) the Final
Disposition of all Indemnified Events.
(c) This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of the
Officer and his or her heirs, devisees, executors, and administrators or other
legal representatives.
(d) To the extent that the Company maintains an
insurance policy or policies providing liability insurance for directors or
executive officers of the Company or for any person serving in any other
Indemnified Position, the Officer shall be covered by such policy or policies in
accordance with its or their terms to the maximum extent of the coverage
available for any such director or executive officer or person serving in such
position under such policy or policies.
10. PROCEEDINGS.
(a) The parties hereto agree that except as
otherwise provided for herein, any disputes arising with respect to the
interpretation or enforcement of any provision hereof shall be submitted, at the
sole election of the Officer, either to arbitration or to judicial
determination. Any arbitration shall be conducted in the County of Palm Beach,
Florida in accordance with the then existing rules of the American Arbitration
Association ("AAA"). In any arbitration pursuant to this Agreement, the award or
decision shall be rendered by a majority of the members of an arbitration panel
consisting of three members chosen in accordance with the then existing rules of
the AAA. The award or decision of the arbitration panel pursuant to this Section
10 shall be binding and conclusive on the parties, provided that enforcement of
such award or decision may be obtained in any court having jurisdiction over the
party against whom such enforcement is sought. The Company hereby agrees to bear
all fees, costs and expenses imposed by the AAA, in connection with the
arbitration, irrespective of the determination thereof. The provisions of
Section 10(c) shall govern with respect to the proceedings referred to therein.
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<PAGE>
(b) In the event that, for any reason, the
Company fails to pay any Indemnification or advance demanded, or the Company
requests repayment of any Expenses advanced, the Officer shall nevertheless be
entitled, at his or her sole option, to a final judicial determination or may
seek arbitration of his or her entitlement to Indemnification hereunder in
respect of such claim. In the event the Officer seeks a judicial determination,
the Officer shall commence an action in a court of the State of Florida. In the
event the Officer seeks an award in arbitration, (i) such arbitration shall be
conducted in Palm Beach County, Florida pursuant to Section 10(a), and (ii) the
arbitrator shall notify the parties of his or her decision within sixty (60)
days following the initiation of such arbitration (or such other period
proscribed by the rules of AAA). The Company further agrees that its execution
of this Agreement shall constitute a stipulation by which it shall be bound in
any court or arbitration in which such proceeding shall have been commenced,
continued or appealed that (i) it shall not oppose the Officer's right to seek
any such adjudication or award in arbitration or any other claim by reason of
any prior determination made by the Company with respect to the Officer's right
to Indemnification under this Agreement on such claim or any other claim, or,
except in good faith, raise any objections not specifically relating to the
merits of the Officer's claim; and (ii) for purposes of this Agreement any such
adjudication or arbitration shall be conducted de novo and without prejudice by
reason of any prior determination that the Officer is not entitled to
Indemnification.
(c) Whether or not the court or arbitrators
shall determine that the Officer is entitled to payment of Indemnification
Amounts or has to return the payment of Expenses or otherwise finds against the
Officer, the Company shall within thirty (30) days after written request
therefor (and submission of reasonable evidence of the nature and amount
thereof), and unless there is a specific judicial finding that the Officer's
suit or arbitration was frivolous, pay all Expenses incurred by the Officer in
connection with such adjudication or arbitration (including, but not limited to,
any appellate proceedings).
11. SEVERABILITY. If any provision or provisions of this
Agreement shall be held to be invalid, illegal, or unenforceable for any reason
whatsoever: (a) the validity, legality, and enforceability of the remaining
provisions of this Agreement (including without limitation, each portion of any
Section, paragraph or clause of this Agreement containing any such provision
held to be invalid, illegal, or unenforceable, that is not itself invalid,
illegal, or unenforceable) shall not in any way be affected or impaired thereby;
and (b) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of any Section, paragraph or clause
of this Agreement containing any such provision held to be invalid, illegal, or
unenforceable, that is not itself invalid, illegal, or unenforceable) shall be
deemed revised, and shall be construed, so as to give effect to the intent
manifested by this Agreement (including the provision held invalid, illegal, or
unenforceable).
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<PAGE>
12. MERGER OR CONSOLIDATION OF THE COMPANY. In the event that
the Company shall be a constituent corporation in a consolidation or merger,
whether or not the Company is the resulting or surviving corporation, the
Officer shall stand in the same position under this Agreement with respect to
the Company if its separate existence had continued.
13. ENFORCEMENT.
(a) The Company unconditionally and irrevocably
stipulates and agrees that its execution of this Agreement shall also constitute
a stipulation by which it shall be bound in any court or arbitration in which a
proceeding by the Officer for enforcement of his or her rights shall have been
commenced, continued or appealed, that the obligations of the Company set forth
herein are unique and special, and that failure of the Company to comply with
the provisions of this Agreement will cause irreparable and irremediable injury
to the Officer, for which a remedy at law will be inadequate. As a result, in
addition to any other right or remedy he or she may have at law or in equity
with respect to a violation of this Agreement, the Officer shall be entitled to
injunctive or mandatory relief directing specific performance by the Company of
its obligations under this Agreement.
(b) In the event that the Officer is subject to
or intervenes in any legal action in which the validity or enforceability of
this Agreement is at issue or institutes any legal action, for specific
performance or otherwise, to enforce his or her rights under, or to recover
damages for breach of, this Agreement, the Officer shall, within thirty (30)
days after written request to the Company therefor (and submission of reasonable
evidence of the amount thereof), and unless there is a specific judicial finding
that the Officer's suit was frivolous, be indemnified by the Company against all
Expenses incurred by him or her in connection therewith.
14. NOTIFICATION AND DEFENSE OF CLAIM. The Officer agrees to
promptly notify the Company in writing upon being served with any summons,
citation, subpoena, complaint, indictment, information or other document
relating to any Proceeding involving an Indemnification Event; provided,
however, that the failure of the Officer to give such notice to the Company
shall not adversely affect the Officer's rights under this Agreement except to
the extent the Company shall have been materially prejudiced by such failure.
Nothing in this Agreement shall constitute a waiver of the Company's right to
seek participation, at its own expense, in any Proceeding which may give rise to
Indemnification hereunder.
15. HEADINGS. The headings of the Sections and paragraphs of
this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
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<PAGE>
16. MODIFICATION AND WAIVER. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
17. NOTICES. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand, or sent via telecopy or facsimile
transmission, in each case receipted for by the party to whom said notice or
other communication shall have been directed or transmitted, or (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed, or (iii) delivered by overnight courier
service:
(a) If to the Officer, to:
name~
address~
(b) If to the Company, to:
Golden Bear Golf, Inc.
11780 U.S. Highway, # 1
North Palm Beach, FL 33408
Attention: President and
Chief Executive Officer
or to such other address as may have been furnished to either party by the other
party.
18. ENTIRE AGREEMENT. All prior and contemporaneous
agreements and understandings between the parties with respect to the subject
matter of this Agreement are superseded by this Agreement, and this Agreement
constitutes the entire understanding between the parties. This Agreement may not
be modified, amended, changed or discharged except by a writing signed by the
parties hereto, and then only to the extent therein set forth.
19. NONASSIGNMENT. This Agreement may not be assigned
by either of the parties hereto.
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<PAGE>
20. GOVERNING LAW. This Agreement, including its
validity, interpretation and effect, and the relationship of the
parties shall be governed by, and construed in accordance with,
the laws of the State of Florida.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the day and year first above written.
GOLDEN BEAR GOLF, INC.
By:
--------------------------------
OFFICER
By:
--------------------------------
name~
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EXHIBIT 10.10
[EXECUTION COPY]
JACK NICKLAUS APPAREL INTERNATIONAL
AMENDED AND RESTATED JOINT VENTURE AGREEMENT
This is a joint venture agreement made as of January 1, 1994, by and
between Seaford Clothing Co. (an Illinois corporation), a wholly owned
subsidiary of Hart Schaffner & Marx (a New York corporation), with offices at
101 North Wacker Drive, Chicago, Illinois 60606 ("HS&M Sub"), and Golden Bear
International, Inc. (a Florida corporation), as successor by merger to Golden
Bear Apparel International, Inc. (a Florida corporation), with offices at 11780
U.S. Highway #1, Suite 400, North Palm Beach, Florida 33408 ("Golden Bear"), who
hereby agree as follows:
ORGANIZATION
/section/1. CONTINUATION OF JOINT VENTURE; PARTIES. This Agreement
is an amendment and restatement of that Joint Venture Agreement dated March 29,
1983, between HS&M Sub and Golden Bear's predecessor in interest. Pursuant to a
Master Apparel Agreement dated as of June 1, 1993, between Golden Bear and HS&M
Sub's affiliates (the "Master Agreement"), Golden Bear has agreed to renew the
prior Joint Venture Agreement subject to certain matters set forth in the Master
Agreement. The parties to this agreement hereby agree to continue on and after
January 1, 1994, subject to the Master Agreement and on the terms and conditions
herein, their joint venture (the "Venture") which commenced as of December 6,
1973. The parties to the Venture are HS&M Sub and Golden Bear (sometimes
hereinafter called collectively the "Venturers" and individually a "Venturer").
/section/ 2. NAME, PRINCIPAL OFFICE AND PRINCIPAL MARKETING OFFICE.
The name of the Venture is "Jack Nicklaus Apparel International." The principal
office of the Venture is at 11780 U.S. Highway #1, Suite 400, North Palm Beach,
Florida 33408, or at such other place as Golden Bear may select from time to
time and specify in a notice to HS&M Sub, and the principal marketing office of
the Venture is at 101 North Wacker Drive, Chicago, Illinois 60606, or at such
other place as HS&M Sub may select from time to time and specify in a notice to
Golden Bear.
/section/ 3. SCOPE AND PURPOSES. The scope and specific purposes of
the Venture are to: (i) locate licensees for the use of the name and likeness of
Jack Nicklaus, including facsimile signature of Jack Nicklaus (the "Nicklaus
Endorsement") and the "Golden Bear Trademarks" (which trademarks shall consist
of those elements of the Nicklaus Endorsement used in a trademark sense, the
Golden Bear logo (but only in such territories where such logo is expressly
included in a sublicense from the Venture) and any other trademarks used upon or
in connection with wearing apparel products endorsed by Jack Nicklaus to which
Golden Bear has exclusive rights) in connection with the manufacture,
advertisement, promotion and sale of wearing apparel, except footwear, and any
other products approved by Golden Bear in its sole discretion from time to time
("Nicklaus Products"), throughout the world, except for those territories
excluded in Exhibit "A" annexed hereto, as the same may be amended from time to
time pursuant to the Master Agreement (the "Licensing Territory"), during the
period which commenced December 6, 1973 and ends December 31, 2000 (the
"Licensing Period"); (ii) enter into agreements ("Licensing Agreements")
licensing the right to use the Nicklaus Endorsement and the Golden Bear
Trademarks in connection with the
<PAGE>
manufacture, advertisement, promotion and sale of Nicklaus Products in the
Licensing Territory during the Licensing Period and continue any such Licensing
Agreements in effect on the date hereof; and (iii) acquire and furnish design,
advertising, and marketing expertise, materials and services and manufacturing
know-how, confidential know-how and patent technology for and to licensees under
Licensing Agreements in connection with the manufacture, advertisement,
promotion and sale of Nicklaus Products in the Licensing Territory during the
Licensing Period (provided that the Venture shall not engage as a principal in
any manufacturing, marketing or selling of Nicklaus Products).
/section/4. LICENSING OF RIGHTS BY VENTURER. Golden Bear shall,
concurrently with the execution of this agreement, enter into an agreement with
the Venture, a copy of which is attached hereto as Exhibit "B", licensing to the
Venture all of its rights with respect to the use of the Nicklaus Endorsement
and the Golden Bear Trademarks in connection with the manufacture,
advertisement, promotion and sale of Nicklaus Products in the Licensing
Territory during the Licensing period. HS&M Sub shall and other parties may,
from time to time, authorize the Venture to negotiate sales or licenses (but
without any additional compensation to HS&M Sub therefor) of their rights with
respect to any patents, designs or know-how in connection with the manufacture,
advertisement, promotion and sale of Nicklaus Products in the Licensing
Territory during the Licensing Period.
FINANCIAL
/section/5. CASH ADVANCES. To the extent not generated by the operations of the
Venture, the Venturers shall advance to the Venture, from time to time as
needed, additional cash required to meet the costs and expenses of the Venture
under /section/8 and for any other purpose as the Venturers may determine from
time to time. Unless otherwise agreed by the Venturers, all such cash advances
("advances") by the Venturers shall be in equal amounts. No advance by a
Venturer shall earn interest, except that for any period during which the
outstanding advances by a Venturer are in excess of the outstanding advances by
the other Venturer, the Venture shall pay interest on the amount of the excess
for such period at a rate equal to the prime rate in effect from time to time
during such period at The First National Bank of Chicago. Except as provided in
this agreement, no Venturer shall be obligated to make any advances to the
Venture, and no Venturer shall have any right to demand a return of any advances
to the Venture made by it.
/section/6. ALLOCATION OF INCOME AND LOSSES. As of the last day of
each fiscal year, the "Non-Apparel Net Income or Loss" (as defined below) earned
by the Venture (determined in accordance with generally accepted accounting
principles consistently applied) shall be allocated 90% to Golden Bear and 10%
to HS&M Sub. As of the last day of each fiscal year of the Venture, all other
net income earned and net losses incurred by the Venture (determined in
accordance with generally accepted accounting principles consistently applied),
hereinafter referred to as "Apparel Net Income or Loss," shall be allocated to
the Venturers in equal shares. Notwithstanding the above, funds and other
property acquired by the Venture, as a result of net income earned by it or
otherwise, shall not be distributed to the Venturers except as provided in
/section//section/7 and 16.
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<PAGE>
Any allocation to a Venturer of a proportion of any net income earned or net
losses incurred by the Venture shall be deemed an allocation to that Venturer of
the same proportionate part of each item of such income, gain, loss, deduction,
or credit that is earned, realized, or available by or to the Venture for
federal income tax purposes. (For purposes of this agreement, "Non-Apparel Net
Income or Loss" shall mean the gross receipts of the Venture received under a
Licensing Agreement (the "Asahi Licensing Agreement") with Asahi Chemical
Industry Co., Ltd. ("Asahi") and any other Licensing Agreement mutually agreed
to by the Venturers from time to time by reason of the sale of "Non-Apparel
Products," less any "Non-Apparel Expenses." For this purpose, "Non-Apparel
Products" means products sold by the non-apparel sublicensees of Asahi listed on
the attached "Schedule I" and any other non-apparel products mutually agreed to
by the Venturers from time to time. Also, for this purpose, "Non-Apparel
Expenses" means any expenses of the Venture solely related to Non-Apparel Net
Income or Loss plus a proportionate part of all expenses ("General Expenses")
related to both Non-Apparel Net Income and Loss and Apparel Net Income and Loss
(such as, but not limited to, salaries and expenses of employees, "Nicklaus
Travel Expenses" (as defined in /section/8), marketing fees paid to Golden Bear,
fees paid to accountants and attorneys and other general purpose expenses, but
specifically excluding any expenses solely related to Apparel Net Income and
Loss). The proportionate part of the General Expenses which are to be included
in Non-Apparel Net Income or Loss shall be determined by multiplying the
aggregate amount of the General Expenses by a fraction, (i) the numerator of
which is the gross receipts of the Venture from the sale of Non-Apparel Products
and (ii) the denominator of which is the total gross receipts of the Venture).
/section/7. DISTRIBUTION OF FUNDS. The Venture shall establish from
time to time reasonable reserves for working capital, payment of the costs and
expenses of the Venture, other obligations of the Venture and contingencies. All
other funds of the Venture (except those retained in reserves established
pursuant to the preceding sentence) shall be distributed, annually or at any
more frequent intervals that the Venturers may from time to time select, to the
Venturers as follows:
(a) First, as a repayment of a Venturer's advances to the
Venture under /section/5 (with interest as provided therein) in an amount equal
to the amount by which the outstanding unreturned advances by such Venturer are
in excess of the outstanding unreturned advances by the other Venturer.
(b) Next, to the Venturers equally as a repayment of their
advances to the Venture under /section/5 in an amount equal to the then
aggregate unreturned advances by each Venturer.
(c) Next, funds shall be distributed to the Venturers to the
extent of accumulated Apparel Net Income and Non-Apparel Net Income as of the
end of the fiscal year of the Venture (the "Reference Fiscal Year") immediately
preceding the fiscal year of distribution which has not yet been distributed to
the Venturers, with each distribution being with respect to both accumulated and
undistributed Apparel Net Income and Non-Apparel Net Income on a PARI PASSU
basis, and with the Apparel Net Income portion being distributed in equal shares
to both Venturers and the Non-Apparel Net
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<PAGE>
Income portion being distributed in equal shares to both Venturers and the
Non-Apparel Net Income portion being distributed 90% to Golden Bear and 10% to
HS&M Sub.
(d) Next, if at the time of any distribution during a fiscal
year there is no such accumulated and undistributed Apparel Net Income or
Non-Apparel Net Income, funds shall be distributed to the Venturers, as an
advance against future funds distributable under (c) above, with each Venturer's
share being in proportion to its proportionate share of the total budgeted,
projected or estimated distribution (as agreed upon by the Venturers) for such
fiscal year of Apparel Net Income and Non-Apparel Net Income. (As soon as any
funds become distributable under (c) above, any advances to the Venturers under
this (d) shall be credited against said funds and treated at the time of
crediting as if they were distributed under (c) above. To the extent the
Venturers have, at any time, outstanding distributions under this (d) in excess
of the amounts which can be so credited, such excess amounts shall, at the
Venturer's option, be repaid by the Venturers to the Venture.)
(e) Thereafter, all remaining funds shall be
distributed to the Venturers in equal shares.
For purposes of this /section/7, a reimbursement to a Venturer for
expenditures properly considered as costs or expenses of the Venture shall not
be considered as a distribution of funds to a Venturer; the Venture shall make
any such reimbursement prior to any distribution of funds to a Venturer under
this /section/7.
/section/8. COSTS AND EXPENSES. All direct costs and expenses of the
Venture shall be paid or reimbursed by the Venture, including but not limited to
the salary and expenses of all employees of the Venture; the Nicklaus Travel
Expenses described below in this /section/8; an annual marketing fee of $25,000
payable to Golden Bear on or before June 1 of each year during the term of this
agreement; the fees and expenses of independent accountants and attorneys for
time devoted to needs of the Venture; and, subject to the provisions of
/section/10 with respect to certain consents to incurring some of the following
costs on behalf of the Venture, the costs of registering and protecting, in
classes for which the Venture has existing or prospective licensees, all or any
part of the Nicklaus Endorsement and the Golden Bear Trademarks in any and all
jurisdictions within the Licensing Territory, the costs of maintaining actions
for the infringement or other violation of the Venture's rights to the Nicklaus
Endorsement and the Golden Bear Trademarks and resolving and defending claims
and legal actions alleging infringement or any other violation of the rights of
other parties arising out of the use of the Nicklaus Endorsement and the Golden
Bear Trademarks by the Venture in any and all jurisdictions within the Licensing
Territory, the costs of registering and protecting all or any part of any
patents or designs owned by the Venture or in which the Venture has any rights
or interest in any and all jurisdictions within the Licensing Territory, and the
costs of maintaining actions for the infringement or other violation of the
Venture's rights pertaining to any patents, designs or know-how and resolving
and defending claims and legal actions alleging infringement or any other
violation of patents of other parties or the rights of other parties arising out
of the use of any designs or know-how by the Venture in any and all
jurisdictions within the Licensing Territory. Notwithstanding anything contained
above in this /section/8, and except as the Venturers may
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<PAGE>
otherwise expressly agree, no compensation (including fringe benefits) or travel
expenses of employees of the Venturers or any organization affiliated with them
and no office overhead of the Venturers or any organization affiliated with
them, whether or not incurred on behalf of or allocable to the business of the
Venture, shall be paid or reimbursed by the Venture. In this connection, the
Venturers expressly agree that "Nicklaus Travel Expenses" shall be reimbursed as
expenses of the Venture. (For purposes of this agreement, "Nicklaus Travel
Expenses" shall mean the Venture's share of travel expenses incurred by Jack
Nicklaus (after allocation of expenses to any other business undertaken by him
during such travel) only for trips to Japan and any other personal appearance by
or meeting with Jack Nicklaus arranged by mutual agreement of the parties to
promote the business of the Venture, provided that the projected expenses and
prorations with other activities of Jack Nicklaus shall be disclosed to HS&M Sub
at the time such other appearance or meeting is arranged.)
OPERATION
/section/9. RESPONSIBILITIES. HS&M Sub's primary responsibilities
shall consist of: (i) maintaining a reasonably representative licensing program
for Nicklaus products in the Licensing Territory during the Licensing Period,
locating prospective licensees for the use of the Nicklaus Endorsement and the
Golden Bear Trademarks in connection with the manufacture, advertisement,
promotion and sale of Nicklaus Products in the Licensing Territory during the
Licensing Period, advising such prospective licensees of the benefits of such a
licensing agreement, recommending to the Venture such prospective licensees and
the proposed terms for Licensing Agreements with such prospective licensees, and
assisting in negotiating the terms of Licensing Agreements with such prospective
licensees; (ii) acquiring and furnishing design, advertising and marketing
expertise, materials, know-how and services and manufacturing know-how,
confidential know-how, and patent technology for and to licensees as reasonably
necessary to support the design, manufacturing and marketing of Nicklaus
Products by such licensees; and (iii) registering and protecting all or any part
of any patents, designs or know-how owned by the Venture or with respect to
which the Venture has any rights or interest in any and all jurisdictions within
the Licensing Territory, and maintaining actions for the infringement or other
violation of the Venture's rights pertaining to any patents, designs or know-how
and resolving and defending claims and legal actions alleging infringement or
any other violation of patents of other parties or the rights of other parties
arising out of the use of any designs or know-how by the Venture in any and all
jurisdictions within the Licensing Territory. Golden Bear's primary
responsibilities shall consist of: (i) consulting with licensees relating to
marketing, promotional and advertising matters; (ii) reviewing proposed
advertising of Nicklaus Products for the purpose of recommending to the Venture
whether it should approve or disapprove of the use of such advertising by
licensees; (iii) assisting in negotiating the terms of Licensing Agreements;
(iv) preparing and executing Licensing Agreements and amendments thereto
(subject to HS&M Sub's consent under /section/10(a)(1) to execution); (v)
furnishing the services of Jack Nicklaus to meet any commitments by the Venture
in a Licensing Agreement to provide his services (except that Golden Bear shall
be under no such obligation unless it has consented to the execution of such
Licensing Agreement containing such commitments); (vi) registering and
protecting all
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or any part of the Nicklaus Endorsement and the Golden Bear Trademarks in any
and all jurisdictions within the Licensing Territory, and maintaining actions
for the infringement or other violation of the Venture's rights to the Nicklaus
Endorsement and the Golden Bear Trademarks and resolving and defending claims
and legal actions alleging infringement or any other violation of the rights of
other parties arising out of the use of the Nicklaus Endorsement and the Golden
Bear Trademarks by the Venture in any and all jurisdictions within the Licensing
Territory; (vii) maintaining accounting and other records and property of the
Venture; (viii) receiving and disbursing the funds of the Venture; and (ix)
making all routine administrative decisions of the Venture. Each Venturer may,
upon request of the other, assist the requesting Venturer in the performance of
its duties and the carrying out of its primary responsibilities under this
/section/9. All other activities of the Venture shall be the joint
responsibility of the Venturers, including the general supervision and
compensation of employees of the Venture, entering into agreements acquiring
rights for the Venture (including trademark, design, patent and know-how rights
and copyrights), the protection of and resolution and defense of claims and
legal actions relating to the Venture's rights to any trademarks other than the
Golden Bear Trademarks, the protection of and resolution and defense of claims
and legal actions relating to the Venture's rights to any copyrights, the
enforcement of any contract rights of the Venture, and the employment of
independent accountants and attorneys and other professionals.
/section/10. AUTHORITY. Each Venturer shall have the power and
authority to act on behalf of the Venture in connection with the fulfillment of
that Venturer's responsibilities under this agreement, except as otherwise
hereinafter set forth.
(a) Neither Venturer may, except as expressly authorized in
this agreement or except with the prior consent of the other Venturer, do any of
the following on behalf of the Venture:
(1) Execute and deliver or amend any
Licensing Agreement.
(2) Terminate any existing Licensing
Agreement.
(3) Approve of any design, advertising or
marketing (including but not limited to distributions and
sales through ordinary marketing channels and in the
"Premium Market" as such term is defined in /section/7 of the
Licensing Agreement, attached hereto as Exhibit "B") of
Nicklaus Products, or grant any other approvals or consents
under any Licensing Agreement.
(4) Employ, retain, or dismiss any employee
of the Venture.
(5) Execute, endorse, or guarantee any note, bond,
bill of exchange, or surety or indemnity agreement, if such
execution, endorsement, or guarantee may, under any process,
become a liability of the Venture or the other Venturer.
(6) Engage in any transaction or enter into any
agreement outside the usual course of the Venture's business
or outside the scope
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and purposes of the Venture or outside the contemplation of
this agreement.
(7) Use any money or property belonging to the
Venture or pledge the Venture's credit, except in the
ordinary course of business and for the benefit of the
Venture.
(8) Assign, pledge, compromise, or release any
claim of or debt to the Venture without receiving full
payment thereof.
(9) Confess judgment against the Venture or
institute any legal action on behalf of the Venture.
(10) Acquire, dispose of or encumber any tangible
or intangible property or other right of the Venture, except
in the ordinary course of business and for the benefit of the
Venture.
(b) Golden Bear may not, except with the prior consent of
HS&M Sub (which consent shall not be unreasonably withheld), do either of the
following on behalf of the Venture:
(1) Incur any costs for registering and protecting
all or any part of the Nicklaus Endorsement and the Golden
Bear Trademarks in any jurisdiction within the Licensing
Territory, or for maintaining any actions for the
infringement or other violation of the Venture's rights to
the Nicklaus Endorsement and the Golden Bear Trademarks.
(2) Incur any costs in resolving or defending any
claims or legal actions alleging infringement or any other
violation of the rights of other parties arising out of the
use of the Nicklaus Endorsement and the Golden Bear
Trademarks by the Venture in any jurisdictions within the
Licensing Territory.
(c) HS&M Sub may not, except with the prior consent of
Golden Bear (which consent shall not be unreasonably withheld), do either of the
following on behalf of the Venture:
(1) Incur any costs for registering and protecting
all or any part of any patents, designs or know-how owned by
the Venture or in which the Venture has any rights or
interest in any jurisdiction within the Licensing Territory,
or for maintaining any actions for the infringement or other
violation of the Venture's rights to any patents, designs or
know-how.
(2) Incur any costs in resolving or defending any claims or
legal actions alleging infringement or any other violation of
patents of other parties or the rights of other parties
arising out of the use of any design or know-how by the
Venture in any jurisdiction within the Licensing Territory.
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Any dispute as to whether the consent of HS&M Sub or Golden Bear under (b) or
(c) above, respectively, is being unreasonably withheld shall be settled by
arbitration in accordance with /section/19, and in the event any such consent is
so determined to have been unreasonably withheld, such consent shall be deemed
to have been given prior to any costs having been incurred by the responsible
Venturer and such Venturer shall be reimbursed for any such costs as costs of
the Venture under /section/8.
Notwithstanding anything to the contrary contained above in this
/section/10, Golden Bear may, on behalf of the Venture, for the purpose of
performing its administrative responsibilities under /section/9, pay and
disburse funds to cover the costs and expenses of the Venture under /section/8.
In order to provide for the orderly conduct of the business of the
Venture, each Venturer shall designate one or more representatives
("Representatives") to represent that Venturer, either jointly or severally (as
designated), in all matters relating to the Venture and its busine/section/ The
Representative or Representatives currently designated by each Venturer are:
VENTURER REPRESENTATIVES
HS&M Sub Elbert O. Hand
Homi B. Patel
Golden Bear Richard P. Bellinger
Thomas P. Hislop
Each Venturer's Representative or Representatives shall have full and complete
power and authority to act for and on behalf of that Venturer in connection with
the Venture or its business, to execute documents in the name of the Venture and
on its behalf, and to bind that Venturer in all matters relating to the Venture,
except that neither Venturer's Representative or Representatives shall have the
power or authority (as such) to appoint a new Representative or Representatives
hereunder or to amend this agreement, although each Venturer's Representative or
Representatives shall have the power and authority to give any consent or
approval which may be given by that Venturer under this agreement. If more than
one Representative is appointed by a Venturer, such Representatives shall be
deemed co-equal in their authority to act on behalf of such Venturer, and either
of such Representatives shall be authorized to act individually as provided
above. Each Venturer's Representative or Representatives shall serve as such
until (i) he has been removed by that Venturer and the other Venturer has
received notice of such removal, (ii) he resigns by giving notice thereof to
both Venturers, or (iii) he dies. Upon removal, resignation, or death of a
Venturer's Representative or Representatives, that Venturer shall designate
another person or persons to become its Representatives hereunder by giving
notice thereof to the other Venturer.
/section/11. INDEPENDENT VENTURES. Each Venturer shall be permitted
to
engage in or possess an interest in other business ventures of every type and
description, independently or with others, except that during the Licensing
Period, the parties
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acknowledge that the exclusivity provisions of Section 16 of
the Master Agreement shall apply to the business conducted by them and their
affiliates with respect to this Agreement.
/section/12. VENTURE RECORDS. All accounting records, general
records, and other documents relating to the Venture shall be maintained by
Golden Bear at the principal office of the Venture and shall be open to the
reasonable examination and copying by either Venturer or its duly authorized
representative at any reasonable time. Each Venturer shall promptly, fully, and
accurately cause to be entered in the accounting records of the Venture all
transactions undertaken by it on behalf of the Venture. The fiscal year of the
Venture shall be the calendar year unless the Venturers shall agree upon a
different fiscal year.
/section/13. FULL DISCLOSURE. Each Venturer shall keep the other
Venturer informed generally of the transactions entered into by it on behalf of
or relating to the Venture. In addition, each Venturer upon request shall
furnish the other Venturer with full information and account for any and all
transactions and matters within its knowledge affecting or relating to the
Venture's business and purposes.
FUNDAMENTAL CHANGES
/section/14. TRANSFER OF INTEREST IN VENTURE. A Venturer may
not assign or otherwise transfer any of its interest in the Venture without the
consent of the other Venturer, except as provided herein. For purposes of this
section, the sale or issuance of capital stock by a Venturer to persons other
than its then current stockholders, or entry into any other voting or management
agreement, such that the party obtaining such shares or agreement is able to
exercise control over such Venturer, shall be a transfer subject to this
section. Golden Bear agrees that it will not unreasonably withhold or deny its
consent to any transfer to an affiliated company owned and controlled by
Hartmarx Corporation, or owned and controlled by any subsidiary of Hartmarx
Corporation, which thereupon succeeds to the rights of HS&M Sub with respect to
all patents, designs and know how licensed by the Venture. HS&M Sub agrees that
it will not unreasonably withhold or deny its consent to any assignment by
Golden Bear of its rights to receive payment under this Agreement, or to any
other transfer by Golden Bear to an affiliated company owned and controlled by
the Nicklaus family which thereupon succeeds to the rights of Golden Bear with
respect to the Golden Bear Trademarks and Nicklaus Endorsement. In addition, no
transfer of all or any portion of the interest of any Venturer in the Venture
shall affect or release the transferring Venturer's obligations under this
agreement or confer upon the transferee any of the authority or responsibilities
of the transferring Venturer except to the extent otherwise expressly agreed
upon in writing by all the Venturers. Notwithstanding anything to the contrary
contained in this /section/14, HS&M Sub may at any time transfer or assign all
of its interest (but not less than all) to another corporation which is a
wholly-owned subsidiary of Hartmarx Corporation or of Hart Schaffner & Marx, and
in such event HS&M Sub's obligations under this agreement shall be released as
of the effective date of transfer, and the obligations, rights, authority and
responsibilities of the transferring Venturer under this agreement shall vest in
the transferee corporation and become the obligations, rights, authority and
responsibilities of the transferee
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corporation as if it were HS&M Sub as of the effective date of transfer,
provided only that such transferee corporation agrees to be substituted under
this agreement for HS&M Sub and to be bound by all of the terms and conditions
of this agreement. No such transfer shall be effective unless and until Golden
Bear is given written notice of such transfer.
/section/15. TERMINATION OF VENTURE. The Venture shall continue until
December 31, 2000, or until terminated prior thereto by the mutual consent of
both Venturers, or until otherwise terminated as hereinafter set forth. Pursuant
to Section 17 of the Master Agreement, the Venture shall terminate automatically
upon a termination of the Master Agreement by any party under the provisions of
such Section, and the parties shall wind up the business of the Venture as
provided for herein, unless the parties hereto have mutually agreed in writing
to continue this Agreement on or before such effective date.
(a) AT THE ELECTION OF HS&M SUB. HS&M Sub shall have the
right to terminate the Venture at any time after the occurrence of any one of
the following events:
(1) The bankruptcy or insolvency of Golden Bear, an
assignment for the benefit of creditors by Golden Bear, the
dissolution or liquidation of Golden Bear (other than as a
result of any transaction permitted under /section/14 of this
agreement).
(2) The failure of Golden Bear to perform or observe any
material obligation or condition of this Agreement which is
not fully cured within 30 days after notice of such failure is
given to Golden Bear by HS&M Sub.
(3) A material provision of this agreement is held to
be invalid under /section/24 below.
(b) AT THE ELECTION OF GOLDEN BEAR. Golden Bear shall have
the right to terminate the Venture at any time after the occurrence of any one
of the following events:
(1) The bankruptcy or insolvency of Hart Schaffner & Marx or
HS&M Sub, an assignment for the benefit of creditors by Hart
Schaffner & Marx or HS&M Sub, the dissolution of Hart
Schaffner & Marx or HS&M Sub (other than the dissolution of
HS&M Sub as a result of any transaction permitted under
/section/14 of this agreement), or the liquidation of Hart
Schaffner & Marx.
(2) The failure of HS&M Sub to perform or observe any
material obligation or condition of this agreement which is
not fully cured within 30 days after notice of such failure is
given to HS&M Sub by Golden Bear.
(3) A material provision of this agreement is held to be
invalid under /section/24 below.
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Unless otherwise agreed by the parties, the effective date of any election under
this /section/15 to terminate the Venture (the "Effective Termination Date")
shall be the 30th day after (i) written notice of such election has been given
by the electing Venturer to the other Venturer or (ii) the Venturers have
mutually consented to the termination of the Venture. In the event the Venture
is terminated automatically as a result of the termination of the Master
Agreement, unless otherwise agreed by the parties hereto, the effective date of
the termination of the Master Agreement shall be the Effective Termination Date
for purposes of this Agreement. In the event the Venture continues until
December 31, 2000 (the "Ordinary Termination Date"), such date shall be the
Effective Termination Date.
/section/16. TERMINATION PROCEDURES; EFFECT OF TERMINATION.
Following the Effective Termination Date, the Venture shall continue for the
purpose of winding up its affairs, as hereinafter set forth. The process of
winding up its affairs shall include the Venture's performance of its
obligations and receipt of its benefits under all Licensing Agreements existing
on the Effective Termination Date ("Existing Licensing Agreements") during their
initial term or other term in effect on the Effective Termination Date, but the
Venture shall not thereafter pursue the purposes set forth in /section/3 except
to the extent required for its performance under Existing Licensing Agreements
and winding up the affairs of the Venture. Except as provided in the preceding
sentence, during the period in which the Venture continues for the purpose of
winding up its affairs, the provisions of this agreement shall continue in full
force and effect to the extent they are not inconsistent with the Venture
winding up its affairs and with this /section/16, and except further that the
provisions of /section/11 shall no longer apply in territories not covered by
Existing Licensing Agreements.
Notwithstanding anything to the contrary contained in this
/section/16, HS&M Sub may elect (by giving written notice to Golden Bear on or
before the Effective Termination Date) not to continue to fulfill its
responsibilities under /section/9 on behalf of the Venture to acquire and
furnish design, advertising and marketing expertise, materials, know-how and
services and manufacturing know-how, confidential know-how, and patent
technology ("HS&M Sub Responsibilities") after the Effective Termination Date
for and to licensees under any or all of the Existing Licensing Agreements as
reasonably necessary to support the design, manufacturing and marketing of
Nicklaus Products by such licensees, provided only that the licensee under each
such Existing Licensing Agreement consents to HS&M Sub's withdrawal and to
Golden Bear's assumption of these obligations of the Venture within 30 days
after such notice by HS&M Sub.
Although the Venture shall continue as described above for the
purpose of winding up its affairs, upon the Effective Termination Date the
following property of the Venture shall be distributed, notwithstanding the
provisions of /section/7, to the Venturers as follows:
(a) All rights, title and interest of the Venture in or
pertaining to any patents, designs, know-how and other property rights which
were acquired from HS&M Sub automatically shall vest in HS&M Sub upon the
Effective Termination Date and shall be assigned and distributed to HS&M Sub,
subject to the Venture's and Golden Bear's continuing rights and license during
the Licensing Period to use such patents,
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designs, know-how and other property rights in connection with the manufacture,
advertisement, promotion and sale of Nicklaus Products under all Existing
Licensing Agreements for the remainder of their initial term or other term in
effect on the Effective Termination Date.
(b) All rights, title, interest and obligations of the
Venture in, to and under any Existing Licensing Agreements with respect to which
HS&M Sub has (under the second paragraph of this /section/16) elected to
discontinue fulfilling HS&M Sub Responsibilities (provided the required licensee
consent has been obtained) automatically shall vest in Golden Bear upon the
Effective Termination Date and shall be assigned and distributed to Golden Bear.
(c) All rights, title, and interest of the Venture in and to
the following automatically shall vest in Golden Bear upon the Effective
Termination Date and shall be assigned and distributed to Golden Bear, subject
to the Venture's rights to the following for purposes of performing its
obligations under "Undistributed Licensing Agreements" as such term is defined
below in this /section/16:
(1) The Venture's entire supply of advertising
materials and any and all other items on which appears all
or any part of the Nicklaus Endorsement or the Golden Bear
Trademarks (including but not limited to labels, hangtags,
bags or other packaging materials, point of sales aids,
sales promotional items and advertising mats and layouts),
except that such materials and other items as must be
retained by the Venture for the purpose of performing under
Undistributed Licensing Agreements shall not be assigned and
distributed to Golden Bear for so long as they are needed
for such purpose.
(2) All rights of the Venture in and to the
Nicklaus Endorsement and the Golden Bear Trademarks.
Following the Effective Termination Date, HS&M Sub shall not continue to fulfill
HS&M Sub Responsibilities with respect to any Existing Licensing Agreements
required by (b) above to be distributed to Golden Bear, neither the Venture nor
HS&M Sub shall have any rights to any of the property listed in (b) and (c)
above, except as otherwise provided in (b) and (c) above and below in this
/section/16, and neither the Venture nor Golden Bear shall have any rights to
any of the property listed in (a) above, except as otherwise provided in (a)
above. For purposes of this /section/16, the term "Undistributed Licensing
Agreements" shall mean all Existing Licensing Agreements, except those Existing
Licensing Agreements with respect to which all of the Venture's rights, title,
interest and obligations have vested in Golden Bear and are required to be or
have been assigned and distributed to Golden Bear pursuant to this /section/16
("Distributed Licensing Agreements").
Notwithstanding anything to the contrary contained in this
/section/16, in the event that upon the Effective Termination Date it is not
appropriate or at any time thereafter it becomes inappropriate for HS&M Sub to
continue to fulfill HS&M Sub Responsibilities with respect to any Undistributed
Licensing Agreements due to a poor relationship between HS&M Sub or Hart
Schaffner & Marx and the licensee under any such
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Undistributed Licensing Agreement, HS&M Sub shall not thereafter continue to
fulfill HS&M Sub Responsibilities with respect to such Undistributed Licensing
Agreements, all rights, title, interest and obligations in, to and under such
Undistributed Licensing Agreements automatically shall vest in Golden Bear and
shall be assigned and distributed to Golden Bear, and neither the Venture nor
HS&M Sub shall have any rights to such Undistributed Licensing Agreements,
except as otherwise provided below in this /section/16. A poor relationship
between HS&M Sub or Hart Schaffner & Marx and a licensee rendering it
inappropriate for HS&M Sub to continue to fulfill HS&M Sub Responsibilities
shall be deemed to exist if Golden Bear and HS&M Sub mutually agree that it
exists, or, in the event Golden Bear and HS&M Sub do not so mutually agree
within 30 days after Golden Bear requests in writing that such a determination
be made, if such licensee, upon the request of Golden Bear at any time after
such 30 days, states in writing that such a relationship exists.
Upon the conclusion of the initial term or other term in effect on
the Effective Termination Date of an Undistributed Licensing Agreement, HS&M Sub
shall not thereafter continue to fulfill HS&M Sub Responsibilities with respect
to any such Undistributed Licensing Agreement, all rights, title, interest and
obligations of the Venture in, to and under any such Undistributed Licensing
Agreement automatically shall vest in Golden Bear and shall be assigned and
distributed to Golden Bear, and neither the Venture nor HS&M Sub shall have any
rights to such Undistributed Licensing Agreement.
Upon the "Venture Termination Date" as such term is defined below in
this /section/16, and after payment, or the setting aside of funds in reserve
for payment, of all expenses of liquidation and all liabilities of the Venture
(including advances by the Venturers and interest thereon, if any, and any other
liabilities to the Venturers), all remaining property of the Venture shall be
distributed, notwithstanding the provisions of /section/7, to the Venturers as
follows:
(a) All cash shall be distributed pursuant to and in
accordance with the provisions of /section/7.
(b) All accrued but unpaid payments owing to the Venture on
the Venture Termination Date under any Existing Licensing Agreements for periods
during which such Existing Licensing Agreements were Undistributed Licensing
Agreements shall be distributed to the Venturers as such payments are received
by the Venture or either of the Venturers pursuant to and in accordance with the
provisions of /section/7.
(c) All rights, title, interest and obligations of the
Venture in, to and under the following automatically shall vest in Golden Bear
on the Venture Termination Date and shall be assigned and distributed to Golden
Bear:
(1) All Undistributed Licensing Agreements.
(2) All rights of the Venture to the use of
the Venture's name.
(3) All other property of the Venture which
is not to be distributed to HS&M Sub under this
/section/16.
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Following the Venture Termination Date, HS&M Sub shall not continue to fulfill
HS&M Sub Responsibilities with respect to any Undistributed Licensing Agreements
required by (c)(1) above to be distributed to Golden Bear and neither the
Venture nor HS&M Sub shall have any rights to any of the property listed in (c)
above, except as otherwise provided below in this /section/16. For purposes of
this /section/16, the term "Venture Termination Date" shall mean the earliest
date as of which (i) all of the Venture's rights, title, interest and
obligations in, to and under all Existing Licensing Agreements have vested in
Golden Bear and are required to be or have been assigned and distributed to
Golden Bear or (ii) the Licensing Period has ended.
In addition to the distributions described above in this /section/
16, Golden Bear shall pay to HS&M Sub a price (determined as hereinafter
provided) for HS&M Sub's interest in each Distributed Licensing Agreement. Such
price is intended to compensate HS&M Sub for its former rights to future
payments during the Licensing Period under each Distributed Licensing Agreement
for the remainder of its initial term or other term in effect on the Effective
Termination Date. Such price for each such interest shall be as agreed upon by
the Venturers within 30 days from the time Golden Bear is vested with all
rights, title, interest and obligations of the Venture in, to and under such
Distributed Licensing Agreement or within any other reasonable time which Golden
Bear may but shall not be required to specify (which reasonable time shall be
not less than 30 days from the time Golden Bear is so vested), and such price
may, in the discretion of Golden Bear, be paid in whole or in part by the
execution and delivery of a promissory note, payable over (A) a period five
years, or (B) a period which ends on December 31, 2001, whichever is the lesser
period, in equal annual installments of principal plus interest accrued and
determined each month on the unpaid balance thereof at a rate equal to the prime
rate in effect on the last business day of each such month at The First National
Bank of Chicago. As to any Distributed Licensing Agreements for which a price
has not been so mutually agreed upon within such 30 days or such other
reasonable time (if Golden Bear has specified such other reasonable time),
Golden Bear shall have a continuing obligation for the lesser period of (i) the
initial term or other term in effect on the Effective Termination Date of such
Distributed Licensing Agreement or (ii) the Licensing Period, to pay to HS&M
Sub, within 30 days after each December 31 during the Licensing Period, a total
amount equal to 25% of the "net profits" (as such term is defined below in this
/section/16) derived by Golden Bear from all such Distributed Licensing
Agreements during the twelve month period ending on such December 31. For
purposes of this /section/16, "net profits" shall mean the total payments
received under all such Distributed Licensing Agreements, excluding payments
relating to Non-Apparel Products, less all direct and indirect expenses incurred
in administering, performing, and supervising thereunder and in maintaining or
defending any rights or claims thereunder other than expenses specifically
related solely to Non-Apparel Products. For so long as Golden Bear is obligated
to pay HS&M Sub with respect to the net profits from any Distributed Licensing
Agreements, Golden Bear shall not terminate or substantially modify any
exclusivity provisions of such Distributed Licensing Agreements; but,
notwithstanding anything to the contrary contained in the first paragraph of
this /section/16, such restrictions shall no longer apply in territories covered
by any Distributed Licensing Agreement once Golden Bear is no longer obligated
under
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this /section/16 to pay HS&M Sub with respect to the net profits from any such
Distributed Licensing Agreement.
The provisions of this /section/16, structured more for a
step-by-step winding up and liquidation in the event the Venture is terminated
prior to the Ordinary Termination Date rather than an immediate winding up and
liquidation in the event the Venture is terminated on the Ordinary Termination
Date, shall nonetheless apply in the event the Venture terminates on the
Ordinary Termination Date. However, the Venturers deem it necessary to set forth
in this paragraph their understanding as to how the step-by-step procedures
would operate in such an event. Accordingly, the Venturers agree that if the
Venture terminates on the Ordinary Termination Date, the Venture will not
require a period of time for the purpose of winding up its affairs. Hence, all
distributions provided for in this /section/16 (which distributions are, in
accordance with this /section/16, to be made on one of (i) the Effective
Termination Date, (ii) the Venture Termination Date or (iii) one or more dates
between the Effective Termination Date and the Venture Termination Date) shall
be made on the Ordinary Termination Date (as this /section/16 provides by
defining the Effective Termination Date and the Venture Termination Date to be
the Ordinary Termination Date if the Venture terminates on the Ordinary
Termination Date).
The distributions and payments or rights to payments under this
/section/16 upon and following the Effective Termination Date for the purpose of
the termination of the Venture shall be in lieu of all rights of the Venturers
in and to any property of the Venture, and no Venturer shall have a right to a
judicial accounting upon the termination of the Venture. HS&M Sub and Golden
Bear each agree to execute any and all documents reasonably requested by the
other for the purpose of reflecting the ownership and rights of the other in any
property required by this /section/16 to be assigned and distributed by the
Venture to such other Venturer.
/section/17. WITHDRAWAL. No Venturer shall withdraw from the
Venture at any time except as expressly provided in this agreement.
/section/18. AMENDMENTS. This agreement may be amended, in whole or
in part, at any time, but only by an instrument in writing, signed by each of
the Venturers, setting forth the amendment or amendments and the date on or as
of which such amendment or amendments are to be effective. As of such effective
date, this agreement shall be deemed to have been amended as provided in such
instrument, and the Venturers shall be bound thereby.
MISCELLANEOUS
/section/19. ARBITRATION OF DISPUTES. Any disagreement or controversy
arising under this agreement or otherwise with respect to the business or
property of the Venture, whether before or after termination, which cannot be
resolved by the Venturers and for which another method of resolution is not
provided under this agreement, shall be settled by arbitration to be held, and
the award made, in Palm Beach County, Florida, pursuant to the Florida
Arbitration Law and, to the extent not inconsistent therewith, the then-existing
Commercial Rules of the American Arbitration Association. Unless otherwise
agreed by the parties at the time of submission, such arbitration shall be
conducted before a single neutral arbitrator appointed from a panel maintained
by the
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Miami, Florida, office of the American Arbitration Association, whose decision
shall be final and binding upon the parties and enforceable by legal or
equitable proceedings in any applicable jurisdiction. The parties agree that the
arbitrator so chosen shall have no power to alter, modify or change any of the
provisions of this Agreement in any respect whatsoever, nor shall the arbitrator
have the power to make any award of reformation or accelerate the payments which
may be required, and the jurisdiction of said arbitrator is hereby expressly
limited accordingly. All expense and fees of the arbitrator shall be borne
equally by the Venturers.
/section/20. NOTICES. Any notice or document required or desired to
be given to any Venturer or the Venture shall be in writing and shall be deemed
given: (i) to the Venture when deposited in the United States mail, first-class
postage prepaid, addressed to the Venture at the address of its principal
office, and (ii) to any Venturer when delivered personally to that Venturer (or
its successor in interest) or when deposited in the United States mail,
first-class postage prepaid, addressed to that Venturer at the following address
to the attention of the Representatives or at least one of the Representatives,
if any, of that Venturer designated as provided in /section/10 (with copies to
the attention of any other Representatives and, in the case of HS&M Sub, with a
copy to the attention of the General Counsel of Hartmarx Corporation at the
address of HS&M Sub), or at such other address as that Venturer (or its
successor in interest) may previously have specified in a notice to the Venture
or to the Venturer, whichever is giving Notice:
(a) To HS&M Sub:
Seaford Clothing Co.
c/o Hart Schaffner & Marx
101 North Wacker Drive
Chicago, Illinois 60606
(b) To Golden Bear:
Golden Bear International, Inc.
11780 U.S. Highway #1, Suite 400
North Palm Beach, Florida 33408
/section/21. GOVERNING LAW. It is the intention of the Venturers that
the Venture be governed under the laws of the State of Florida and that all
questions concerning the intention, validity, and meaning of this agreement or
relating to the rights and obligations of the Venturers with respect to
performance under this agreement shall be construed and resolved according to
the laws of the State of Florida.
/section/22. INDEMNIFICATION. If any Venturer breaches any provision
of this agreement, or otherwise fails to perform any obligation or observe any
condition imposed upon it under this agreement, then, in addition to being
subject to all other remedies, liabilities, and obligations imposed upon it for
such breach or failure under this agreement or under any applicable law, that
Venturer shall indemnify and save harmless the Venture and the other Venturer
against and from any and all liabilities, loses, damages, claims, costs, and
expenses of any kind whatsoever (including
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<PAGE>
reasonable attorney's fees and other costs and expenses of prosecuting or
defending claims or controversies, litigated or unlitigated) arising directly or
indirectly out of or by reason of any such breach or failure. The parties
further acknowledge that the additional indemnification provisions of Sections
13 and 14 of the Master Agreement shall apply to any claims arising out of this
Agreement as provided therein.
/section/23. WARRANTIES. Each Venturer and the individuals
signing this agreement jointly and severally represents and warrants to the
Venture and the other Venturer that:
(a) Each person or persons signing this agreement on
behalf of that Venturer has been duly authorized to do so.
(b) That Venturer has the capacity to execute and
perform this agreement.
(c) The execution and performance of this agreement by that
Venturer will not violate its charter, articles of incorporation, by-laws or
regulations, or any judgment, contract, agreement, statute or governmental
regulation to which that Venturer is subject or a party.
(d) HS&M Sub represents and warrants that it is a
wholly-owned subsidiary of Hart Schaffner & Marx, and Golden Bear represents and
warrants that it is the duly authorized successor by merger to the interest to
Golden Bear Apparel International, Inc.
/section/24. SEVERABILITY. It is the intention of the parties to this
agreement to comply with the laws governing joint ventures, and this agreement
shall be construed consistently with such laws to the extent possible. If and to
the extent that any court of competent jurisdiction is unable to so construe any
provision of this agreement and holds such provision (or any part thereof) to be
invalid, such holding shall in no way affect the validity of the remainder of
this agreement. Notwithstanding the foregoing, in the event that any material
provision of this agreement is severed by operation of this /section/24, either
party may terminate the Venture.
/section/25. CONSTRUCTION OF AGREEMENT. The captions at the
beginning of the several sections and subsections of this agreement are not part
of the context hereof, but are merely labels to assist in locating and reading
those sections and subsections; they shall be ignored in construing this
agreement. Each pronoun shall include any gender or number thereof, as the
identity of its antecedent may require. This agreement may be executed in
several counterparts, and each executed counterpart shall be considered as an
original of this agreement. Time shall be of the essence with respect to the
satisfaction of any condition to the rights of the Venturers under this
agreement and with respect to all other times specified in this agreement.
/section/26. ENTIRE AGREEMENT. This document contains the entire
agreement between the Venturers and supersedes any prior understandings or
agreements between them respecting the subject matter, provided that this
agreement shall be subject in all respects to, and shall not be deemed to have
amended or modified, any provision of the Master Agreement. There are no
representations, arrangements,
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<PAGE>
understandings, or agreements, oral or written, between the Venturers relating
to the subject matters of this agreement, except those fully expressed in this
document or the Master Agreement. Except as otherwise provided in /section/18,
no changes, alterations, modifications, additions, or qualifications to the
terms of this agreement shall be made or be binding.
/section/27. SUCCESSORS IN INTEREST. Except as otherwise provided in
this agreement, all provisions of this agreement shall be binding upon, inure to
the benefit of, and be enforceable by and against the respective successors and
assigns of each Venturer.
IN WITNESS WHEREOF, the parties have executed multiple original
counterparts of this agreement as of the date first set forth at the beginning
hereof.
GOLDEN BEAR INTERNATIONAL, INC. SEAFORD CLOTHING CO.
By: BY:
-------------------------- --------------------------
Title: Title:
Its Authorized Officer Its Authorized Officer
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<PAGE>
EXHIBIT "A"
EXCLUDED TERRITORIES
United States of America, its overseas possessions, military posts and exchanges
Canada
Mexico
Central and South America
Europe (excluding that part formerly within the territorial limits of the Union
of Soviet Socialist Republics)
Peoples' Republic of China and Hong Kong
\bullet\ The Venture shall be authorized to locate and negotiate potential
licensing arrangements in these countries, provided that GBI has
authorized Hart Schaffner & Marx and Trans-Apparel Group. an
affiliate of HS&M Sub, to distribute apparel in such territories by
separate agreements until such time as the Venture may conclude a
definitive license agreement which would prevent such direct
distribution. Execution and delivery of a definitive license within
such territory will be subject to mutual approval of the parties
involved
\bullet\ In the event that the Venture is successful in concluding the
proposed license agreement with Ryoden for this territory, such
territory will be automatically added to the Licensing Territory of
the Venture for the term of such license agreement upon the
execution of such license agreement by HS&M Sub and Golden Bear,
subject to the conditions set forth herein. For purposes of Section
6, 7 and 16 of the Joint Venture Agreement, Apparel Net Income and
Loss generated by the Venture from any such license will be specially
allocated and cash distributions made therefrom in the ratio of
sixty-six and two-thirds percent (66 2/3%) to Golden Bear and
thirty-three and one-third percent (33 1/3%) to HS&M Sub, and the
Venture will segregate its revenues and expenses from such license as
necessary to account for such special allocations in the same manner
as otherwise provided for Non-Apparel Net Income and Loss. As
consideration for the special allocation made to Golden Bear
hereunder, Golden Bear shall be responsible for payment of any share
of the income derived from such territory as Kosugi may require in
connection with services to be rendered or marketing rights to be
surrendered by Kosugi in connection with such license.
<PAGE>
EXHIBIT "B"
LICENSING AGREEMENT
This agreement amends and restates, as of January 1, 1994, that certain
licensing agreement originally dated as of March 29, 1983 by and between Golden
Bear International, Inc. (a Florida corporation), with offices at Suite 400,
11760 U. S. Highway #1, North Palm Beach, Florida 33408 ("Golden Bear"), and
Jack Nicklaus Apparel International (a joint venture between a wholly owned
subsidiary of Hart Schaffner & Marx ("HS&M"), a New York corporation, and Golden
Bear), with its principal offices at Suite 400, 11760 U. S. Highway #1, North
Palm Beach, Florida 33408 (the "Venture"). In consideration of the execution of
joint venture agreement (the "Venture Agreement") dated the date hereof between
Hart Schaffner & Marx's wholly owned subsidiary, Seaford Clothing Co. (an
Illinois corporation), and Golden Bear, and the other instruments and agreements
contemplated by the Venture Agreement, concurrently with the execution of this
agreement, and in consideration of the mutual covenants and conditions contained
herein, the parties hereto agree as follows:
/section/1. GRANT OF ENDORSEMENT RIGHTS. During the "Licensing Period"
(as such term is defined below in this /section/1), within the "Licensing
Territory" (as such term is defined below in this /section/1) and subject to all
the terms and conditions of this agreement, Golden Bear hereby grants to the
Venture the exclusive right and license to the use of the "Nicklaus Endorsement"
(as such term is defined below in this /section/1) in connection with the
manufacture, advertisement, promotion and sale of "Nicklaus Products" (as such
term is defined below in this /section/1). Golden Bear agrees that, during the
Licensing Period and within the Licensing Territory, it will not grant to others
and right or license to the use of the Nicklaus Endorsement in connection with
the manufacture, advertisement, promotion and sale of Nicklaus Products, except
to the extent such rights vest in Golden Bear and are no longer subject to any
rights of the Venture as provided in /section/13 of this agreement. For purpose
of this agreement, the terms "Licensing Period," "Licensing Territory,"
"Nicklaus Endorsement" and "Nicklaus Products" shall have the meanings given
them in /section/3 of the Venture Agreement (as amended from time to time).
/section/2. GOLDEN BEAR TRADEMARKS. It is understood and agreed
that Golden Bear is the owner of those trademarks identified in Schedule "1"
annexed hereto, which trademarks have been frequently used upon or in connection
with articles of apparel licensed by the Venture and have been registered under
the trademark laws of various jurisdictions within the Licensing Territory.
Golden Bear hereby exclusively authorizes the Venture to utilize such
trademarks, and any other trademarks used upon or in connection with wearing
apparel products endorsed by Jack Nicklaus which are manufactured and/or
distributed by HS&M or its affiliates under that Certain Master Apparel
Agreement with Golden Bear dated as of June 1, 1993 (the "Master Agreement")
(which trademarks are hereinafter referred to as the "Golden Bear Trademarks"),
and in connection with the manufacture, advertisement, promotion and sale of
Nicklaus Products within the Licensing Territory and during the Licensing
Period, subject to the provisions of /section/10 of this agreement requiring
prior approval by Golden Bear of the use of trademarks and advertising,
respectively, as if the same were included within the Nicklaus Endorsement, to
the extent provisions similar to or deriving from the provisions provided for in
/section//section/4 and 5 of this agreement are contained in "Licensing
Agreements" (as such term is defined below in this /section/2). Golden Bear
<PAGE>
agrees that, during the Licensing Period and within the Licensing Territory, it
will not grant to others any right or license to the use of the Golden Bear
Trademarks in connection with the manufacture, advertisement, promotion and sale
of Nicklaus Products, except to the extent such rights vest in Golden Bear and
are no longer subject to any rights of the Venture as provided in /section/13 of
this agreement. For purposes of this agreement, the term "Licensing Agreements"
shall have the meaning given it in /section/3 of the Venture Agreement (as
amended from time to time).
/section/3. SUBLICENSING AND ASSIGNMENT. Golden Bear understands that
it is necessary for the Venture to grant sublicenses hereunder with respect to
various aspects of the manufacture, advertisement, promotion and sale of
Nicklaus Products. Accordingly, the Venture shall have the right to grant such
sublicenses hereunder; provided, however, that all such sublicenses granted
hereunder shall be subject to the prior approval of Golden Bear with respect to
both "Sublicensees" (as such term is defined below in this /section/3) and the
terms and conditions of the Licensing Agreement and provided, further, that the
rights of Sublicensees and Sublicensees' "sublicensees" (as such term is defined
below in this /section/3) hereunder shall be subject to all of the covenants and
conditions set forth in this agreement and the rights of approval set forth in
/section//section/4, 5, 6, 7 and 8 of this agreement. The Venture shall, in the
Licensing Agreements, expressly subject all Sublicensees to such covenants,
conditions and rights of approval which covenants, conditions and rights of
approval shall expressly run to, be exercisable by and be enforceable by the
Venture. In addition, the Venture shall be responsible to Golden Bear for
enforcing and exercising all of such covenants, conditions and rights of
approval as against any Sublicensees. For purposes of this /section/3, Golden
Bear shall be deemed to have approved any sublicense if it consents to the
execution and delivery of a Licensing Agreement as provided in /section/10 of
the Venture Agreement. Otherwise than as provided in this /section/3, the
Venture shall have no right to sublicense, assign, transfer, alienate or
hypothecate any of its rights or obligations hereunder without the consent of
Golden Bear. For purposes of this agreement, the term "Sublicensees" shall
include any party licensed directly or indirectly by or under the Venture
pursuant to the Venture Agreement and this agreement. For purposes of this
agreement and the Licensing Agreements, Sublicensees' "sublicensees" shall be
defined to include any party licensed directly or indirectly by or under
Sublicensees pursuant to Licensing Agreements.
/section/4. "APPROVAL OF PRODUCTS" PROVISION FOR LICENSING AGREEMENTS.
The Venture shall have the following provision in all of the Licensing
Agreements:
"APPROVAL OF PRODUCTS. __________________ Sublicensee agrees
that the Venture shall have the exclusive right to approve or
disapprove of all Nicklaus Products, without exception, sold by or on
behalf of Sublicensee and its sublicensees as to the nature, quality,
style and design thereof and as to any endorsement, trademark or trade
name used in connection therewith, it being understood and agreed,
however, that if the Venture has not disapproved of a product submitted
to it for approval as herein provided within the thirty (30) day period
following the receipt of said product, said product shall be deemed to
have been approved by the Venture. It is further understood and agreed
that such approval shall in no event be unreasonably withheld or
delayed, and if withheld, the reasons therefor shall be clearly
explained to Sublicensee. Sublicensee and its sublicensees
2
<PAGE>
shall not manufacture (except in sample lots for obtaining the
approval thereof by the Venture), advertise, promote and/or sell any
of the Nicklaus Products without such prior approval of the Venture."
/section/5. "APPROVAL OF ADVERTISING" PROVISION FOR LICENSING
AGREEMENTS. The Venture shall have the following provision in all of the
Licensing Agreements:
"APPROVAL OF ADVERTISING. Sublicensee acknowledges that it is
essential for the protection of the interests of the Venture in the
Nicklaus Endorsement that the Venture has a continuing control over the
manner in which the Nicklaus Endorsement is used in advertising.
Accordingly, Sublicensee agrees that the Venture shall have a
continuing right to approve or disapprove of any advertising of any of
the Nicklaus Products, which advertising involves in any way the
Nicklaus Endorsement, whether used by Sublicensee, by its sublicensees,
or by any distributor, retailer or other party selling Nicklaus
Products manufactured and/or sold by Sublicensee and its sublicensees
hereunder. Sublicensee further agrees that it and its sublicensees will
not use and will not extend to others the right to use any such
advertisement of any type whatsoever without the prior approval thereof
by the Venture, and Sublicensee and sublicensees shall be responsible
to the Venture for enforcing the Venture's rights under this paragraph
as against any other party. Sublicensee finally agrees that it and its
sublicensees will not use or continue to use and will use their best
efforts to prevent the use or continued use of any such advertisement
subsequent to a written notice of disapproval from the Venture,
regardless of whether such advertisement theretofore had been approved.
For the purposes of this paragraph, the Venture shall be deemed to have
approved any advertisement, a copy of which is delivered to the
Venture, which advertisement is not specifically disapproved by the
Venture within the ten (10) day period next following the date of its
receipt, it being understood and agreed, however, that such approval
shall in no event be unreasonably withheld, the reasons therefor shall
be clearly explained to Sublicensee."
/section/6. "APPROVAL OF MARKETING" PROVISION FOR LICENSING
AGREEMENTS. The Venture shall have the following provision in all of
the Licensing Agreements:
"APPROVAL OF MARKETING. Sublicensee agrees that the Venture
shall have the exclusive right to approve or disapprove of all means of
marketing Nicklaus Products, without exception, sold by or on behalf of
Sublicensee and its sublicensees, whether used by Sublicensee, by its
sublicensees, or by any distributor, retailer or other party selling
Nicklaus Products sold by or on behalf of Sublicensee and its
sublicensees hereunder. Sublicensee further agrees that it and its
sublicensees will not use and will not extend to others the right to
use any means of marketing Nicklaus Products of any type whatsoever
without the prior approval thereof by the Venture, and Sublicensee and
its sublicensees shall be responsible to the Venture for enforcing the
Venture's rights under this paragraph as against any other party.
Sublicensee finally agrees that it and its sublicensees will not use or
continue to use and will prevent the use or continued use of any means
of marketing subsequent to a written notice of disapproval thereof from
the Venture, regardless of whether such means of marketing
3
<PAGE>
theretofore had been approved. For the purposes of this paragraph, the
Venture shall be deemed to have approved any means of marketing which
is not specifically disapproved by the Venture within the thirty (30)
day period net following the date of its receipt of notification of the
proposed means of marketing, it being understood and agreed, however,
that such approval shall in no event be unreasonably withheld or
delayed, and if withheld, the reasons therefor shall be clearly
explained to Sublicensee."
/section/7. "PREMIUM MARKET" PROVISION FOR LICENSING AGREEMENTS.
The Venture shall have the following provision in all of the Licensing
Agreements:
"PREMIUM MARKET. Notwithstanding anything to the contrary
contained in this agreement, it is expressly understood and agreed that
Sublicensee and its sublicensees shall not have the right, without the
express written consent of the Venture, to distribute any Nicklaus
Products for sale by any party in the 'Premium Market' as that term is
defined herein. 'Premium Market' shall be deemed to include sales of
products to be sold to the consumer through automotive or tire stores,
or gas stations, or grocery stores, or through any channel of
distribution where the product would be used a part of a premium
promotion or 'traffic builder' program designed to induce the consumer-
purchaser (i) to come to or contact a certain place of business under
circumstances where the premium seller is interested primarily in
selling or exposing such consumer- purchaser to products or services
other than Nicklaus Products, or (ii) to purchase a service or product
other than Nicklaus Products; provided, however, that under no
circumstances will the Premium Market be regarded as including sales of
Nicklaus Products through such outlets as a "stock item" (as that term
is understood in the industry) sold in the ordinary course of business
at a normal mark-up to the retailer and jobber (if any), and not as
what is recognized in the industry as a promotional item. Sublicensee
shall be responsible to the Venture for enforcing the Venture's right
under this paragraph to withhold consent to any sale of Nicklaus
Products in the Premium Market as against any distributor, retailer or
other party distributing or selling Nicklaus Products manufactured,
distributed and/or sold by Sublicensee and its sublicensees under this
agreement, and in furtherance of such responsibility Sublicensee shall
restrict all distributors, retailers and other parties distributing or
selling Nicklaus Products manufactured, distributed and/or sold by
Sublicensee and its sublicensees under this agreement from distributing
Nicklaus Products for sale in the Premium Market. In addition,
Sublicensee shall provide that the Venture shall have the right to
enforce such restrictions against all such distributors, retailers and
other parties."
/section/8. USE OF GOLDEN BEAR TRADEMARKS SUBJECT TO APPROVALS. The
Venture shall provide in all of the Licensing Agreements that authorization to
utilize the Golden Bear Trademarks is subject to the provisions, required by
/section//section/4 and 5 of this agreement to be in all Licensing Agreements,
requiring the prior approval by the Venture of the use of trademarks and
advertising, respectively, as if the same were included within the Nicklaus
Endorsement.
4
<PAGE>
/section/9. VARIATIONS IN LICENSING AGREEMENTS. Notwithstanding
anything to the contrary contained in this agreement, Golden Bear may, by
consenting to the execution and delivery of a Licensing Agreement containing
provisions different from the provisions provided for in /section//section/4, 5,
6, 7 and 8 of this agreement, waive its right to require that such provisions be
in such Licensing Agreement and permit the Venture to delete such provisions
from or vary such provisions in such Licensing Agreement.
/section/10. GOLDEN BEAR'S APPROVAL RIGHTS. All approvals of or
consents to products, advertising and marketing by the Venture under Licensing
Agreements, including approvals or consents under provisions similar to or
deriving from the provisions provided for in /section//section/4, 5, 6, 7 and 8
of this agreement, shall not be given by the Venture without Golden Bear's prior
approval or consent. If Golden Bear does not specifically disapprove of any
matter submitted to it by the Venture for its approval within the period of time
specified in a Licensing Agreement as the period of time in which the Venture
must specifically disapprove of the matter or else be deemed to have approved of
it, Golden Bear shall be deemed to have approved such matter, it being
understood and agreed, however, that such approval shall in no event be
unreasonably withheld or delayed, and if withheld, the reasons therefor shall be
clearly explained to the Venture. In the event Golden Bear disapproves of any
such matter within such period, or in the event that Golden Bear disapproves of
a matter after such period and the Licensing Agreement permits a subsequent
disapproval whether or not such matter had theretofore been approved, the
Venture shall then disapprove of such matter as provided for in the Licensing
Agreement. This provision is intended to and shall be interpreted as allowing
Golden Bear to unilaterally require the Venture to disapprove of a matter, but
as requiring, as provided in /section/10(a)(3) of the Venture Agreement, that
both parties to the Venture are required to approve or consent in order for the
Venture to grant any approvals or consents under Licensing Agreements.
/section/11. REPRESENTATIONS OF GOLDEN BEAR. Golden Bear represents
and warrants that it has rights with respect to licensing the use of the
Nicklaus Endorsement and the Golden Bear Trademarks which entitle it to grant
the exclusive rights granted in this agreement.
/section/12. REGISTRATION AND PROTECTION OF NICKLAUS ENDORSEMENT AND
GOLDEN BEAR TRADEMARKS. Any registration and/or protection during the Licensing
Period of the Nicklaus Endorsement and the Golden Bear Trademarks by the Venture
in any and all jurisdictions within the Licensing Territory shall not be in the
name of the Venture, it being understood and agreed that all such registrations
and protections shall be in the name of Golden Bear, or in other such name as
Golden Bear shall specify. However, as provided in /section/8 of the Venture
Agreement, subject to the provisions of /section/10 of the Venture Agreement
with respect to certain consents to incurring some of the following costs on
behalf of the Venture, the costs of registering and protecting all or any part
of the Nicklaus Endorsement and the Golden Bear Trademarks in any and all
jurisdictions within the Licensing Territory and the costs of maintaining
actions for the infringement or other violation of the Venture's rights to the
Nicklaus Endorsement and the Golden Bear Trademarks and resolving and defending
claims and legal actions alleging infringement or any other violation of the
rights of other parties arising out of the use of the Nicklaus Endorsement and
the Golden Bear Trademarks by the Venture in any and all jurisdictions within
the Licensing Territory shall be direct costs of the Venture, and
5
<PAGE>
shall not be costs either charged to Golden Bear or for which Golden Bear is
obligated to indemnify the Venture.
/section/13. EFFECT OF TERMINATION OF VENTURE. Notwithstanding
anything to the contrary contained in this agreement, on the "Effective
Termination Date" (as such term is defined below in this /section/13), as
provided in paragraph (c)(2) of /section/16 on page 14 of the Venture Agreement,
all rights, title, and interest of the Venture in and to the Nicklaus
Endorsement and the Golden Bear Trademarks automatically shall vest in Golden
Bear, and shall be assigned and distributed to Golden Bear, subject only to the
Venture's rights to the Nicklaus Endorsement and the Golden Bear Trademarks for
purposes of performing its obligations under "Undistributed Licensing
Agreements" (as such term is defined below in this /section/13), and the Venture
and Sublicensees shall not thereafter manufacture, advertise, promote and/or
sell any product whatsoever in connection with the Nicklaus Endorsement and the
Golden Bear Trademarks, except for purposes of performance under Undistributed
Licensing Agreements. Further, and notwithstanding anything to the contrary
contained in this agreement, on the "Venture Termination Date" (as such term is
defined below in this /section/13), all rights of the Venture and Sublicensee in
and to the Nicklaus Endorsement and the Golden Bear Trademarks shall cease
absolutely. For the purposes of this agreement, the term "Effective Termination
Date" shall have the meaning given it in /section/15 of the Venture Agreement
(as amended from time to time) and the term "Undistributed Licensing Agreements"
shall have the meaning given it in /section/16 of the Venture Agreement (as
amended from time to time).
IN WITNESS WHEREOF, the parties have executed multiple original
counterparts of this agreement as of the date first set forth at the beginning
hereof.
GOLDEN BEAR INTERNATIONAL, JACK NICKLAUS APPAREL
INC. INTERNATIONAL
By: By:
--------------------------- -----------------------------
Name: Name:
Title: As Authorized Representative of
Its Duly Authorized Officer Seaford Clothing, Inc.
By:
-----------------------------
Name:
As Authorized Representative of
Golden Bear International, Inc.
6
<PAGE>
Hart Schaffner & Marx and its undersigned wholly owned subsidiary, in
consideration of the execution of the Venture Agreement, this agreement, and
the other instruments and agreements contemplated by the Venture Agreement,
concurrently with their execution hereunder for the purposes of making the
representations, warranties and covenants which follow, hereby make the
representations, warranties and covenants which follow. Hart Schaffner & Marx
and its undersigned wholly owned subsidiary hereby covenant that there will not
be any registration and/or protection of the Nicklaus Endorsement and the Golden
Bear Trademarks during the Licensing Period by the Venture or either of them or
any organization controlled directly, or indirectly through controlled
organizations, by them in the name of the Venture or either of them or any
organization controlled directly, or indirectly through controlled
organizations, by them, it being understood that all such registrations and
protections shall be in the name of Golden Bear, or in such other name as
Golden Bear shall specify. (For purposes hereof, "control" shall have the
meaning given it in /section/11 of the Venture Agreement.)
HART SCHAFFNER & MARX
By:
----------------------------
Name:
Title:
Its Duly Authorized Officer
SEAFORD CLOTHING CO.
By:
----------------------------
Name:
Title:
Its Duly Authorized Officer
7
EXHIBIT 10.11
[Execution Copy]
MASTER APPAREL AGREEMENT
AGREEMENT, dated as of this 1st day of June, 1993, by and between
GOLDEN BEAR INTERNATIONAL, INC., a Florida Corporation having its principal
place of business at 11780 U.S. Highway #1, North Palm Beach, Florida 33408
("GBI"), JAYMAR-RUBY, INC. t/a TRANS-APPAREL GROUP, an Indiana corporation with
its principal place of business at 5000 South Ohio Street, Michigan City,
Indiana 46360 ("TAG"), HART SCHAFFNER & MARX, a New York corporation having its
principal place of business at 101 North Wacker Drive, Chicago, Illinois 60606
("HS&M"), and HARTMARX CORPORATION, a Delaware Corporation with its principal
place of business at 101 North Wacker Drive, Chicago, Illinois 60606
("Hartmarx"), as the controlling party of TAG and HS&M.
WHEREAS, pursuant to a Joint Venture Agreement and certain related
agreements dated March 29, 1983 (collectively, the "JNAI Agreement"), GBI's
predecessor, Golden Bear Apparel International, Inc. ("Golden Bear Sub"), and
HS&M's subsidiary, Seaford Clothing Co. ("HS&M Sub") formed a venture known as
Jack Nicklaus Apparel International ("JNAI") to license third parties to develop
and market certain apparel products bearing the "Golden Bear" and "Jack
Nicklaus" trademarks outside of the United States, and to permit the transfer of
certain manufacturing technologies and marketing know-how to its licensees;
WHEREAS, the JNAI Agreement is due to expire on May 31, 1995;
WHEREAS, pursuant to an Agreement dated March 29, 1983, as amended by
letter dated July 9, 1987, countersigned July 17, 1987 (the "HS&M Agreement"),
GBI's predecessor, Golden Bear, Inc. ("Golden Bear"), and HS&M have developed,
manufactured, marketed and distributed certain apparel products bearing the
"Golden Bear" and "Jack Nicklaus" trademarks in the United States;
WHEREAS, the HS&M Agreement is due to expire on August 31, 1995;
WHEREAS, pursuant to a Joint Venture Agreement dated July 1, 1987
(the "Warnaco Agreement"), GBI and Warnaco, Inc. ("Warnaco") have developed,
manufactured, marketed and distributed a line of sportswear/active wear apparel
bearing the "Golden Bear" and "Jack Nicklaus" trademarks in the United States,
which line does not include golf apparel;
WHEREAS, the Warnaco Agreement is due to expire on May 31, 1995;
WHEREAS, pursuant to a Golf Apparel Agreement dated June 15, 1991,
effective as of July 1, 1990 (the "Golf Apparel Agreement"), GBI and TAG, have
developed, manufactured, marketed and distributed a line of golf apparel bearing
the "Jack Nicklaus Signature" and "South Shore" trademarks which is sold in golf
related channels in the United States;
WHEREAS, GBI and Hartmarx desire to extend their relationship with
respect to international licensing, tailored clothing and golf apparel, and to
integrate the active wear business currently conducted by Warnaco into the
apparel program developed
<PAGE>
under this Agreement upon the expiration or earlier termination of the Warnaco
Agreement;
WHEREAS, GBI and Hartmarx desire to provide for certain modifications
to the existing agreements with TAG and HS&M in order to reflect changes in the
business plans adopted by the parties for the period from the date of this
Agreement through the year 2000;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions set forth herein, the parties hereto agree as
follows:
1. DEFINITIONS. The parties agree that the terms set forth
below shall have the definitions provided herein when used in this Agreement:
(a) "APPAREL" shall mean, except as expressly provided to the
contrary in this Master Agreement or in any Existing Agreement or Related
Agreement, all items and forms of men's and women's casual, dress and tailored
apparel, including, without limitation, knit and woven shirts/blouses, blazers,
jackets, sport coats, suits, slacks, trousers, shorts and other bottoms,
neckwear, rainwear (other than golf rainsuits), sweaters, fleecewear and
hosiery. It is understood that accessory items such as shoes, wallets, jewelry
and gloves and golf rainwear shall not be included within the definition of
"apparel" under this Master Agreement, provided however, that the exclusion of
such items shall not prevent the parties from agreeing upon the development of
complementary lines of merchandise in such categories by including them in any
Related Agreement or separate agreement with respect to such items.
(b) "ENDORSED PRODUCTS" shall mean those items of apparel which bear
any of the Trademarks or are marketed, advertised or promoted using any of the
Trademarks, which are developed by the parties under this Master Agreement or
any Related Agreement.
(c) "EXISTING AGREEMENTS" shall mean, collectively, the JNAI
Agreement, HS&M Agreement, Golf Apparel Agreement and Warnaco Agreement.
(d) "MASTER AGREEMENT" shall mean this Master Apparel Agreement.
(e) "NEW JNAI AGREEMENT" shall mean that amended and restated Joint
Venture Agreement referred to in Section 3, below, in the form of Exhibit "A"
annexed hereto.
(f) "NEW MENSWEAR AGREEMENT" shall mean that trademark license
agreement referred to in Section 4, below, in the form of Exhibit "B" annexed
hereto.
(g) "RELATED AGREEMENTS" shall mean, collectively, the Existing
Agreements, the New JNAI Agreement, the New Menswear Agreement and the
Sportswear Agreement, as defined herein.
(h) "SPORTSWEAR AGREEMENT" shall mean that trademark license
agreement referred to in paragraph 5, below, in the form of Exhibit "C" annexed
hereto.
(i) "TERRITORY" shall, for purposes of this Agreement, be worldwide,
it being the understanding and intention of the parties that the
responsibilities of the parties with
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respect to particular parts of this overall territory shall be as more
particularly described in the Related Agreements.
(j) "TRADEMARKS" shall mean, collectively, those trademarks owned by
GBI and associated by the public with Jack Nicklaus to the extent such
trademarks are used in connection with apparel, except as otherwise provided in
this Master Agreement or in any Related Agreement , and any subsequent
trademarks adopted by GBI for use in connection with the sale of apparel under
any Related Agreement with the agreement of the other parties to such agreement.
Any one of such Trademarks may hereafter be referred to singularly as a
"Trademark". Unless otherwise agreed by the parties, all Trademarks shall be
owned by GBI, and neither TAG, HS&M or Hartmarx shall be required to authorize
the use of any trademarks owned by them or their affiliates or licensed to any
of them by third parties as Trademarks under this Master Agreement or any
Related Agreement. Nothing herein contained shall be deemed to include within
the definition of Trademarks any trademarks owned by Hartmarx, HS&M, TAG or any
of their affiliates, or any trademarks licensed to them by third parties.
2. GENERAL RESPONSIBILITIES OF THE PARTIES. Subject to the terms and
conditions of this Master Agreement and the Related Agreements, GBI, TAG and
HS&M hereby agree to cooperate in the development, production and distribution
of coordinated lines of apparel to be marketed by TAG and HS&M under separate
brands using the Trademarks. GBI shall be responsible for the development and
adoption of the Trademarks, and GBI shall use its best efforts to provide such
marketing support and such personal services of Jack Nicklaus as may be required
in order to provide a unique identification for the apparel lines developed
under this Master Agreement and the Related Agreements. TAG and HS&M shall be
responsible for the manufacture, sourcing, distribution and marketing of the
apparel lines developed by each of them as contemplated by this Master
Agreement, and they shall be jointly responsible for developing and implementing
international licensing and distribution programs throughout the Territory. In
that regard, TAG and HS&M shall provide such funding, technical expertise and
personnel as may be required to carry out the various apparel programs described
in the Related Agreements. It is understood by GBI that TAG and HS&M may
delegate their duties with respect to international licensing and distribution
activities to Hartmarx International, Inc. ("HII"), an affiliated party owned
and controlled by Hartmarx, provided that TAG and HS&M shall be solely
responsible for payment of any compensation due to HII with respect to the
services rendered to them. The delegation of responsibilities to HII with
respect to international activities shall not relieve TAG or HS&M from their
obligations to GBI under this Agreement or any Related Agreement with respect to
such activities.
3. INTERNATIONAL LICENSING PROGRAM. Subject to the termination rights
provided in the JNAI Agreement, the parties have agreed to extend the term of
JNAI, which is presently due to expire on May 31, 1995, through December 31,
2000. The parties agree that the terms of this Section 3 shall apply to their
international licensing activities during the term of this Master Agreement.
(a) Upon execution of this Master Agreement, GBI will execute, and
HS&M will cause HS&M Sub to execute, an Amended and Restated Joint Venture
Agreement
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in the form annexed hereto as Exhibit "A", which shall determine the rights of
the parties during the period from the effective date of the New JNAI Agreement
through December 31, 2000. All rights of the parties under the JNAI Agreement
shall be merged into the New JNAI Agreement as of its effective date, and the
New JNAI Agreement shall thereafter be controlling.
(b) The parties further agree in principle to the renewal of the
Jack Nicklaus Apparel International - Far East joint venture ("JNAI-FE") for the
period from June 1, 1995, through December 31, 2000, subject to the conditions
set forth in this subsection. GBI and HS&M shall use their best efforts to
effect a mutually agreeable restructuring of JNAI-FE prior to renewal of the
existing term in order to eliminate the current nominal participation of Asahi
Chemical Industry Co., Ltd. ("Asahi"), and to provide for a mutually agreeable
level of participation and royalty share for Kosugi Sangyo Co., Ltd. ("Kosugi").
(c) The parties also agree in principle to the non-renewal of the
existing license between JNAI and Asahi for the territory of Japan upon its
expiration on May 31, 1995, and to negotiating a direct apparel license with
Kosugi for such territory for the renewal term of JNAI. HS&M acknowledges that
the termination of the Asahi license shall eliminate any participation by JNAI
in those non-apparel product lines originally included in the Asahi license by
special arrangement with Golden Bear, unless GBI and Kosugi agree to include
such product lines in the new master license to be concluded between JNAI and
Kosugi. GBI shall thereafter be free to license such products directly in its
discretion, provided that GBI shall provide HS&M with a right of first
negotiation to participate in any new opportunity to license such product lines
in Japan, which right shall expire, but only with respect to those specific
products offered, without further obligation to GBI unless the parties have
concluded a written agreement with respect to such participation within sixty
(60) days of the date of HS&M's receipt of written notice of such licensing
opportunity. The parties agree that the Kosugi license shall provide for
payment to GBI of percentage marketing fees based upon wholesale shipments by
Kosugi's sublicensees of Endorsed Products in Japan (the "Marketing Fees"),
which fees are intended to capture for the benefit of GBI the difference
between: (i) the projected annual spread between royalties paid to JNAI by
Kosugi and its anticipated gross royalties from its sublicensees, and (ii) the
projected local advertising and marketing expenses which Kosugi will be required
to make on behalf of its sublicensees under the new JNAI-Kosugi agreement. GBI
agrees to pay to HS&M Sub twenty-five percent (25%) of the Marketing Fees, if,
as and when received by GBI from Kosugi, up to a limit of one million dollars
(U.S.$1,000,000) for any License Year, and to pay to HS&M Sub fifty percent
(50%) of the Marketing Fees, if any, received by GBI from Kosugi in excess of
one million dollars (U.S.$1,000,000) for any License Year.
(d) It is the intention of the parties that the primary focus of
JNAI's licensing activities during the term of this Master Agreement shall be
the Asia-Pacific region, and that JNAI will cooperate with TAG in order to
develop direct distribution of Endorsed Products by TAG in those territories
initially assigned to TAG under the Sportswear Agreement. HS&M and TAG shall be
jointly responsible for any conflicts with JNAI licensees created by direct
sales authorized by JNAI outside of the territories of TAG and HS&M.
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4. MENSWEAR PROGRAM. Subject to the termination rights provided in
the HS&M Agreement, the parties have agreed to extend the term of their
relationship under the HS&M Agreement, which is presently due to expire on
August 31, 1995, through December 31, 2000. The parties agree that the terms of
this Section 4 shall apply to their menswear program activities during the term
of this Master Agreement.
(a) Upon execution of this Master Agreement, GBI and HS&M will
execute a New Menswear Agreement in the form annexed hereto as Exhibit "B",
which shall determine the rights of the parties during the period from January
1, 1994, through December 31, 2000. In order to synchronize the fiscal year
under the HS&M Agreement with the fiscal years applicable to all other Related
Agreements, the parties agree that (i) the last fiscal year of the HS&M
Agreement shall be that four (4) month period from September 1, 1993, to
December 31, 1993, (ii) HS&M's obligations for payment of the Annual Retainer
for the last fiscal year of the HS&M Agreement shall be reduced by two-thirds
(2/3) to reflect the shortened fiscal period , (iii) the final Annual Retainer
of twenty-seven thousand four hundred forty-nine dollars ($27,449) shall be paid
in one (1) installment due on December 1, 1993, and (iv) HS&M will make its
final annual accounting under the HS&M Agreement within sixty (60) days of
December 31, 1993. All rights and obligations of the parties under the HS&M
Agreement shall be merged into the New Menswear Agreement effective January 1,
1994, and the New Menswear Agreement shall thereafter be controlling.
(b) The parties agree that the responsibility of HS&M under this
Master Agreement shall be the development and marketing of a coordinated line of
tailored and dress apparel using the Trademarks to complement the sportswear
program to be developed by TAG as described in Section 5, below. HS&M shall
consult with and provide support to JNAI in connection with opportunities for
licensing or direct distribution of Endorsed Products developed by HS&M under
this Master Agreement.
(c) The parties agree that the HS&M Agreement, as amended, will
continue in full force and effect through December 31, 1993, subject to the
modifications set forth in this Section 4. HS&M acknowledges the succession of
GBI to the interest of Golden Bear under the HS&M Agreement with the consent of
HS&M, and the parties agree, as a result of such succession, that GBI has
become a direct party to the HS&M Agreement. The parties further agree, based
upon the mutually agreed role of HS&M in their overall business plan for
Endorsed Products under this Master Agreement, that the activities of HS&M for
the remainder of the term of the HS&M Agreement shall be limited to those items
of apparel defined in the New Menswear Agreement, notwithstanding any broader
definition of apparel included in the original definition under the HS&M
Agreement. The exclusivity provisions contained in paragraphs 2 and 3 of the
HS&M Agreement are hereby superceded by the terms of Section 16 of this Master
Agreement, which shall hereafter bind GBI and HS&M in connection with their
activities involving Endorsed Products under the HS&M Agreement.
5. SPORTSWEAR PROGRAM. The parties have agreed to reorganize the
business heretofore conducted under the Golf Apparel Agreement and the Warnaco
Agreement as soon as reasonably practicable, and to authorize TAG to develop a
comprehensive program for the design, manufacture and marketing of lines of
men's
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and women's golf apparel, sportswear and active wear apparel throughout the
Territory. Upon termination of the present restrictions imposed by the Golf
Apparel Agreement in the United States, Puerto Rico and Mexico, TAG will be
authorized to integrate, replace and expand the sportswear business presently
conducted by Warnaco and combine such business with the golf apparel business
presently conducted by TAG. The parties agree that the terms of this Section 5
shall apply to their sportswear program activities during the term of this
Master Agreement. The parties contemplate that the Golf Apparel Agreement will
be terminated as of January 1, 1994 and that the Warnaco Agreement will continue
for the remainder of its term; however, in the event of an earlier termination
or abandonment of the rights of Warnaco, the Sportswear Agreement shall become
fully effective in the territories and channels currently held by Warnaco as
set forth therein.
(a) Upon execution of this Master Agreement, GBI and TAG will
execute a Sportswear Agreement in the form annexed hereto as Exhibit "C", which
shall determine the rights of the parties during the period from its Effective
Date through December 31, 2000. All rights of the parties under the Golf Apparel
Agreement shall be merged into the Sportswear Agreement as of its Effective
Date, and the Sportswear Agreement shall thereafter be controlling subject to
the transition provisions set forth therein.
(b) Commencing as of the effective date of this Agreement, TAG will
commence direct distribution of an integrated apparel line outside of the
United States, Puerto Rico and Mexico in support of the licensing activities of
JNAI as provided in Section 3(d), above, and TAG will aggressively pursue
potential export sales and licensing programs of sportswear products to Europe,
Canada, Central America (except Mexico) and South America, which sales will
include products and channels not currently authorized to TAG domestically under
the Golf Apparel Agreement. It is understood that all such sales made through
December 31, 1993, shall be subject to the terms and conditions set forth for
the "Signature Products" in the Golf Apparel Agreement, and that royalties shall
be payable to GBI with respect to all such sales as provided in Subsection 10 of
the Golf Apparel Agreement. TAG shall assume direct sale responsibility for
exports to Mexico upon termination of Warnaco's license for such territory under
the terms described in the Sportswear Agreement.
(c) The parties agree that the existing Golf Apparel Agreement will
continue in full force and effect through the Effective Date of the Sportswear
Agreement, subject to the modifications set forth in this Section 5. TAG
acknowledges that, pending termination and release of the rights of Warnaco as
a licensee under the Warnaco Agreement, TAG shall abide in all respects by the
restrictions imposed by the Golf Apparel Agreement with respect to licensed
products and channels of distribution within the United States, Puerto Rico and
Mexico in order to avoid any conflicts between GBI and Warnaco. Except for such
restrictions on products and channels, the exclusivity provisions contained in
paragraph 5 of the Golf Apparel Agreement are hereby superceded by the terms of
Section 16 of this Master Agreement, which shall hereafter bind GBI and TAG in
connection with their activities involving Endorsed Products.
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6. TERM OF MASTER AGREEMENT. The Initial Term of this Master
Agreement shall commence on the date set forth above and shall expire on
December 31, 2000, unless earlier terminated as provided in Section 17, below.
Upon expiration of the Initial Term, this Master Agreement may be renewed for
successive Renewal Terms of five (5) years each by mutual agreement in writing
by the parties, which agreement shall include any agreed modifications of this
Master Agreement and/or any of the Related Agreements to be effective during
such Renewal Term. In order to allow the parties sufficient time to determine
their business plans in the event of a non-renewal of this Agreement, the
parties agree that their representatives will enter into good faith discussions
during the period from September 1 through December 31, 1999, for the purpose
of reviewing the performance of the apparel programs developed under this Master
Agreement and determining their mutual interest in renewing this Master
Agreement and any Related Agreements then in effect. It is understood that such
discussions shall not be required in the event that either party is then in
default under this Master Agreement or any Related Agreement, or if any party
has given express written notice of its intention not to renew prior to the time
scheduled for such meetings. If the parties are unable to reach a mutual written
agreement regarding the renewal of this Master Agreement on or before the
conclusion of such period, it is understood and agreed that, during the
remainder of the term of this Master Agreement: (i) HS&M and TAG may take such
steps as may reasonably be required to wind up their business under any Related
Agreement not renewed by the parties, including reduction of inventories, orders
and marketing efforts, and such steps shall not be deemed a breach of such
parties' obligations to GBI under the Related Agreements, and (ii) GBI may
conduct discussions and negotiations, and conclude such agreements, with such
other prospective apparel licensees as GBI may deem appropriate in order to
carry on the business developed under this Master Agreement, and such actions
shall not be deemed a breach of GBI's obligations under this Master Agreement.
If required in order to meet sales and delivery requirements for the Spring 2001
apparel season, GBI may authorize a successor licensee to announce lines, source
product, take orders and handle shipments of apparel products for such season
prior to the expiration of this Agreement, provided that GBI acknowledges and
agrees that it will not authorize any marketing or sales of such apparel
products to the public prior to December 31, 2000.
7. NICKLAUS SERVICES. It is understood that the primary goal of the
parties under this Master Agreement is the development of a coordinated apparel
brand image endorsed by and associated with the image of Jack Nicklaus. In order
to carry out such goal, GBI agrees that TAG and HS&M may require the personal
services of Jack Nicklaus as a model and spokesman for the various apparel
programs contemplated by this Master Agreement, and that GBI shall provide such
services subject to the terms and conditions of the Related Agreements.
Notwithstanding the foregoing, or any termination right which may heretofore
have existed under any of the Existing Agreements, Hartmarx, TAG and HS&M
acknowledge that the continuing ability of GBI to furnish the personal services
of Jack Nicklaus shall no longer be a condition to the obligations of TAG, HS&M
or any affiliate under any Related Agreement, so long as Jack Nicklaus does not:
(i) take any action to withdraw his personal endorsement of the Endorsed
Products (ii) contest the right of GBI to license the Trademarks or provide such
endorsement pursuant to the Related Agreements, or (iii) grant his personal
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endorsement to, or render promotional services in connection with, any product
which, if licensed by GBI, would result in a violation of the exclusivity
provisions of Section 16, below. In the event of the death, disability or
retirement of Jack Nicklaus during the term of this Master Agreement, none of
the Related Agreements will be terminated by either party for such cause, and
the parties will consult with one another as soon as reasonably practicable in
order to adopt a strategy to minimize the impact of such event upon the goodwill
represented by the Trademarks and the Endorsed Products. In any such event, GBI
will use its best efforts to provide additional marketing support to TAG, HS&M
and their affiliates in order to confirm the association of Jack Nicklaus with
the Trademarks and Endorsed Products.
8. ACTIVITIES OF DESIGN STUDIO. Commencing with the date of this
Agreement, the parties shall establish a working group under the direction of
TAG to be known as the "Jack Nicklaus International Design Studio", which will
be dedicated to the development of comprehensive lines of Endorsed Products to
be marketed by TAG and the licensees of JNAI under the Trademarks and
coordinated marketing and advertising direction and support throughout the
Territory. The purpose of the Design Studio will be to provide designs and
consulting services as required by the parties to establish and support
distinctive brand identities for the "Nicklaus", "Jack Nicklaus Signature" and
"Golden Bear", brands (and such other brands as may be created by agreement of
the parties under this Agreement or any Related Agreement), to create a range of
complementary Endorsed Products to be sold under such brands, and to support the
efforts of JNAI to create a unified identity for such brands among its licensees
throughout the Territory. It is intended that the Design Studio will actively
pursue and interpret evolving design concepts, fashion trends and advertising
concepts on a global basis in order to provide the Endorsed Products with a
leadership position within their respective product lines. Although TAG will be
primarily responsible for the operation of the Design Studio, HS&M will
contribute designs and consulting services as required to support the licensing
of tailored clothing by JNAI as part of a coordinated apparel line. TAG and
HS&M shall use their best efforts to avoid duplication or imitation of designs
developed by the Design Studio in their other lines of apparel. JNAI shall hire
a design coordinator to work one-half (1/2) time with the Design Studio and
JNAI's licensees as described in Part I of the job description annexed hereto as
Exhibit "D" and one-half (1/2) time with the Design Studio, TAG and its
distributors as set forth in Part II of such job description. The parties agree
that one-half (1/2) of the salary, benefits and reasonable travel and
entertainment expenses of such design coordinator shall be borne by JNAI. All
other direct and indirect overhead and expenses of the Design Studio will be
borne by HS&M and allocated among its affiliates as part of their
responsibilities under the HS&M Agreement, the New Menswear Agreement, the Golf
Apparel Agreement, or the Sportswear Agreement, and none of such costs shall be
allocated to GBI under the JNAI Agreement.
9. JACK NICKLAUS SHOP. HS&M shall be responsible for establishing,
financing and managing a retail operation to be known as the "Jack Nicklaus
Shop", which shall be opened at a location to be mutually approved by the
parties on or before December 31, 1995. The sole and exclusive purpose of this
facility shall be to present and promote a comprehensive collection of the
Endorsed Products to customers in an
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attractive setting dedicated to the marketing of brands established under this
Master Agreement and such complementary products from the "Jack Nicklaus
Collection" catalog (the "Catalog") and from other licensees of GBI as the
parties may mutually agree upon, provided however, that HS&M shall not be
required to market apparel products produced by Warnaco prior to the termination
of the Warnaco Agreement or apparel products sourced by the Catalog from
unaffiliated apparel manufacturers. The responsibility for merchandising the
Jack Nicklaus Shop shall be HS&M's and TAG's.
(a) The parties anticipate that the prototype Jack Nicklaus Shop will
be a free-standing retail store consisting of between fifteen hundred (1,500)
and two thousand (2,000) square feet, devoted exclusively to the display and
sale of Endorsed Products. GBI and HS&M hereby agree that GBI will license, and
HS&M will make specific use of, the name, likeness and signature of Jack
Nicklaus in the identification and promotion of the Jack Nicklaus Shop, and GBI
agrees to consult with HS&M concerning appropriate uses of the endorsement of
and trademarks associated with Jack Nicklaus in order to carry out such
intention. HS&M acknowledges that GBI shall have the right to approve all uses
of the name, likeness, and signature of Jack Nicklaus and all related trademarks
and endorsement materials, in connection with the prototype Jack Nicklaus Shop.
GBI shall also have the right to approve of all advertising and promotional
activities developed by HS&M or its agents in connection with the marketing of
the Jack Nicklaus Shops. GBI's approvals hereunder shall not be unreasonably
withheld or delayed with respect to proposed activities which are consistent
with the standards of quality heretofore established by GBI for advertising and
promotion of the Endorsed Products under the Related Agreements. HS&M and GBI
shall consult on a regular basis concerning the proposed uses of the name,
likeness and signature of Jack Nicklaus and all related trademark and
endorsement materials as well as the advertising and promotional activities in
connection with the Jack Nicklaus Shops. GBI shall be deemed to have approved
any advertising or promotional material submitted by HS&M for GBI's approval
hereunder unless GBI has raised specific objections to such material within
fifteen (15) days after such submission.
(b) In the event that the prototype Jack Nicklaus Shop opened by
HS&M under this Agreement is successful in achieving profitable operations
reasonably acceptable to the parties hereto, HS&M has committed to open two (2)
additional shops at locations to be mutually agreed by the parties. The
requirements of the parties with respect to such additional shops will be
determined by the parties after review of the operations of the prototype and
incorporated in license agreements for such additional shops. In the event that
the prototype Jack Nicklaus Shop operates at a significant loss at the gross
profit line (before allocation of G&A expenses), the parties will make a mutual
determination as to the terms on which such operation will be continued or
phased out. If the parties are unable to agree upon such terms, HS&M shall have
a reasonable opportunity to wind up its business at the prototype shop and shall
have no further obligation to open additional locations. In such event, GBI
shall be free thereafter to use or otherwise license any trademark rights
established hereunder in connection with the Jack Nicklaus Shop.
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(c) It is understood and agreed that GBI, as the owner and licensor
of the Trademarks, shall have the right to approve the layout, fixtures and
furnishings, and all other aspects of the prototype Jack Nicklaus Shop which are
material to its operation in order to establish a standard of quality for use of
the endorsement and service mark "Jack Nicklaus" as the identifying
characteristic of such facility. It is understood that GBI shall be the sole
owner of any trademark or service mark rights developed as a result of the
operation of the prototype shop, and that all future Jack Nicklaus Shops shall
be opened only under license from GBI. GBI agrees that, unless the prototype
shop is abandoned as provided in subsection (b), above, JNAI will have a
non-exclusive license during the term of its agreements to establish Jack
Nicklaus Shops within the territory of any then-active licensee of JNAI, with
the right to sublicense such operations to such licensees on such terms as the
parties may determine.
10. AFFILIATED PARTY TRANSACTIONS. The parties acknowledge and agree
that the compensation payable to GBI, TAG, HS&M and their affiliates in
connection with the activities contemplated by this Master Agreement shall be
determined by wholesale transactions involving the Endorsed Products in
accordance with the Related Agreements. The parties further contemplate that
HS&M and TAG, as distributors of Endorsed Products, may engage in intercompany
sales with each other or to any other affiliated parties. The parties agree that
HS&M and TAG shall be entitled to make sales of Endorsed Products to each other
or to any other affiliated parties within the territories defined by their
agreements with GBI, without prior notice to or approval by GBI. All such sales
shall be made at a BONA FIDE wholesale price and on terms which shall be no more
favorable than those available to unaffiliated third parties for sales involving
comparable quantities and terms. Notwithstanding the foregoing, in the event
HS&M and/or TAG make intercompany sales of Endorsed Products to each other or
other affiliates, the royalty payable by the selling party on such intercompany
sales under the applicable Related Agreement shall be computed and reported to
GBI as though such sales were made at a BONA FIDE wholesale price, regardless of
the actual invoice price of such Endorsed Products.
11. COOPERATION WITH OTHER LICENSEES; PREMIUM SALES. HS&M and TAG
hereby acknowledge that licensing of the endorsement of the Jack Nicklaus,
Golden Bear and related trademarks and service marks forms a substantial and
valuable part of the business of GBI, and that the marketing and promotional
services provided by GBI are an integral part of such business. The parties
further acknowledge the importance of GBI's apparel programs to its overall
marketing and licensing activities. TAG and HS&M agree to use their best efforts
to coordinate the marketing of apparel under this Master Agreement and the
Related Agreements with the other marketing and licensing activities of GBI in
order to maximize brand awareness and maintain the quality image associated with
the Trademarks.
(a) As the primary apparel licensees of GBI, TAG and HS&M agree to
cooperate with GBI and its other licensees in the development of joint
advertising, marketing and/or cross-promotional activities involving the
Endorsed Products for their mutual benefit. In addition to such joint marketing
activities, TAG acknowledges that certain clients and licensees of GBI may
operate retail golf shops in connection with
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golf courses designed by GBI or teaching and practice facilities licensed by
GBI, and that GBI has an interest in assuring a reasonable supply of appropriate
Endorsed Products to such shops as part of its marketing relationship with such
parties. TAG agrees to use its best efforts to supply such customers with
reasonable commercial quantities of Endorsed Products for such purposes,
including custom embroidered products approved by GBI, at prices and terms
comparable to those available to other purchasers for similar items and
quantities of the Endorsed Products and subject to TAG's then prevailing credit
requirements and general sales policies.
(b) TAG and HS&M acknowledge that control of premium sales of the
Endorsed Products is essential to GBI in order to avoid the use of such
Endorsed Products in unauthorized promotions which attempt to imply the
endorsement of GBI or Jack Nicklaus for entities, products or services which are
not endorsed by such parties. For that reason, neither TAG nor HS&M, nor any of
their affiliates shall, without the prior written consent of GBI, offer Endorsed
Products for sale through any channel of distribution where such products are to
be used as a part of a premium promotion or "traffic builder" program designed
to induce the consumer-purchaser either: (i) to come to or contact a certain
place of business under circumstances where the seller is interested primarily
in selling or exposing such consumer to products or services other than the
Endorsed Products; or (ii) to purchase a service or product other than the
Endorsed Products.
(c) The parties agree that the ability for GBI to include Endorsed
Products as high quality premium items in connection with marketing and
promotional programs developed by GBI for its affiliates and clients is a
critical adjunct to GBI's marketing efforts. In the event that GBI desires to
acquire Endorsed Products to be used as premium items in connection with
marketing or promotional programs authorized by GBI, GBI shall consult with TAG
and HS&M regarding the proposed activities and cross-promotional opportunities
for such parties. Unless the party consulted by GBI reasonably believes that a
proposed program will have a material adverse impact upon sales of Endorsed
Products through its normal channels, such party shall provide GBI or its
designees with reasonable commercial quantities of Endorsed Products for such
purposes at prices and terms comparable to those available to other purchasers
for similar items and quantities of the Endorsed Products.
12. TRADEMARK RIGHTS. GBI hereby represents and warrants that it has
the full right, power and authority to license the Trademarks and the likeness,
other identifying characteristics and endorsement of Jack Nicklaus (the
"Nicklaus Endorsement") as provided in this Agreement and the Related
Agreements. TAG, HS&M and Hartmarx acknowledge that GBI is and shall be the sole
and exclusive owner of the entire right, title and interest in and to the
Trademarks and Nicklaus Endorsement, and that all rights arising out of the use
of any of the Trademarks by TAG, HS&M and/or their affiliates under this Master
Agreement and the Related Agreements shall inure to the sole and exclusive
benefit of GBI. TAG, HS&M and Hartmarx covenant and agree that neither they nor
any of their affiliates shall contest, either directly or indirectly, GBI's
exclusive right, title and interest in and to the Trademarks or Nicklaus
Endorsement, which covenant shall survive the termination of this Master
Agreement or any Related Agreement. It is understood that TAG and
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<PAGE>
HS&M shall be responsible in each case for giving GBI reasonable prior notice of
any proposed activities in any jurisdiction outside of the United States which
require use of a Trademark which has not theretofore been used in such
jurisdiction, and the parties intending to make such use shall be responsible
for contributing one-half (1/2) of the expenses of registration of the Trademark
for such intended use. GBI shall not be responsible for any loss or liability
incurred for trademark infringement as a result of any other party's
distribution of Endorsed Products prior to confirmation by GBI that no conflict
exists in such jurisdiction with respect to the proposed use of such Trademark.
In the event that any person not authorized by GBI asserts any interest in a
Trademark or in any similar or conflicting trademark under the trademark laws or
regulations of a jurisdiction outside of the United States, the parties
affected by such situation shall reach a mutual determination as to their common
business interest in defending GBI's ownership rights in its Trademark or
resolving any conflict with the other trademark based upon the proposed
activities to be conducted in such jurisdiction under this Agreement or any
Related Agreement. If the affected parties determine to proceed with their
proposed activities, GBI shall use its best efforts to secure the trademark
rights required for the proposed activities in such jurisdiction, provided that
the other parties affected will contribute one-half (1/2) of the reasonable
expenses and attorneys' fees required by GBI to secure such rights.
Notwithstanding the foregoing, it is understood that GBI, as the sole owner of
the Trademarks, reserves the right to take such action at its sole cost and
expense as it may deem prudent in order to protect its trademark rights in any
part of the Territory.
13. INDEMNIFICATION OF GBI. As a further inducement to GBI to enter
into the relationships contemplated by this Master Agreement and the Related
Agreements, TAG and HS&M, jointly and severally (the "Indemnitors") shall
provide the following indemnification rights to GBI and its officers, directors,
employees and agents, including, without limitation, Jack Nicklaus
(collectively, the "GBI Indemnified Parties"):
(a) The Indemnitors shall indemnify and hold harmless the GBI
Indemnified Parties and each of them from any and all liability arising out of
any suit, action, legal proceeding, investigation, claim, or demand of whatever
kind or character based upon:
(i) any alleged defect in the design or manufacture of the
Endorsed Products;
(ii) any alleged infringement or unauthorized use of any patents,
copyrights, trademarks (other than the Trademarks), or any other proprietary
rights owned, used, or controlled by third parties arising out of or in
connection with the manufacture, sale and/or distribution of Endorsed Products;
or
(iii) any violation of any applicable law or regulation, tortious
act, misrepresentation, or breach of contract committed by or on behalf of any
party licensed by GBI under the Related Agreements (specifically excluding,
however, the Warnaco Agreement) which arises out of or in connection with the
manufacture, sale, distribution or advertising of Endorsed Products, except to
the extent such matters arise from the negligence or willful misconduct of GBI
or Jack Nicklaus; or
Page 12
<PAGE>
(iv) any violation of any warranty, representation, or covenant of
the Indemnitors under this Master Agreement or of any of their affiliates under
any Related Agreement (specifically excluding, however, the Warnaco Agreement).
The agreement to indemnify and hold harmless from liability set forth herein
shall include, without limitation, all damages, interests, reasonable attorneys'
fees, costs, and reasonable expenses which may be levied against or incurred by
the GBI Indemnified Parties, and each of them, in connection with any suit,
action, legal proceeding, claim, or demand.
(b) The Indemnitors shall be solely responsible for the acts and
omissions of those third parties who contract with them and/or their affiliates
in connection with the manufacture, distribution, and marketing of the Endorsed
Products, or any component thereof, and the Indemnitors shall indemnify the GBI
Indemnified Parties for any loss occasioned by claims made by such third parties
against them, except to the extent that such matters arise from the negligence
or willful misconduct of GBI or Jack Nicklaus.
(c) The GBI Indemnified Parties shall notify the Indemnitors promptly
in writing of any claim against them hereunder for which they seek indemnity and
the Indemnitors shall have the sole right to defend or settle such claim in
their sole discretion.
(d) The provisions of this Section 13 shall survive any termination
of this Master Agreement or of any Related Agreement, regardless of cause, and
inure to the benefit of the GBI Indemnified Parties with respect to any matter
arising out of the performance of this Master Agreement or any Related Agreement
(specifically excluding, however, the Warnaco Agreement) prior to such
termination and during any authorized period for liquidation of the underlying
business activities.
(e) Hartmarx hereby agrees to guarantee the performance of the
Indemnitors to the GBI Indemnified Parties under this Section 13, which
obligation shall be immediately and absolutely effective upon any failure by the
Indemnitors to respond to any claim made by a party indemnified hereunder and
shall not require any GBI Indemnified Party to institute any legal proceedings
against the Indemnitors to compel their performance or to recover damages for
their failure to perform.
14. INDEMNIFICATION OF HARTMARX AFFILIATES. As a further inducement
to TAG, HS&M and their affiliates to enter into the relationships contemplated
by this Master Agreement and the Related Agreements, GBI shall provide the
following indemnification rights to TAG, HS&M, Hartmarx and their affiliates,
and their respective officers, directors, employees and agents (collectively,
the "Hartmarx Indemnified Parties"):
(a) GBI shall indemnify and hold harmless the Hartmarx Indemnified
Parties and each of them from any and all liability arising out of any suit,
action, legal proceeding, investigation, claim, or demand of whatever kind or
character based upon:
(i) any claims of third parties that a use of the Trademarks by an
Hartmarx Indemnified Party authorized by GBI under this Agreement or any Related
Agreement infringes a previously registered trademark right of such third party
or any common law
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right licensed to such party by GBI or Jack Nicklaus, provided however, that
such indemnity shall not apply to any expenses undertaken under Section 12,
above, with respect to trademark disputes arising out of actions jointly
approved by the parties; or
(ii) any violation of any applicable law or regulation, tortious
act, misrepresentation, or breach of contract committed by or on behalf of GBI
or Jack Nicklaus under the Related Agreements (specifically excluding, however,
the Warnaco Agreement), which arises out of or in connection with the GBI's
licensing of the Trademarks, except to the extent such matters arise from the
negligence or willful misconduct of a party affiliated with TAG, HS&M or
Hartmarx; or
(iii) any violation of any warranty, representation, or covenant of
GBI under this Master Agreement or under any Related Agreement.
The agreement to indemnify and hold harmless from liability set forth herein
shall include, without limitation, all damages, interests, reasonable attorneys'
fees, costs, and reasonable expenses which may be levied against or incurred by
the Hartmarx Indemnified Parties, and each of them, in connection with any suit,
action, legal proceeding, claim, or demand.
(b) GBI shall indemnify the Hartmarx Indemnified Parties for any loss
occasioned by claims made against them by third parties as a result of any
contractual obligation undertaken by GBI and/or its affiliates to such third
parties outside of the scope of this Agreement or unauthorized commitment made
to such third parties with respect to the apparel business conducted under this
Agreement, except to the extent that such matters arise from the negligence or
willful misconduct of a party affiliated with TAG, HS&M or Hartmarx.
(c) The Hartmarx Indemnified Parties shall notify GBI promptly in
writing of any claim against them hereunder for which they seek indemnity and
GBI shall have the sole right to defend or settle such claim in its sole
discretion.
(d) The provisions of this Section 14 shall survive any termination
of this Master Agreement or of any Related Agreement, regardless of cause, and
inure to the benefit of the Hartmarx Indemnified Parties with respect to any
matter arising out of the performance of this Master Agreement or any Related
Agreement (specifically excluding, however, the Warnaco Agreement) prior to such
termination and during any authorized period for liquidation of the underlying
business activities.
(e) The indemnification provided under clause 14(a)(i), above, shall
not apply to any legal fees or expenses to be incurred jointly by the parties
under Section 12 of this Agreement in the event GBI is required to quiet title
to any Trademark under the laws of any jurisdiction outside of the United States
in order to protect the interests of the parties under this Master Agreement or
any Related Agreement, including any legal or administrative opposition,
cancellation or similar proceedings with respect to trademarks registered by
third parties which allegedly conflict with the Trademarks.
15. ASSIGNMENT. The following restrictions shall apply to any
assignment or attempted assignment of this Master Agreement, including
assignments by operation of law:
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<PAGE>
(a) Neither this Master Agreement nor any rights hereunder may be
assigned, directly or indirectly, by TAG or HS&M in whole or in part without the
prior written consent of GBI as provided herein. For purposes of this Section
15, the acquisition by any party of voting securities sufficient to elect a
majority of the Board of Directors of either of TAG or HS&M shall be deemed an
indirect assignment of this Master Agreement. GBI hereby agrees that it will not
unreasonably deny its consent to any assignment by TAG or HS&M hereunder,
provided that (i) such assignment is made as part of a transfer of all or
substantially all of the business conducted by the parties under this Master
Agreement to a single transferee or affiliated group of transferees under common
ownership and control, (ii) the transferee is a firm of comparable or greater
financial strength with experience in the apparel industry, and (iii) the
principals of the transferee provide GBI with reasonable assurances regarding
their intention to maintain the quality of the Endorsed Products and corporate
support for the apparel programs developed under the Related Agreements.
(b) Neither this Master Agreement nor any rights hereunder (other
than the right to receive payments due to GBI hereunder) may be assigned,
directly or indirectly, by GBI in whole or in part without the prior written
consent of TAG, HS&M and Hartmarx as provided herein. For purposes of this
Section 15, the acquisition by any party of a number of shares of GBI sufficient
to elect a majority of its Board of Directors shall be deemed an indirect
assignment of this Master Agreement. TAG, HS&M and Hartmarx hereby agree that
they will not unreasonably deny their consent to any assignment by GBI
hereunder, provided that (i) such assignment is made as part of a transfer of
all or substantially all of the Trademarks and related rights of GBI in the
endorsement of Jack Nicklaus, (ii) the transferee is an affiliate of Jack
Nicklaus or his immediate family, and (iii) unless Jack Nicklaus retains control
of the transferee, the principals of the transferee provide TAG, HS&M and
Hartmarx with reasonable assurances regarding the continued association of Jack
Nicklaus with the Endorsed Products and their corporate support for the apparel
programs developed under the Related Agreements.
(c) In the event of any direct or indirect assignment subject to this
Section 15, the assignor shall provide written notice to the other party of the
proposed or actual assignment as soon as reasonably practicable, which notice
shall identify the transferee and its principals and describe the details of the
assignment and any related transactions. A party whose consent is required under
this paragraph shall have ninety (90) days from the date it actually receives
written notice of an assignment in order to determine whether or not to consent
to such assignment. The failure of a party to object in writing during such
ninety (90) day period shall be deemed a consent to the assignment. The failure
of a party to give notice of an assignment of this Master Agreement shall not
affect the rights of the other party to object to such assignment at any time
and to invoke any other remedies which may be available to such party as a
result of the failure to obtain such party's consent to the assignment as
required hereunder.
16. EXCLUSIVITY. Except for the rights of Warnaco under the present
Warnaco Agreement, GBI hereby agrees that during the term of this Master
Agreement, it will not, directly or indirectly, license any of the Trademarks to
any person for, or otherwise
Page 15
participate in, any apparel programs other than those described in the Related
Agreements involving the sale within the Territory of items of apparel of the
same types as the Endorsed Products, provided however, that such covenant shall
not restrict GBI from development and/or marketing of specialty apparel products
through GBI's Catalog business under the terms set forth herein. GBI shall
provide TAG or HS&M with a right of first refusal to supply any apparel products
to be marketed through its catalog business which are customarily handled by
such parties. It is understood that GBI shall be entitled to develop and retain
exclusive rights in Trademarks associated with GBI which do not include the name
or signature of Jack Nicklaus, or the Golden Bear name or logo, or otherwise
conflict with any brand expressly licensed to TAG or HS&M under the Related
Agreements. It is further understood that the participation of GBI in the
development or marketing of apparel products as an agent or marketing
representative for any athlete other than Jack Nicklaus who is represented by
GBI (including its Golden Bear Sports Management division) shall not be deemed a
violation of this Section 16. Neither this Master Agreement nor any Related
Agreement shall restrict GBI from participating in the sale within the Territory
of any products not included within the definition of apparel under such terms
and with such third parties as GBI may deem appropriate in its sole discretion.
HS&M and TAG agree that, except for the "Bobby Jones" apparel program currently
administered by affiliates of HS&M and TAG and such future programs as may be
developed by mutual agreement with GBI, neither TAG nor HS&M, nor any of their
affiliates, shall participate in any apparel program which sells apparel items
of the same type as the Endorsed Products within the Territory using the name or
endorsement of, or any trademarks associated with, any professional golfer other
than Jack Nicklaus. GBI acknowledges that Bobby Jones' use of other recognized
professional golfers to promote the Bobby Jones line, under "staff pro"
agreements which require the use and endorsement of such apparel by such golfers
without modification of the Bobby Jones trademarks or identification, shall not
be prohibited by this Section. Hartmarx further agrees that, on or before the
effective date of the Sportswear Agreement, TAG will wind up its current sales
of sportswear under the "Sans-A-Belt Golf" and "South Shore" labels, and that
TAG, HS&M and their affiliates will not thereafter market any golf related
sportswear during the term of the Sportswear Agreement except as provided
therein without the prior express written consent of GBI. The parties
acknowledge that any trademarks hereafter used by TAG, HS&M or their affiliates
during the term of this Master Agreement for sportswear distributed through the
"Golf Specialty Channels" (as defined in the Sportswear Agreement) shall be
deemed to be Trademarks owned and licensed by GBI under this Agreement, such
Trademarks may be registered by GBI in its own name subject to the licenses
described in this Agreement, and such sportswear shall be considered "Endorsed
Products" subject to the requirements of the Sportswear Agreement, unless
otherwise expressly agreed in writing to the contrary by GBI at the time such
trademarks are adopted. Notwithstanding the foregoing, HS&M's affiliates shall
continue to be free to conduct the development, marketing and distribution of
their Bobby Jones apparel line throughout the Territory or in any portion
thereof as they deem appropriate, provided that HS&M and TAG shall at all times
continue to devote their best efforts to the activities contemplated by this
Master Agreement and the Related Agreements regardless of their involvement in
the Bobby Jones line.
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17. TERMINATION. In the event either party validly exercises a
right to terminate any of the Related Agreements in accordance with its terms,
such party shall have the option to terminate this Master Agreement upon ninety
(90) days written notice to the other party. In addition to the foregoing:
(a) GBI shall have the right to terminate this Master Agreement by
written notice to TAG and HS&M in the event that either of them shall: (i) fail
to observe or perform any covenant, agreement or obligation under this Master
Agreement, unless such failure is remedied or remedy commenced within thirty
(30) days of such notice and continuously pursued to the reasonable satisfaction
of GBI; (ii) violate the assignment provisions of paragraph 15, above; (iii)
directly or indirectly, or if any affiliate of either of them shall, contest
GBI's ownership of any Trademark, or shall take any action to the prejudice of
GBI's interests as the sole and exclusive owner of the Trademarks; (iv)
institute proceedings under any bankruptcy or insolvency law or other law for
the benefit of creditors or the relief of debtors; (v) have involuntary
bankruptcy proceedings commenced against them and such proceedings are not
dismissed within sixty (60) days of the commencement thereof; (vi) have a
receiver appointed for all or substantially all of its assets in general or of
the assets used in carrying out its obligations under this Master Agreement,
which appointment is not terminated within sixty (60) days; (vii) be adjudicated
bankrupt or insolvent.
(b) TAG and HS&M shall have the right, by mutual consent, to
terminate this Master Agreement by written notice to GBI in the event that (i)
GBI shall fail to observe or perform any covenant, agreement or obligation under
this Master Agreement, unless such failure is remedied or remedy commenced
within thirty (30) days of such notice and continuously pursued to the
reasonable satisfaction of TAG and HS&M; (ii) GBI shall violate the assignment
provisions of paragraph 15, above; (iii) the rights of GBI to license the
Trademarks or provide the endorsement of Jack Nicklaus are terminated or
materially reduced, voluntarily or by operation of law, unless such termination
results from an action or omission by an affiliate of TAG or HS&M; (iv)
proceedings are instituted by GBI under any bankruptcy or insolvency law or
other law for the benefit of creditors or the relief of debtors; (v) involuntary
bankruptcy proceedings are commenced against GBI and such proceedings are not
dismissed within sixty (60) days of the commencement thereof; (vi) GBI shall
have a receiver appointed for all or substantially all of its assets in general
or of the assets used in carrying out its obligations under this Master
Agreement, which appointment is not terminated within sixty (60) days; (vii) GBI
shall be adjudicated bankrupt or insolvent.
Any permitted termination of this Master Agreement by a party shall
simultaneously terminate any of the Related Agreements then in effect, subject
to the requirements of any of such Related Agreements with respect to the
orderly winding up of the business upon termination. After termination of this
Master Agreement and discharge of any post termination requirements of the
Related Agreements, neither party shall have any further responsibilities to the
other with respect to the subject matter of this Master Agreement, provided
however, that such termination shall not release any party from liabilities
hereunder incurred prior to the effective date of such termination.
Notwithstanding any post-termination obligations of the parties under the
Related Agreements, each party shall be free to pursue alternative apparel
programs after
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<PAGE>
termination of this Master Agreement, either alone or by agreement with such
persons as either party may deem appropriate in its sole discretion.
18. RELATIONSHIP OF THE PARTIES. The parties agree that nothing in
this Master Agreement or any Related Agreement shall be deemed to create or
constitute a partnership, joint venture, or agency relationship between GBI, TAG
and HS&M, or to authorize any of such parties to bind or commit the other in or
to any matter, cause or thing whatsoever without the prior express written
consent of the party to be so bound or committed. It is understood that GBI, TAG
and HS&M are acting as independent contractors which have undertaken certain
obligations to each other under this Master Agreement, notwithstanding any other
relationship which may exist between GBI and such parties or their affiliates
under any Related Agreement, and each party to this Master Agreement shall be
solely responsible for the manner and method of its performance of such
obligations and for the acts of its employees and agents in connection
therewith.
19. NO WAIVER; REMEDIES. The failure of either party at any time or
times to demand strict performance by the other party or its affiliates of any
of the terms, covenants, or conditions set forth in this Master Agreement or any
Related Agreement shall not be construed as a continuing waiver or
relinquishment thereof, and the aggrieved party may at any time demand strict
and complete performance by the other party and its affiliates of said terms,
covenants, and conditions. No right or remedy conferred upon or reserved to a
party in this Master Agreement or any Related Agreement is intended to be
exclusive of any other right or remedy, and each and every right and remedy
shall be cumulative and in addition to any right or remedy given hereunder, or
now or hereafter existing at law or in equity or by statute.
20. NOTICES. All payments and notices hereunder shall be made and
given to the parties at their respective addresses set forth at the beginning
hereof, or at such other address as any party may specify for itself in a
written notice given to the other parties, by certified mail or express
delivery, and such notices shall be deemed given when deposited in the United
States Mail or delivered by express delivery, as the case may be. A copy of any
notice sent to HS&M, TAG or Hartmarx hereunder shall be sent in like manner to
Hartmarx Corporation, 101 North Wacker Drive, Chicago, Illinois 60606,
Attention: General Counsel.
21. CHOICE OF LAW. The parties agree that all matters regarding the
construction or enforcement of this Master Agreement shall be governed by the
internal laws of the State of Florida, without regard to choice of law
principles which might otherwise be applied.
22. MISCELLANEOUS.
(a) This Master Agreement contains the entire agreement of the
parties hereto with respect to the subject matter hereof, and no provisions of
this Master Agreement may be changed or modified except in writing, signed by
the parties hereto. The parties acknowledge that there are no representations,
warranties, promises or undertakings between them other than those contained in
this Master Agreement or the Related Agreements.
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(b) This Master Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
(c) This Master Agreement supersedes any and all previous agreements
between GBI, TAG, HS&M, and Hartmarx, and their affiliates with respect to the
subject matter hereof, provided however, that the rights and obligations of the
parties under the JNAI Agreement, the HS&M Agreement and the Golf Apparel
Agreement shall survive the execution and delivery of this Master Agreement to
the extent provided, and subject to those specific amendments referenced, in
Sections 3, 4 and 5, above.
(d) The parties acknowledge that the section titles have been
inserted for ease of reference only, and that such titles shall not be used in
the construction of this Master Agreement.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals as of the date first set forth above.
GOLDEN BEAR INTERNATIONAL, INC. HARTMARX CORPORATION
By: /s/ Illegible By: /s/ Homi Patel
---------------------------- -------------------------
Title: President Title: Homi Patel
Its Authorized Officer Its Authorized Officer
JAYMAR-RUBY, INC. t/a HART SCHAFFNER & MARX
TRANS-APPAREL GROUP,
By: /s/ Illegible By: /s/ Illegible
--------------------------- --------------------------
Title: Title:
Its Authorized Officer Its Authorized Officer
19
EXHIBIT 10.12
TRADEMARK LICENSE AGREEMENT
THIS AGREEMENT, dated as of June 6, 1996, is made between Golden Bear
International, Inc. (hereinafter, "Licensor"), a Florida corporation with its
principal offices at 11760 U.S. Highway No. 1, North Palm Beach, Florida 33408,
and Golden Bear Golf, Inc. (hereinafter, "Licensee"), a Florida corporation,
with its principal offices at 11760 U.S. Highway No. 1, North Palm Beach,
Florida 33408.
RECITALS:
A. It is the intention of the parties that Licensee will take over
Licensor's interest in the ownership and operation of various businesses
currently operated by Licensor and operated by third parties under license from
Licensor as more particularly described in the attached Schedule A (the
"Transferred Businesses"), and that Licensor will license Licensee to conduct
and sub-license the Transferred Businesses under the marks and names presently
or hereafter owned or used by Licensor; and
B. It is the further intention of the parties that Licensee will have
the exclusive right, subject to the terms and conditions of this Agreement, to
develop future business opportunities utilizing the goodwill developed by
Licensor and the marks and names licensed under this Agreement, except for those
existing lines of business and business opportunities expressly reserved to
Licensor, as more particularly described in the attached Schedule A (the
"Retained Businesses").
UNDERTAKINGS:
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration being extant, the
parties agree as follows:
1. GRANT OF LICENSE.
A. Licensor hereby grants to Licensee the exclusive license to use the
GOLDEN BEAR trade name and trademark, as well as all of the other marks
shown on the attached Schedule B (hereinafter referred to individually
and collectively as "Licensed Marks") in connection with the
manufacture, advertising, sale and distribution of all of the goods and
rendering of all of the services included within the description of the
Transferred Businesses in Schedule A, including those goods and services
set forth in the registrations and applications on Schedule B, except as
otherwise noted in such Schedule (hereinafter, collectively, the
"Licensed Goods"). The Licensed Goods shall include line extensions,
except as expressly reserved herein.
B. Licensor further grants to Licensee the right to use the name, image,
likeness, nickname, biographical data, and other identifying
characteristics of Jack W. Nicklaus (hereinafter the "Nicklaus Image")
in
<PAGE>
connection with the advertising, promotion, or sale of the goods or the
rendering of the services covered by the Licensed Goods.
C. Licensor also grants to Licensee those limited rights in Licensor's
copyrighted works indicated on Schedule C (hereinafter "Licensed
Copyrights"). Licensor expressly reserves all other copyright rights in
the Licensed Copyrights not expressly granted by such Schedule,
including without limitation, the right to make derivative works other
than those derivative works authorized by such Schedule.
D. The license granted herein does not include the right of Licensee to
use the personal services of Jack W. Nicklaus as a model or spokesman,
or to attribute specific statements, claims or endorsements to Mr.
Nicklaus as an individual. The right to such personal services of Mr.
Nicklaus as an individual will be the subject of written agreements
separately negotiated between Licensee and Jack W. Nicklaus, including
an Employment Agreement between the parties which will become effective
as of the Effective Date (as defined below).
E. In addition to the licenses granted herein, Licensor acknowledges and
agrees that Licensee shall have the exclusive right to develop new
business opportunities utilizing the Licensed Marks, Licensed Copyrights
and the Nicklaus Image in connection with product and service lines
outside of the current scope of the Licensed Goods, and that the scope
of the licenses granted herein will be extended to include such business
opportunities subject to the further terms and conditions of this
Agreement, including 5, below. Notwithstanding the foregoing, Licensee
acknowledges that Licensor has expressly reserved its exclusive right to
utilize and license the Retained Marks (as defined in sub-paragraph 4C,
below), the Nicklaus Image, and the Licensed Copyrights in connection
with the Retained Businesses, and that Licensee shall not be permitted,
by virtue of the licenses granted above or any extension of such
licenses, to make or license any use of the Licensed Marks, the Nicklaus
Image or the Licensed Copyrights which infringes upon or materially
conflicts with Licensor's exclusive rights relating to the Retained
Businesses as reserved under this sub-paragraph.
2. SCOPE. This License shall be exclusive and worldwide.
3. ROYALTIES. This License is paid in full and shall be royalty free.
4. QUALITY STANDARDS.
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<PAGE>
A. Licensee understands and acknowledges that Licensor has the right to
establish and to change the standards of quality of the Licensed Goods
identified by the Licensed Marks, subject to the further terms of this
Paragraph 4.
B. Licensor expressly adopts the standards of quality of the Licensed
Goods identified by the Licensed Marks as they existed on the Effective
Date (as defined below) of this Agreement.
C. Licensor agrees that it will maintain quality standards for the goods
and services provided by Licensor and its licensees in the Retained
Businesses under those marks which are the same as or substantially
similar to the Licensed Marks (hereinafter, the "Retained Marks") at a
level consistent with or superior to the quality standards in effect for
such trademarks of Licensor on the date of this Agreement, provided that
Licensor may make reasonable modifications to such standards to conform
them with quality standards for the Licensed Goods proposed by Licensee
and approved by Licensor under sub-paragraph E, below. In order to
permit Licensee to monitor Licensor's adherence to the foregoing
covenant, Licensor further agrees that if it intends to enter into any
new license with a third party to use any of the Retained Mark in
connection with Licensor's Retained Businesses, Licensor shall submit
the proposed quality standards for the goods or services to be offered
under such license to the Licensee at least thirty (30) days prior to
the date such license with the third party becomes a binding agreement
of Licensor. If Licensee objects to the proposed standards during such
thirty (30) day period, Licensor will not adopt such standards until the
parties have resolved such objections.
D. Licensor agrees that it will not change the standards of quality for
any of the Licensed Goods without giving Licensee at least sixty (60)
days written notice of the change and, further, that any such changes
will not be required to be made by the Licensee until the Licensee has
exhausted its inventory of goods made in accordance with the Licensor's
prior standards. Licensee agrees to conform to such standards as
Licensor may establish from time to time, provided that the new
standards do not (i) materially increase the cost of production or
distribution of the Licensed Goods affected by such changes over the
existing standards, (ii) materially depart from the quality standards
established by Licensor for
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<PAGE>
the Retained Businesses, or (iii) materially depart from the quality
standards in effect as of the Effective Date.
E. Licensee may propose new standards for adoption by Licensor for
Additional Goods (as defined in 5, below), and it may suggest changes in
existing standards for the Licensed Goods bearing the Licensed Marks.
Such proposed standards shall be submitted in writing for approval by
Licensor, which approval shall not be withheld or delayed if such
proposed standards are consistent with existing standards applicable to
the Licensed Goods and the Retained Businesses. If the Licensor does not
respond in writing to the Licensee regarding such new or changed
standards within thirty (30) days of its receipt of the Licensee's
written proposal, the Licensor's consent thereto shall be conclusively
presumed.
F. Licensee agrees to furnish to Licensor, at Licensor's request, a
reasonable number of samples of each of the Licensed Goods identified by
the Licensed Marks, without cost to Licensor, not to exceed twenty (20)
samples of any one product in any one year period. Additional samples
shall be furnished to Licensor at its request and expense, based on
Licensee's wholesale price plus shipping. The limitation of this
paragraph shall not apply to samples of the Licensed Goods which are
necessary for Licensor to obtain or maintain the registration of the
Licensed Marks or for the enforcement of rights in such marks.
G. Licensee shall not advertise, distribute, offer for sale, render, or
sell Licensed Goods identified by the Licensed Marks which do not meet
the quality standards established hereby. However, Licensee shall have
the right to dispose of any Licensed Goods not made in accordance with
the Licensor's standards or which are no longer in style in accordance
with the then prevailing custom and practice of the trade for like
goods.
H. Licensee shall permit Licensor or its designees to inspect Licensee's
premises, facilities, and equipment, during normal business hours for
the purpose of insuring Licensor's control over the quality of the
Licensed Goods identified by the Licensed Marks. Licensee, however,
shall not be required to permit any such inspection by Licensor where
the inspection would disclose one or more trade secrets of the Licensee.
I. So long as Jack W. Nicklaus is actively involved in the management of
Licensor, all final decisions by Licensor regarding the standards of
quality or the approval or disapproval of Additional Goods
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shall be made personally by Jack W. Nicklaus, unless Licensee waives
such requirement.
5. EXPANSION OF EXISTING RIGHTS. The parties acknowledge that the Licensed
Marks and Nicklaus Image have enjoyed worldwide renown as a result of the fame
of Jack W. Nicklaus and the business, marketing and licensing activities
conducted by Licensor prior to the date of this Agreement. Subject to the terms
of this paragraph, Licensor hereby agrees to grant Licensee the right, on an
exclusive worldwide basis, to expand the current scope of the business conducted
under the licenses granted by this Agreement to any reasonable category of goods
or services that either party proposes to offer or license which is outside of
the scope of the Retained Businesses (the "Additional Goods"), and to provide
for any reasonable extension of the Licensed Goods and Licensed Marks under this
Agreement to cover such expansion.
A. Licensee may, but shall have no obligation whatsoever to, undertake
the development of a new product or service which is within the
Additional Goods. In the event that Licensee desires for such product to
be advertised, promoted, or sold or such service to be rendered using
any of the Licensed Marks or the Nicklaus Image, Licensee will provide
Licensor with written notice of its intention to develop such Additional
Goods and a reasonable description of the product(s) or service(s)
involved, the Licensed Marks which Licensee proposes to utilize, and
Licensee's proposed quality standards for such Additional Goods.
Licensor shall have thirty (30) days after its receipt of such notice to
make written objection to such proposal if Licensor reasonably believes
that the use of the Licensed Marks in connection with the Additional
Goods proposed in Licensee's notice: (i) will be in the same field of
use as any of the Retained Businesses, or would cause substantial damage
to any of Licensor's material business relationships in connnection with
the Retained Businesses, (ii) will associate the goodwill of the
Licensed Marks with a product or service category or distribution
network having a reputation which would substantially harm the public
image of Licensor or any of its Retained Businesses, or (iii) would
substantially harm the personal reputation or image of Jack W. Nicklaus
or compromise his integrity as a public figure.
B. Unless Licensor makes a timely written objection to Licensee's
proposal to add Additional Goods to this Agreement, the product(s)
and/or service(s) described in Licensee's notice shall be added to the
Licensed
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Goods subject to this Agreement, and Schedule B shall be deemed amended
as set forth in such notice without further action of the parties. In
the event that Licensor objects to Licensee's notice within the required
time period, the parties will make reasonable efforts to address
Licensor's objections and, to the extent practicable under the
circumstances, to reach agreement upon a revised description for the
Additional Goods which resolves such objection, which description shall
be incorporated in a written amendment to Schedule B to this Agreement.
If the parties are unable to resolve Licensor's objections, the
Additional Goods described in Licensee's notice shall not be licensed
under this Agreement. In the event that Licensee in good faith believes
that Licensor has no reasonable basis for any objection raised under
sub-paragraph A, above, Licensee shall have the right to seek relief as
provided in Paragraph 17, below.
C. If Licensor undertakes to develop any new product or service, or if
it receives an offer from a third party to license a new product or
service, which is within the scope of the Additional Goods, and for
which the Licensor intends to use or license the use of any marks which
are the same as or substantially similar to the Licensed Marks or any
part of the Nicklaus Image, Licensor shall first offer Licensee the
right to develop or sublicense such product(s) or service(s) under
exclusive royalty-free license as part of the Licensed Goods in
accordance with the terms of this Agreement. Such offer shall be in
writing and shall state Licensor's intention to develop or license such
Additional Goods, shall provide a reasonable description of the
product(s) or service(s) involved and the trademarks which Licensor
proposes to utilize as Retained Marks in connection with such business,
and shall identify the names of any prospective third party licensees
and the material licensing terms offered by them to Licensor. If such
offer is made by Licensor in response to a third party licensing offer,
Licensor's offer shall include the option, in Licensee's discretion, to
pursue such licensing opportunity with such third party without
compensation to Licensor in the event that Licensee accepts the
opportunity relating to the offered goods or services. In the event that
Licensee accepts the offer to develop or sublicense the Additional Goods
identified in such offer, the product(s) and/or service(s) described in
Licensor's offer shall be added to the Licensed Goods and the proposed
marks shall be added to the Licensed Marks subject to this Agreement,
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and Schedule B shall be deemed amended as set forth in such offer
without further action of the parties.
D. In the event that Licensee fails to accept any offer made by Licensor
under sub-paragraph C., above, within a sixty (60) days of its receipt
thereof, Licensor may request that such Additional Goods be added to the
Retained Businesses identified in this Agreement by further written
notice renewing the terms of its prior offer and stating Licensor's
intention to add such Additional Goods to the Retained Businesses if
such renewed offer is rejected and such addition is approved in writing
by Licensee. Licensee agrees to respond in writing to any such request
as soon as reasonably practicable, provided however, that Licensee shall
not be required to accept Licensor's prior offer or to approve
Licensor's request to add the proposed Additional Goods to the Retained
Businesses if Licensee reasonably determines that (i) such Additional
Goods are not appropriate to the brand image established by Licensee for
the Licensed Goods, (ii) such Additional Goods would compete with any of
the Licensed Goods, (iii) such Additional Goods would be an appropriate
business opportunity for Licensee to exploit at a future date, or (iv)
the proposed expansion of the Retained Businesses would cause
substantial damage to any of Licensee's material business relationships.
E. If Licensee approves Licensor's request under sub-paragraph D to add
Additional Goods to the Retained Businesses reserved by Licensor under
this Agreement, the product(s) and/or service(s) described in Licensor's
request shall be added to such Retained Businesses, and Schedule A shall
be deemed amended as set forth in such offer without further action of
the parties.
F. If Licensor decides to abandon its use of the Retained Marks for any
material part of the Retained Businesses (considered on an individual
product line or category of service basis in any geographic jurisdiction
where such Retained Marks may be exploited by Licensee in a commercially
reasonable manner), rather than offering to assign, transfer or
otherwise convey its ownership interest in such trademarks and/or the
related assets of such business in a transaction subject to
sub-paragraph 13 B, below, Licensor shall provide Licensee with
reasonable prior written notice identifying the products and/or services
and jurisdictions affected by such decision and the time after which
Licensor reasonably anticipates that such rights will be available for
use by Licensee. Licensee shall have
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the exclusive right during the term of this Agreement to utilize such
Retained Marks as Licensed Marks for the purposes stated in such notice,
and the products and services identified in such notice may thereafter
be included in subsequent requests under this Paragraph to add
Additional Products to the schedule of Licensed Goods in the discretion
of Licensee. Licensor shall not be required under this Agreement to
continue its use of the Retained Marks in any part of the Retained
Businesses pending Licensee's exercise of its option rights under this
Agreement, nor will Licensor be responsible for any diminution of its
trademark rights in the Licensed Marks caused by delay on the part of
Licensee in making an election under this sub-paragraph to utilize any
trademark rights which become available for Additional Products.
6. NEW MARKS.
A. Licensee shall have the right to adopt and use in connection with the
Licensed Goods any mark which is similar in sound or appearance to any
of the Licensed Marks, without the Licensor's prior written approval,
provided that the mark is used with goods or services which meet the
Licensor's standards for such goods or services. Such similar marks
shall be considered as part of the Licensed Marks.
B. Licensee shall have the right to request the adoption of new marks by
the Licensor as Licensed Marks for the Licensed Goods which are not
similar to the existing Licensed Marks, and Licensee shall have the
obligation to make such request if Licensee intends to use the Nicklaus
Image or any form or variant of the Licensed Marks in connection with
such new marks or the advertisement or promotion of the goods and
services identified by such marks to the public. Any such proposed new
marks shall be submitted in writing to Licensor for approval by
Licensor, which approval shall not be unreasonably withheld. If the
Licensor does not respond in writing to the Licensee regarding such new
mark within twenty (20) days of its receipt of Licensee's written
proposal, the Licensor's approval thereto shall be conclusively
presumed. Upon approval by Licensor, the new marks shall be considered
part of the Licensed Marks. In addition, Licensor shall be free to
utilize such marks or any reasonable variant thereof approved by the
parties as Retained Marks in connection with the Retained Businesses to
the extent that such use may be appropriate.
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<PAGE>
C. In the event that Licensor desires to adopt any new marks for the
Retained Businesses which are not similar to the existing Licensed
Marks, and Licensor intends to use the Nicklaus Image or any form or
variant of the Licensed Marks in connection therewith, Licensor shall
provide Licensee with a written description of such marks prior to their
adoption. Licensee shall have the right to object to Licensor's adoption
of such marks if, in the reasonable opinion of Licensee, the proposed
marks contain any scandalous or offensive matter, or their association
with the Nicklaus Image or Licensed Marks could reasonably be expected
to have a material adverse effect upon the business of Licensee, the
goodwill associated with the Licensed Marks, or the market for the
Licensed Goods. Iif Licensee makes any such objections in writing to the
Licensor regarding such new mark within twenty (20) days of its receipt
of Licensor's written description, the parties will be required to
mutually resolve such objections as a condition to the adoption of such
mark by Licensor. Upon adoption by Licensor, the new marks shall be
considered part of the Retained Marks, unless otherwise mutually agreed
by the parties, and Licensee shall be free thereafter to utilize such
marks or any reasonable variant thereof approved by the parties as
Licensed Marks in connection with the Licensed Goods to the extent that
such use may be appropriate.
D. Licensee shall have the right to adopt, use and own any mark in
connection with the Licensed Goods free of the limitations and
restrictions of sub-paragraph A of this paragraph if (i) the mark is not
similar to any of the Licensed Marks; and (ii) Licensee does not intend
to use the Nicklaus Image in connection therewith. In order to avoid
confusion as to the source of goods and services offered under such
marks as may be acquired or adopted under this sub-paragraph, Licensee
hereby covenants and warrants that it will not use or license any mark
adopted under this sub-paragraph in any manner which will associate such
mark with the Nicklaus Image in advertising, marketing or promotional
activities during the term of this Agreement, nor use or license any
such mark in any business competitive with any of the Retained
Businesses until such earlier time, if any, as Licensor has transferred
or assigned its rights with respect to the affected Retained Businesses
to an unaffiliated third party in a transaction subject to sub-paragraph
13 B., below.
E. Licensor shall have the right to adopt, use and own any mark in
connection with the Retained Businesses free of the limitations and
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restrictions of sub-paragraph C of this paragraph if (i) the mark is not
similar to any of the Licensed Marks; and (ii) Licensor does not intend
to use the Nicklaus Image in connection therewith. In order to avoid
confusion as to the source of goods and services offered under such
marks as may be acquired or adopted under this sub-paragraph, Licensor
hereby covenants and warrants that it will not use or license any mark
adopted under this sub-paragraph in any manner which will associate such
mark with the Nicklaus Image in advertising, marketing or promotional
activities during the term of this Agreement.
F. The parties further acknowledge that each of them shall be entitled
to own, utilize and register any mark adopted by them under paragraph
6D or 6E free and clear of the other restrictions and limitations of
this Agreement, provided however, that the insurance and indemnification
provisions of paragraph 11 shall apply to any claim made against or loss
sustained by a party as a result of the other party's use or licensing
of any such marks during the term of this Agreement.
7. LABELING AND ADVERTISING.
A. All advertising and labeling of Licensee for the Licensed Goods
identified by the Licensed Marks and/or Nicklaus Image shall conform to
good industry practice and shall comply with all governmental laws and
regulations.
B. Licensee shall submit copies of any new labeling or advertising
bearing the Licensed Marks and/or Nicklaus Image to Licensor not less
than thirty (30) days prior to its first use by Licensee. If Licensor
reasonably objects to any such labeling or advertising within ten (10)
days after its receipt of such copies, the Licensee shall thereafter not
use it until it meets with Licensor's approval, which approval shall not
be unreasonably withheld or delayed.
C. Licensee shall use the Licensed Marks only in the manner and format
specified by Licensor. The parties acknowledge that Licensor has
established formats and standards for use of the Licensed Marks and
Retained Marks prior to the date of this Agreement and agree that such
formats and standards will form the basis for Licensor's specifications
under this sub-paragraph with respect to the Licensed Marks. Licensee
shall have the right to propose for Licensor's review new formats and
standards for use of the Licensed Marks, which standards shall form the
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basis for future specifications by Licensor with respect to such
Licensed Marks under this sub-paragraph upon approval by Licensor.
Licensor shall not unreasonably withhold or delay its approval of any
new formats or standards proposed by Licensee hereunder, and Licensor
shall be deemed to have approved any such formats and standards unless
written objection is made to Licensee within twenty (20) days of
Licensor's receipt of a written proposal from Licensee requesting such
approval under this sub-paragraph.
D. Licensee shall use such trademark notices - for example, the
encircled "R" symbol of registration - as Licensor may reasonably
require.
E. In order to maintain the goodwill of the Nicklaus Image and protect
the common interests of Licensor and Licensee in the preservation of
such goodwill, the parties agree to consult with each other and the
other licensees involved in the marketing of the Licensed Goods and
Retained Businesses regarding appropriate uses of the Nicklaus Image to
promote their respective marketing activities. Neither Licensor nor
Licensee shall materially depart from or authorize any material
departure from the standards and practices established prior to the date
of this Agreement for utilization of the Nicklaus Image in advertising
and promotional materials generated during the term hereof unless such
departure is mutually discussed and approved by the parties prior to the
dissemination of such materials, which approval shall not be
unreasonably withheld or delayed. Licensor agrees to use its reasonable
efforts to provide copies and samples of advertising and labeling
generated by Licensor and its other licensees in connection with the
Retained Businesses to Licensee for review as soon as practicable after
such materials become available to Licensor in order to allow the
parties to discuss the effective utilization of the Retained Marks and
Nicklaus Image and to promote uniform brand standards.
8. REPRESENTATIONS AND ACKNOWLEDGMENTS CONCERNING LICENSED MARKS.
A. Licensor represents, warrants and agrees that:
i. It is the owner of all right, title and interest
in and to the trademark and service mark registrations and
applications listed on Schedule B.
ii. It will maintain the registrations on Schedule B
for so long as the Licensee is using the mark on any of
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the goods or the rendering of the services set forth in such
registration(s).
iii. It will, on request by Licensee, file
applications to register the Licensed Marks in any country
where the marks are not presently registered for any goods and
services within the scope of this License.
iv. It will file applications at Licensee's expense
to register any new marks suggested by Licensee and approved by
Licensor pursuant to paragraph 6(A), and (B) in any classes
and countries requested by Licensee, and it may file such
additional applications, at Licensor's expense, in all other
classes and countries which it considers appropriate, and seek
reimbursement from Licensee for the reasonable costs of filing
any such registration in the event such Licensed Mark is later
utilized by Licensee in any jurisdiction or product category
covered by such registrations.
v. It has agreements regarding the use of the
GOLDEN BEAR name, the Licensed Marks or related trademarks, and
the Nicklaus Image with the parties shown on Schedule D, and
this License is subject to those agreements.
vi. It has pending administrative or court actions
involving the Licensed Marks as set forth on Schedule E.
B. LICENSEE REPRESENTS, WARRANTS AND AGREES THAT:
i. Any and all use of the Licensed Marks shown on the
attached Schedule A, or any variants thereof, as well as any
new marks adopted by the parties under paragraph 6(A), (B) and
(C) and used by Licensee pursuant to this Agreement shall inure
to the benefit of the Licensor as owner of the Licensed Marks
and Retained Marks.
ii. During the term of this Agreement and thereafter,
Licensee agrees that nothing herein shall give it any right,
title or interest in or to the Licensed Marks, except the right
to use in accordance with the terms of this Agreement. Nothing
herein shall preclude Licensee from acquiring a right, title or
interest in the Licensed Marks or in any other of the marks
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reserved by Licensor pursuant to separate agreements.
iii. During the term of this Agreement and thereafter,
Licensee agrees not to raise or cause to be raised any
objection on any ground whatsoever to the validity of the
Licensed Marks, the Licensor's ownership thereof, or the
Licensor's right to register said marks as Licensed Marks for
the Licensed Goods or as Retained Marks for the Retained
Businesses, provided that such registrations are made in
conformity with the terms and conditions of this Agreement.
iv. Except as provided in clause A.iv, above,
Licensee will reimburse Licensor for all reasonable costs in
connection with the filing and maintenance of registration of
the Licensed Marks for the Licensed Goods, including the costs
and attorney's fees relating to the recording of the Licensee
and its sub-licensees as registered users, as well as for all
other costs related to the protection of the Licensed Marks for
the Licensed Goods. Licensee agrees, on request by Licensor, to
advance government fees and out-of-pocket expenses, including
attorney's fees, in connection with the filing and maintenance
of registrations of the Licensed Marks for the Licensed Goods
and such other registrations as may be filed at the request of
Licensee for protection of the interests of Licensee's future
rights with respect to Additional Goods.
9. MAINTENANCE OF TRADEMARK RIGHTS; SPECIAL RIGHT OF TERMINATION.
A. The Licensor and Licensee agree that the non-use of the Licensed
Marks or of the Nicklaus Image by Licensee can have a substantial
adverse impact on the ownership rights of Licensor in its Licensed
Marks. Licensee agrees that the provisions of this Paragraph shall apply
in the event that Licensee does not continue to make good faith,
reasonable use of all of the Licensed Marks in connection with the
distribution and sale of goods and rendering of services included within
the Licensed Goods, unless Licensor agrees in writing to waive its
rights under this sub-paragraph with respect to a particular mark,
geographical jurisdiction and/or product category. "Reasonable Use"
under this paragraph shall not require the sale of any particular
quantity or dollar value of Licensed Goods bearing the Licensed Mark so
long as Licensee or its authorized sub-licensee(s) make BONA FIDE use of
each Licensed Mark in the ordinary
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course of trade in conformity with section 15 U.S.C. 1127, or such
definition of trademark "use" as may be adopted in any successor statute
or regulation. The abandonment by Licensee of an obsolete variant of a
Licensed Mark in favor of a redesigned or updated Licensed Mark adopted
under this Agreement as provided in Paragraph 6 to represent the same
brand shall not subject Licensee to the provisions of this Paragraph
with respect to such obsolete mark or give rise to any rights in
Licensor to an assignment of any rights with respect to such Licensed
Mark.
B. Licensor and Licensee agree and acknowledge that Licensee may from
time to time deem it necessary to change Licensee's use of the Licensed
Marks and the Nicklaus Image in order to meet competitive conditions in
the markets for the Licensed Goods. In the event that Licensor believes,
in good faith, that such changes may create a substantial risk of
abandonment of any of the Licensed Marks for any class of Licensed Goods
in any jurisdiction, Licensee shall provide reasonable assurances to
Licensor of its intention to utilize the affected Licensed Marks upon
request unless Licensee elects to abandon such trademarks under
sub-paragraph C, below.
C. If Licensee elects to abandon its use of any of the Licensed Marks or
to abandon its activities with respect to the sub-licensing and/or sales
of the Licensed Goods entirely in any jurisdiction within Licensor's
existing business as of the date of this Agreement or in any
jurisdiction to which Licensee extends the business hereafter, Licensee
shall give Licensor prior written notice of its intention to abandon
such use.
i. In the event Licensee gives written notice of
its intention to abandon pursuant to sub-paragraph C., above,
Licensee shall, upon written request by Licensor, provide an
assignment and release of Licensee's further rights under this
Agreement with respect to its right to use such individual
Licensed Marks and the Nicklaus Image for the affected classes
of Licensed Goods in the applicable jurisdiction; and Licensor
thereafter shall be free to use, license or sub-license such
rights in the applicable jurisdiction in order to maintain its
trademark rights as an addition to the Retained Businesses
authorized by this Agreement and subject to the other terms
applicable to such Retained Businesses.
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ii. The parties acknowledge that the rights and
obligations of the parties under this sub-paragraph are
intended to be severable, based upon Licensee's intentions with
respect to the use of each Licensed Mark and the Nicklaus Image
for each class of Licensed Goods in each applicable
jurisdiction, and that the transfer by Licensee of its rights
with respect to any individual mark as a trademark for any
class of Licensed Goods in any affected jurisdiction as a
result of Licensor's exercise of its rights under this
sub-paragraph shall not affect the rights of Licensee (i) to
utilize such trademark in any other jurisdiction where it has
not elected to abandon its use of such trademark, (ii) to
utilize such trademark on any other classes of Licensed Goods
which may be offered by or under license from Licensee in the
affected jurisdiction, or (iii) to utilize or adopt any other
Licensed Mark or the Nicklaus Image in the affected
jurisdiction.
D. In the event that Licensee elects to abandon its use of all or
substantially all of the Licensed Marks in all or substantially all of
the countries included within the Transferred Business conveyed to
Licensee as of the date of this Agreement and to which the Licensee
hereafter extends such business, other than territories where Licensee's
rights have been abandoned or surrendered to Licensor under
sub-paragraph C, above (hereafter the "Existing Territory"), Licensor
shall have the right to terminate this Agreement by written notice to
Licensee. Licensee may elect to abandon the Licensed Marks by written
notice to Licensor or by non-use of all or substantially all of the
Licensed Marks in all or substantially all of the Existing Territory.
The Licensee shall have the right to withdraw any written election under
this sub-paragraph within thirty (30) days of its receipt of Licensor's
notice of termination. The Licensee shall also have one hundred and
eighty (180) days from the date of a notice of termination from Licensor
to cure any alleged abandonment resulting from non-use by re-commencing
use of the Licensed Marks with respect to any commercially reasonable
number of the Licensed Goods in any commercially reasonable part of the
Existing Territory, provided that (I) LICENSEE SHALL PROMPTLY ASSIGN AND
RELEASE ITS RIGHTS AS PROVIDED UNDER CLAUSE II OF SUB-PARAGRAPH C,
ABOVE, IN ANY INDIVIDUAL LICENSED MARKS AND LICENSED GOODS IN ANY
JURISDICTIONS IN WHICH the Licensee does not intend to re-commence
actual use, and (ii) Licensee shall be required to promptly undertake
and diligently continue
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during such cure period those preliminary marketing activities which are
necessary or prudent to avoid a finding that such any Licensed Marks
have been abandoned or deemed abandoned with respect to the Licensed
Goods and territories which Licensee seeks to retain under the laws and
regulations of the United States or any other applicable jurisdictions.
E. The failure of Licensor to request a release of trademark rights from
Licensee under this Agreement, or its failure to elect to terminate this
Agreement within the time provided by this Agreement, shall not preclude
Licensor from invoking the provisions of sub-paragraph D of this
paragraph at any subsequent time, provided that it shall be required to
give Licensee ninety (90) days notice of its intention to invoke such
provisions, which notice shall be subject to the cure rights provided in
such sub-paragraph, during which notice period Licensee shall be
entitled to continue its rights under the Agreement provided its use is
in conformity with the remaining terms of this Agreement.
F. If Licensor exercises its special right of termination under
sub-paragraph D this paragraph, this Agreement shall terminate on the
date stated in the notice of termination, and the parties shall be
released from any further obligations to each other except for those
which relate to acts occurring prior to the date of termination.
G. The exercise of Licensor's special right of termination under this
paragraph shall not be subject to arbitration under this Agreement.
10. TRADEMARK INFRINGEMENT/UNFAIR COMPETITION CLAIMS.
A. Each party agrees to notify the other party of any claim made against
it with respect to the use of the Licensed Marks by such party or its
licensees, and of any claims of rights conflicting with Licensor's
exclusive ownership of the Licensed Marks and the Nicklaus Image.
B. The Licensor shall have the first option to bring or defend any
trademark and/or unfair competition action arising from the Licensee's
use of the Licensed Marks, provided that such right shall not apply to
the prosecution or defense of any claim which relates primarily to the
activities and rights of Licensee under this Agreement, or otherwise
does not materially affect the interests of Licensor in the use of the
Retained Marks in the Retained Business. Licensee shall have the first
option to bring or defend any action not subject to Licensor's first
option upon written notice to Licensor, which notice shall describe the
basis for such action, parties involved and trademark and related rights
in
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issue. If either party does not exercise its option to bring or defend
such an action within ten (10) calendar days of its receipt of the other
party's written request to do so, the party making such request may
bring or defend such action in its name and in the name of the other
party as its interest appears in such action. As between the Licensor
and Licensee, the party bringing the action shall have the right to
control the conduct of the proceeding, but in no circumstance shall
either party enter into any settlement, license or compromise of any
controversy which would affect Licensor's rights as owner of the
Licensed Marks and/or Nicklaus Image or Licensee's exclusive rights to
utilize them under this Agreement without the prior written approval of
the other party, which shall not be unreasonably withheld.
C. In any action brought by Licensee involving the Licensed Marks, the
Licensor shall have the option to participate. In any action brought by
Licensor which relates to the Licensed Marks or rights to license them
under this Agreement, the Licensee shall have the option to participate.
In any action involving the Licensed Marks, the party controlling such
action shall keep the other party reasonably advised regarding the
status of such proceedings, and the Licensor and Licensee shall each
render its fullest cooperation and assistance to the other.
D. In any action which arises as a result of or relates to the marketing
or sale of the Licensed Goods under the Licensed Marks, the Licensee
shall bear all reasonable costs of itself and of the Licensor, including
out-of-pocket costs and expenses of witnesses employed by Licensor,
Licensor's counsel, as well as all costs and reasonable expenses of any
material or expert witness. If the Licensor brings or defends such an
action, it shall have the right to set off its out-of-pocket expenses,
including attorney's fees, against any monetary award or settlement
proceeds actually received, and the balance of any such receipts shall
be remitted to Licensee. If the Licensee brings such action, it shall
promptly pay all costs and expenses of Licensor as required by this
sub-paragraph, and upon payment of such costs and expenses, Licensor
agrees that Licensee shall have the right to plead, prove and receive
such amounts as part of its damage, fees or taxable costs award in such
proceedings without further obligation to Licensor.
E. In any action which arises as a result of Licensor's marketing or
sale of goods or services included within the Retained Businesses under
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the Retained Marks, the Licensor shall bear all costs of itself and the
Licensee, including costs and related out-of-pocket expenses of
witnesses employed by Licensee, Licensee's counsel, as well as all costs
and reasonable expenses of any material or expert witness. In any such
action, the Licensor shall have the right to receive and retain any
monetary award granted by the court.
11. PRODUCT LIABILITY, INDEMNITY & INSURANCE.
A. Nothing in this Agreement shall be construed as a guaranty or
warranty of any kind on the part of Licensor with respect to the
Licensed Goods bearing the Licensed Marks which are manufactured or
rendered for or by Licensee.
B. In no event shall Licensor be liable for any loss or damage sustained
by Licensee because of the manufacture, rendering, sale or distribution
of the Licensed Goods identified by the Licensed Marks, except where the
loss or damage is caused by the negligence of the Licensor. In no event
shall Licensee be liable for any loss or damage sustained by Licensor
because of the manufacture, rendering, sale or distribution of goods or
services identified by the Retained Marks through the Retained
Businesses, except where the loss or damage is caused by the negligence
of the Licensee.
C. Licensee shall indemnify Licensor, its officers, directors, agents,
and employees harmless from, against and in respect of any and all
losses, liabilities, claims, causes of actions, suits, damages and
expenses (including attorney's fees), for which any of them may become
liable or which any of them may incur, sustain or be compelled to pay in
any action or claim against the Licensor, its officers, directors,
agents and/or employees arising out of or with respect to any act or
omission that may be suffered or committed by Licensee or by any
individual, partnership, firm, corporation, or other enterprise acting
or purporting to act (whether or not so authorized) for or on behalf of
the Licensee, including sub-licensees acting under color of this
Agreement, unless such claim, loss or damage is caused by the negligence
of the party seeking such indemnification.
D. Licensor shall indemnify Licensee, its officers, directors, agents,
and employees harmless from, against and in respect of any and all
losses, liabilities, claims, causes of actions, suits, damages and
expenses
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(including attorney's fees), for which any of them may become liable or
which any of them may incur, sustain or be compelled to pay in any
action or claim against the Licensee, its officers, directors, agents
and/or employees arising out of or with respect to any act or omission
that may be suffered or committed by Licensor or by any individual,
partnership, firm, corporation, or other enterprise acting or purporting
to act (whether or not so authorized) for or on behalf of the Licensor,
including other licensees involved in the Retained Businesses, unless
such claim, loss or damage is caused by the negligence of the party
seeking such indemnification.
E. During the term of this License, each party shall maintain insurance
in full force and effect covering general liability (including
contractual and products liabilities and completed operations) and such
other specific areas of liability as are customarily insured against by
parties domiciled in the United States conducting business activities of
the same general kind and scope as those undertaken by Licensor and
Licensee from time to time, including appropriate umbrella coverage for
catastrophic events. The amounts of coverage to be provided by each
party (and deductibles or self insurance primary to such coverage) shall
be set in its reasonable discretion according to customs in the
businesses undertaken and general corporate standards of prudent
financial management, provided that neither party shall materially
reduce any insurance coverage limits (or increase any deductibles or
self insurance limits) from the limits in force previous to such action
without providing reasonable written notice of such action to the other
party. Any policies of insurance effected hereunder shall be placed with
an insurance company of reasonable net worth and reputation in the
industry which is licensed in the State of Florida, and any self
insurance program effected by a party in lieu of primary insurance
coverage required hereunder shall be designed and implemented in
accordance with all legal, regulatory and underwriting requirements
applicable to such programs and otherwise reasonably acceptable to the
other party.
F. Each party shall use reasonable efforts to name the other party as an
additional named insured party in any liability policies effected by such party
under sub-paragraph E., above, where such insurance can be obtained without
material increase in premium or the party so named agrees to pay the additional
premium attributable to such designation. Each party agrees to provide such
other party with certificates showing the policies obtained under this
paragraph, with the coverages and
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names of all insured parties designated, and to cause its insurance carriers to
give copies of any official notice to such other party in the event of a
cancellation, non-renewal or material reduction or limitation of coverage under
any such policy.
12. BANKRUPTCY OR INSOLVENCY PROCEEDINGS.
A. If either Licensor or Licensee shall file a petition for relief under
the United States Bankruptcy Code, section 11 U.S.C. 101 et seq., or if
an involuntary bankruptcy petition is filed under section 11 U.S.C. 303
which results in entry of an order for relief as to either Licensor or
Licensee, then the rights of Licensor and Licensee with respect to
rejection of this Agreement under section 11 U.S.C. 365(a) including,
without limitation, all rights to enforce the exclusivity provisions of
this Agreement, shall be governed by section 11 U.S.C. 365(n) as it
presently exists or is hereafter amended.
B. If Licensor makes an assignment for the benefit of creditors,
discontinues its business, or if a receiver or custodian is appointed to
take control of Licensor's property or business, Licensor shall be in
material default under this Agreement, and Licensee shall have all of
the rights of a licensee under section 11 U.S.C. 365(n) as it presently
exists or is hereafter amended, including, without limitation, all
rights to enforce the exclusivity provisions of this Agreement.
13. LICENSEE'S PURCHASE OPTION RIGHTS.
A. If Licensor decides to assign, transfer or otherwise convey its legal
title and ownership interest in the Licensed Marks, or in any other
trademark right, trademark registration, or publicity right which is
licensed exclusively to Licensee under this Agreement, Licensor shall
offer to transfer to Licensee its legal title and/or ownership interest
in all trademark rights, trademark registrations, and publicity rights
which are licensed exclusively to Licensee under this Agreement,
together with the goodwill of the businesses symbolized thereby, for a
consideration of ten dollars ($10.00), plus reimbursement to Licensor
for all costs and expenses, including attorney's fees, directly related
to the transfer of such title and/or interest to Licensee. Licensee
acknowledges that such transfer will include the right to utilize GOLDEN
BEAR in Licensee's corporate name, but will not include any right to own
or register any part of the Retained Marks or Nicklaus Image in
connection with the Retained Businesses or the right to prevent Licensor
from utilizing its corporate name in connection therewith. As a
condition to the conveyance of
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Licensor's rights under this sub-paragraph, Licensee shall cooperate
with Licensor in concluding and filing such documents and instruments as
may reasonably be required by Licensor's legal counsel to assure the
appropriate division of legal rights in the Licensed Marks, the Retained
Marks and Nicklaus Image between the parties, including without
limitation, such additional trademark registrations and concurrent use
agreements as may be required to effect such division.
B. In the event Licensor desires to negotiate with any third party to:
(i) assign, convey or transfer its ownership interest in, or to license
substantially all of its beneficial interest in the right to license and
utilize, any part of the Retained Marks or the Nicklaus Image as used in
connection with any of the Retained Businesses, or (ii) otherwise divest
itself of all or substantially all of the assets, equity holdings,
and/or business opportunities relating to any of the Retained
Businesses (the foregoing being collectively referred to as the
"Business Interests"), Licensor agrees to enter into good faith
negotiations for a period of sixty (60) days with Licensee regarding the
acquisition by Licensee of any of the Business Interests which Licensor
desires to transfer to third parties. Unless the parties have concluded
an agreement for Licensee to acquire the Business Interests which
Licensor intends to transfer within such negotiation period, Licensor
shall be free to offer and sell the Business Interests included in such
negotiations to third parties subject only to the further provisions of
this paragraph. In the event Licensor proposes to make such a transfer
to a third party upon terms and conditions less favorable to Licensor
than the last offer of Licensee made during the negotiation period,
Licensor shall give Licensee written notice of the terms of the proposed
transfer, and the Licensee shall have the right to accept the proposed
transfer on the same terms and conditions offered to or by said third
party by accepting such offer within thirty (30) days of the date such
notice is given, with the closing to be within sixty (60) days of the
Licensee's written notice of the exercise of its option. For purposes of
this sub-paragraph, a proposed change of control of Licensor shall be
deemed a transfer subject to the first negotiation rights set forth
herein, except as provided in sub-paragraph C, below.
C. The terms of this Paragraph 13 shall not apply to any proposed
transfer by Licensor to Mr. Nicklaus, members of his immediate family or
their personal representatives or lineal descendants, or to any entity
or trust established to hold the Licensed Marks, Retained Marks and/or
Nicklaus Image for the benefit of such persons and their authorized
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licensees, provided that such transferee assumes all of the obligations
of this Agreement with respect to any intangible rights so assigned.
14. ASSIGNMENTS & SUB-LICENSES.
A. Except as otherwise provided in this Paragraph 14, this Agreement
may not be assigned, transferred or hypothecated by Licensee, whether by
operation of law or otherwise, without the prior written consent of
Licensor.
B. This Agreement may not be assigned, transferred or hypothecated by
Licensor, without the prior written consent of Licensee.
C. Any attempted assignment, or transfer or hypothecation of this
Agreement by either party without the written consent of the other,
where such consent is required, shall be null and void and of no effect,
and shall constitute a material default hereunder.
D. Licensee may grant to any person, firm, corporation or other entity a
sub-license of any of its rights under this License, provided that the
sub-license is expressly subject to the terms and conditions of this
License.
E. Notwithstanding the restrictions of this paragraph, Licensee shall be
entitled without the consent of Licensor to transfer this Agreement, by
assignment or by operation of law, to any entity which simultaneously
acquires all or substantially all of the business developed by Licensee
under this Agreement, provided that such entity agrees in writing to
accept and be bound by all of the terms and conditions of this
Agreement, to the extent such undertaking is not made by operation of
law.
15. RELATIONSHIP OF PARTIES.
A. Nothing in this Agreement shall create a joint venture or establish
the relationship of principal and agent or any other relationship of a
similar nature between the parties hereto. Nothing contained in this
Agreement shall be construed as in any way granting to or conferring
upon Licensee a "franchise" within the meaning of any law, statute,
rule, regulation, order, decision or public policy.
B. In all of its transactions with third parties, the Licensee shall
assume sole responsibility for its commitments, obligations, or
representations made in connection therewith, and it shall not attempt
to
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bind or commit Licensor in any matter whatsoever.
C. The parties acknowledge that, due to the common public association of
the Licensed Marks and Nicklaus Image with all of the products and
services offered by the parties and their respective licensees utilizing
the Licensed Marks and Nicklaus Image, it is in their mutual best
interests to furnish reasonable cooperation to each other in order to
support common marketing efforts and a unified brand image, and to
assist each other and their respective licensees in preventing the
unauthorized use of the Licensed Marks and the Nicklaus Image. Without
limiting the rights of the parties to manage and conduct their
respective businesses independently as contemplated by this Paragraph
15, the parties have agreed to undertake the following obligations
during the term of this Agreement in support of their mutual interests
in maintenance of the goodwill represented by the Licensed Marks and
Nicklaus Image:
i. During the Term of this Agreement, Licensor and
Licensee will keep each other advised of the identity of any
subsequent licensees or venture partners authorized by the
parties to utilize the Licensed Marks and/or Nicklaus Image and
the nature of the business undertaken by them, and will provide
each other with reasonable advance notice of events affecting
their respective promotional activities with respect to the
Licensed Goods and Retained Businesses or affecting public
awareness of the Licensed Marks and the common brand image
developed by the parties and their respective licensees.
ii. Licensor and Licensee will use all reasonable
efforts throughout the term of this Agreement to meet
periodically with each other at least once per calendar quarter
and, where appropriate, with representatives of their
respective licensees to discuss matters of mutual importance to
them and complementary strategies with respect to the effective
world wide exploitation of the Licensed Marks. In the event
that either party elects to call a general meeting of its staff
and licensees or venture partners to discuss matters of common
market strategy or business development, such party will
provide the other party with reasonable advance notice of such
meeting, and if requested by such other party, the party
calling such general meeting will use reasonable efforts to
schedule a plenary session at such meeting
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where both parties and their respective licensees and venture
partners can attend to exchange information and discuss matters
of common interest to them as persons utilizing the Licensed
Marks and Nicklaus Image. Unless otherwise agreed, the expenses
of any such plenary session shall be shared by the parties on a
PRO RATA basis according to the number of attendees from each
party. The parties agree to hold any non-public marketing,
sales or business information obtained through such meetings
and discussions in strictest confidence, and to treat such
information in the same manner as their own most sensitive
confidential business information. The parties further agree to
impose similar confidentiality restrictions upon their
licensees in a written document signed prior to the attendance
of any such party at any meetings where either party reasonably
believes that confidential information will be discussed,
unless the parties are satisfied that the confidentiality
provisions of the existing license agreement with such party is
sufficient to protect their mutual interests under this clause.
iii. Without limiting the generality of the
cooperation to be furnished under this sub-paragraph during the
term of this Agreement: (i) Licensor hereby agrees to use its
reasonable efforts to promote the use of the Licensed Goods by
all parties affiliated with Licensor and parties having
substantial ongoing licensing or business relationships with
Licensor in connection with the Retained Businesses, to the
extent that Licensor has knowledge of such related parties'
requirements for goods or services of the type included within
the Licensed Goods, and (ii) Licensee hereby agrees to use its
reasonable efforts to promote the use of the goods and services
provided by the Retained Businesses by all parties affiliated
with Licensee and parties having substantial ongoing licensing
or business relationships with Licensee in connection with the
Licensed Goods, to the extent that Licensee has knowledge of
such related parties' requirements for goods or services of the
type provided by the Retained Businesses. The parties agree to
cooperate with each other and their respective licensees in the
development of advertising tie-ins and cross-promotional
activities using the Licensed Goods and Retained Businesses
wherever appropriate to
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the common marketing objectives of the parties, and the parties
will make reasonable efforts to use branded goods or services
featuring the Licensed Marks and/or Nicklaus Image throughout
the term of this Agreement in any of their other advertising or
promotional activities where use of such goods or services is
required.
iv. The parties acknowledge that the ready
availability of branded goods and merchandise bearing the
Licensed Marks and Nicklaus Image is important to their common
goals in promoting goodwill for their respective businesses and
securing long term brand loyalties by supplying the
requirements of affiliated parties and business associates for
products and services endorsed by and associated with Jack
Nicklaus. For that reason, the parties agree to cooperate with
each other on an ongoing basis to provide reasonable access to
goods and services associated with the Licensed Marks and
Nicklaus Image, and to extend to each other and their
respective clients, licensees and venture partners to the
fullest extent practicable the benefits of any supply
arrangements negotiated by the parties with respect to the
Licensed Goods and any goods and services distributed through
the Retained Businesses in support of the development and
implementation of advertising and promotional activities
requiring the use of such goods and services. It is understood
that neither party shall be required under this clause to make
any purchase, advance funds, or provide any credit or financial
accommodation to the other party in connection with any such
supply arrangement, it being understood that the party
requesting goods or services shall in all events be required to
meet the customary price, quantity and payment terms of the
supplier of such goods and services as a condition to
purchasing any such goods and services and to accept sole
financial responsibility for any purchases made under this
clause.
v. The parties hereby agree to use all reasonable
efforts, as licensor and licensee, to limit conflicts between
themselves and their respective licensees and licensed venture
partners with respect to uses of the Licensed Marks or the
Nicklaus Image, and subject to the provisions of applicable
law, to cooperate in the control of "grey market" sales of
Licensed Goods
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and any other goods and services offered by the Retained
Businesses.
16. TERM OF AGREEMENT; TERMINATION.
A. Subject to the provision for prior termination as hereinafter set
forth, this Agreement and the licenses granted hereunder shall be
effective commencing upon the "Effective Date", which for purposes of
this Agreement shall have the same meaning and be deemed to occur
simultaneously with the Effective Date defined in Section 4 of that
certain Agreement and Plan of Reorganization between Licensor and
Licensee of even date herewith, and shall continue in full force and
effect until December 31, 2026. Thereafter, this Agreement shall
automatically be renewed for successive ten (10) year terms, subject to
the terms of Paragraph 17, below.
B. Licensee may terminate this Agreement at any time upon ninety (90)
days prior written notice to the Licensor.
17. BREACH OF THIS AGREEMENT; ARBITRATION.
A. In the event that either party does not initiate action to correct a
breach of this License within ninety (90) days after receipt of written
notice from the other party, the party giving such notice shall, as a
condition to pursuing a termination of this Agreement based upon such
breach, demand within ninety (90) days following the expiration of said
initial ninety (90) day period that the disputed matter be submitted to
arbitration by a single arbitrator in North Palm Beach, Florida, or at
such other site as the parties may agree, in accordance with the
Commercial Rules of the American Arbitration Association. The cost and
expenses (including reasonable attorney's fees) of arbitration shall be
apportioned in such amounts and against such party or parties as the
arbitrator may determine.
B. The arbitrator shall have the right to issue reasonable preliminary
and final orders directing the parties to take such actions or to cease
and desist from such actions as may be deemed necessary to ameliorate
the effects of the alleged breach on the aggrieved party or cause such
party to honor its financial commitments under this Agreement, provided
that no such award shall include incidental or consequential damages or
compensation for any losses sustained other than direct costs incurred
as a result of such breach. Any orders so issued may be enforced by
preliminary or permanent injunction in any court of competent
jurisdiction subject to general principles of equity applicable to such
proceedings.
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The arbitrator shall also be authorized to award and apportion
reasonable attorneys' fees to the prevailing party or parties in such
action, in addition to taxable costs of the arbitration.
C. In the event that Licensor declares a default under this Agreement
and requests termination as a remedy in its demand for arbitration, it
shall be the duty of the arbitrator to determine whether the Licensee
has committed a material breach of any of the material covenants, terms
or conditions of this Agreement. If the arbitrator finds that there has
been a breach of any one or more of the terms thereof which is material
to the overall relationship of the parties under this Agreement, the
Licensee shall be afforded forty-five (45) days from the date of the
arbitrator's decision, or within such additional time as the arbitrator
may permit on request and for good cause by Licensee, to cure such
breach or, to take such actions or make such payments as the arbitrator
may require to ameliorate the effects of a default as a condition to
avoiding termination if such breach is not subject to cure. If such
material breach is curable and is not so cured, or if such breach is not
curable and the arbitrator does not determine that there is an action or
payment which would appropriately ameliorate such breach, the Licensor
shall have the right to terminate this License upon written notice given
to Licensee within sixty (60) days of the later of (i) the date of such
arbitrator's decision, or (ii) the expiration of the time afforded by
the arbitrator for the cure. The arbitrator may award such additional
relief as the arbitrator deems just, exclusive of termination, and may
grant Licensor the conditional right to terminate in the event Licensee
fails to comply with any remedies ordered by the arbitrator to
ameliorate the effects of a default which is not subject to cure. The
arbitrator's decision shall be final and binding upon the parties, and
it shall be a condition precedent to any court action arising from an
alleged breach of this License.
18. CESSATION OF USE OF LICENSED MARKS. Upon termination or expiration of
this Agreement, Licensee shall not thereafter use the Licensed Marks, including
the trade name GOLDEN BEAR, but it shall have the right to exhaust its inventory
of supplies bearing said marks, provided that they meet the Licensor's quality
standards. Licensee shall delete GOLDEN BEAR from its corporate name as soon as
reasonably practical after such expiration or termination.
19. NOTICES. Except as otherwise provided in this Agreement, all notices
required or permitted to be given hereunder shall be sent to the other in
writing and
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shall be valid and sufficient only if sent by facsimile transmission and
confirmed by registered or certified mail or the equivalent, postage prepaid,
addressed as follows:
LICENSOR: LICENSEE:
President President
Golden Bear International, Inc. Golden Bear Golf, Inc.
11780 U.S. Highway No. 1 11780 U.S. Highway No. 1
North Palm Beach, FL 33408 North Palm Beach, FL 33408
Either party hereto may change its address by a notice given to the other party
in the manner set forth above.
20. ENTIRE AGREEMENT; AMENDMENTS. This Agreement represents the entire
understanding and agreement into which all prior negotiations and agreements are
merged between the parties hereto with respect to the subject matter hereof; and
it can be amended, supplemented or changed, or any provision hereof can be
waived, only by a written instrument making specific reference to this License
signed by the party against whom enforcement of any such amendment, supplement,
modification or waiver is sought.
21. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
22. PARAGRAPH HEADINGS. The paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
23 APPLICABLE LAW. This Agreement shall be governed by the law of the
State of Florida.
24 SEVERABILITY. If any time subsequent to the date hereof, any provision
of this Agreement shall be held by any court of competent jurisdiction to be
illegal, void or unenforceable, in whole or in part, such provision (to the
extent of such illegality or unenforceability) shall be of no force and effect,
but the illegality or unenforceability of such revision shall have no effect
upon and shall not impair the enforceability of any other provision of this
Agreement.
25 CONSTRUCTION. All terms and words used in this Agreement, regardless of
the number, format or gender in which they are used, shall be deemed and
construed to include any other number (singular or plural), or any format
(hyphenated or capitalized), or any other gender (masculine, feminine or
neuter), and the term "and"
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shall include "or" and vice versa, as the contents or sense of this Agreement
may require, the same as if the words had been fully and properly written in the
proper number, format, gender or expression.
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed by their duly authorized representatives as of the day and year
first above written.
GOLDEN BEAR INTERNATIONAL, INC. GOLDEN BEAR GOLF, INC.
By:_________________________ By:___________________________
Title:________________________ Title:__________________________
<PAGE>
SCHEDULE A
DESCRIPTION OF TRANSFERRED BUSINESSES
BRAND DEVELOPMENT - MARKETING AND PROMOTION OF LICENSED GOODS
Marketing, advertisement, promotion, sourcing, manufacturing,
distribution and sale of goods and services identified in Schedule "B" utilizing
the Licensed Marks and the Nicklaus Image through first quality retail
distribution channels. Identification and development of expansion opportunities
for brands developed around the Licensed Marks and the Nicklaus Image into other
appropriate product and service categories, subject to the terms of Paragraph 5
of the Agreement. Engaging in general marketing and public relations activities
to build awareness and enhance the reputation of the Licensed Marks and Nicklaus
Image among consumers and providers of goods and services.
MEMORABILIA DEVELOPMENT AND MARKETING
Development, marketing, advertisement, promotion, sourcing,
manufacturing, distribution and sale of memorabilia and commemorative
merchandise utilizing the Nicklaus Image and commemorating events from the
career and achievements of Jack Nicklaus, including works of visual art,
merchandise, collectibles and other items customarily sold to sports fans and
collectors. Subject to the limitations of Schedule "C", the right to develop,
market, advertise, promote, source, distribute and sell memorabilia and
commemorative merchandise based upon the Licensed Copyrights.
CORPORATE STRATEGIC MARKETING ALLIANCES
Participation in marketing alliances where the Nicklaus Image, Licensed
Marks, corporate hospitality services and/or business contacts and relationships
of Licensee in the golf world are provided to corporate clients to help them
penetrate golf related markets in exchange for direct compensation and/or
reciprocal marketing support from such clients for the Licensee's marketing
activities, including worldwide sales of the Licensed Goods and/or general brand
and image development activities. The transfer of this business shall not
include the right to provide the personal services of Jack Nicklaus as a
spokesman or his personal efforts to support the marketing of any corporation,
product or service, it being understood that such rights have been reserved
under this License Agreement.
GOLF CENTERS AND ACADEMIES
The identification, development, design, construction, acquisition,
management, operation, marketing of golf teaching and practice facilities, which
may include, without
Schedule "A" - Page 1
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limitation, a pro shop, food and beverage service, and other appropriate on-site
golf and recreational facilities, such as regulation golf practice holes,
miniature golf, baseball batting amenities for family entertainment. Such
facilities may also include a 9 hole or 18 hole executive/par 3 golf course if
located, operated and marketed as part of the golf instruction and practice
facility. The development and implementation of golf instructional programs for
use at such facilities, including instructor training and certification,
approved curricula, and teaching materials. The development, acquisition and
upgrading of computer interactive and audio visual systems for golf instruction,
practice and game simulation, including the Jack Nicklaus Coaching STUDIO,
SIMTREK /trademark/ and related technologies, provided that such technologies
will be limited to those which interact with actual golf club swing mechanics
and will not include traditional video or computer game golf simulations
accessed by computer input devices. The development and implementation of
comprehensive licensing and franchising programs for the identification,
operation and marketing of golf facilities worldwide. The foregoing businesses
include those golf teaching and practice facilities currently operating under
the Golden Bear Golf Center, Jack Nicklaus Golf Center, and Jack Nicklaus
Academy of Golf brands.
GOLF COURSE CONSTRUCTION SERVICES
The development, marketing and provision of comprehensive golf course
construction and technical services as a general contractor to developers of
golf course projects, including new golf course construction and renovation of
existing golf courses. The provision of specialized golf course shaping services
to developers, designers and general contractors on a subcontract basis. The
provision of technical advice and consulting services relating to all aspects of
golf course construction, including project management for golf course
construction projects on a fee for service basis. It is understood that such
services may be provided for Nicklaus Design golf course projects and for
projects in which the golf course is designed by competing designers, and that
the business transferred hereunder will include the right to subcontract design
work to Nicklaus Design or other parties where required to provide a developer
with a comprehensive design-build arrangement. The business transferred hereby
includes all of the business currently operated through Licensor's affiliate,
Paragon Golf Construction, Inc.
GOLF INSTRUCTIONAL PROGRAMS AND EVENTS
The development, marketing and operation of organized golf instructional
programs for individuals and corporate groups utilizing the Licensed Marks,
Nicklaus Image and personal teaching philosophies of Jack Nicklaus, including
offerings currently made through the Nicklaus/Flick Golf Schools and the Golden
Bear Executive Golf program. The provision of golf instructional services and
clinic programs to third party event organizers on a subcontract basis for
corporate outings and hospitality
Schedule "A" - Page 2
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events and charity fundraising events. The development, marketing and operation
of a children's golf camp program associated with Jack Nicklaus, which is
currently under development as the Golden Bear Golf Camp.
JACK NICKLAUS INTERNATIONAL CLUB
The development, organization, marketing, operation and management of a
proprietary membership club known as the Jack Nicklaus International Club, which
offers as its central feature reciprocal playing privileges for its members at
exclusive private country clubs having Jack Nicklaus Signature /trademark/ golf
courses worldwide. The marketing concept for such club includes recruitment and
retention of a group of qualified private golf clubs willing to extend playing
privileges to members as Host Clubs, providing centralized reservation, travel,
information and support services without charge to the Host Clubs, and offering
membership in the club to qualified members of the Host Clubs for an annual fee.
Although direct sales of memberships through the Host Clubs are contemplated as
the primary method of attracting members, the club would be promoted, and
services delivered to its members, in all media appropriate for membership sales
and direct response marketing now known or hereafter created, including direct
mail, broadcast and print media, and on-line computer networks. In addition to
offering membership contracts giving members access to Jack Nicklaus designed
courses at the Host Clubs, the club would provide Licensee with access to a
targeted marketing group of golf oriented consumers for the Licensed Goods. The
club would also provide its members with access to certain general services
offered to club membership groups by third party vendors in order to build
member loyalty and as additional means of generating revenues. It is understood
that Licensee will have the exclusive rights to the name and membership concept
adopted for the club, and the exclusive right to market the club to design
clients of Licensor during the term of this Agreement.
GOLF CLUB MANAGEMENT SERVICES
The provision of golf club management, consulting and staffing services
to the owners of private, public and semi-private golf clubs and country clubs,
including the turn-key operation of golf courses and/or clubs on a subcontract
basis, the management of golf courses and/or clubs owned and operated by third
parties, and the provision of management consulting services relating to golf
courses and related club facilities, except as provided below. Golf club
management shall include the management of all matters related to the daily
operation and maintenance of a golf club, including golf operations, pro shop
operations, food and beverage, and golf course maintenance for clubs under
contract to Licensee and its affiliates, but shall not include the right to
provide agronomy consulting services to such clubs (other than in connection
general on-site golf course maintenance and greenskeeping services) with or to
other golf course operators. The grant to Licensee of the right to manage golf
clubs shall include
Schedule "A" - Page 3
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the right to provide management services under contract to Licensor and its
affiliates, but such grant shall not prevent Licensor or its affiliates from
making other arrangements for the management of any golf club developed as a
part of the Retained Businesses.
Schedule "A" - Page 4
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DESCRIPTION OF RETAINED BUSINESSES
GOLF COURSE DESIGN AND RELATED BUSINESSES
Performance of professional design services, agronomy services and
related consulting services (including on site design review and coordination
during construction) in connection with the design, development and turf
maintenance of golf courses and golf practice facilities customarily associated
with such golf courses, including, without limitation, those services performed
for clients by the Nicklaus Design and Golfturf Divisions of Licensor prior to
the date of this Agreement, but excluding (i) golf course construction,
renovation, shaping and grassing contractor services, and (ii) the provision of
general on-site golf course maintenance and greenskeeping services in connection
with the management of a golf club.
DAILY FEE GOLF COURSE BUSINESSES
Participation as a principal, joint venturer, and/or licensor in the
design, development, ownership, and operation of high quality, proprietary daily
fee golf courses open to the general public, including the right to manage or
subcontract the management of such daily fee golf courses. A primary focus of
this business will be the development and promotion of a chain of golf courses
under the Golden Bear Golf Club /trademark/ brand associated with the design
work of Jack Nicklaus and with the Licensed Marks. Licensor acknowledges that
the daily fee golf course business described hereunder shall not include the
right to participate in the development, ownership or operation of an
executive/par 3 golf course of the type which may be operated or licensed by
Licensee as part of a Golden Bear Golf Center /trademark/.
SPORTS EVENT PRODUCTION AND MANAGEMENT
Development, production and operation of professional golf tournaments
and other professional sports events or amateur sports events sanctioned by a
recognized amateur association on a turnkey basis for event promoters and/or
sanctioning authorities, including all aspects of marketing, sales, recruitment,
event logistics and administration required to develop and produce such events.
Providing management services, operational support, and equipment rental for
other parties involved in the development, production and operation of golf
tournaments and other sports events of the types described above on an
independent contract basis, and providing consulting services using event
production expertise to event promoters and/or sanctioning authorities desiring
to produce such events. Organization, development and management of professional
golf "mini tours" and related professional golf events, and providing management
support and consulting services using expertise developed in such activities to
other operators of such tours and events. Creation, development, production,
marketing and management of specialty professional sports events or amateur
sports events sanctioned by a recognized amateur association for media
production and/or broadcast use, including "made for television" sporting events
and
Schedule "A" - Page 5
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related properties which involve the purchase and resale of broadcast media time
for an event as a principal or venture partner. The retention of this business
by Licensor shall not preclude Licensee or its sublicensees from: (i) sponsoring
any professional or amateur sports event, (ii) utilizing any licensed teaching
and practice facilities to host sports events or contests, (iii) conducting golf
or other sporting events or contests as part of a golf teaching program or
clinic or golf-related corporate hospitality event; or (iv) participating in the
development of professional or amateur sports events or contests for itself or
on behalf of Licensee's marketing clients or sub-licensees where such events or
contests are utilized primarily for the purpose of promoting the goods or
services of such persons.
SPORTS MARKETING
Development and management of sports event properties and sports related
marketing and merchandising programs which do not require use of the Licensed
Marks for persons other than clients or sub-licensees of Licensee. Providing
exclusive independent sales representation for such properties and programs and
sales representation for other sports related promotions, marketing projects and
advertising media on a commission basis, including solicitation of sponsorship
and licensing opportunities, provided that the retention of this business shall
not affect the rights of Licensee to engage in merchandising and sales efforts
relating to the Licensed Goods at events or sales representation at or for
promotions, projects and media involving the Licensed Goods or any sub-licensee
or endorsement client of Licensee or to be involved in the retention of third
party sales representatives by such persons. Acting as a broker, finder or
consultant in connection with sports related transactions developed by third
parties, including Licensee, including contacting sports figures, event
promoters and sponsors regarding potential business opportunities on a
commission or fee for service basis, it however being understood that Licensee
may also engage in such activities with respect to transactions and business
contacts generated and expertise developed by Licensee so long as it does not
directly interfere with any transaction involving Licensor hereunder.
AUDIO-VISUAL MEDIA PRODUCTION, BROADCASTING AND CONSULTING SERVICES
Development, production, editing and distribution of audio visual media
programming and properties (including golf instructional programming and
properties related to Jack Nicklaus) for television, home video, film, sound
recordings, computer generated, interactive, multimedia, and all other audio
visual media, whether now known or hereafter created, as a principal and
producer on a turnkey basis and as an independent contract producer for third
party producers of such properties, and engaging in customary marketing and
licensing activities required in connection with the distribution of such
programming and properties. Providing broadcast and audio visual media
consulting, marketing and licensing services to sports event promoters and
authors/owners of other potential media properties in connection with the
development, production, marketing and/or exploitation of such properties in all
appropriate media.
Schedule "A" - Page 6
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Development and licensing of video games and related computer programs,
excluding computerized golf practice equipment and audio-visual simulators
designed for professional golf instruction or simulation of the game of golf
using actual golf swing mechanics.
PUBLISHING AND CREATIVE WORKS
The creation, development, authorship and editing of books, articles and
print media creative works involving the career and biography of Jack Nicklaus,
his teaching and game improvement methods, his editorial opinions on the game of
golf, and his personal efforts as an author or co-author. The licensing,
publishing and distribution of such works, when created, in print media for sale
to the public, and engaging in customary marketing and promotional activities
required in connection with the distribution of such works by the publishers.
The adaptation of such works for use in audiovisual works and distribution in
all other appropriate media.
RESIDENTIAL COMMUNITY DEVELOPMENT AND MARKETING
Participation as a licensor, venture partner and/or principal in the
identification, promotion, development, marketing and sale of residential
communities having a Nicklaus Design golf course as a principal amenity,
including the development, promotion and marketing of Golden Bear /trademark/
communities featuring a Golden Bear Golf Club /trademark/ on site. Handling
continuing responsibilities for existing residential community projects
associated with the Licensed Marks, including the Jack Nicklaus /trademark/
communities which feature a signature designed private golf club as their
principal amenity. Developing additional licensing and business opportunities
for utilizing the design services and goodwill of Licensor in connection with
the development and marketing of residential real estate.
GOLF EQUIPMENT BUSINESS
Participation as a principal, venture partner and/or licensor in the
design, development, production, marketing, distribution and sale of golf
equipment, which is defined as equipment used in playing the sport of golf,
including golf clubs, bags, balls, gloves, carts (other than riding golf cars),
and other accessories commonly used in connection with such equipment, other
than items of apparel, footwear (subject to Schedule "D"), and luggage.
GOLF GAME IMPROVEMENT MEMBERSHIP CLUB
The development, organization, marketing, operation and management of a
proprietary membership club targeted at an affinity group of golfers desiring to
improve their golf game through the instructional methods of Jack Nicklaus. Such
club would be promoted, and services delivered to its members, in all media
appropriate for
Schedule "A" - Page 7
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membership sales and direct response marketing now known or hereafter created,
including direct mail, broadcast and print media, and on-line computer networks.
In addition to offering membership contracts giving members access to Jack
Nicklaus instructional materials and related information, the club would provide
access to a targeted marketing group of golf oriented consumers. The club would
generate additional revenues by marketing additional Nicklaus/Golden Bear
related products and services to the membership group on a commission or direct
response basis, including Licensed Products acquired from Licensee's authorized
sources. The club would also provide its members with access to certain general
services customarily offered to club membership groups by third party vendors,
including membership events, travel, insurance, an affinity credit card, buying
services, and discount programs, provided that the club would not utilize the
services of any vendor which competes with the Licensed Goods or provides goods
or services which create a business conflict with vendors of the Licensed Goods.
The club would control its membership lists and would be able to provide such
lists to other marketers as additional means of generating revenues. It is
understood that Licensor will retain the exclusive rights to the name and
membership concept adopted for the club, provided that such exclusive right to
provide goods and services to club members or to participate in group marketing
programs directed to such members shall not restrict Licensee from using any
medium or method to market the Licensed Goods, from marketing Licensed Goods to
other club membership groups, from offering or licensing as Licensed Goods any
of the collateral member services or benefits, other than golf instructional
materials, provided by the club to its members, or from organizing or operating
any proprietary membership club which does not utilize a substantially similar
membership concept. Notwithstanding anything in the foregoing to the contrary,
Licensee shall not be prohibited from and shall be free to engage in any sales
efforts for the Licensed Goods or relating to the Transferred Businesses or any
Additional Goods through membership clubs, membership sales, direct marketing in
any media or market now known or hereafter created, including, without
limitation, broadcast media and online computer networks, provided that such
efforts do not include or are not packaged with a publicly offered golf
improvement membership club.
Schedule "A" - Page 8
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SCHEDULE C
DESCRIPTION OF LICENSED COPYRIGHTS
1. Commercial Rights in Instructional Materials:
Licensor hereby grants to Licensee the following limited commercial rights
in the instructional works authored or co-authored by Jack Nicklaus and
heretofore or hereafter copyrighted by Licensor during the term of this
Agreement.
A. The exclusive right to incorporate extracts from such works not to
exceed two (2) pages in length in labeling and advertising materials
for the Licensed Goods, subject to the requirements of Paragraph 7
of this Agreement, and the non-exclusive right to publish, broadcast
or distribute such extracts as incorporated in such labeling or
advertising materials in the development of Licensed goods; and
B. The right to incorporate portions of the copyrighted work, the title
of the work, or any of the information relating to Jack W. Nicklaus
contained in the work, as the basis for (i) the creation of a new
Licensed Mark for Licensed Goods, or (ii) the development of
memorabilia, merchandise or other Licensed Goods, provided that such
rights shall not include the right to reproduce, publicly exhibit,
perform, publish or distribute the copyrighted works themselves or
other literary, dramatic or audio-visual works derived therefrom.
2. Nicklaus-Flick Workbook (the "Workbook"):
Licensor hereby grants to License the exclusive right to reproduce the
workbook and the right to distribute the Workbook solely to customers of the
Nicklaus-Flick Golf School and golf teaching and practice facilities operated
by Licensee or its sublicensees under the Golden Bear or Jack Nicklaus names.
Licensee shall als9 have the right to edit, revise and update the Workbook
during the term of this License and to distribute subsequent editions of the
Workbook reflecting such editorial changes solely to its customers in
substantially the same format AS ITS ORIGINAL PRINTED EDITION OR IN ANY OTHER
MEDIUM NOW KNOWN OR HEREAFTER CREATED WHICH IS SUITABLE TO REPRODUCING THE TEXT
AND GRAPHICAL MATERIALS CONTAINED IN THE WORKBOOK TO SUCH CUSTOMERS FOR THEIR
INTENDED PURPOSE, provided that Licensee shall assign back to Licensor the
copyrights in any additions or revisions to the Workbook in order to maintain
Licensor's ownership of the copyright therein and all derivative works created
therefrom, subject to the licenses granted herein. Without the prior consent of
Licensor, which consent shall not be unreasonably withheld: (i) Licensee shall
not be authorized to publish or license the publication of the Workbook or any
extracts therefrom for any purpose other than distribution as authorized
hereunder, and (ii) Licensee shall not adapt the Workbook into any other format,
or make any fundamental changes in the basic instructional content of the
Workbook as originally approved by Jack Nicklaus.
Schedule "C" - Page 1
EXHIBIT 10.13
DESIGN SERVICES MARKETING AGREEMENT
DESIGN SERVICES MARKETING AGREEMENT, made as of this 6th day of June,
1996, by and between NICKLAUS DESIGN, a division of Golden Bear International,
Inc. ("GBI"), a Florida corporation having its principal place of business at
11780 U.S. Highway One, Suite 400, North Palm Beach, Florida 33408 ("Designer"),
and GOLDEN BEAR GOLF, INC., a Florida corporation having its principal place of
business at 11780 U.S. Highway One, Suite 400, North Palm Beach, Florida 33408
("Golden Bear").
W I T N E S S E T H:
WHEREAS, Designer and its predecessors have established and currently
operate a golf course design and consulting business (the "Business") providing
the personal golf course design services of Jack W. Nicklaus ("JWN"), Jack W.
Nicklaus II ("JWN II"), Steven C. Nicklaus ("SCN"), Gary T. Nicklaus ("GTN")
(collectively, the "Nicklaus Family"), and those associated designers employed
by Designer or under contract to serve on its staff (the "Design Associates");
WHEREAS, prior to the date of this Agreement, the Business has been
marketed by Designer worldwide under certain tradenames and service marks owned
by Designer, including "Jack Nicklaus Design", "Jack Nicklaus Golf Services",
"Golden Bear Design Associates" and "Nicklaus Design";
WHEREAS, as part of a corporate reorganization, Golden Bear has acquired
certain assets, intangible rights and marketing staff formerly utilized by GBI
to assist Designer in the marketing of its Business, and Golden Bear has
undertaken sole responsibility for worldwide brand development and marketing
activities which are complementary to the effective marketing of Designer's
services and the maintenance of its standing and image as a premiere golf course
design company;
WHEREAS, Designer intends to carry on the Business as a professional
design and consulting business, and desires to contract out related sales and
marketing activities to Golden Bear in order to concentrate the efforts of
Designer's staff on the design and implementation of golf course work;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions set forth herein, the parties hereto agree as
follows:
1. APPOINTMENT. Designer hereby appoints Golden Bear as its worldwide
marketing representative and sales agent for the purpose of identifying and
negotiating contracts with developers, owners and/or operators of golf
facilities and potential golf facilities (the "Clients") for Designer's golf
course design and consulting services, including contracts for the design and
redesign of golf courses and parts thereof and for such related consulting
services as may be offered from time to time by Designer in conjunction with its
Business. Designer further retains Golden Bear to provide ongoing liaison and
consulting services and administrative assistance to Designer in connection with
contracts concluded by Designer with such clients, as more particularly
described in Exhibit "A" annexed hereto (the "Contract Support Services").
Without limiting the
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foregoing, it is intended by the parties that Golden Bear will market Designer's
standard Golf Course Agreements (as the same may be modified from time to time,
the "Design Agreements") for projects which: (i) require the personal services
of JWN and/or other members of the Nicklaus Family as principal designer(s),
under design agreements which permit the utilization by Clients of the personal
endorsement of the principal designer(s), and (ii) require the personal services
of the Design Associates as the principal designer(s), under design agreements
which permit the utilization by Clients of the Nicklaus Design designation or
other identification of Designer as the source of the design work. The parties
understand that Design Agreements to be marketed under this Agreement will
normally require the Client to develop a full 18 hole championship quality golf
course, although Designer may undertake the original design of other larger or
smaller golf facilities involving multiples of 9 holes and the redesign of golf
holes as circumstances require. By this Agreement, Golden Bear will be
authorized to solicit design work from individuals, corporations and other
entities on a world-wide basis, directly or through affiliates or cooperating
sales representatives, provided that Golden Bear will not be authorized to
commit Designer to any work unless and until the terms of a formal Design
Agreement or other written contract for design work have been reviewed and
approved by Designer, which approval will not be unreasonably withheld provided
that Designer's customary terms and conditions for providing its design and
consulting services are met.
2. EXCLUSIVITY. The parties agree that Golden Bear will be Designer's
exclusive representative during the term of this Agreement, and that Designer
will be required to pay compensation to Golden Bear with respect to all Design
Agreements and other contracts for design and related consulting services
(collectively, with the Design Agreements, the "Client Contracts") concluded
during the term of this Agreement, except as otherwise provided in this
Agreement or otherwise mutually agreed by the parties in writing.
Notwithstanding the foregoing, the parties acknowledge and agree that Designer
shall be free to deal directly with respect to the marketing and negotiation of
contracts, agreements and undertakings to provide any of the following design
services (the "Protected Work"): (i) any design or design consulting services
provided for any entity controlled by, or under common control with, GBI or
Golden Bear, (ii) any design services provided as a courtesy or at Designer's
cost to modify, upgrade or redesign any existing golf course which was designed
or previously redesigned by Designer or its predecessor entities as part of the
Business, (iii) any daily fee golf facility developed by GBI, licensed by GBI to
operate utilizing GBI's trademarks on a royalty basis, or in which GBI, JWN or
other members of the immediate family of JWN acquire a controlling equity
interest (a "Daily Fee Golf Project"), or (iv) any golf facility developed as
part of, or as an amenity serving, a residential community developed by GBI,
licensed by GBI to operate utilizing GBI's trademarks on a royalty basis, or in
which GBI, JWN or other members of the immediate family of JWN acquire a
controlling equity interest (a "Residential
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Community Project"). Golden Bear shall not be required to represent Designer
exclusively, and Designer agrees that Golden Bear may participate as a marketing
representative, consultant and liaison in connection with the promotion, sale,
negotiation, contracting or performance of golf course design work on behalf of
other golf course designers during the term of this Agreement, subject to the
further covenants and conditions of this Section. Golden Bear agrees at all
times during the term of this Agreement to use its best efforts to promote the
services of Designer throughout the world, and to actively encourage all
prospective Clients to utilize the services of Designer, unless (i) Designer has
expressly rejected a Client introduced by Golden Bear under Section 4, below, or
(ii) a Client has contacted Golden Bear for the express purpose of obtaining the
services of another golf course designer. As a condition to Designer's waiver of
potential conflicts of interest which may arise out of Golden Bear's
representation of other golf course designers, Golden Bear acknowledges and
agrees that it will not utilize any confidential information entrusted to Golden
Bear by Designer in connection with this Agreement, its representation
activities under this Agreement, its corporate affiliations with Designer or the
Nicklaus Family, or its licensing relationships with Designer to further the
interests of any competing golf course designer or to imply the endorsement of
Designer or the Nicklaus Family for the services of such a designer, unless such
activities have been expressly approved by Designer in writing.
3. PARTICIPATION IN PROTECTED WORK. Golden Bear shall have the right to
participate as Designer's representative in connection with the negotiation and
management of the Client Contracts developed for any Daily Fee Golf Project or
Residential Community Project which is undertaken by Designer and its affiliates
with an Approved Client introduced by Golden Bear under Section 4, below, and to
earn compensation with respect to such activities as set forth in Section 5,
below. In the event that Designer or its affiliates require Golden Bear to be
substantially involved in the development, negotiation and/or administration of
the Client Contracts relating to a Daily Fee Golf Project or a Residential
Community Project involving a Client generated by Designer or its affiliates
directly or from another source, Golden Bear shall be entitled to receive
reasonable compensation for the services actually required by Designer and its
affiliates from Golden Bear in connection with such project, which services and
compensation shall be determined by mutual agreement of the parties on a
case-by-case basis at the time such services are requested, provided that
Representative shall in any event be entitled to receive an amount sufficient to
cover any out-of-pocket expenses incurred by Representative in connection with
its participation in any Protected Work contracted with its assistance. Designer
shall keep Golden Bear's marketing staff reasonably informed of any Protected
Work negotiated and contracted with parties other than Approved Clients through
the sole efforts of Designer and/or its affiliates during the term of this
Agreement, and shall promptly advise Golden Bear of any exclusive dealing or
territorial restrictions accepted by
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<PAGE>
Designer in conjunction with any such Protected Work in order to avoid marketing
conflicts with prospective Clients affected by such arrangements.
4. QUALIFICATION OF PROSPECTS. In order to protect the credibility of
the parties in their dealings with prospective Clients, the parties agree that
Designer will have the right to review and approve potential Clients identified
in writing by Golden Bear prior any active solicitation of Design Work from such
persons and that Golden Bear will limit its specific sales and negotiation
activities under this Agreement to those potential Clients approved by Designer
(the "Approved Clients") except as otherwise expressly requested by Designer
under Section 3, above. The parties have annexed an initial list of Approved
Clients to this Agreement as Schedule "1", which list reflects all current
prospects of Designer (other than for Protected Work), and Designer hereby
assigns to Golden Bear the right to pursue the sale and negotiation of Client
Contracts with such Approved Clients pursuant to the terms of this Agreement.
The parties further agree that future prospects identified in writing by Golden
Bear will be added to the list of Approved Clients upon approval by Designer,
which approval will not be unreasonably withheld or delayed, and that any Client
which Designer refers to Golden Bear or which contacts Designer directly or
through other parties shall automatically be deemed an Approved Client for all
purposes other than the contracting of Protected Work. Designer agrees to
provide Golden Bear and the Approved Clients with reasonable access to
Designer's key personnel and facilities in connection with the marketing of
design work to such persons under this Agreement, and Designer agrees to furnish
reasonable cooperation to Golden Bear in connection with the promotion,
marketing and negotiation of Client Contracts, subject only to Designer's
discretion as to the acceptance of particular projects offered by Clients.
5. COMPENSATION. As compensation for the services to be rendered by
Golden Bear under this Agreement, Designer shall pay Golden Bear a commission at
the rate of ten percent (10%) of the Gross Fees (as defined below) actually
received or deemed received by Designer or its affiliates from all Work in
Process (as defined in Section 13, below) and from any Client Contract hereafter
concluded by Designer with an Approved Client during the term of this Agreement.
For purposes of this Section, the "Gross Fees" shall include: (i) all fees
received by Designer, net of foreign tax withholding and discounts taken, from
an Approved Client for Designer's professional services, plus (ii) the amount of
any foreign income taxes withheld by an Approved Client from such fees, if such
withholding is actually paid and received by the taxing authorities and credited
for the benefit of Designer under applicable tax treaties. The parties agree
that Gross Fees shall not include any other taxes imposed upon the receipts or
income generated from the payments made to Designer by an Approved Client or any
payments made to Designer in addition to agreed fees for expenses advanced or
allocated to a project by Designer which an Approved Client is required to
reimburse under the Client Contract. In the event that a Client Contract or
other related
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agreement with an Approved Client negotiated by Golden Bear provides for the
payment to Designer of a participation in the revenues or profits earned from
the sale of club memberships, real estate or other rights or services offered by
such Client or its affiliates in connection with a golf course project, which
payment is in addition to Designer's customary fees for its design services, any
additional compensation actually received by Designer from such participation
shall be included in Gross Fees as, if and when received. Within fifteen (15)
days of the end of each calendar month during the term of this Agreement,
Designer will furnish Golden Bear with an accounting for all Gross Fees received
during such month, including its actual cash receipts and any additions thereto
or exclusions therefrom, and shall pay all commissions due with respect to such
Gross Fees at the time such statement is rendered. Designer shall keep and
maintain such books of account as shall be necessary to record all billings to
and collections from Approved Clients and for the accurate computation of Golden
Bear's compensation with respect thereto pursuant to the terms of this Section,
which books of account shall be open for inspection and copying upon prior
reasonable notice and during reasonable business hours by Golden Bear and its
representatives for at least twenty-four (24) months after the end of the
calendar year to which such books apply. Golden Bear shall have the right to
audit such books and records upon reasonable prior notice to Designer, which
audit shall be performed by certified public accountants to be designated by
Golden Bear at Golden Bear's sole cost and expense. In the event that Golden
Bear negotiates a Client Contract which requires Designer to accept a discounted
cash payment for its services in return for an equity interest in a golf course
project, a payment in kind, or any form of participation interest in the
revenues or earnings of a project, whether such payment is provided under the
Client Contracts, Golden Bear shall (i) receive its agreed percentage of any
participation interest or payment in kind, where such participation interest may
be taken in the name of Representative or such payment in kind divided between
the parties, or otherwise (ii) receive its agreed commissions based upon Gross
Fees received by Designer from the actual payment structure negotiated with the
Approved Client, in which case Golden Bear's guaranteed compensation will be
limited to its commissions on the actual cash payments (if any) received and any
future revenues received by Designer from such arrangements or consideration
will be reported and included in Gross Fees subject to the payments required
hereunder if, as and when actually received, provided however, that Designer's
obligation to make such payment to Golden Bear shall be continued and remain in
effect until the agreed fees are paid in full to Golden Bear notwithstanding
any prior termination of this Agreement . For purposes of determining the
Gross Fees received by Designer with respect to a payment in kind from an
Approved Client, Designer shall report the actual net resale value or net barter
credit received as and when received by Designer from any goods or services
accepted by Designer as barter, and Designer shall report the net fair market
value (as reported by Designer for income tax purposes) of any goods or services
accepted by Designer for its own use at the time such goods or services are
actually received. Notwithstanding the foregoing, the parties shall have the
right to negotiate a fixed fee from such Client Contract based upon Designer's
then standard fee schedules and terms of payment for an all cash deal, in which
case such fees shall
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<PAGE>
be paid in lieu of any commission payments which would otherwise be due under
this Section, and Designer shall not be required to account to Golden Bear for
any gains or profits realized or entitled to receive any rebate of the agreed
fees based on losses sustained as a result of Designer's acceptance of non-cash
consideration for its services.
6. TERM. The term of this Agreement shall commence on the "Effective
Date", which for purposes of this Agreement shall have the same meaning and be
deemed to occur simultaneously with the Effective Date defined in Section 4 of
that certain Agreement and Plan of Reorganization between GBI and Golden Bear of
even date herewith, and shall expire on December 31, 2006, unless renewed or
terminated as provided in this Section.
(a) Either party may terminate this Agreement in the event of a material
breach by the other party on ninety (90) days written notice specifying the
breach, unless the other party has cured the breach to the reasonable
satisfaction of the notifying party within such notice period. Golden Bear shall
have a special right to terminate this Agreement, without cause, at the end of
any calendar year, commencing with the end of calendar year 2000, by giving
written notice to Designer of its intent to terminate not later than July 1 of
the year in which such termination is to be effective. As a condition to such
termination, Golden Bear shall make reasonable efforts to continue its marketing
activities and to arrange for an orderly transition of all sales and marketing
responsibilities with respect to prospects and Approved Clients to Designer or
its designated successor representative(s) prior to the effective date of such
termination, provided that in no event will Golden Bear be required to provide
any further services to GBI or its successor, representative(s) after the
effective date of such termination.
(b) This Agreement shall terminate automatically in the event that either party
suffers or commits any of the following acts of default, unless such default is
waived in writing by the non-defaulting party upon such assurances of cure and
future performance as such non-defaulting party may reasonably request: (1)
institutes voluntary proceedings under any bankruptcy or insolvency law or other
law for the benefit of creditors or the relief of debtors, becomes the subject
of involuntary bankruptcy proceedings instituted by other parties, and such
proceedings are not dismissed within sixty (60) days of the commencement
thereof, or is adjudicated bankrupt or insolvent in any legal proceedings, (2)
makes a general composition, assignment for the benefit of its creditors, or
other common-law or statutory arrangement for compromise of its indebtedness to
general creditors, (3) is voluntarily or involuntarily dissolved, becomes the
subject of any seizure or receivership affecting its ability to perform this
Agreement, or ceases its business or materially curtails any part of the
business activities contemplated by this Agreement, or (4) voluntarily transfers
all or a substantial part of the employees, or conveys all or a substantial part
of the assets or intangible rights necessary to perform this Agreement, without
a permitted assignment of this Agreement to the transferee. Any termination
under this
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subsection shall be without prejudice to any other right or remedy which the
non-defaulting party may have as a result of such event or events, and shall not
release the defaulting party from any damage claims arising under this Agreement
as a result of such default unless otherwise agreed in writing.
(c) The expiration or earlier termination of this Agreement shall not
affect Golden Bear's right to receive commissions under Section 5, above, with
respect to any Client Contract concluded by Designer (i) prior to the effective
date of such termination, or (ii) within a period of six (6) months after the
effective date of such termination, if such contract is with any Approved Client
actively solicited by Golden Bear during the term of this Agreement.
(d) Upon the expiration of the initial term of this Agreement, Golden
Bear shall have the option to renew this Agreement for successive three (3) year
terms subject to its satisfactory performance of its responsibilities to
Designer under this Agreement through the effective date of such renewal. Any
such option shall be exercised by Golden Bear in a written notice given to
Designer not later than July 1 of the calendar year in which the initial term or
then current renewal term expires. A renewal shall be effective automatically if
due notice is given unless Designer makes a written objection to such renewal on
or before its effective date, which objection shall state in reasonable detail
the reasons for Designer's dissatisfaction with Golden Bear's performance and
the actions reasonably necessary for Golden Bear to remedy the recited problems.
The delivery of a written objection to renewal by Designer shall, if necessary,
extend the term of this Agreement for a minimum period of ninety (90) days from
the date of such notice, if such period is longer than the remaining stated term
then in force, which extension is made for the purpose of allowing the parties
to resolve the matters raised in such notice to their mutual satisfaction.
7. MARKETING SUPPORT. Designer agrees to provide Golden Bear, without
charge, with reasonable quantities of promotional material and other information
regarding Designer, its principals and the Business for the purpose of Golden
Bear's promotion of the Business and solicitation of Clients. Golden Bear and
Designer will work together to coordinate the production and dissemination of
such promotional material and the development of appropriate updated material
from time to time, which material may be developed "in house" by the parties or
by outside contractors as determined by Designer with the advice of Golden Bear.
Designer will have the final approval of all materials produced by any parties
for the purpose of promoting the Business, and will be responsible for payment
of all printing costs and third party creative fees and set up charges incurred
in development of such materials. In addition to the foregoing materials,
Designer will provide access for Golden Bear's sales staff to its professional
staff for the purpose of providing current information regarding the Business
and answering questions regarding design issues raised by Approved Clients
during the solicitation and negotiation process. In the event that Designer
requires
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Golden Bear to participate in any trade shows, or to undertake any extraordinary
expenses in connection with business entertainment or promotional activities
other than normal business travel and entertainment or activities undertaken for
the benefit of other businesses maintained by Golden Bear, Golden Bear shall be
entitled to require Designer to pay or reimburse the costs of such activities as
a condition to its participation under this Agreement.
8. CONTRACTING PROCEDURES. Throughout the term of this Agreement,
Designer shall provide Golden Bear with current price lists for standard Design
Agreements, together with schedules of all standard discounts and optional
services if separately priced. Designer shall also provide Golden Bear with its
standard forms of Design Agreement to be used in the solicitation of new golf
course design projects from Approved Clients, which forms may be provided on
computer disk or electronic format as requested by Golden Bear in order to
facilitate its communication and production of documents to prospective Clients.
Golden Bear shall not quote any other pricing or terms for a Design Agreement to
an Approved Client without the prior consent of Designer, and Golden Bear shall
not accept any counteroffer as to pricing or terms made by an Approved Client
unless communicated to and approved by Designer. Designer reserves the right to
refer any negotiations involving terms of a Client Contract affecting the scope
of work or legal responsibility of Designer to its legal counsel, and Golden
Bear's representatives will cooperate with such counsel as necessary to resolve
any such issues to the satisfaction of Designer. Designer may provide Golden
Bear with additional approved forms of Client Contracts for other design and
consulting work from time to time in its discretion, or Designer may direct
Golden Bear to solicit contracts for such work from Approved Clients for review
and approval by Designer. Golden Bear acknowledges that no agency has been
created by this Agreement, and that Client Contracts negotiated and procured by
Golden Bear or its representatives shall not be binding upon Designer or legally
effective as a contract unless and until accepted in writing by a designated
officer of Designer at its principal place of business in Florida.
9. EXPENSES. As an independent marketing representative, Golden Bear
shall be responsible for all expenses incurred by Golden Bear in the conduct of
its business, including, without limitation, payroll and commission expenses
with respect to its personnel, income and other taxes payable with respect to
commissions earned from Designer, and general overhead and administrative
expenses, except for those out-of-pocket expenses which Designer has agreed to
pay or reimburse under Sections 3 or 7, above. Designer will be responsible for
payment of any expenses incurred by Designer and its staff to support the
marketing and negotiation efforts of Golden Bear under this Agreement, and to
perform all work contracted with Approved Clients.
10. INDEMNIFICATION. Designer hereby agrees to indemnify and hold Golden
Bear harmless from and against any claims, losses or liabilities in the event
that Golden
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Bear is included as a party in any claim or governmental proceeding arising out
of or relating to (i) the failure of Designer or any Approved Client to fully
perform any Client Contract accepted by Designer, (ii) the business activities
and operations of Designerand the operation of the Business, including without
limitation, any alleged negligence, breach of contract or product liability
lawsuit against Designer, or (iii) the failure of Designer to comply with any
law or regulation applicable to the Business in any jurisdiction where such
Business is conducted by Designer. Golden Bear hereby agrees to indemnify and
hold Designer harmless from and against any claims, losses or liabilities
arising out of or relating to (i) any gross negligence or willful misconduct by
its employees or representatives in the performance of this Agreement, or (ii)
contracts or commitments for golf course design services made by Golden Bear
without the required authorization or approval of Designer. Such indemnification
shall include the indemnified party's expenses and reasonable attorneys' fees
incurred in the defense or settlement of a claim or proceeding.
11. ASSIGNMENT; SUBCONTRACTING. Golden Bear shall not assign or
sublicense any of its rights or delegate any of its duties hereunder to any
third party, other than a wholly owned subsidiary of Golden Bear, without the
prior written consent of Designer, and any purported assignment or sublicensing
by Golden Bear without such consent shall be of no force or effect.
(a) It is understood and agreed that Golden Bear may, in the normal
course of its business, subcontract with brokers, finders and other parties
having contact with Clients for the purpose of obtaining introductions and sales
assistance in the solicitation and negotiation of Design Agreements for Designer
with such Clients. Such activities shall not be deemed a prohibited assignment
of this Agreement, provided, however, that Golden Bear shall give prior written
notice to Designer of the identity, business address, and scope of the duties of
any broker, finder or representative authorized to solicit Clients and the
Approved Clients to be assigned to such person. Unless Designer makes a
reasonable objection to such a person within fifteen (15) days of such notice,
Golden Bear shall be authorized to enter into a subcontract with such person
consistent with the matters stated in such notice. Golden Bear shall be
responsible for payment of all fees and commission splits required by any
subcontractors retained by Golden Bear under this subsection from the
compensation payable by Designer under Section 5, above, unless the Designer
agrees in writing to pay such compensation at the time such subcontractor's
services are retained. Any direct payments made by Designer with respect to
Client Contracts generated with the participation of subcontractors retained by
Golden Bear under this subsection shall be deducted from the Gross Fees reported
by Designer from such Client Contracts for purposes of computing Golden Bear's
right to payment under Section 5 of this Agreement, unless otherwise expressly
agreed in the writing which evidences Designer's obligation to make such
payments.
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(b) Golden Bear acknowledges that any marketing arrangement between
Golden Bear and another marketing or sales representative shall be deemed an
assignment by Golden Bear subject to the requirements of this Section 11 if such
arrangement provides the representative with exclusivity regarding classes of
Clients or defined geographic territories, or delegates all or substantially all
of Golden Bear's obligations to market, sell and negotiate with Approved Clients
within such classes or territories, regardless of the form of such transaction.
No such arrangement shall be developed without the prior consent of Designer,
and Designer shall have the right to approve any agreements between Golden Bear
and the representative documenting such arrangement in order to assure that its
rights under this Agreement are protected.
(c) The parties acknowledge that Designer entered into those marketing
and sales arrangements described in Schedule "2" annexed hereto prior to the
Effective Date with the independent contractors identified in such Schedule, and
Representative agrees that the continuation of such arrangements after the
Effective Date will not be deemed a breach of this Agreement. From and after the
Effective Date, such persons will become approved subcontractors of Golden Bear,
and Golden Bear will assume primary responsibility for managing such
arrangements and coordinating the activities of such subcontractors with Golden
Bear's exclusive marketing and sales activities under this Agreement. Designer
shall remain solely responsible for payment of the fees and commissions of such
persons from and after the Effective Date, and Golden Bear shall not be required
to divide its agreed commissions under this Agreement to compensate such persons
with respect to their participation in Work in Process or future Client
Contracts; provided however, that the parties have agreed that Designer shall be
entitled to deduct any fees and commissions paid under this subsection from the
Gross Fees reported from such Work in Process and Client Contracts for purposes
of computing Golden Bear's right to payment under Section 5 of this Agreement.
(d) Notwithstanding the approval by Designer of an assignment under this
Section 11, no assignment by Golden Bear of its rights hereunder or delegation
of its duties shall relieve Golden Bear of any of its obligations hereunder, and
any permitted assignee of Golden Bear shall be subject to the restrictions
imposed on Golden Bear under this Section 11 with respect to any further
assignment of its rights or delegation of duties under this Agreement.
(e) Golden Bear shall have the right to subcontract design services to
Designer through Golden Bear's Paragon Golf Construction, Inc. subsidiary or any
successor entity wholly owned and controlled by Golden Bear ("Paragon"), where
such arrangement is requested by an Approved Client or deemed prudent by Golden
Bear in order to provide comprehensive design and construction services for a
golf course project. Golden Bear shall advise Designer of its intention to
subcontract design services for an Approved Client as soon as practicable, and
Golden Bear shall have the
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right to approve the proposed arrangements, which approval shall not be
unreasonably withheld or delayed. Upon approval by Designer of a subcontracting
arrangement with Paragon, the parties shall thereafter negotiate in good faith
the terms of the design subcontract and master design/build agreements required
to effect such arrangement, which shall contain in substance those provisions
regarding scope of work and liability of the Designer which are then contained
in Designer's standard form of Design Agreement. The parties acknowledge that
any subcontract between Paragon and Designer will be considered Protected Work
for purposes of this Agreement, and that Paragon will be allowed a discount of
ten percent (10%) off from Designer's normal pricing schedule in lieu of payment
by Designer of any compensation or expenses to Golden Bear with respect to such
design services under Section 5 of this Agreement. The parties agree that such
discount is intended to reflect the full value to Designer of Golden Bear's
marketing and sales efforts in the conclusion of a master design/build contract
for the benefit of Paragon.
12. OTHER BUSINESS OPPORTUNITIES. Designer acknowledges that Golden Bear
has been authorized by GBI to explore, develop and promote other business and
licensing opportunities involving Designer's principal, JWN, and related
intangible rights associated with JWN, and that business opportunities outside
of the scope of this Agreement may be presented to or developed by Golden Bear
as an result of its efforts and involvement in the promotion and solicitation of
Client Contracts for Designer's services. In the event that such opportunities
consist of endorsement or personal appearance activities involving personal
services of JWN, other than his endorsement activities as the principal of
Designer under the standard form of Design Agreement, the parties agree that the
commission rates payable and procedures applicable to personal endorsements and
appearances under that certain Personal Services Management Agreement between
GBI and Golden Bear will apply to the negotiation, consummation and management
of such activities. In the event that such opportunities involve the development
of Daily Fee Projects or Residential Community Projects, the provisions of
Section 3 of this Agreement shall govern the rights and obligations of the
parties with respect thereto, unless otherwise agreed in writing in a particular
case. In the event that such opportunities involve any other matter included
within the "Retained Businesses" of GBI (as more particularly described in
Schedule "A" of that certain Trademark License Agreement of even date herewith
between Golden Bear and GBI), Golden Bear agrees to refer such opportunities to
GBI free and clear of any claims for compensation under this Agreement, provided
that Golden Bear shall have a right of first negotiation to furnish any goods or
services available from Golden Bear or its subsidiaries which are reasonably
required in connection with the development and operation of such Retained
Businesses. All other business opportunities generated by Golden Bear in
connection with the performance of its duties under this Agreement shall be for
the sole and exclusive account of Golden Bear, and may be pursued in its sole
discretion without obligation to Designer under this Agreement
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13. RESPONSIBILITY FOR WORK IN PROCESS. In addition to its assumption of
responsibility for Designer's worldwide marketing representation under this
Agreement, Golden Bear has agreed to provide Designer with all further Contract
Support Services required by Designer in connection with those contracts and
agreements between Designer and its existing Clients for design services
identified in Schedule "3" annexed hereto (the "Work in Process"), in exchange
for receiving the agreed commissions under Section 5 above with respect to all
Gross Fees collected by Designer from such Work in Process from and after the
Effective Date. It is the intention of the parties that Golden Bear assume all
contracted responsibilities under this Agreement with respect to all Client
Contracts of Designer, except for those contracts where Designer's work has been
completed and all fees have been collected prior to the Effective Date of this
Agreement, and that all such Client Contracts have been reflected in either
Schedule "1" or Schedule "3". The parties agree that all contracts and
arrangements identified in Schedule "3" shall be deemed to be Client Contracts
for all purposes under this Agreement, and that the contracting parties
thereunder shall be deemed Approved Clients under this Agreement where the
context so requires. In the event that Designer concludes a Client Contract with
any of the Approved Clients identified in Schedule "1" prior to the Effective
Date, such event shall not affect the ongoing rights and obligations of the
parties under this Agreement with respect to such Client, it being understood
that such Client Contract shall be automatically treated as Work in Process
subject to the terms hereof from and after the date a final binding agreement is
concluded.
14. MISCELLANEOUS.
(a) CHOICE OF LAW; ARBITRATION. This agreement shall be construed and
enforced in accordance with the internal laws of the State of Florida without
regard to conflicts of laws rules which might otherwise be applied. The parties
agree, except as otherwise expressly set forth herein, that all disputes
involving the construction or enforcement of this Agreement shall be resolved by
binding arbitration before a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association ("AAA") and the
Federal and Florida Arbitration Acts. The parties agree that the location of any
such arbitration shall be at a site selected by the arbitrator in Palm Beach
County, Florida, unless otherwise agreed at the time the dispute is submitted to
the AAA. In accordance with the Federal and Florida Arbitration Acts, any party
may apply to any court of competent jurisdiction to compel arbitration in
accordance with this subsection or to enforce any award rendered by the
arbitrator in a proceeding conducted hereunder in accordance with its terms.
Unless otherwise agreed in writing by the parties, legal action to compel any
arbitration involving the construction or enforcement of this Agreement may be
brought by either party in that State or Federal Court having subject matter
jurisdiction over the cause which is located in Palm Beach County, Florida, and
each of the parties to this Agreement hereby agrees to submit to the personal
jurisdiction of such Courts regardless of the
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domicile of such party at the time such action is filed. In any arbitration
under this subsection, the arbitrator shall have the authority to award to the
prevailing party attorneys' fees and expenses in accordance with the provisions
of subsection (e) of this Section.
(b) NOTICES. Any notice to be given under this Agreement shall be made
in writing and shall be sent to the address of the intended recipient as set
forth at the beginning of this Agreement or the facsimile number set forth on
the signature page, or to such other address or facsimile number as may be
designated in a written notice meeting the requirements of this subsection.
Notices under this subsection will be effective: (i) if mailed by certified
mail, return receipt requested, three (3) days after the date the notice is
deposited, postage paid with the United States Postal Service, as shown by its
receipt for certified mail; (ii) if sent via courier service or express
delivery, upon the date of actual delivery as endorsed by the carrier or person
accepting such delivery for the recipient of such notice, or (iii) if sent via
facsimile to the telephone numbers given by the recipients of such notice, on
the date of transmission as shown by the confirmation forms printed by the
sending machine showing the recipients' station identification and verification
of error free communication, provided that confirmation copies of the notice are
sent to the recipient via certified mail or courier as provided above not later
than the day following the date of such confirmed facsimile transmission.
(c) ENTIRE AGREEMENT; AMENDMENT. This Agreement and the annexed
schedules constitute the entire agreement of the parties with respect to the
subject matter hereof. This Agreement may not be amended or modified, or any
right or obligation of a party hereunder waived or released, except in a written
document signed by the party to be charged with such amendment, modification,
waiver or release.
(d) COUNTERPARTS. This agreement may be executed simultaneously 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.
(e) EXPENSES; ATTORNEYS' FEES. Except as otherwise expressly provided in
this Agreement, each party shall be responsible for payment of its own expenses
(including, without limitation, the fees and expenses of their agents,
representatives, counsel and accountants) incidental to the preparation and
carrying out of this Agreement. In the event any a party is required to retain
the services of an attorney to enforce the rights of such party under this
Agreement, or to require a construction of this Agreement or declaration or
determination of the rights of any party hereunder, the prevailing party or
parties in any subsequent litigation involving such matter shall be entitled to
receive an award of all attorneys' fees incurred by them in connection with such
matter, including any fees incurred for review, negotiation, settlement,
preparation of pleadings, trial or appeal.
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(f) SECTION HEADINGS. The section headings are inserted for
convenience of reference only, and shall not affect the interpretation or
construction of any of the express terms of this Agreement.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals as of the date first set forth above.
GOLDEN BEAR INTERNATIONAL, INC. GOLDEN BEAR, INC.
By: By:
--------------------------- ----------------------------
Name: Name:
Title: Title:
Its Authorized Signatory Its Authorized Signatory
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Exhibit "A"
DESCRIPTION OF CONTRACT SUPPORT SERVICES
Golden Bear will provide the following ongoing liaison and consulting
services and administrative support in connection with contracts concluded by
Deisgner with its Clients:
1. Golden Bear will maintain contact with each Client's principals
during the design and construction phases of contracted golf course
projects in order to identify any contractual issues which may arise
between such Client and Designer and to assist Designer in clarifying
such issues;
2. Golden Bear will assist Designer's accounting staff in monitoring the
compliance of each Client with its contractual payment obligations, and
will provide Client contact and follow-up services to assist Designer's
staff in obtaining payment of such obligations.
3. Golden Bear will coordinate all ground breaking, Nicklaus site visits
and grand opening events with the principals of Client, as reasonably
required by Designer to meet its contractual obligations.
4. Golden Bear will review and make recommendations to Designer
regarding all Client generated marketing materials submitted for
Designer's approval where required under the terms of the Design
Agreement, and if requested by Designer, Golden Bear will communicate
directly with Clients regarding Designer's requirements for approval of
such materials.
5. Where reasonably requested by Designer, Golden Bear shall consult
with Designer and the principals of Clients with respect to other
marketing and golf course development issues which arise in connection
with Designer's performance of Design Agreements, provided that Golden
Bear shall not be required to provide any technical services or
professional advice to any Client with respect to such matters unless
specifically retained for such purposes.
Schedule A - Pge 1
EXHIBIT 10.14
PERSONAL SERVICES MANAGEMENT AGREEMENT
THIS AGREEMENT, dated as of June 6, 1996, sets forth the agreements and
understandings between GOLDEN BEAR GOLF, INC., a Florida corporation having its
principal place of business at 11780 U.S. Highway #1, Suite 400, North Palm
Beach, Florida 33408 ("Representative"), GOLDEN BEAR INTERNATIONAL, INC., a
Florida corporation having its principal place of business at 11780 U.S. Highway
#1, Suite 400, North Palm Beach, Florida 33408 ("GBI"), and JACK W. NICKLAUS
("Nicklaus"), an individual having a business address at 11780 U.S. Highway #1,
Suite 400, North Palm Beach, Florida 33408, as follows:
1. EXCLUSIVE MANAGEMENT RELATIONSHIP; TERM. By signing this Agreement,
GBI and Nicklaus hereby retain Representative as the exclusive manager and
representative of Nicklaus in connection with the development, management and
marketing of certain personal endorsement services which may be provided by
Nicklaus as a celebrity for third parties not affiliated with GBI or
Representative (the "Clients"), as more particularly described in this
Agreement. GBI and Nicklaus confirm to Representative that neither of them is
presently subject to any other management agreements, commitments or
understandings which would conflict with this Agreement, and that they will not
enter into any conflicting management relationships involving the endorsement
services of Nicklaus during the term of this Agreement (as defined in Paragraph
9, below). Representative may represent, manage or otherwise provide marketing
services similar to those contemplated by this Agreement to, any other
professional golfer during the term of this Agreement without the prior written
consent of GBI, provided however, that Representative will not utilize its
representation activities under this Agreement or any confidential information
entrusted to Representative by GBI or Nicklaus in connection therewith, or
otherwise take unfair advantage of its corporate affiliations with GBI or
Nicklaus or its licensing relationships with GBI: (i) to further the interests
of any other professional golfer in obtaining personal services contracts where
such contract opportunities would otherwise be reasonably available to Nicklaus,
or (ii) to imply the endorsement of GBI or Nicklaus for the personal services of
such a golfer, unless such activities have been expressly approved by GBI in
writing.
2. MANAGEMENT SERVICES OF GBI. The parties acknowledge that GBI will
continue to manage Nicklaus' career as a professional golfer, and will be solely
responsible for scheduling PGA Tour and Senior Tour events and other golf
tournaments on behalf of Nicklaus, for promoting his personal services as a
golfer in golf exhibitions, events and outings, and for coordinating his
scheduled activities as a professional golfer with his other business
commitments, including his services as a golf course designer to GBI's Nicklaus
Design division. GBI will also have the exclusive right as between the parties,
subject to the terms and conditions of its agreements with Nicklaus and his
affiliated parties, to provide the personal services of Nicklaus as a speaker,
author, commentator or performer in connection with personal appearances where
such services are promoted directly to the public, or to patrons of or
contributors to an event, rather than being utilized to endorse or promote the
products and services
<PAGE>
of a third party. GBI will advise Representative promptly of all personal
service commitments and other business and travel commitments undertaken by
Nicklaus individually and on behalf of GBI, and the parties will use their best
efforts to resolve any scheduling conflicts which arise as a result of Nicklaus'
various professional and personal activities. In the event the parties are
unable to resolve a conflict, Nicklaus shall make the final determination as to
his schedule after consultation with GBI and Representative.
3. PERSONAL APPEARANCES AND OTHER ENDORSEMENT SERVICES. Representative
will serve as the exclusive world-wide representative of Nicklaus in connection
with the marketing and solicitation of non-golf related personal appearances and
other personal service opportunities where Nicklaus' services are utilized by
third parties as a commercial spokesman or celebrity endorser of businesses,
products and services which are not marketed under any trademarks owned or
licensed by GBI (collectively, the "Personal Services"), including without
limitation, promotional or motivational speaking engagements with Clients,
attendance at promotional and public relations events, appearing as a model or
performer in media advertising, providing support for direct marketing
activities to consumers or businesses, and lending his personal endorsement to
products or services used or recommended by him, whether such endorsement is
made directly by Nicklaus or by attribution to Nicklaus of specific statements
approved by him. It is the intention of the parties that the Personal Services
will consist of and be limited to those activities where the personal services
of Nicklaus are retained by a Client in order to lend his prestige as a
professional golfer, businessman, golf course designer, or public figure to a
business, product or non-golf event developed or marketed by such Client, but
will exclude those marketing activities conducted personally by Nicklaus in
support of trademark and endorsement licensing activities of Representative
under license from GBI and in support of GBI in the conduct of its Retained
Businesses (as defined below). Representative shall be responsible for reviewing
all requests from prospective Clients for Personal Services received by
Representative, GBI and Nicklaus, and for recommending Personal Service
opportunities for final review and acceptance by GBI and Nicklaus in their
discretion. In reviewing such requests, Representative shall give due
consideration to the reasonable directions of GBI and Nicklaus and to Nicklaus'
availability as determined by GBI. For purposes of this Agreement, all talent
and use fees, honoraria and other compensation paid by Clients contracting for
Nicklaus' Personal Services shall be included in the calculation of Net
Revenues, provided however, that the value of any goods or services provided by
Clients to Nicklaus or members of his immediate family which they are required
to personally use or use for promotional purposes in support of his endorsement
shall be excluded from the calculation of Net Revenues.
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4. DUTIES OF REPRESENTATIVE. Unless otherwise directed by GBI,
Representative will actively work to promote Nicklaus' personal services, to
identify potential Clients, and to locate and develop Personal Services suitable
for Nicklaus' participation, according to such guidelines as may reasonably be
provided by GBI from time to time. Representative will also assist GBI in the
negotiation with Clients of those Personal Service deals which GBI authorizes
Representative to pursue on Nicklaus' behalf, provided that GBI and Nicklaus
shall have a right of final approval over any binding contract negotiated with a
Client under this Agreement (each, a "Service Contract"). Upon execution and
delivery of a Service Contract, Representative shall be responsible for
providing all management services required for GBI to fulfill such contract
except as otherwise expressly agreed by GBI or Nicklaus personally, including,
without limitation: (i) coordination of Client service requirements with
Nicklaus' schedule, and generally acting as a liaison between Nicklaus and the
Clients retaining his personal services, (ii) where required by the terms of any
Service Contract, reviewing the details of any events or promotional activities
and the scripts, storyboards and/or copy of any media advertising with Nicklaus
to secure his approval thereof, and assisting Nicklaus in communicating to the
Clients any comments or revisions requested by Nicklaus in order to secure such
approval, (iii) making all travel, set-up and practice/rehearsal arrangements
required in connection with any services to be rendered to Clients by Nicklaus,
(iv) coordinating personal supplies of endorsed products with the Clients and
any third party providers involved in customizing such products to Nicklaus'
personal specifications where appropriate, and (v) providing follow-up services
to assure Client satisfaction with services performed by Nicklaus under the
Service Contracts. The parties acknowledge that GBI and JWN are presently
parties to those contracts and arrangements with Clients described in Schedule
"1" annexed hereto (the "Existing Contracts") which provide for the provision by
JWN of personal services of the kind covered by this Agreement. Commencing on
the Effective Date (as defined below), the parties agree that GBI shall delegate
and Representative shall assume all of GBI's ongoing responsibilities for
management of the Existing Contracts under the terms of this Paragraph, and that
such Existing Contracts shall be treated thereafter as Service Contracts subject
to the terms of this Agreement except as otherwise provided herein.
5. COMPENSATION AND EXPENSES. As a fee for the services provided under
this Agreement, GBI and Nicklaus agree that Representative shall be entitled to
receive a percentage of the Net Revenues received, in any form, by GBI, Nicklaus
and/or any other parties designated by Nicklaus as compensation for Nicklaus'
services under any Service Contract which is signed or substantially negotiated
during the term of this Agreement and from any extension, renewal or
renegotiation of such Service Contract which is finalized during such term. Such
percentage shall be determined by
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mutual agreement of the parties on a case by case basis prior to the time each
Service Contract is signed, provided that the parties agree that the minimum fee
payable to Representative from each Service Contract in any event shall be
twenty percent (20%) of Net Revenues. GBI and Nicklaus further agree that
Representative shall be paid thirty percent (30%) of the Net Revenues received,
in any form, by GBI and/or any other parties designated by Nicklaus as
compensation for Nicklaus' services under the Existing Contracts and from any
extension, renewal or renegotiation of any Existing Contract which is finalized
during the term of this Agreement, provided that, for purposes of calculating
the compensation due to Representative under this Paragraph, Net Revenues shall
not include any revenues earned by GBI or Nicklaus under the Existing Contracts
prior to the Effective Date. For purposes of calculating Representative's fees
hereunder, Net Revenues will include all cash payments made by Clients to GBI
and/or parties designated by Nicklaus and the fair market value of any property
or barter credits provided by the Clients in lieu of cash compensation. Where a
Service Contract provides for payment or reimbursement of expenses in addition
to the agreed compensation, expense advances and reimbursements made to Nicklaus
or any other party assisting him in the performance of his services will not be
included in Net Revenues. Withholding taxes paid by the Clients and received by
the taxing authorities for the account of GBI or a designated payee and credited
for their benefit under applicable tax laws and treaties shall be included in
Net Revenues, provided that any other withholding or transaction taxes imposed
upon the receipts or income generated from the payments due under a Service
Contract shall be excluded from Net Revenues. In addition to its agreed fees,
Representative shall be entitled to payment or reimbursement by GBI or the
designated payee (if there has been an assignment of rights or payments as
contemplated by Section 6, below) of its out-of-pocket expenses, including
travel, express and communication charges incurred by Representative's personnel
in connection with the marketing, negotiation, consummation and management of
Service Contracts under this Agreement, to the extent such expenses are not
directly paid or reimbursed by the Client. Representative will use its best
efforts to manage such expenses within such budgetary requirements as may be
established by GBI and Nicklaus for marketing of new endorsement services and to
obtain the commitment of Clients to reimburse ongoing expenses of Representative
under any Service Contract negotiated by Representative. Unless otherwise
approved for payment by a Client, or authorized for reimbursement by GBI and
Nicklaus in an annual marketing budget, Representative will secure the prior
approval from GBI or Nicklaus of all single expense items in excess of one
thousand dollars ($1,000) and any recurring expense items expected to exceed
twelve thousand five hundred dollars ($12,500) in the aggregate in any twelve
(12) month period.
6. SUBSTITUTION OF CONTRACTING PARTIES. It is understood that Nicklaus
has, by executing this Agreement, reserved the right in his discretion to enter
into any
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Service Contract in his own name or in the name of any other entity designated
by him to provide his personal services to Clients where he determines that GBI
is not the appropriate party to provide the required services, and that GBI and
Nicklaus have further reserved the right to assign any payments due to them
under a Service Contract to such parties as may be designated by them. GBI and
Nicklaus acknowledge that Representative's rights and obligations under this
Agreement, including without limitation, its right to receive compensation as
agreed under Section 5 from GBI or the party designated by Nicklaus to enter
into or perform such Service Contract, shall not be affected by an assignment of
any Service Contract or payment right to a party other than GBI, either prior to
or after execution of such Service Contract, and that the party assigning such
payment right shall be responsible for payment to Representative of any agreed
fees to the extent such fees are not paid by the designated payee under such
Service Contract.
7. PAYMENT DIRECTIONS AND COLLECTION RIGHTS. At Representative's
request, GBI and Nicklaus agrees to direct the payment to Representative of all
compensation and expense reimbursements from Service Contracts negotiated by
Representative under Paragraph 3, above, and GBI and Nicklaus authorize
Representative to deduct its fees and reimbursable expenses under Paragraph 5
and remit the balance as directed by them as soon as practicable after
Representative's receipt of funds. Representative is further authorized by this
Agreement to endorse and deposit in its bank accounts any checks received for
such purposes, whether payable to Representative or to another designated payee
alone or jointly, and to pay the net share over to the parties entitled to
receive such funds by check or other transfer from Representative's accounts. In
the event that Representative does not directly collect funds due from Client
under any Service Contract, GBI and Nicklaus agree that: (i) payment in full to
Representative of its percentage fees under Paragraph 5 will be due not later
than thirty (30) days after receipt of funds by the designated payees, and (ii)
their right to assign payments will be limited to the net amount due to them
after payment of Representative's fees and any expense reimbursements from
Clients which are due to Representative under this Agreement.
8. THIRD PARTY PROFESSIONAL SERVICES. Representative will coordinate its
activities under this Agreement with legal, tax and/or accounting work performed
on GBI's and Nicklaus' behalf by their professional advisors. It is understood
and agreed that Representative's personnel are not licensed to provide, and will
not provide, independent public accounting or legal services on behalf of GBI in
connection with the negotiation and drafting of Service Contract and the
structuring of related transactions for liability and tax purposes. GBI and
Nicklaus shall be responsible for retaining all professional advisors as
necessary to protect their interests under any Service Contracts and for payment
of the fees and expenses of such persons from their net
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receipts under this Agreement unless otherwise agreed at the time such services
are provided. The parties acknowledge and agree that GBI and Nicklaus shall be
free to retain the services of professionals who provide similar services for
Representative in connection with marketing transactions handled by
Representative for its own account, and that the representation of GBI and
Nicklaus by such persons in connection with the Service Contracts to be
negotiated and performed under this Agreement does not create any conflict with
the interests of Representative under this Agreement as GBI's exclusive
marketing representative.
9. TERM; RENEWAL. The term of this Agreement will begin on the
"Effective Date", which for purposes of this Agreement shall have the same
meaning and be deemed to occur simultaneously with the Effective Date defined in
Section 4 of that certain Agreement and Plan of Reorganization between GBI and
Representative of even date herewith, and will end on December 31, 2006, unless
otherwise terminated or renewed as provided below.
(a) Either party may terminate this Agreement in the event of a material
breach by the other party on ninety (90) days written notice specifying the
breach, unless the other party has cured the breach to the reasonable
satisfaction of the notifying party within such notice period. Representative
shall have a special right to terminate this Agreement, without cause, at the
end of any calendar year, commencing with the end of calendar year 1997, by
giving written notice to GBI of its intent to terminate not later than July 1 of
the year in which such termination is to be effective. As a condition to such
termination, Representative shall make reasonable efforts to continue its
marketing activities and to arrange for an orderly transition of all marketing
and management responsibilities with respect to prospective Clients and Service
Contracts to GBI or its designated successor representative(s) prior to the
effective date of such termination.
(b) This Agreement shall terminate automatically in the event that
either party suffers or commits any of the following acts of default, unless
such default is waived in writing by the non-defaulting party upon such
assurances of cure and future performance as such non-defaulting party may
reasonably request: (1) institutes voluntary proceedings under any bankruptcy or
insolvency law or other law for the benefit of creditors or the relief of
debtors, becomes the subject of involuntary bankruptcy proceedings instituted by
other parties, and such proceedings are not dismissed within sixty (60) days of
the commencement thereof, or is adjudicated bankrupt or insolvent in any legal
proceedings, (2) makes a general composition, assignment for the benefit of its
creditors, or other common-law or statutory arrangement for compromise of its
indebtedness to general creditors, (3) is voluntarily or involuntarily
dissolved, becomes the subject of any seizure or receivership affecting
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its ability to perform this Agreement, or ceases its business or materially
curtails any part of the business activities contemplated by this Agreement, or
(4) voluntarily transfers all or a substantial part of the employees, or conveys
all or a substantial part of the assets or intangible rights necessary to
perform this Agreement, without a permitted assignment of this Agreement to the
transferee. Any termination under this subparagraph shall be without prejudice
to any other right or remedy which the non-defaulting party may have as a result
of such event or events, and shall not release the defaulting party from any
damage claims arising under this Agreement as a result of such default unless
otherwise agreed in writing.
(c) The expiration or earlier termination of this Agreement shall not
affect Representative's right to receive fees under Paragraph 5, above, with
respect to any Service Contract concluded by GBI (i) prior to the effective date
of such termination, or (ii) within a period of six (6) months after the
effective date of such termination, if such contract is with any Client actively
solicited by Representative during the term of this Agreement. Representative's
rights to payment with respect to such Service Contracts shall continue at the
agreed rate until the expiration or earlier termination of the contract term in
force on the effective date of the termination of this Agreement or on the date
of execution of such Service Contract, whichever last occurs, and shall not
apply to any renewal or extension of such Service Contract other than by
exercise by a Client of an option to renew on terms contained in such Service
Contract or otherwise negotiated by Representative on behalf of GBI prior to the
expiration of this Agreement. GBI and Nicklaus shall be free to renegotiate any
Service Contract subject to this Agreement prior to the termination of
Representative's rights hereunder, provided that Representative's rights to
payment shall continue only as to the original compensation levels and stated
term of such Service Contract, and shall not apply to any additional
compensation or term extensions obtained by GBI or Nicklaus in such
renegotiation.
(d) Upon the expiration of the initial term of this Agreement,
Representative shall have the option to renew this Agreement for successive
three (3) year terms subject to its satisfactory performance of its
responsibilities to GBI under this Agreement through the effective date of such
renewal. Any such option shall be exercised by Representative in a written
notice given to GBI not later than July 1 of the calendar year in which the
initial term or then current renewal term expires. A renewal shall be effective
automatically if due notice is given unless GBI makes a written objection to
such renewal on or before its effective date, which objection shall state in
reasonable detail the reasons for GBI's dissatisfaction with Representative's
performance and the actions reasonably necessary for Representative to remedy
the recited problems. The delivery of a written objection to renewal by GBI
shall, if necessary, extend the term of this Agreement for a minimum period of
ninety (90) days from the date of such notice, if such period is longer than the
remaining stated term
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then in force, which extension is made for the purpose of allowing the parties
to resolve the matters raised in such notice to their mutual satisfaction.
10. ASSIGNMENT; SUBCONTRACTING. Representative shall not assign any of
its rights or delegate any of its duties hereunder to any third party, other
than a wholly owned subsidiary of Representative, without the prior written
consent of Nicklaus as the principal of GBI, and any purported assignment or
sublicensing by Representative without such consent shall be of no force or
effect.
(a) It is understood and agreed that Representative may, in the normal
course of its business, subcontract with brokers, finders and other parties
having contact with Clients for the purpose of obtaining introductions and sales
assistance in the solicitation and negotiation of Service Contracts with such
Clients. Such activities shall not be deemed a prohibited assignment of this
Agreement, provided, however, that Representative shall give prior written
notice to GBI of the identity, business address, and scope of the duties of any
broker, finder or representative authorized to solicit Clients and the Clients
to be assigned to such person. Unless GBI makes a reasonable objection to such a
person within fifteen (15) days of such notice, Representative shall be
authorized to enter into a subcontract with such person consistent with the
matters stated in such notice.
(b) Notwithstanding the ability of Representative to deal with brokers
or finders as authorized under subparagraph (a), above, Representative
acknowledges that any representation arrangement between Representative and
another marketing or sales representative shall be deemed an assignment by
Representative subject to the requirements of this Paragraph 10 if such
arrangement provides the representative with exclusivity regarding classes of
Clients or defined geographic territories, or delegates all or substantially all
of Representative's obligations to market, sell and negotiate with Clients or
provide management services within such classes or territories, regardless of
the form of such transaction. No such arrangement shall be developed without the
prior consent of GBI, and GBI shall have the right to approve any agreements
between Representative and the representative documenting such arrangement in
order to assure that its rights under this Agreement are protected.
(c) Notwithstanding the approval by GBI of an assignment under
this Paragraph 10, no assignment by Representative of its rights
hereunder or delegation of its duties shall relieve Representative of any of its
obligations hereunder, and any permitted assignee of Representative shall be
subject to the restrictions imposed on Representative under this Paragraph 11
with respect to any further assignment of its rights or delegation of duties
under this Agreement.
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11. OTHER BUSINESS OPPORTUNITIES. GBI acknowledges that Representative
has been authorized by GBI to explore, develop and promote other business and
licensing opportunities involving GBI and related intangible rights associated
with Nicklaus, and that business opportunities may be presented to or developed
by Representative as an result of its efforts and involvement in the promotion
and solicitation of Service Contracts for Nicklaus' services. In the event that
such opportunities consist of design services offered by GBI's Nicklaus Design
division or Nicklaus' personal services and his endorsement as a designer of
golf courses of a finished golf course, a daily fee golf project, or a
residential real estate project, the parties agree that the commission rates
payable and procedures applicable to design and related consulting agreements
under that certain Design Services Marketing Agreement between GBI and
Representative will apply to the negotiation, consummation and management of
such activities. In the event that such opportunities involve any matter
included within the those Retained Businesses of GBI (as more particularly
described in Schedule "A" of that certain Trademark License Agreement of even
date herewith between Golden Bear and GBI), Representative agrees to refer such
opportunities to GBI free and clear of any claims for compensation under this
Agreement, provided that Representative shall have a right of first negotiation
to furnish any goods or services available from Representative, its corporate
affiliates, or its licensees which are reasonably required in connection with
the development and operation of such Retained Business. All other business
opportunities generated by Representative in connection with the performance of
its duties under this Agreement shall be for the sole and exclusive account of
Representative, and may be pursued in its sole discretion without obligation to
GBI under this Agreement subject only to those restrictions which may apply
under another written agreement between the parties.
12. MISCELLANEOUS.
(a) CHOICE OF LAW; ARBITRATION. This agreement shall be construed and
enforced in accordance with the internal laws of the State of Florida without
regard to conflicts of laws rules which might otherwise be applied. The parties
agree, except as otherwise expressly set forth herein, that all disputes
involving the construction or enforcement of this Agreement shall be resolved by
binding arbitration before a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association ("AAA") and the
Federal and Florida Arbitration Acts. The parties agree that the location of any
such arbitration shall be at a site selected by the arbitrator in Palm Beach
County, Florida, unless otherwise agreed at the time the dispute is submitted to
the AAA. In accordance with the Federal and Florida Arbitration Acts, any party
may apply to any court of competent jurisdiction to compel arbitration in
accordance with this subparagraph or to enforce any award rendered by the
arbitrator in a proceeding conducted hereunder in accordance with its terms.
Unless otherwise
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agreed in writing by the parties, legal action to compel any arbitration
involving the construction or enforcement of this Agreement may be brought by
either party in that State or Federal Court having subject matter jurisdiction
over the cause which is located in Palm Beach County, Florida, and each of the
parties to this Agreement hereby agrees to submit to the personal jurisdiction
of such Courts regardless of the domicile of such party at the time such action
is filed. In any arbitration under this subsection, the arbitrator shall have
the authority to award to the prevailing party attorneys' fees and expenses in
accordance with the provisions of subparagraph (e) of this Section.
(b) NOTICES. Any notice to be given under this Agreement shall be made
in writing and shall be sent to the address of the intended recipient as set
forth at the beginning of this Agreement or the facsimile number set forth on
the signature page, or to such other address or facsimile number as may be
designated in a written notice meeting the requirements of this subsection.
Notices under this subparagraph will be effective: (i) if mailed by certified
mail, return receipt requested, three (3) days after the date the notice is
deposited, postage paid with the United States Postal Service, as shown by its
receipt for certified mail; (ii) if sent via courier service or express
delivery, upon the date of actual delivery as endorsed by the carrier or person
accepting such delivery for the recipient of such notice, or (iii) if sent via
facsimile to the telephone numbers given by the recipients of such notice, on
the date of transmission as shown by the confirmation forms printed by the
sending machine showing the recipients' station identification and verification
of error free communication, provided that confirmation copies of the notice are
sent to the recipient via certified mail or courier as provided above not later
than the day following the date of such confirmed facsimile transmission.
(c) ENTIRE AGREEMENT; AMENDMENT. This Agreement and the annexed
schedules constitute the entire agreement of the parties with respect to the
subject matter hereof. This Agreement may not be amended or modified, or any
right or obligation of a party hereunder waived or released, except in a written
document signed by the party to be charged with such amendment, modification,
waiver or release.
(d) COUNTERPARTS. This agreement may be executed simultaneously 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.
(e) EXPENSES; ATTORNEYS' FEES. Except as otherwise expressly provided in
this Agreement, each party shall be responsible for payment of its own expenses
(including, without limitation, the fees and expenses of their agents,
representatives, counsel and accountants) incidental to the preparation and
carrying out of this Agreement. In the event any party is required to retain the
services of an attorney to
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enforce the rights of such party under this Agreement, or to require a
construction of this Agreement or declaration or determination of the rights of
any party hereunder, the prevailing party or parties in any subsequent
litigation involving such matter shall be entitled to receive an award of all
attorneys' fees incurred by them in connection with such matter, including any
fees incurred for review, negotiation, settlement, preparation of pleadings,
trial or appeal.
(f) PARAGRAPH HEADINGS. The paragraph headings are inserted
for convenience of reference only, and shall not affect the interpretation or
construction of any of the express terms of this Agreement.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals as of the date first set forth above.
GOLDEN BEAR INTERNATIONAL, INC. GOLDEN BEAR GOLF, INC.
By: By:
--------------------------- -----------------------------
Name: Name:
Title: Title:
Its Authorized Signatory Its Authorized Signatory
Facsimile Number: (561) 626-4104 Facsimile Number: (561) 626-4104
-----------------------------
Jack W. Nicklaus
Facsimile Number: (561) 626-4104
<PAGE>
SCHEDULE "1"
EXISTING CONTRACTS
1. Trademark License Agreement between GBI and Dunlop Slazenger
Corporation, dated as of September 1, 1994.
2. Endorsement Agreement between GBI and Gulfstream Aerospace
Corporation dated as of September 1, 1994.
3. Personal Services and Promotional Agreement between GBI and
Young & Rubicam Detroit on behalf of its client, the
Lincoln-Mercury Division of_____________________
the Ford Motor Company, dated April 13, 1993,
commencing June 1, ______________________ 1993.
4. Endorsement Agreement between GBI and Rolex Watches dated
March 16, 1995.
EXHIBIT 10.15
MARKETING CONSULTING AND COOPERATION AGREEMENT
MARKETING CONSULTING AND COOPERATION AGREEMENT, made as of this 6th day of
June, 1996, by and between GOLDEN BEAR INTERNATIONAL, INC. , a Florida
corporation having its principal place of business at 11780 U.S. Highway
One, Suite 400, North Palm Beach, Florida 33408 ("GBI"), GOLDEN BEAR GOLF,
INC., a Florida corporation having its principal place of business at 11780
U.S. Highway One, Suite 400, North Palm Beach, Florida 33408 ("Golden
Bear"), and Nicklaus Golf EQUIPMENT COMPANY, L.C., a Florida limited
liability company having its principal place of business at 7850 Byron
Drive, West Palm Beach, Florida 33404 ("Nicklaus Golf").
W I T N E S S E T H:
WHEREAS, Nicklaus Golf was established on September 17, 1992, by GBI and N48
Corporation ("N48") as its only members for the purpose of establishing a
golf equipment manufacturing and distribution business (the "Equipment
Business") utilizing the name and expertise of GBI's principal, Jack
Nicklaus ("JWN"), on a worldwide basis, except as otherwise excluded by the
terms of then existing agreements between GBI and third parties;
WHEREAS, upon inception of Nicklaus Golf, GBI and Nicklaus Golf entered into
that certain Trademark License, Consulting and Technical Services Agreement
(the "NGEC License"), which authorized Nicklaus Golf to utilize certain
trademarks, tradenames and publicity rights relating to JWN and GBI (the
"Golf Endorsement") in connection with the identification, marketing,
advertising, promotion and sale of golf equipment and required GBI to
furnish certain ongoing consulting and marketing services in connection with
the development of the Nicklaus /trademark/ brand and use of other
intangible rights developed by GBI and its predecessors in interest;
WHEREAS, as part of a corporate reorganization, Golden Bear has acquired certain
businesses and assets (the "Transferred Businesses") and marketing staff
formerly utilized by GBI to consult with Nicklaus Golf in connection with
the marketing of the Equipment Business, and pursuant to a Trademark License
Agreement of even date herewith (the "GB License"), Golden Bear is
exercising exclusive license rights and has undertaken worldwide brand
development and marketing responsibilities with respect to the Transferred
Businesses, which activities are complementary to GBI's golf equipment
licensing activities under the NGEC License;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions set forth herein, the parties hereto agree
as follows:
1. RETENTION OF GOLDEN BEAR AS CONSULTANT. By executing this Agreement,
GBI hereby agrees to retain Golden Bear, and Golden Bear hereby agrees to
provide its services, as a marketing consultant to GBI in connection with
GBI's participation in the Equipment Business, which services shall include
providing GBI with advice regarding the imapact of marketing considerations
on the operation and management of Nicklaus Golf and furnishing reasonable
cooperation, information and advice to
<PAGE>
Nicklaus Golf as a licensee of GBI in support of the marketing of its golf
equipment products on a worldwide basis. By executing this Agreement,
Nicklaus Golf acknowledges and accepts the delegation of duties set forth
below, subject to the terms and conditions of this Agreement. The parties
acknowledge and agree that such delegation of duties and acceptance thereof
by Nicklaus Golf shall not affect the ultimate responsibilities of GBI for
its performance to N48 as a member of Nicklaus Golf under the Promoters' and
Operating Agreement of Nicklaus Golf and to Nicklaus Golf as licensor under
the NGEC License. The parties further agree that Golden Bear shall not, by
virtue of this Agreement or otherwise, acquire any legal or beneficial
ownership interest in or claim against Nicklaus Golf or the trademarks
licensed under NGEC License, or succeed to any right or obligation of GBI
under the Promoters' and Operating Agreement of Nicklaus Golf, including,
without limitation, any right or obligation to participate in the
management, control or direction of the Equipment Business.
2. CONSULTING SERVICES OF GOLDEN BEAR. From and after the
Effective Date (as defined below), Golden Bear shall provide the following
marketing consulting services to GBI in support of the Equipment Business:
(a) Golden Bear shall render to GBI marketing related advisory and
consulting services as reasonably requested by GBI with respect to all
marketing aspects of the Equipment Business and Nicklaus Golf's product
lines, and will provide such information, advice and analysis with respect
to the relationships between the Transferred Businesses and the Equipment
Business as GBI's marketing staff have historically provided to its
Executive Committee and its designated management representatives in
Nicklaus Golf prior to the Effective Date.
(b) Golden Bear shall also consult with GBI as requested regarding those
marketing considerations involved in the development and implementation of
ongoing marketing, advertising, promotion and merchandizing programs for the
Equipment Business, and will assist GBI in determining and implementing
appropriate methods and formats for using the Golf Endorsement as part of a
global brand strategy and marketing program involving GBI and its various
licensees.
(c) Golden Bear shall assist GBI in the review and evaluation of
marketing, advertising, promotion and merchandizing programs developed or
implemented by Nicklaus Golf staff for the Equipment Business, including
review and evaluation of the concepts of programs proposed by Nicklaus Golf
and review and evaluation of the implementation and effectiveness of
programs implemented by Nicklaus Golf.
The consulting services required under this Section shall be rendered to JWN
as the principal of GBI and to such additional employees and authorized
representatives of GBI as GBI may designate in writing generally or with
respect to particular matters.
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Golden Bear acknowledges that Nicklaus Golf is an intended beneficiary of
the consulting services being rendered by Golden Bear to GBI as a member of
Nicklaus Golf and that GBI shall be authorized to provide Nicklaus Golf
staff and management with all information, advice and other ideas generated
by Golden Bear as a consultant under this Agreement without additional
charge or restriction. If requested by GBI, Golden Bear further agrees to
make its staff available at its principal offices during reasonable times to
discuss matters arising under this Agreement with Nicklaus Golf staff.
3. REVIEW AND APPROVAL OF MARKETING MATERIALS. Golden Bear acknowledges
that, under the NGEC License, Nicklaus Golf has the exclusive right to
produce and use advertising and promotional materials which incorporate the
personal services of JWN and the Golf Endorsement to market golf equipment
utilizing the trademarks licensed by GBI which meets GBI's quality
standards, and to promote the business interests of Nicklaus Golf generally,
including Nicklaus Golf's public image and licensed business activities,
subject to the rights of GBI to approve such advertising and promotional
materials under Paragraph 8 of the NGEC License. The parties understand and
acknowledge that, as a result of Golden Bear's succession as licensee under
the GB License to the Transferred Businesses formerly conducted by GBI under
trademarks and endorsement rights related to the Golf Endorsement, the
active participation of Golden Bear as GBI's marketing consultant in the
review of advertising and promotional materials will promote their mutual
interests in the maintenance of a uniform brand image for all products
offered or licensed by GBI. In order to protect the mutual interests of the
parties in such participation, GBI shall promptly furnish the following to
Golden Bear staff: (i) copies of all proposed advertising and promotional
materials, concepts and other information provided to GBI under Paragraph 8
of the NGEC License, and (ii) any other marketing materials, concepts or
information relating to the Golf Endorsement submitted by Nicklaus Golf
staff to GBI for its review, comment or approval. Golden Bear staff shall
review any materials furnished to them under this Section within a
reasonable time based upon the circumstances and will communicate any
comments upon or objections to such materials to JWN and/or those other
persons designated by GBI to review such materials and communicate its
response to Nicklaus Golf. In any event, Golden Bear will use its best
efforts to respond to GBI prior to the expiration of any time limitations
imposed upon objections from GBI under the terms of Paragraph 8 of the NGEC
License or the terms of any other agreements between GBI and Nicklaus Golf
governing GBI's response to any other submission. GBI agrees to act in good
faith to address with Nicklaus Golf any matters raised by Golden Bear staff
which may affect the goodwill of GBI's trademarks or endorsement rights, and
to communicate the results of its discussions with Nicklaus Golf to Golden
Bear's staff.
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4. COORDINATION WITH OTHER EQUIPMENT LICENSEES. Golden Bear agrees that,
in addition to its marketing consulting responsibilities with respect to
Nicklaus Golf, Golden Bear shall provide such consulting services as GBI may
reasonably request in order for GBI to coordinate the marketing activities
of the Equipment Business with the activities of MacGregor Golf (Japan),
Ltd. ("MGJ"), as the exclusive golf equipment licensee of GBI in Japan and
South Korea. In addition to providing such marketing advice to GBI, Golden
Bear will perform all of the services for GBI required under Sections 2 and
3 of this Agreement to the extent such services may be applicable to the
relationship between GBI and MGJ. Golden Bear shall also assist GBI in
evaluating the activities of Nicklaus Golf and MGJ as GBI's licensees in the
golf equipment field and in providing consulting assistance as may
reasonably be requested by GBI in connection with MGJ's adaptation of global
brand strategies to the domestic Japanese market for golf equipment.
5. COMPENSATION AND EXPENSES. In consideration of the services to be
provided and obligations to be undertaken by Golden Bear on behalf of GBI
under this Agreement, GBI agrees to pay Golden Bear a consulting fee in the
amount of one hundred thousand dollars ($100,000) per year, which fee will
be payable equal monthly installments due in advance on the Effective Date
and on the same day of each consecutive month during the term of this
Agreement thereafter. In addition to such consulting fee, GBI shall pay or
reimburse Golden Bear for reasonable out-of-pocket expenses incurred by
Golden Bear in connection with the services rendered under this Agreement,
including, without limitation, travel and lodging expenses incurred in
connection with services rendered at places other than the principal offices
of GBI or Nicklaus Golf, provided that Golden Bear will cooperate with GBI
to obtain the prior approval and direct payment or reimbursement of such
expenses by Nicklaus Golf where applicable under subparagraph 4(e) of the
NGEC License. Any such reimbursement shall be made as soon as practicable
after submission by Golden Bear of vouchers or reports of such expenditures
in such reasonable detail as GBI may require. It is understood that travel
and entertainment expenses incurred by Golden Bear in order to manage and
promote the Transferred Businesses or other profit making activities
licensed by GBI shall be for the sole and exclusive account of Golden Bear,
and that the conduct by Golden Bear personnel of incidental marketing
support functions under this Agreement during such activities shall not
entitle Golden Bear to seek reimbursement of or contribution to such
expenses from GBI unless GBI has expressly agreed in writing to pay a stated
amount or allocated share of such expenses prior to the date such services
are rendered. The parties acknowledge that the services of Golden Bear are
provided for the sole benefit of GBI as a member of and licensor to Nicklaus
Golf, and that Golden Bear shall not claim or assert any right to payment
against Nicklaus Golf under this Agreement, including any right to direct
payment of expenses payable or reimbursible to GBI under subparagraph 4(e)
of the
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NGEC License, unless Nicklaus Golf has agreed in writing to pay such
expenses directly at the request of GBI.
6. TERM. The term of this Agreement shall commence on the "Effective
Date", which for purposes of this Agreement shall have the same meaning and
be deemed to occur simultaneously with the Effective Date defined in Section
4 of that certain Agreement and Plan of Reorganization between GBI and
Golden Bear of even date herewith, and shall expire on December 31, 2006,
unless renewed or terminated as provided in this Section.
(a) Either of GBI or Golden Bear may terminate this Agreement in the
event of a material breach by the other party on ninety (90) days written
notice specifying the breach, unless the other party has cured the breach to
the reasonable satisfaction of the notifying party within such notice
period. Golden Bear shall have a special right to terminate this Agreement,
(i) upon ninety (90) days written notice to GBI, if the time and staff
commitments required of Golden Bear under this Agreement are materially
increased at any time during the term of this Agreement, or (ii) without
cause, at the end of any calendar year, commencing with the end of calendar
year 1997, by giving written notice to GBI of its intent to terminate not
later than July 1 of the year in which such termination is to be effective.
As a condition to any such termination, Golden Bear shall make reasonable
efforts to continue its marketing support activities and to arrange for an
orderly transition of all responsibilities under this Agreement to GBI or
its designated successor consultant(s) prior to the effective date of such
termination, provided that in no event will Golden Bear be required to
provide any further services to GBI or its successor consultant(s) after the
effective date of such termination.
(b) This Agreement shall terminate automatically in the event of: (i) a
termination of either the NGEC License or the GB License, which termination
shall be effective on the effective date of the termination of either such
license unless waived in writing by mutual agreement of the parties, (ii) in
the event of the withdrawal of GBI as a member of NGEC, or any
reorganization of NGEC which materially affects GBI's participation in the
management of NGEC, unless GBI and Golden Bear mutually agree to continue
the performance of this Agreement after such event, or (ii) in the event the
marketing support obligations of GBI to NGEC which form the subject matter
of this Agreement are terminated. This Agreement shall also terminate
automatically in the event that any party suffers or commits any of the
following acts of default, unless such default is waived in writing by the
non-defaulting parties upon such assurances of cure and future performance
as such non-defaulting parties may reasonably request: (1) institutes
voluntary proceedings under any bankruptcy or insolvency law or other law
for the benefit of creditors or the relief of debtors, becomes the subject
of involuntary bankruptcy proceedings instituted by other parties, and such
proceedings are not dismissed within sixty (60) days of the commencement
thereof, or is adjudicated
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<PAGE>
bankrupt or insolvent in any legal proceedings, (2) makes a general
composition, assignment for the benefit of its creditors, or other
common-law or statutory arrangement for compromise of its indebtedness to
general creditors, (3) is voluntarily or involuntarily dissolved, becomes
the subject of any seizure or receivership affecting its ability to perform
this Agreement, or ceases its business or materially curtails any part of
the business activities contemplated by this Agreement, or (4) voluntarily
transfers all or a substantial part of the employees, or conveys all or a
substantial part of the assets or intangible rights necessary to perform
this Agreement, without a permitted assignment of this Agreement to the
transferee. Any termination under this subsection shall be without prejudice
to any other right or remedy which the non-defaulting party may have as a
result of such event or events, and shall not release the defaulting party
from any damage claims arising under this Agreement as a result of such
default unless otherwise agreed in writing.
(c) Upon the expiration of the initial term of this Agreement, Golden
Bear shall have the option to renew this Agreement for successive three (3)
year terms subject to its satisfactory performance of its responsibilities
to GBI under this Agreement through the effective date of such renewal. Any
such option shall be exercised by Golden Bear in a written notice given to
GBI not later than July 1 of the calendar year in which the initial term or
then current renewal term expires. A renewal shall be effective
automatically if due notice is given unless GBI makes a written objection to
such renewal on or before its effective date, which objection shall state in
reasonable detail the reasons for GBI's dissatisfaction with Golden Bear's
performance and the actions reasonably necessary for Golden Bear to remedy
the recited problems. The delivery of a written objection to renewal by GBI
shall, if necessary, extend the term of this Agreement for a minimum period
of ninety (90) days from the date of such notice, if such period is longer
than the remaining stated term then in force, which extension is made for
the purpose of allowing the parties to resolve the matters raised in such
notice to their mutual satisfaction.
(d) Copies of any termination notices or other communications sent by
GBI or Golden Bear under this Section shall be promptly delivered to
Nicklaus Golf, and GBI and Golden Bear acknowledge and understand that
neither the existence of a dispute between them nor the termination of this
Agreement by action of either of them shall affect GBI's obligations to
provide marketing support to Nicklaus Golf as required by the NGEC License.
7. INDEMNIFICATION. GBI hereby agrees to indemnify and hold Golden Bear
harmless from and against any claims, losses or liabilities in the event
that Golden Bear is included as a party in any claim or governmental
proceeding arising out of (i) the failure of Nicklaus Golf or GBI to fully
perform any commitments made to third parties in connection with the
marketing activities subject to this Agreement, (ii) the business
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<PAGE>
activities and operations of Nicklaus Golf, including without limitation,
products liability claims from purchasers of Nicklaus Golf's licensed
products, or (iii) the failure of Nicklaus Golf to comply with any law or
regulation applicable to its business in any jurisdiction where such
business is conducted by Nicklaus Golf or its sublicensees. Golden Bear
hereby agrees to indemnify and hold GBI harmless from and against any
claims, losses or liabilities arising out of (i) any gross negligence or
misconduct by its employees or representatives in the performance of this
Agreement, or (ii) contracts or commitments for marketing and promotional
activities made by Golden Bear without the required authorization or
approval of Nicklaus Golf or GBI. Such indemnification shall include the
indemnified party's expenses and reasonable attorneys' fees incurred in the
defense or settlement of a claim or proceeding.
8. ASSIGNMENT; SUBCONTRACTING. Golden Bear shall not assign any of its
rights or delegate any of its duties hereunder to any third party, other
than a wholly owned subsidiary of Golden Bear, without the prior written
consent of GBI, and any purported assignment or subcontracting by Golden
Bear without such consent shall be of no force or effect. Prior to giving
its consent to any proposed assignment or subcontract, GBI shall review the
terms of such proposal with Nicklaus Golf, and GBI shall have the right to
withhold its consent to any proposed arrangement if Nicklaus Golf makes any
reasonable objection thereto unless such objection is resolved by Golden
Bear prior to the time such consent is required.
9. CONFIDENTIALITY. Golden Bear hereby agrees to maintain the
confidentiality of all non-public information regarding the Equipment
Business, regardless of the source of such information, including without
limitation, information relating to the following matters: (i) the
relationships of Nicklaus Golf with particular customers and suppliers,
including the identity and position of individual contacts, capabilities,
and pricing structures, (ii) manufacturing and marketing information
regarding the Nicklaus Golf's products and potential product lines,
including existing, pending and potential product offerings, market studies,
sales results and projections, and financial matters relating to the
production and distribution of products, and (iii) research and development
projects and new product, sales or marketing concepts developed by or for
Nicklaus Golf. Golden Bear agrees that, without the prior express written
consent of GBI and Nicklaus Golf, Golden Bear will not release, publish,
communicate or otherwise disclose any of such information to any party
(other than GBI and Nicklaus Golf management and staff), or make any use of
such information for any purpose other than performing Golden Bear's
consulting and marketing support services under this Agreement. Nicklaus
Golf and GBI hereby agree to maintain the confidentiality of all non-public
information regarding the Transferred Businesses and any other businesses
developed by Golden Bear under the GB License, regardless of the source of
such information, including without limitation, information relating to the
following
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<PAGE>
matters: (i) the relationships of Golden Bear and its licensees with
particular customers and suppliers, including the identity and position of
individual contacts, capabilities, and pricing structures, (ii)
manufacturing and marketing information regarding the products and services
and potential product and service lines to be offered under the GB License,
including existing, pending and potential offerings, market studies, sales
results and projections, and financial matters relating to the licensing,
production and distribution of products and services, and (iii) research and
development projects and new product, service, sales or marketing concepts
developed by or for Golden Bear. GBI and Nicklaus Golf agree that, without
the prior express written consent of Golden Bear, Nicklaus Golf and GBI will
not release, publish, communicate or otherwise disclose any of such
information to any party (other than GBI and Golden Bear management and
staff), or make any use of such information for any purpose other than
determining and implementing marketing strategies for the Equipment Business
under this Agreement. In the event that any party believes that it is
required in response to any form of legal process or under applicable
securities laws or regulations to make a public disclosure of any
information subject to this Section, such party shall provide the other
parties with prompt written notice of the matters which such party believes
that it is required to disclose and the reasons why such disclosures are
required by law or regulation, and the parties shall cooperate with each
other as reasonably necessary to permit such party to discharge its legal
obligations.
10. OWNERSHIP OF INTANGIBLE RIGHTS. Golden Bear agrees not to assert any
intellectual property rights adverse to GBI or Nicklaus Golf in any
information or concepts for marketing golf equipment which come into
existence as a result of this Agreement, and that GBI and Nicklaus Golf
shall be entitled to exploit any work or creation developed by Golden Bear
in connection with the marketing of golf equipment as a consultant to GBI in
the performance of Golden Bear's services hereunder without payment of any
compensation in any form other than the fees payable under Section 5, above.
In that regard, GBI or Nicklaus Golf will be entitled own and exercise as
provided under the GB License and NGEC License all copyrights, trademarks
and servicemarks, by assignment or otherwise, which are developed for and/or
promoted by the parties with respect to Golf Equipment under this Agreement,
and Golden Bear expressly agrees to make no use of any such rights other
than uses in fulfillment of Golden Bear's obligations under this Agreement
or other uses permitted by the GB License and in connection with Golden
Bear's business. The parties acknowledge that GBI's use of, and its further
authorization of Nicklaus Golf to use, creative ideas and marketing concepts
furnished to GBI by Golden Bear under this Agreement shall not give GBI
exclusive intellectual property rights in such ideas or concepts, and that
GBI shall not seek to limit or prevent the use of such ideas or concepts by
Golden Bear in the development of other similar marketing and promotional
projects within the scope of the GB License and in connection with Golden
Bear's business for parties other than
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<PAGE>
Nicklaus Golf or GBI. Notwithstanding the retention of any intellectual
property rights in such ideas and concepts by Golden Bear as against third
parties, Golden Bear agrees that such ideas and concepts shall remain
available for use by GBI and Nicklaus Golf after termination of this
Agreement, without royalty or other additional compensation to Golden Bear,
for use in the continuation of then existing programs or independent
development of similar marketing programs by or for GBI or Nicklaus Golf.
11. MISCELLANEOUS.
(a) CHOICE OF LAW; ARBITRATION. This agreement shall be construed and
enforced in accordance with the internal laws of the State of Florida
without regard to conflicts of laws rules which might otherwise be applied.
The parties agree, except as otherwise expressly set forth herein, that all
disputes involving the construction or enforcement of this Agreement shall
be resolved by binding arbitration before a single arbitrator pursuant to
the Commercial Arbitration Rules of the American Arbitration Association
("AAA") and the Federal and Florida Arbitration Acts. The parties agree that
the location of any such arbitration shall be at a site selected by the
arbitrator in Palm Beach County, Florida, unless otherwise agreed at the
time the dispute is submitted to the AAA. In accordance with the Federal and
Florida Arbitration Acts, any party may apply to any court of competent
jurisdiction to compel arbitration in accordance with this subsection or to
enforce any award rendered by the arbitrator in a proceeding conducted
hereunder in accordance with its terms. Unless otherwise agreed in writing
by the parties, legal action to compel any arbitration involving the
construction or enforcement of this Agreement may be brought by either party
in that State or Federal Court having subject matter jurisdiction over the
cause which is located in Palm Beach County, Florida, and each of the
parties to this Agreement hereby agrees to submit to the personal
jurisdiction of such Courts regardless of the domicile of such party at the
time such action is filed. In any arbitration under this subsection, the
arbitrator shall have the authority to award to the prevailing party
attorneys' fees and expenses in accordance with the provisions of subsection
(e) of this Section.
(b) RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARIES. GBI and
Nicklaus Golf acknowledge that the status of Golden Bear under this
Agreement shall be as an independent subcontractor to GBI, and that Golden
Bear shall exercise its independent judgment and discretion in the
performance of all work assigned under this Agreement. Except for Nicklaus
Golf's rights to utilize the work product and intellectual property
delivered by Golden Bear to GBI under this Agreement as expressly set forth
above, no party shall be deemed a third party beneficiary of this Agreement,
and Golden Bear and Nicklaus Golf acknowledge and agree that neither of them
shall have any independent right of action against the other as a result of
their status as parties to this Agreement
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<PAGE>
or any acts undertaken by either of them in connection with the performance
of this Agreement.
(c) NOTICES. Any notice to be given under this Agreement shall be made
in writing and shall be sent to the address of the intended recipient as set
forth at the beginning of this Agreement or the facsimile number set forth
on the signature page, or to such other address or facsimile number as may
be designated in a written notice meeting the requirements of this
subsection. Notices under this subsection will be effective: (i) if mailed
by certified mail, return receipt requested, three (3) days after the date
the notice is deposited, postage paid with the United States Postal Service,
as shown by its receipt for certified mail; (ii) if sent via courier service
or express delivery, upon the date of actual delivery as endorsed by the
carrier or person accepting such delivery for the recipient of such notice,
or (iii) if sent via facsimile to the telephone numbers given by the
recipients of such notice, on the date of transmission as shown by the
confirmation forms printed by the sending machine showing the recipients'
station identification and verification of error free communication,
provided that confirmation copies of the notice are sent to the recipient
via certified mail or courier as provided above not later than the day
following the date of such confirmed facsimile transmission.
(d) ENTIRE AGREEMENT; AMENDMENT. This Agreement and the annexed
schedules constitute the entire agreement of the parties with respect to the
subject matter hereof. This Agreement may not be amended or modified, or any
right or obligation of a party hereunder waived or released, except in a
written document signed by the party to be charged with such amendment,
modification, waiver or release.
(e) COUNTERPARTS. This agreement may be executed simultaneously 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.
(f) EXPENSES; ATTORNEYS' FEES. Except as otherwise expressly provided in
this Agreement, each party shall be responsible for payment of its own
expenses (including, without limitation, the fees and expenses of their
agents, representatives, counsel and accountants) incidental to the
preparation and carrying out of this Agreement. In the event any a party is
required to retain the services of an attorney to enforce the rights of such
party under this Agreement, or to require a construction of this Agreement
or declaration or determination of the rights of any party hereunder, the
prevailing party or parties in any subsequent litigation involving such
matter shall be entitled to receive an award of all attorneys' fees incurred
by them in connection with such matter, including any fees incurred for
review, negotiation, settlement, preparation of pleadings, trial or appeal.
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<PAGE>
(f) SECTION HEADINGS. The section headings are inserted for
convenience of reference only, and shall not affect the interpretation or
construction of any of the express terms of this Agreement.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals as of the date first set forth above.
GOLDEN BEAR INTERNATIONAL, INC. GOLDEN BEAR GOLF, INC.
By: By:
--------------------------- -----------------------------
Name: Name:
Title: Title:
Its Authorized Signatory Its Authorized Signatory
NICKLAUS GOLF EQUIPMENT COMPANY, L.C.
By:
--------------------------------
Name:
Title:
Its Authorized Signatory
-11-
EXHIBIT 10.16
OFFICE STAFF AND EQUIPMENT SERVICE AGREEMENT
THIS AGREEMENT, dated as of_________________ , 1996, is entered into by
and between GOLDEN BEAR INTERNATIONAL, INC. ("GBI"), a Florida corporation,
having its principal place of business at 11780 U.S. Highway One, North Palm
Beach, Florida 33408, and GOLDEN BEAR, INC. ("Golden Bear"), a Florida
corporation having its principal place of business at 11780 U.S. Highway One,
North Palm Beach, Florida 33408, and sets forth the agreements and
understandings of the parties as follows:
SECTION 1: SUBJECT MATTER OF AGREEMENT
1.1 USE OF OFFICE SPACE. Prior to the date of this Agreement, the
businesses operated by the parties to this Agreement were operated by GBI as a
single entity out of the headquarters of GBI located on the third, fourth and
fifth floors of that office building known as Three Golden Bear Plaza, at the
street address set forth above (the "Premises"). By separate Sublease Agreement
of even date herewith, GBI has agreed to grant to Golden Bear the right to use a
portion of the the Premises for Golden Bear's main corporate headquarters,
including certain space allocated for the sole and exclusive use of Golden Bear
(the "GB Space") and other common tenant areas to be shared by the parties as
more particularly described in the Sublease Agreement (the "Common Areas"). In
order to better facilitate the use of the Premises by the parties under the
Sublease Agreement, and to provide for the sharing of office and business
services and equipment formerly provided by GBI which would be inconvenient or
wasteful for the parties to duplicate, GBI and GB have agreed to enter into the
arrangements described below in connection with their respective business
operations at the Premises.
1.2 USE OF COMMON AREAS AND FACILITIES. In conjunction with the Sublease
Agreement, GBI has authorized Golden Bear to make non-exclusive use of the
Common Areas, subject to the requirement that the parties mutually cooperate in
the scheduling and use of the Common Areas in order to satisfy both parties'
business objectives and needs. GBI agrees that the following Common Areas shall
be open at all reasonable times to use by the staff, business invitees, and
guests of both parties, and that GBI shall not interfere with ingress and egress
to the common areas by Golden Bear and such persons: main reception area (during
normal business hours), entry ways and hallways, kitchens and break rooms, and
rest rooms. The remaining Common Areas, consisting of those conference and
meeting rooms identified in Exhibit "A" annexed hereto, shall be available to
the parties by prior reservation with the parties designated in such Exhibit, or
on a "space available" basis if no prior conflicting reservation has been made.
GBI reserves the right to limit use of meeting rooms to parties above a certain
number or to utilize other reasonable criteria mutually adopted by the parties
where necessary in order to relieve congestion or limit scheduling conflicts
between the parties.
<PAGE>
1.3 JOINT OWNERSHIP OF USE OF PHONE EQUIPMENT. In order to minimize the
expense of separate telephone systems, the parties have agreed that they will
jointly own the In addition to the use of the Common Areas and related
facilities, GBI hereby grants to Golden Bear during the term of the Sublease
Agreement the right to utilize the GBI telephone system for the Premises and the
necessary components thereof, including (i) the non-exclusive use of the PBX
switching unit, local line access, main switchboard, voice mail system, and
interior wiring connections in the Premises, and (ii) the exclusive right to
utilize office telephone instruments appropriate to the GB Space, such as desk
and wall phones, handsets and phone jacks. Each party Golden Bear will establish
its own long distance phone service and be responsible for payment of all
charges and expense in establishing and using long distance phone service.
1.4 JOINT OWNERSHIP OF USE OF OTHER EQUIPMENT. In addition to the phone
system, the parties have agreed that they will jointly own certain office and
business equipment owned by Golden Bear as more particularly described in
Exhibit "B" annexed hereto, including without limitation, Golden Bear's central
facsimile machines, photocopying machines, and computer network. Golden Bear
will establish Rreasonable security precautions will to be developed and
mutually approved by the parties to assure that access to confidential business
data of each party is restricted to personnel directly employed by such party
and to such other parties as may be authorized by such party to have access to
such data. On or before the effective date of this Agreement, the parties will
conduct a physical inventory of all equipment to be shared by the parties and
will identify those items to be jointly owned, in which case Exhibit "B" will be
amended to reflect any additions or deletions to the equipment to be jointly
owned.
1.3 USE OF GOLDEN BEAR EMPLOYEES. In recognition of the fact that
certain headquarters staff employees formerly employed by GBI are still
necessary for the normal conduct of both parties' business operations, and to
obviate the need for GBI to incur the expense of hiring personnel who would
duplicate and conflict with the job performance of personnel permanently
transferred to Golden Bear's staff, Golden Bear shall provide to Golden Bear the
services of those employees whose job descriptions are set forth in Exhibit "C"
annexed hereto, who have been initially identified by the parties who can
effectively serve the needs of both organizations and facilitate the joint use
of the Common Areas. GBI acknowledges that it has retained in its employ all
other staff required by GBI in order to continue its business in the normal
course, that GBI will retain such additional professional and management
consulting services as it may require in connection with such business, and that
Golden Bear shall have no responsibility to provide GBI with the services of any
individual or entity except as set forth in Exhibit "C" or in another written
agreement between the parties. In the event that circumstances after the
effective date of this Agreement obviate the need to share the services of any
identified service require the parties to share use of other service
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<PAGE>
personnel employed by Golden Bear in order to continue their operations in the
normal course, Exhibit "C" will be amendment by a written document signed by
both parties to confirm such change.
SECTION 2: FEES AND EXPENSES
2.1 EMPLOYEE EXPENSE. As compensation to Golden Bear for the use of
those staff members identified in Exhibit "C", GBI shall pay to Golden Bear an
initial monthly fee of ________________ dollars ($__________ ) (the "Management
Fee"), which represents fifty percent (50%) of the current costs to Golden Bear
of employing the identified staff. The Management Fee will be paid in advance,
on or before the first day of the month, and shall be nonrefundable. The parties
will review their staffing requirements under this Agreement annually during the
last thirty (30) days of Golden Bear's fiscal year and at any other time when
Exhibit "C' is amended to determine the projected staffing costs and
requirements for the coming year, at which time the Management Fee may be
adjusted by mutual agreement of the parties to reflect cost increases and
changes in staffing requirements.
2.2 TELEPHONE EXPENSE. As compensation to GBI for the use of its
telephone equipment by Golden Bear, In the event any portion of the telephone
system requires repair or replacement, the parties will share equally in such
cost and any additional components purchased will be owned jointly. In addition,
Golden Bear shall pay GBI an initial monthly fee of_______________ dollars
($ _____________ ) (the "Phone Rental"), which represents Golden Bear's pro rata
share of GBI's current costs of providing local telephone service. and
maintenance to dedicated and shared phone equipment in the premises. In addition
to the Phone Rental, Golden Bear shall be responsible for payment of any
equipment costs or service charges incurred by GBI in order to provide
additional phone services to Golden Bear or to make changes in the phone service
as currently provided to the Premises., including the changes of GBI's PBX
system provider and the local phone company charges. The Phone Rental will be
paid in advance, on or before the first day of the month, and shall be
nonrefundable. The parties will review their telephone service requirements
under this Agreement annually during the last thirty (30) days of GBI's
maintenance contract year and at any other time when changes are made in phone
service to determine the projected recurring costs of such changes, at which
time the Phone Rental may be adjusted by mutual agreement of the parties to
reflect cost increases and changes in service requirements.
2.3 OTHER EQUIPMENT EXPENSE AND RIGHTS UPON SALE. If any of the items
identified on Exhibit "B" or any additional equipment jointly acquired, requires
repair or replacement, the parties will share equally in the cost of such repair
or replacement and any additional equipment purchased will be owned jointly. The
parties will mutually agree on additional equipment needs and purchases. Upon
the sale or disposition of
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<PAGE>
any Equipment, the parties will divide equally the proceeds from any such sale
of disposition. In the event of a proposed sale or disposition, either party
shall have the right to purchase such equipment at the then current book value
of such equipment on the books of the party wishing to purchase the equipment.
In purchasing any new equipment to be jointly owned, the parties will execute
such instruments and documents as necessary to reflect joint ownership.
2.4 OTHER OFFICE EXPENSES. Each party shall be solely responsible for
the costs of acquisition, installation, supplies and maintenance for all
equipment dedicated solely for its use, and for payment of all staff not subject
to sharing under this Agreement. Except as otherwise provided in this Agreement
or in the Sublease Agreement, GBI shall be responsible for payment of the costs
of providing the Premises to the parties, including all rental and pass-through
charges imposed by the landlord. In the event of any material change in the
business of the parties which causes a material increase or decrease in its
utilization of the Premises, the parties shall have the right to renegotiate
this Agreement and the Sublease Agreement to more accurately reflect the usage
of the Premises to be made by the parties and apportion the costs to be shared
by the parties based upon such usage.
SECTION 3 - TERM AND TERMINATION
3.1 TERM OF THE AGREEMENT. The term of this Agreement shall commence on
the date hereof and shall terminate upon the expiration or earlier termination
of the Sublease Agreement, unless sooner terminated as provided in this Section
3.
3.2 TERMINATION OF AGREEMENT. - Either party may terminate this
Agreement upon ninety (90) days written notice to the other of a material breach
of this Agreement, and the failure of the breaching party to cure such default.
This Agreement shall terminate in the event proceedings are instituted by either
party under any bankruptcy or insolvency law or other law for the benefit of
creditors or the relief of debtors; or involuntary bankruptcy proceedings are
commenced against either party and such proceedings result in the entry of an
order adjudicating such party as bankrupt or such proceedings are not dismissed
within one hundred eighty (180) days after the commencement thereof; or either
party shall make an assignment for the benefit of its creditors; or either party
shall be adjudicated bankrupt or insolvent, unless the other party agrees
otherwise.
3.3 DUTIES UPON TERMINATION OR EXPIRATION. Upon the termination or
expiration of this Agreement, each party shall cease making use of any shared
staff or equipment, and shall make all necessary arrangements to provide
replacement staff or equipment
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<PAGE>
for its own account. All shared equipment shall be left in place (or delivered
as directed by the party owning such equipment) in working condition, reasonable
wear and tear excepted, and shall not be removed or damaged by the party losing
the right to use such equipment under this Agreement.
SECTION 4 - RELATIONSHIP OF PARTIES
4.1 INDEPENDENT CONTRACTORS. Nothing herein is intended nor shall be
deemed to create a joint venture, partnership, or agency relationship among GBI
and Golden Bear, or to impose any liability or responsibility on either party
for the debts, losses or liabilities of the other. Neither party shall have the
power to commit the other to any matter, cause or thing whatsoever without the
prior express written consent of the party to be charged. It is understood that
each party is to perform its obligations and exercise its rights hereunder as an
independent contractor with discretion and control as to the manner and timing
of its performance.
4.2 INDEMNIFICATION; INSURANCE. Each party agrees to indemnify the
other, its directors, officers or agents, for and hold them harmless from and
against any and all obligations, losses, costs, expenses, damages, liabilities
or claims, including attorneys' fees, arising out of claims asserted by third
parties which are related in any way to the other party's business or
operations, except as otherwise provided in a written agreement between the
parties regarding specific business relationships undertaken by them. In the
event a party is joined as a defendant in any legal action instituted against
the other as a result of any matter requiring indemnity hereunder, the
indemnitor shall undertake to defend the indemnitee against any such asserted
liability and shall pay all reasonable costs or defense related thereto,
including, but not limited to, the cost and expense of independent counsel, if
any, retained by the indemnitee, and shall indemnify and hold such parties
harmless in the event of a settlement or adverse judgment against either of
them. Each party shall obtain general liability and property and casualty
insurance necessary to adequately fulfill each parties obligation hereunder,
including obligations of indemnity.
SECTION 5 - GENERAL PROVISIONS
5.1 ASSIGNMENT. Neither party may assign any of its rights
under this Agreement without the consent of the other party.
5.2 NON WAIVER. The failure of a party to demand strict performance of
or compliance with this Agreement or any provisions thereof at any time or under
any set of circumstances shall not be deemed a waiver by such party of its right
to demand
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<PAGE>
such performance and compliance at any other time or under any other
circumstances. This Agreement may not be changed, modified, or terminated
orally, but only by a written instrument of change, modification, or termination
executed by the party against whom enforcement of any change, modification, or
termination is sought.
5.3 SEVERABILITY. If any term or provision of this Agreement or the
application thereof to any particular person or circumstances shall to any
extent be invalid or unenforceable then such invalidity or unenforceability
shall not impair the remainder of this Agreement or the application of such term
or provisions to persons or circumstances other than those as to which it is
held invalid or unenforceable and each other term and provision of this
Agreement, not affected thereby, shall be valid and enforceable to the fullest
extent permitted by law.
5.4 GOVERNING LAW. All questions pertaining to the validity,
construction, execution and performance of this Agreement shall be construed in
accordance with and governed by the internal laws of the State of Florida
without regard to principles of conflicts of law which might otherwise be
applied.
5.5 NOTICES. All notices given or made under or pursuant to this
Agreement shall be in writing and delivered or sent to the address shown in the
first page hereof or to such other address or facsimile number as the recipient
may have notified the sender and shall be deemed to be duly given or made: (a)
if by letter, three (3) days after posting, and in proving the same it shall be
sufficient to show that the envelope containing the same was duly addressed,
stamped, and posted by certified mail; or (b) If by hand, when delivered to the
attention of the Chief Executive Officer of the recipient at the Premises.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
as of the date first set forth above.
GOLDEN BEAR INTERNATIONAL, INC. GOLDEN BEAR, INC.
By: By:
--------------------------- -----------------------------
Name. Name:
Title: Title:
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EXHIBIT 10.17
DRAFT
July 9, 1996
SUBLEASE AND SHARING AGREEMENT
THIS AGREEMENT, dated as of , 1996, between GOLDEN BEAR
INTERNATIONAL, INC., a Florida corporation (the "Sublessor"), and GOLDEN BEAR,
INC., a Florida corporation (the "Sublessee"), recites and provides:
RECITALS:
A. By "Lease Agreement" as amended (the "Lease Agreement"),
between GOLDEN BEAR PLAZA ASSOCIATES as lessor (the "Lessor"), and the
Sublessor, as lessee, the Lessor leased to the Sublessor certain office space
(the "Premises") in the building (the "Building") located in the City of Palm
Beach Gardens, Florida, with a street address of Three Golden Bear Plaza, 11780
U.S. Highway One, North Palm Beach, Florida 33408.
B. The Sublessor has agreed to lease to the Sublessee and
the Sublessee has agreed to lease from the Sublessor that portion of the
Premises (the "Subleased Premises") described on composite Exhibit "A" hereto on
the terms and conditions hereinafter set forth.
SUBLEASE AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual
covenants contained herein, the Sublessor and the Sublessee hereby agree as
follows:
1. DESCRIPTION OF SUBLEASED PREMISES. The Sublessor hereby
demises and subleases to the Sublessee and the Sublessee hereby rents and
subleases from the Sublessor, on the terms and conditions hereinafter set forth,
the Subleased Premises containing
<PAGE>
approximately 17,760 square feet and designated on Exhibit "A".
2. TERM.
(a) The term of this Sublease Agreement shall
commence on , and shall end at midnight on , unless sooner terminated or
extended on the terms and conditions set forth herein.
(b) Sublessee shall have no right to extend this
Sublease unless Sublessor and Sublessee have entered into a written agreement
therefor prior to expiration of the term hereof.
3. RENT. During the term of this Sublease Agreement
the Sublessee covenants and agrees to pay to the Sublessor the amounts set forth
on Exhibit "B" hereto; such amounts to be payable to Sublessor on the first day
of each month for the succeeding month. All such Rent is based on a straight
pass through of rental charges to Sublessor under the Lease. The first rental
payment due shall be on . Sublessee shall also pay all Florida sales tax due on
all rental payments hereunder.
4. INCORPORATION OF LEASE AGREEMENT. The Lease Agreement is
incorporated herein by this reference thereto with the same force and effect as
if it were fully set forth herein and, except as otherwise herein specifically
provided, nothing herein shall in any way be interpreted or construed as to
result in an amendment or modification of the Lease Agreement. A true, correct,
and complete copy of the Lease Agreement is set forth on Exhibit "C" hereto. For
purposes hereof, the Lease Agreement includes the "FHS Sublease" attached here
as Exhibit C-1. The parties under the FHS Sublease Agreement intend to amend the
Lease to include the subleased premises under the FHS Sublease.
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<PAGE>
5. COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE LEASE AGREEMENT.
All rights, powers, and privileges granted to the Sublessee under this Sublease
Agreement are subject to the provisions of the Lease Agreement. The Sublessee
covenants and agrees to comply with all of the provisions of the Lease Agreement
and to perform all of the obligations of the Sublessor under the Lease Agreement
pertaining to the Subleased Premises, except that the Sublessor shall pay rent
to the Lessor according to the terms and conditions of the Lease Agreement and
the Sublessee shall pay rent to the Sublessor in such amounts and on such dates
as provided in this Sublease Agreement.
6. SUBLESSEE'S COVENANTS.
(a) The Sublessee covenants and agrees that it will occupy the
Subleased Premises in accordance with the Lease Agreement and it will not suffer
to be done nor omit to do any act which may result in a violation of or default
under any of the terms and conditions of the Lease Agreement or render the
Sublessor liable for any charge or expense thereunder (except for any matters
approved by Sublessor in advance, which approval shall not be unreasonably
whithheld if Sublesee has made appropriate security arrangements satisfactory to
Sublessor).
(b) The Sublessee further covenants and agrees to indemnify the
Sublessor against and hold it harmless from any loss, liability, damage or
expense (including attorney's fees) arising out of, by reason of, or resulting
from (i) the Sublessee's failure to perform or observe any of the terms and
conditions of this Sublease Agreement or the Lease Agreement or (ii) the
Sublessee's use or occupancy of the Subleased Premises; excepting, however,
claims, actions, damages, liability and expense arising out of the willful or
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<PAGE>
negligent act or failure of Sublessor, its agents, servants, employees, or
contractors.
(c) At the commencement hereof, and throughout the term hereof, the
Sublesee shall maintain appropriate liability and casualty insurance in the
amounts set forth in the Lease Agreement and deliver appropriate evidence
thereof to Sublessor upon request.
7. ADDITIONAL RENT. Notwithstanding any other provisions in
this Sublease Agreement to the contrary, the Sublessee shall pay as additional
rent to the Sublessor, upon demand, (i) any and all sums which the Sublessor may
be required to pay to the Lessor arising out of, by reason of, or resulting from
the Sublessee's failure to perform or observe one or more of the terms and
conditions of this Sublease Agreement and (ii) those amounts set forth in
Sections 3, 14 and 15 hereof and (iii) those amounts set forth in the portion of
this Agreement entitled "Sharing Agreement."
8. ACCEPTANCE. Sublessee agrees to accept the Subleased
Premises in an "as is" condition and the Sublessee acknowledges that no
representations with respect to the condition thereof or any other matters have
been made to it by the Sublessor, or its representatives.
9. ALTERATIONS.
(a) Sublessee shall make no alterations or additions to the
Subleased Premises without the prior written consent of the Sublessor.
(b) All matters with respect to any such alteration
oradditions and the construction thereof shall be approved by Sublessor, and, if
applicable, the Lessor. Any approved alterations or additions shall be
constructed at the sole cost and expense of the
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<PAGE>
Sublessee. Sublessee shall allow no mechanics liens to be filed in connection
therewith and shall indemnify and hold Sublessor harmless from any loss, cost,
damage or expense whatsoever in connection therewith. All such improvements
shall be constructed in a good and workmanlike manner and in compliance with all
applicable laws and building standards.
(c) All alterations, additions, and improvements shall
become the property of the Sublessor upon the completion thereof.
10. RIGHT TO ENFORCE. The Sublessee agrees that the
Sublessor shall not be required to perform any of the covenants and obligations
of the Lessor under the Lease Agreement, or to expend any money for the
preservation or repair of the Subleased Premises, and, insofar as any of the
covenants or obligations of the Sublessor hereunder are required to be performed
under the Lease Agreement by the Lessor, the Sublessee shall rely on and look
solely to the Lessor under the Lease Agreement for the performance thereof. If
the Lessor shall default in the performance of any of its obligations under the
Lease Agreement, and if within a reasonable period after the receipt of written
notice from the Sublessee, the Sublessor fails to enforce such rights, then the
Sublessee shall have the right, in the name of the Sublessee or, if necessary,
in the name of the Sublessor, to enforce any such rights. Such enforcement shall
be at the sole expense of the Sublessee and the Sublessee shall indemnify the
Sublessor against all costs and expenses, including, but not limited to,
reasonable counsel fees, which may be incurred by the Sublessor in connection
with any claim, action, or proceeding undertaken by the Sublessee.
11. DEFAULT. In the event that the Sublessee defaults in the
payment of any monetary amount due hereunder and such default continues for a
period of three (3) days
-5-
<PAGE>
after receipt of written notice or in the event the Sublessee fails to comply
with any other term or condition of this Agreement or of the Lease Agreement,
and such default continues for a period of ten (10) days after receipt of
written notice thereof, then in either event the Sublessor shall have the right
to: (a) declare this Sublease Agreement terminated and receive as damages all
rentals which would have become due hereunder less the proceeds from reletting
the Subleased Premises, if any, plus reasonable expenses in connection
therewith; and (b) pursue all other remedies available to it at law or in
equity.
12. RIGHT OF ENTRY. Sublessor shall have the right to enter
the Subleased Premises during reasonable business hours to examine the same, or
to make such repairs or alterations as they deem necessary, or to exhibit the
Subleased Premises to prospective purchasers or lessees.
13. NOTICES. All notices from the Sublessee to the
Sublessor required or permitted by any provision of this Sublease Agreement
shall be in writing and delivered by hand or sent by registered or certified
mail and addressed as follows:
Golden Bear International, Inc.
11780 U.S. Highway One
Suite 400
North Palm Beach, Florida 33408
Attention: Jack W. Nicklaus, Chairman
All notices from the Sublessor to the Sublessee required or
permitted by any provision of this Sublease Agreement shall be in writing and
delivered by hand or sent by registered or certified mail and addressed as
follows:
Golden Bear, Inc.
Three Golden Bear Plaza
11780 U.S. Highway One
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<PAGE>
Suite
North Palm Beach, FL 33408
Attention: The President
The effective date of the notice shall be the date of
delivery if by hand or the second business day after the date on which the
notice is mailed. Either party may, at any time, or from time to time, designate
in writing a substitute address set forth above, and thereafter notices shall be
directed to such substitute address.
14. PARKING. As long as this Agreement is in effect,
Sublessee shall have the right to utilize ( ) underground parking spaces
designated by Sublessor. Additional rent for these spaces shall be payable as
set forth in Exhibit "B" hereto.
15. UTILITIES. Sublessor shall pay directly all utilities
(e.g. electricity, telephone) for the Subleased Premises, if separately metered.
If not, all such charges shall constitute additional rent and shall be
calculated based on "Tenant's Percentage" of 51.72%. Sublessee shall pay all
charges for air-conditioning utilized in accordance with the provisions of the
Lease Agreement, in addition to normal business hours. In addition, Sublessee
shall pay all other expenses for the Subleased Premises, including real estate
taxes and other common area maintenance charges as required by the Lease
Agreement, which sums shall be based on Tenant's Percentage and shall be due and
payable monthly with the rent hereunder.
16. TERMINATION. Upon the termination hereof, the
Sublessee shall deliver the Subleased Premises to the Sublessor in broom clean
condition and shall remove all of its personal property thereform. In addition,
at the request of Sublessor, Sublessee shall restore the Subleased Premises to
the condition existing prior to any alterations or additions.
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<PAGE>
SHARING AGREEMENT
1. USE OF FACILITIES. Sublessor shall allow Sublessee to use
those common areas and facilities located in the Premises as more particularly
identified in Exhibit "A" hereto (the "Common Areas"), which consist of
reception areas, conference rooms, break rooms, and storage areas.
2. CHARGES. The cost of all of such facilities shall be
based on the allocations set forth in Exhibit "A". Base charges for the Common
Areas are set forth on Exhibit "B". Additional charges shall be due and payable,
as applicible, on a "cost basis". "Cost basis" shall mean ordinary and
reasonable pro-rata charges based on Sublessor's costs and shall be pro rated
based on the ratio between the area of the Subleased Premises and the entire
area of the Premises.
MISCELLANEOUS
1. ASSIGNMENT AND SUBLETTING. The covenants, conditions, and
agreements contained in this Agreement shall bind and inure to the benefit of
the Sublessor and the Sublessee and their respective heirs, devises, personal
representatives, successors, and assigns, subject to the provisions of the Lease
Agreement; provided, however, that the Sublessee shall not sublet or assign this
Sublease, nor any interest therein, without the prior written consent of the
Sublessor and Lessor, which consent may be withheld in accordance with the
provisions of the Lease Agreement. Notwithstanding any authorized subletting or
assignment, the Sublessee shall remain liable to the Sublessor in accordance
with the terms, covenants, and conditions of this Agreement. Consent by the
Sublessor and the Lessor to
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<PAGE>
any assignment or subletting shall not constitute a waiver of the necessity for
such consent to any subsequent assignment or subletting.
2. AMENDMENT AND MODIFICATION. This Agreement shall not be
amended or modified and no waiver of any provision hereof shall be effective
unless set forth in written instrument executed by the Sublessor and the
Sublessee with the same formalities as herein.
3. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the Sublessor and the Sublessee relative to the subject matter
hereof and supersedes all prior and contemporaneous negotiations,
understandings, and agreements, written or oral, between the parties.
4. LITIGATION. In any litigation in connection herewith:
(a) the prevailing party shall be entitled to court costs and reasonable
attorneys' fees and (b) both parties waive the right to trial by jury.
5. BROKERAGE. Sublessor and Sublessee each warrant and
represent to the other that, each such party has not dealt with any broker in
connection with this transaction. In the event of any claim(s) by any other
person or firm for a finder's fee, professional fee or brokerage commission,
Sublessor and Sublessee hereby agree to indemnify and hold the other parties
harmless from any and all losses, damages, costs and expenses, including, but
not limited to, attorneys' fees and related disbursements through trial and on
appeal, incurred in connection with such claim(s) if the warranties stated above
are proven to be false.
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<PAGE>
WITNESS the following signatures and seals:
WITNESSES: GOLDEN BEAR INTERNATIONAL,INC.
By:
- ---------------------------- ------------------------------
(SEAL) Name:
------------------------------
Title:
- ---------------------------- ------------------------------
GOLDEN BEAR, INC.
By:
- --------------------------- ------------------------------
(SEAL)
Name:
- -------------------------- ------------------------------
Title:
------------------------------
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<PAGE>
SCHEDULE OF EXHIBITS
Exhibit "A" Designation of Subleased Premises
(approximately 17,760 square feet)
Exhibit "B" Rent
Exhibit "C" Lease Agreement
Exhibit "C-1" FHS Sublease
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<PAGE>
EXHIBIT "B"
Base Rent
Annual Base Rent $ /year (until ) $ /month
plus
sales tax; subject to
adjustment as set forth in the
Lease
Real estate taxes, insurance $ /year
and c.a.m. $ /month, plus
sales tax; subject to
adjustment as set forth in
the Lease
Underground Parking Spaces
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EXHIBIT 10.18
GROUND LEASE
BY AND BETWEEN
MCDAIN GOLF CENTER OF MONROEVILLE ("Lessor")
AND
GOLDEN BEAR GOLF CENTERS, INC. ("Lessee")
Dated as of this ______day of _____________, 1996
<PAGE>
GROUND LEASE
INDEX
PAGE
ARTICLE 1. PREMISES.................................................... 1
ARTICLE 2. TERM........................................................ 2
ARTICLE 3. RENT........................................................ 2
ARTICLE 4. USE OF PREMISES............................................. 3
ARTICLE 5. COVENANT OF TITLE AND QUIET ENJOYMENT....................... 3
ARTICLE 6. EVIDENCE OF TITLE........................................... 4
ARTICLE 7. LESSOR'S MORTGAGE........................................... 5
ARTICLE 8. ZONING...................................................... 5
ARTICLE 9. COMPLIANCE WITH LAWS AND ORDINANCES......................... 5
ARTICLE 10. MECHANIC'S LIENS........................................... 6
ARTICLE 11. ALTERATIONS, TITLE TO AND REMOVAL OF
IMPROVEMENTS............................................. 7
ARTICLE 12. TRADE FIXTURES, MACHINERY AND EQUIPMENT.................... 8
ARTICLE 13. REPAIRS.................................................... 9
ARTICLE 14. TAXES...................................................... 10
ARTICLE 15. UTILITIES.................................................. 11
ARTICLE 16. INSURANCE AND INDEMNIFICATION.............................. 11
ARTICLE 17. EMINENT DOMAIN ............................................ 13
ARTICLE 18. ASSIGNMENT AND SUBLETTING.................................. 14
ARTICLE 19. DEFAULT BY LESSEE.......................................... 14
ARTICLE 20. LESSOR'S REMEDIES.......................................... 15
ARTICLE 21. REPRESENTATIONS OF LESSOR.................................. 17
ARTICLE 22. LESSOR'S ACCESS TO PREMISES................................ 18
ii
<PAGE>
ARTICLE 23. SURRENDER OF PREMISES...................................... 18
ARTICLE 24. HOLDING OVER............................................... 19
ARTICLE 25. SERVICE OF NOTICE.......................................... 19
ARTICLE 26. SUCCESSORS AND ASSIGNS..................................... 20
ARTICLE 27. RECORDING.................................................. 21
ARTICLE 28. COMMISSION................................................. 21
ARTICLE 29. AMENDMENTS................................................. 21
ARTICLE 30. INVALIDITY OF PROVISIONS................................... 21
ARTICLE 31. ESTOPPEL CERTIFICATE....................................... 22
ARTICLE 32. INTERPRETATION............................................. 22
ARTICLE 33. CAPTIONS................................................... 23
ARTICLE 34. PURCHASE OPTION............................................ 23
ARTICLE 35. ENVIRONMENTAL AUDIT........................................ 24
ARTICLE 36. ENTIRE AGREEMENT........................................... 24
Attachments:
Exhibit A
Exhibit B - Rental Adjustment
iii
<PAGE>
GROUND LEASE
THIS LEASE is made and entered into this________ day of
_________________ , 1996, by and between McDain Golf Center of Monroeville, a
Pennsylvania limited partnership, hereinafter referred to as "Lessor", and
Golden Bear Golf Centers, Inc., a Florida corporation, hereinafter referred to
as "Lessee":
ARTICLE 1. PREMISES.
Lessor, for and in consideration of the covenants hereinafter
contained and made on the part of the Lessee, does hereby demise and lease to
Lessee and Lessee does hereby lease from Lessor:
(a) All that certain parcel of ground situate in
the Municipality of Monroeville, County of Allegheny,
Pennsylvania, as described in Exhibit "A" attached hereto and
made a part hereof, together with all Lessor's easement rights
and appurtenances and all buildings and other improvements
located thereon, reserving however from this Lease all of
Lessor's rights with respect to the operating gas well on said
parcel and the natural gas and all other minerals underlying
said parcel; and
(b) All personal property owned by Lessor and used
or useful in the operation of the Real Estate.
The real estate and personal property described above are hereinafter referred
to respectively as the "Real Estate" and the
<PAGE>
"Personalty". The Real Estate and the Personalty together are hereinafter
referred to as the "Premises".
ARTICLE 2. TERM.
The term of this Lease shall be twenty-nine (29) years
commencing on April 15, 1996 (the "Commencement Date").
ARTICLE 3. RENT.
Lessee shall pay to Lessor annual rent for the Premises in the
amount of $325,000, subject to adjustment as set forth on Exhibit B, attached
hereto and made a part hereof. Annual rent shall be payable in advance without
demand, deductions or setoff, in equal monthly installments, due on the first
day of each and every calendar month during the term of this Lease. Such
installments shall be payable at the address of the Lessor, as set forth in
Article 25 hereof, or at such other place of which Lessor shall have given
Lessee written notice at least thirty (30) days in advance. The accrual of rent
hereunder shall begin with the commencement of the term of this Lease, but in
the event that the Commencement Date shall occur on a day of the month other
than on the first day of the month, the first rental payment (and the last
rental payment) shall be adjusted for the proportionate fraction of the whole
month, so that all rental payments other than the first shall be made and become
due and payable on the first day of each month.
ARTICLE 4. USE OF PREMISES.
2
<PAGE>
It is contemplated by Lessee hereunder that the Premises will
initially be used for the operation of a driving range and related businesses.
Lessee may use the Premises for any other lawful use for which Lessee obtains
prior written consent of Lessor, which prior written consent shall not be
unreasonably withheld.
ARTICLE 5. COVENANT OF TITLE AND QUIET ENJOYMENT.
Lessor covenants that Lessor is well seized of and has good
title to the Premises free and clear of all liens, encumbrances, easements,
tenancies and restrictions, except for the items ("Permitted Encumbrances")
described in Article 7 below. Lessor warrants and will defend the title, and
will indemnify Lessee against any damage or expense which Lessee may suffer by
reason of any claim against title or defect in the title to the Premises or the
description of the Real Estate. Lessor further warrants that the operation of
the gas well on the Premises will not interfere with the operation of a driving
range and Lessor shall indemnify and hold harmless Lessee from all damages and
liability arising from the operation of the gas well.
ARTICLE 6. EVIDENCE OF TITLE.
Within ten (10) days from the date of this Lease, Lessee shall
apply for leasehold title insurance for the Premises from a title company chosen
by Lessee. If the report on title, title binder or commitment discloses any
conditions,
3
<PAGE>
restrictions, liens, encumbrances, easements or covenants which, in Lessee's
reasonable opinion, would affect Lessee's use and enjoyment of the Premises and
appurtenant easements, Lessee shall promptly give notice to Lessor requesting
that Lessor cure such defects to title. Lessor shall then have thirty (30) days
from the date of receipt of said notice to make a good faith effort to cure such
defects and to furnish a title report, binder or commitment showing such defects
cured or removed. If such defects in title are not so cured within thirty (30)
days, Lessee may, at its option, terminate this Lease. Any conditions,
restrictions, liens, encumbrances, easements or covenants which Lessee does not
by the aforementioned notice request Lessor to cure shall be deemed to be
"Permitted Encumbrances."
ARTICLE 7. LESSOR'S MORTGAGE.
Lessee agrees that it will, on the request of the Lessor,
subordinate its leasehold interest in the Premises to any mortgagee of Lessor's
fee interest in the Premises provided that such mortgagee enters into a
nondisturbance agreement reasonably satisfactory to Lessee whereby such
mortgagee agrees not to interfere with Lessee's rights under this Lease so long
as there is no Event of Default (as hereinafter defined).
ARTICLE 8. ZONING.
Lessor hereby represents and warrants that the use by Lessee
of the Premises as a driving range is a permitted use
4
<PAGE>
under the present zoning classification and local laws and ordinances applicable
to the Premises. Lessee at its own expense may seek approval of any zoning
change, conditional use, variance, subdivision or other land use matter,
provided Lessor's consent, which shall not be unreasonably withheld, is first
obtained. Lessor shall cooperate as required in Lessee's efforts to obtain any
such approval.
ARTICLE 9. COMPLIANCE WITH LAWS AND ORDINANCES.
Lessee shall comply with all Federal, State, County and
Municipal laws and ordinances and all rules and regulations of any duly
constituted authority, present and future, affecting or respecting the use or
occupancy of the Premises by Lessee or the business at any time thereon
transacted by Lessee or any assignee or sublessee of Lessee.
ARTICLE 10. MECHANIC'S LIENS.
Lessee shall have no authority to create or place any lien or
encumbrance of any kind whatsoever upon or in any manner to bind the interest of
the Lessor in the Premises, and Lessee covenants and agrees promptly to pay all
sums legally due and payable by it on account of any labor performed on or
material supplied to the Premises upon which any lien is or can be asserted upon
the Premises or the improvements thereon. Lessee will cause any mechanic's,
materialman's or other lien against the Premises to be fully discharged and
released, provided,
5
<PAGE>
however, that if the Lessee desires to contest any such lien, it may do so, but
notwithstanding any such contest, if such lien shall be reduced to final
judgment and such judgment or such processes may be issued for the enforcement
thereof and is not promptly stayed or if is so stayed and such stay thereafter
expires, then and in that event, the Lessee shall forthwith pay and discharge
said judgment. Notwithstanding the above, Lessee shall not suffer any mechanic's
lien to be entered against the interest of Lessor in the Premises. In the event
that Lessor is named as a co-defendant or as a defendant in any action for
mechanic's liens filed, then Lessee shall defend the interest of Lessor upon
request to do so at its own cost and expense, and shall not permit any judgment
to be entered against Lessor's interest. In the event that a judgment is entered
against Lessor's interest, then Lessee shall cause the same to be paid or bonded
within seven (7) days from the date of entry.
ARTICLE 11. ALTERATIONS, TITLE TO AND REMOVAL OF
IMPROVEMENTS.
Lessee may make alterations, additions and improvements (which
for the purposes of this Article 11 shall include all interior and exterior
signage and logos) to the Premises from time to time, and all such alterations,
additions and improvements, shall be and remain the property of Lessee, its
assignee or sublessee, as the case may be, at all times during the term of this
Lease and any extensions or renewals thereof. Lessee shall have the right to
remove any such alterations,
6
<PAGE>
additions and improvements at any time during the term of this Lease or any
extension or renewal thereof and for a period of thirty (30) days after the
termination of this Lease or any extension or renewal thereof, by a lapse of
time or otherwise and, for such purpose, to enter upon the Premises. However,
Lessee shall not be required to remove any such alterations, additions or
improvements, and Lessee's failure to do so after the expiration of such thirty
(30) day period shall be deemed to be an abandonment thereof, whereby the same
shall, thereupon, be and become part of the real estate, with title thereto
vesting in the owner of the land. In case of removal of any building by Lessee
or occurring at or after the termination of this Lease, as aforesaid, Lessee
shall level the area formerly occupied by any buildings so removed.
ARTICLE 12. TRADE FIXTURES, MACHINERY AND EQUIPMENT.
Lessor agrees that all trade fixtures, machinery, equipment,
furniture or other personal property of whatever kind and nature kept or
installed on the Premises by Lessee or Lessee's assignees or sublessees shall
not become the property of the Lessor or a part of the realty, no matter how
affixed to the Premises and may be removed by Lessee or its assignees or
sublessees, in their discretion, at any time, and from time to time, during the
entire term of this Lease and any renewals. Upon request of Lessee or Lessee's
assignees or sublessees, Lessor shall execute and deliver any Landlord's Waiver
forms
7
<PAGE>
submitted by any vendors, lessors, chattel mortgagees or holders or owners of
any trade fixtures, machinery, equipment, furniture or other personal property
of any kind and description kept or installed on the Premises by Lessee or any
sublessee setting forth the fact that the Lessor waives, in favor of such
vendor, lessor, chattel mortgagee or any holder or owner thereof, any lien,
claim, interest or other right therein superior to that of such vendor, lessor,
chattel mortgagee, owner or holder. Lessor shall further acknowledge that the
property covered by such waiver forms is personal property and is not to become
a part of the realty, no matter how affixed thereto and that such property may
be removed from the Premises by the vendor, lessor, chattel mortgagee, owner or
holder at any time upon default by Lessee or its assignees or sublessees in the
terms of such chattel mortgage or other similar documents, free and clear of any
claim or lien of the Lessor.
ARTICLE 13. REPAIRS.
Lessee shall, at all times during the term of this Lease, at
its own cost and expense, keep and maintain or cause to be kept and maintained
in repair and good condition, ordinary wear and tear excepted, all buildings,
improvements and parking areas at any time constructed on the Premises and shall
use all reasonable precautions to prevent waste, damage or injury thereto. In
addition, Lessee does hereby agree to maintain the
8
<PAGE>
same, including pavement in a reasonably good condition and repair, free of all
paper, debris, snow, ice or other refuse.
ARTICLE 14. TAXES.
Lessee shall:
(a) In addition to the rent provided herein, pay and
discharge punctually, all taxes, special and general
assessments attributable to the Premises including
land, water rents, rates and charges, sewer rents and
other governmental impositions and charges of every
kind and nature whatsoever, extraordinary as well as
ordinary (hereinafter referred to as "taxes"), and
each and every installment thereof which shall or may
as of the term of this Lease be charged, levied,
laid, assessed, imposed upon or for or with respect
to the Premises or any part thereof, together with
all interest and penalties thereon, under or by
virtue of all present or future laws, ordinances,
requirements, orders, directives, rules or
regulations, of Federal, State, County, and Municipal
governments and of all other governmental authorities
whatsoever (all of which shall also be included in
the term "taxes" as heretofore defined).
(b) Lessee shall be deemed to have complied with the
covenants of subparagraph (a) of this Article if
payment of such taxes shall have been made either
within any period allowed by law or by the
governmental authority imposing the same, during
which payment is permitted without penalty or
interest or before the same shall become a lien upon
the Premises or, if Lessee is contesting such tax as
permitted under subparagraph (d) hereof, Lessee shall
escrow the amount of such tax with Lessor.
(c) All such taxes, which shall become payable during
each of the calendar year in which the term of this
Lease terminates, shall be apportioned and prorated
between Lessor and Lessee in accordance with the
respective portions of such calendar year during
which such lease term shall be in effect.
(d) Lessee shall have the right to contest or review all
such taxes by legal proceedings, or in such
9
<PAGE>
other manners as it may deem suitable (which, if
instituted, Lessee shall conduct promptly at its own
cost or expense, and free of any expense to Lessor
and, if necessary, in the name of and with the
cooperation of Lessor, and Lessor shall execute all
documents necessary to accomplish the foregoing).
Notwithstanding the foregoing, Lessee shall promptly
pay all such taxes if at any time the Premises or any
part thereof shall then be immediately subject to
forfeiture, or if Lessor shall be subject to any
criminal liability, arising out of the nonpayment
thereof.
(e) Nothing herein or in this Lease otherwise contained
shall require or be construed to require Lessee to
pay any inheritance, estate, succession, transfer,
gift, franchise, income, rental or profit taxes, that
are or may be imposed upon Lessor, its heirs,
successors or assigns.
(f) Lessee agrees to provide Lessor with a copy of any
paid tax bill within sixty (60) days from receipt of
same.
ARTICLE 15. UTILITIES.
Lessee agrees that it will pay all costs for water, sanitary
sewer, gas and electric current and other utilities used, consumed or wasted
upon or in connection with the Premises during the term hereof and of any
renewals thereof, as and when the charges for the same shall be come due and
payable.
ARTICLE 16. INSURANCE AND INDEMNIFICATION.
Lessee shall, at its own cost and expense carry and maintain
fire insurance with standard coverage endorsement on all improvements located on
the Premises in an amount equal to at least eighty percent (80%) of the full
insurable value thereof, excluding foundation and excavating costs.
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Lessee shall maintain commercial liability insurance coverage
with a single limit of no less than $2,000,000, provided Lessor may from time to
time during the term increase said minimum amount to a then commercially
reasonable amount. Such liability policies shall name Lessor as an additional
insured.
Lessee may elect to maintain any insurance required to be
carried by this Lease under its so-called blanket policy or policies. Lessee
shall deliver certificates evidencing the insurance required by this Lease
throughout the term of this Lease and any renewals thereof.
Lessee shall indemnify and save Lessor harmless against and
from any and all liabilities, losses, damages, injuries, costs and expenses as
hereafter may occur, arise, directly or indirectly from or out of: (a) any
failure by Lessee to make any payment to be made by it hereunder or fully to
perform or observe any obligation or condition to be performed and observed by
Lessee hereunder, or (b) any cause whatsoever, on, about or relating to the
Premises during the term of this Lease, by whomever caused, excluding only any
loss or damage attributable to the acts or omissions of the Lessor. The
foregoing costs and expenses shall include any costs or expenses, including
reasonable attorneys' fees, incurred or paid by Lessor in connection with the
defense of any suit or action brought about by any party arising from the
foregoing causes.
ARTICLE 17. EMINENT DOMAIN.
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If the whole or any part of the Premises shall be taken for
any public or quasi-public use under any statute or by right of eminent domain
or by private purchase in lieu thereof, Lessee reserves unto itself the right to
prosecute its claim for an award based upon injury caused to its improvements
and its leasehold interest by such taking, without impairing any rights of
Lessor for the taking of or injury to the reversion.
In the event a part of the Premises shall be taken and Lessee
in good faith determines that the remainder of the Premises cannot be
economically operated, and in any such event, the Lessee may, at any time prior
to or within a period of sixty (60) days after the date when possession of the
Premises shall be required by the taking party, elect to terminate this Lease.
If a portion of the Premises shall be taken and Lessee does
not terminate the Lease under the preceding paragraph, the annual rent and the
purchase price stated in Article 34 shall be equitably adjusted.
ARTICLE 18. ASSIGNMENT AND SUBLETTING.
Lessee shall not assign this Lease or sublease the Premises or
any part thereof to an entity other than a "Related Entity" without the prior
written consent of Lessor, which consent shall not be unreasonably withheld.
Lessee shall have the right to assign this Lease or sublease the Premises or any
part thereof to a "Related Entity" upon prior written notice to Lessor but
without Lessor's consent. A "Related Entity" shall be
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any entity which is at all times controlled by or under common control with
Lessee by a third entity, control being deemed established by ownership of at
least 51% of the voting interest of the entity in question. In the event of any
assignment or subletting, Lessee shall remain liable for the payment of all
rents and other charges required to be paid hereunder and for the performance of
all terms, covenants and conditions herein undertaken by Lessee.
ARTICLE 19. DEFAULT BY LESSEE.
An "Event of Default" shall have occurred if Lessee shall
fail to pay any installment of rent promptly on the day when the same shall
become due and payable hereunder and shall continue in such default for a period
of ten (10) days after written notice thereof by Lessor or if Lessee shall fail
to promptly keep and perform any other affirmative covenants of this Lease,
strictly in accordance with the terms of this Lease, and shall continue in
default for a period of thirty (30) days after written notice thereof by Lessor
of default and demand of performance However, if any default shall occur, other
than in payment of money, which cannot with due diligence be cured within a
period of thirty (30) days, and if Lessee prior to the expiration of thirty (30)
days from and after the giving of the notice as aforesaid, commences to
eliminate the cause of such default, then no Event of Default shall occur as
long as Lessee proceeds diligently and with reasonable dispatch to take all
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steps and do all work required to cure such default and does so cure such
default.
ARTICLE 20. LESSOR'S REMEDIES.
If an Event of Default should occur as set forth in Article 19
hereof, the rent reserved herein for the entire unexpired portion of the term
shall, at Lessor's option, thereupon immediately become due and payable,
provided that the amount of said rent shall be reduced to its present value
using a commercially reasonable discount rate. Tenant shall be obligated for
such present value regardless of which, if any, of the remedies Lessor elects to
pursue.
Further, if an Event of Default should occur as set forth in
Article 19 hereof, Lessor, at its option, may terminate this Lease upon and by
giving written notice of termination to Lessee, or Lessor, without terminating
this Lease, may at any time after such default or breach, without notice or
demand additional to that provided in Article 19 hereof, and without limiting
Lessor in the exercise of any other right or remedy which Lessor may have by
reason of such default or breach (other than the aforesaid right of termination)
exercise any one or more of the remedies hereinafter provided in this Article or
as otherwise provided by law, all of such remedies (whether provided herein or
by law) being cumulative and not exclusive:
(a) Lessor may perform for the account of Lessee any
defaulted term or covenant on Lessee's part to be
observed or performed, and recover as rent any
14
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expenditures made and the amount of any obligations
incurred in connection therewith.
(b) Lessor may enter the Premises (with or without
process of law and without thereby incurring any
liability to Lessee and without such entry being
constituted an eviction of Lessee or term of this
Lease) and take possession of the Premises and all
real and personal property of every kind on the
Premises, and Lessor may (i) apply against the
accelerated rent and the expenses, including
attorneys' fees, which Lessor may have incurred in
connection with such repossession, either the value
of such property or the proceeds, after selling
expenses, from the sale of such property, whichever
Landlord chooses to do, and (ii) at any time and from
time to time relet the Premises or any part thereof
for the account of Lessee, for such terms, upon such
conditions and at such rental as Lessor may deem
proper. In the event of such reletting, (i) Lessor
shall receive and collect the rent therefrom and
shall first apply such rent against such expenses as
Lessor may have incurred in recovering possession of
the Premises, placing the same in good order and
condition, altering or repairing the same for
reletting, and such other expenses, commissions and
charges, including attorneys' fees and real estate
commissions, which Lessor may have paid or incurred
in connection with such repossession and reletting,
and then shall apply such rent against the
accelerated rent, and (ii) Lessor may execute any
lease in connection with such reletting in Lessor's
name or in Lessee's name, as Lessor may see fit, and
the tenant of such reletting shall be under no
obligation to see to the application by Lessor of any
rent collected by Lessor.
(c) If there is an Event of Default, Lessor shall act in
a commercially reasonable manner to mitigate any
damages resulting from the Event of Default.
ARTICLE 21. REPRESENTATIONS OF LESSOR.
Lessor hereby represents to Lessee as follows:
A. The present condition of the Real Estate and the
operation of Lessee's business on the Real Estate
15
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are not in violation of any laws, including without
limitation, environmental laws.
B. There are no underground storage tanks on the Real
Estate.
C. The Real Estate has never been used as a landfill or
waste disposal site.
D. There are no legal actions, suits, or other legal or
administrative proceedings, including condemnation
cases, pending or threatened against the Premises and
Lessor is not aware of any facts which might result
in any such action, suit or other proceeding.
E. Lessor has the authority and power to enter into
this Lease. The execution and delivery of this Lease
will not breach any agreement to which Lessee is a
party.
F. There are no agreements which are binding on the
Premises except for the Permitted Encumbrances.
G. Lessee is not aware of any pending projects which
might result in any municipal assessment against the
Real Estate.
ARTICLE 22. LESSOR'S ACCESS TO PREMISES.
Lessor shall have reasonable rights of access to the Premises
for the purpose of inspecting the condition thereof from time to time throughout
the term of this Lease and any renewals thereof. Lessor shall also have the
right during the last nine (9) months of the Lease term or any renewal thereof
to show the Premises to any prospective tenant at reasonable times during
business hours. Lessor shall give Lessee reasonable prior notice of any entry by
Lessor onto the Premises, except in an emergency. The rights of Lessor under
this Article shall not be exercised in
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any way that interferes with the conduct of Lessee's business on the Real
Estate.
ARTICLE 23. SURRENDER OF PREMISES.
Lessee shall, after the last day of the term or any extension
thereof or upon any earlier termination of such term, surrender the Premises to
Lessor, including all improvements thereon, in good order, condition and state
of repair, reasonable wear and tear and the provisions of Article 11 hereof
excepted. With respect to the Personalty, Lessee may make such substitutions and
replacements to items of Personalty in the ordinary course of business as Lessee
deems appropriate, provided that the value of the Personalty is not materially
diminished during the term of the Lease.
ARTICLE 24. HOLDING OVER.
In the event Lessee continues to occupy the Premises after the
last day of the term hereby created or after the last day of any extension of
said term, and the Lessor elects to accept rent thereafter, a tenancy from month
to month only shall be created under and subject to all other provisions
contained herein.
ARTICLE 25. SERVICE OF NOTICE.
Every notice, approval, consent or other communication
authorized or required by this Lease shall not be effective
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unless the same shall be in writing and sent postage prepaid by United States
registered or certified mail, return receipt requested and (a) if intended for
Lessor shall be addressed to:
McDain, Inc.
c/o Michael Vuick
1400 Smokey Wood Drive
Apt. 911
Pittsburgh, PA 15218
and (b) if intended for Lessee shall be addressed to the Premises with copies
to:
Golden Bear Golf Centers, Inc.
11780 U.S. Highway #1
North Palm Beach, FL 33408
Attention: Mr. Gary Rosmarin, President
and
David M. Shaw, Esquire
Fleming, Haile, Shaw & Gundlach, P.A.
Park Centre, Suite 100
440 Royal Palm Way
Palm Beach, FL 33480
or to such other address as either party may designate by notice given from time
to time in accordance with this Article. Any notice given in accordance with the
provisions of this Article shall be deemed to have been given as of the date
three (3) days after such notice shall have been placed in the United States
Postal Service. The rent payable by Lessee hereunder shall be paid to Lessor at
the same place where a notice to Lessor is herein required to be directed.
ARTICLE 26. SUCCESSORS AND ASSIGNS.
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The terms, conditions and covenants of this Lease shall be
binding upon and shall inure to the benefit of each of the parties hereto, their
heirs, personal representatives, successors or assigns and shall run with the
land.
ARTICLE 27. RECORDING.
This Lease shall not be recorded. However, Lessor and Lessee
agree to execute and deliver to the other a Memorandum of this Lease containing
only minimum statutory requirements, which Memorandum of Lease shall then be
recorded in the appropriate office of the County within which the Premises is
located. The cost of recording such a Memorandum of Lease, including any tax on
the act of recordation, shall be borne by Lessee.
ARTICLE 28. COMMISSION.
Lessor and Lessee hereby warrant and represent to the other
that it has had no dealing with any real estate broker or agent in connection
with this Lease.
ARTICLE 29. AMENDMENTS.
No waivers, alterations or modifications of this Lease or any
agreements in connections therewith shall be valid, unless in writing duly
executed by both Lessor and Lessee herein.
ARTICLE 30. INVALIDITY OF PROVISIONS.
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If any term, covenant, condition or provision of this Lease or
the application thereof to any person or circumstance shall, at any time, or to
any extent, be invalid or unenforceable, the remainder of this Lease or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each term, covenant, condition and provision of this Lease shall be
valid and enforceable to the fullest extent permitted by Law.
ARTICLE 31. ESTOPPEL CERTIFICATE.
Either party to this Lease shall from time to time during the
term of this Lease, immediately upon the request of the other party, execute and
deliver to the other party a statement certifying that this Lease is in full
force and effect, the date through the rent and other charges hereunder have
been paid and any other factual matters reasonably requested by the other party.
ARTICLE 32. INTERPRETATION.
This Lease has been negotiated and prepared by Lessor and
Lessee jointly and the principles that lease provisions should be construed
against the drafter of the lease or against the landlord shall not be applied in
construing this Lease. It is the intention of the parties that the rent to be
paid by the
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Lessee shall be absolutely net to the Lessor and the provisions of this Lease
shall be construed accordingly.
ARTICLE 33. CAPTIONS.
The captions appearing in this Lease are inserted only as a
matter of convenience and in no way define, limit, construe or describe the
scope or intent of such Articles of this Lease or in any way affect this Lease.
ARTICLE 34. PURCHASE OPTION.
Lessee shall have the right to purchase the Premises together
with all rights reserved by the Lessor under Article 1 hereof for the purchase
price of Two Million Dollars (the "Purchase Option"). To exercise this option,
Lessee must provide Lessor with written notice of such exercise. If Lessor does
not receive such notice by that date which is six months prior to the fifth
anniversary of the Commencement Date, Lessor shall provide Lessee with written
notice that, unless exercised, the Purchase Option shall expire on that date
which is fifteen days after the effective date of the notice. The closing of the
purchase shall occur as near the fifth anniversary of the Commencement Date as
practical on a date and at a time and place in Allegheny County, Pennsylvania,
chosen by Lessee. Lessor shall pay one-half of all realty transfer taxes due and
a closing agent's reasonable charge for making disbursements. All other closing
costs (other than matters of title clearance) shall be paid by Lessee.
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ARTICLE 35. ENVIRONMENTAL AUDIT.
Lessee has requested that an environmental audit of the
Premises be prepared by a firm selected by Lessee. Lessee will promptly provide
Lessor with a copy of the audit along with a statement of the conditions, if
any, disclosed by the audit which, in Lessee's reasonable opinion, require
remediation. Lessor shall then have 30 days from the receipt of the audit to
cure any such condition. If such cure is not completed within thirty (3) days,
Lessee may, at its option, terminate this Lease.
ARTICLE 36. ENTIRE AGREEMENT.
This Lease supersedes any and all other agreements, either
oral or in writing, between the parties hereto with respect to the Premises and
contains all of the covenants, agreements, and other obligations between the
said parties in respect to said Premises. This Lease may be executed in any
number of counterparts, each of which shall be deemed to have the full force and
legal effect of an original.
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IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed the day first above written.
WITNESS: McDAIN GOLF CENTER OF MONROEVILLE,
a Pennsylvania limited partnership
By:
- ------------------------------- ---------------------------------
General Partner
ATTEST: GOLDEN BEAR GOLF CENTERS, INC.
By:
- ------------------------------ ---------------------------------
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EXHIBIT A
ALL that certain parcel of land located in the Municipality
of Monroeville, formerly of the Borough of Monroeville, Allegheny County,
Pennsylvania, also being formerly all of Parcel 2 in the Mosside Blvd.
Industrial Park Plan of Lots, as recorded in the Recorder's Office of Allegheny
County, Pennsylvania in Plan Book Volume 110, pages 141-142, and also a part of
Parcel 3 in said recorded Plan, both of which were unified and set apart by
virtue of the Schnurer Plan of Lots subdivision recorded on the 15th day of
December, 1988, in Plan Book Volume 155, page 196, and being more particularly
described as follows:
BEGINNING at a point on the westerly side of the right-
of-way for the Wilmerding-Trafford City Road (Broadway Avenue), L.R. 639, 80
feet wide, at the end of the curve at the intersection of said Road with Mosside
Park Court, a right-of-way shown on the recorded plan of said Mosside Blvd.
Industrial Park; thence continuing along said Wilmerding-Trafford City Road
South 32 degree 37' 28" East, a distance of 95.84 feet to a point; thence
continuing along said Wilmerding-Trafford City Road along an arc of a curve
having a radius of 2370.00 feet deflecting to the right, an arc distance of
149.89 feet to a point; thence South 29 degree 00' 03" East, a distance of
474.25 feet to a point; thence continuing along the Wilmerding-Trafford City
Road along the arc of a circle having a radius of 1170.00 feet deflecting to the
right, an arc distance of 309.65 feet to a point at the Northerly boundary of
Parcel 3-C, in the Schnurer Plan of Lots recorded on December 15, 1988; thence
along said Parcel 3-C South 61 degree 11' 41" West, a distance of 1046.00 feet
to a point on the right-of-way now or formerly of Conrail (formerly the
Pennsylvania Railroad); thence along the easterly right-of-way of now or
formerly of Conrail the following two courses and distances: along the arc of a
circle having a radius of 11,820.00 feet deflecting to the left an arc distance
of 167.53 feet to a point, thence North 27 degree 24' 09" West, a distance of
1248.18 feet to a point; thence North 47 degree 39' 52" East, a distance of
93.98 feet to a point; thence South 42 degree 20' 08" East, a distance of 75.00
feet to a point; thence North 47 degree 39' 52" East, a distance of 165.49 feet
to a point; thence South 32 degree 37' 28' East, a distance of 327.45 feet to a
point on the boundary of Mosside Park Court; thence along the boundary of said
Mosside park Court the following five courses and distances: South 47 degree 22'
32" West, a distance of 40.00 feet, South 32 degree 37' 28" East a distance of
100.00 feet, North 57 degree 22' 32" East a distance of 40.00 feet, along the
arc of a circle having a radius of 25.00 feet an arc distance of 37.37 feet,
thence North 57 degree 22' 32" East, a distance of 690.00 feet to a point;
thence along the arc of a circle having a radius of 25.00 feet curving to the
right an arc distance of 39.27 feet to a point at the place of beginning.
BEING approximately 27.48 acres.
<PAGE>
EXHIBIT B
RENTAL ADJUSTMENT
The Rent, as set forth in Article 3, shall be adjusted as of
the first day of each Lease Year of the term of the Lease commencing with the
first day of the sixth Lease Year. The term "Lease Year" shall mean consecutive
twelve (12) month periods commencing on the Commencement Date and each
anniversary thereof. In the event the Commencement Date falls on a day other
than the first day of the month, for purposes of the definition of Lease Year
only, the Commencement Date shall be deemed to fall on the first day of the
following month. The Rent shall be adjusted in accordance with changes in the
Consumer Price Index (hereinafter referred to as the "C.P.I."). The C.P.I. shall
mean the average for "all items" shown on the "U.S. City Average for Urban Wage
Earners and Clerical Workers (including Single Workers), all items, groups,
subgroups and special groups of items" as promulgated by the Bureau of Labor
Statistics of the U.S. Department of Labor, using 1982-84 as a base of 100.
The Rent shall be adjusted in accordance with the following provisions:
(a) The C.P.I. as of the month two (2) months
preceding that month in which the Commencement Date falls
shall be designated the Base C.P.I.
(b) After the end of the fifth Lease Year and of
each Lease Year thereafter, the Rent shall be adjusted
effective the first month of the succeeding Lease Year. The
adjusted Rent shall be determined as follows:
The C.P.I. for the month
The Rent stated in prior to last month of the
Article 3 X Lease Year then ended
----------------------------
The Base C.P.I.
(c) No such adjustment shall reduce the Rent
below the Rent in effect for the prior Lease Year.
(d) If, during the Term of this Lease or any renewal
thereof, the U.S. Department of Labor, Bureau of Labor
Statistics, ceases to maintain the C.P.I., such other index or
standard as will most nearly accomplish the aim and purpose of
the C.P.I. (as determined by Landlord) shall be used to
determine the amount of rental adjustments hereunder.
(e) In the event of any delay in computing the rental
adjustment for a subsequent Lease Year, Tenant shall continue
payment of the most recent Rent as has been computed, and at
such time as an accounting is
<PAGE>
made and notice is given to Tenant, an accounting will be made
retroactive to the beginning of the subsequent Lease Year for
which adjustment is made, and the amount then due Landlord
shall be paid by Tenant within ten (10) days of receipt of
said notice of accounting.
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ADDENDUM TO LEASE AGREEMENT
THIS ADDENDUM, made and entered as of the _________ day of
March, 1996, by and between McDain Golf Center of Monroeville, a Pennsylvania
limited partnership ("Lessor"), having an address of c/o Michael Vuick, 1400
Smokey Wood Drive, Apartment 911, Pittsburgh, Pennsylvania 15218 and Golden Bear
Golf Centers, Inc., a Florida corporation with an address of 11780 U.S. Highway
#1, North Palm Beach, Florida 33408 ("Lessee"), recites and provides as follows:
RECITALS
A. Lessor is the sole owner of legal and equitable
title of a fee simple leasehold estate in the real estate described on Exhibit
"A" hereto (the "Real Property").
B. Lessor is also the owner of the business and
assets located at the Real Property (including the "Improvements" thereon) and
described on Exhibit "B" hereto (the "Assets").
C. Lessor has agreed to lease the Real Property and
Assets to Lessee. The Real Property and Assets are collectively referred to
herein as the "Project."
D. This Addendum supersedes and controls all
conflicting provisions of the Lease to which it is attached. The Lease and this
Addendum shall constitute and be construed as a single instrument.
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<PAGE>
AGREEMENT
1. RECITALS.
The recitals set forth hereinabove are true and correct.
2. LEASE CONTINGENCIES.
A. This Lease and Lessee's obligations hereunder are
expressly subject to and conditioned upon the matters set forth in Section 3
hereof. The Lease may be terminated by Lessee giving written notice of
termination to Lessor prior to expiration of the "Examination Period" as defined
in Section 3. If Lessee does not so notify Lessor, the lease term shall commence
on April 15, 1996 (the "Commencement Date").
B. The Lease may also be terminated by Lessee as set forth
in Sections 6 and 35 thereof, in which event the "Initial Deposit" described
below shall also be returned to Lessee.
C. On the Commencement Date, Lessor and Lessee shall execute
all documents necessary to carry out the provisions hereof and to transfer all
Project licenses and permits to Lessee.
D. Simultaneously with the execution hereof, Lessee shall
pay Lessor $50,000, (the "Initial Deposit"), which shall be (i) returned to
Lessee if Lessee terminates the Lease in accordance with Sections 2A or 2B
hereinabove or (ii) credited against the Option Purchase Price.
E. On the Commencement Date, Lessee shall deliver an
agreement (the "C & L Agreement") with C & L Ventures 1988 acceptable to Lessor.
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<PAGE>
F. Simultaneously with the execution hereof, Lessee
shall deposit an additional $100,000.00 (the "Additional Deposit") with ________
_____________ as Escrow Agent.
In the event Lessee does not terminate the Lease under the
provisions of Section 2A or 2B hereinabove, Escrow Agent shall deliver said sum
to Lessor on the date all of such contingencies have expired or are waived by
Lessee. This Additional Deposit shall also be credited against the Option
Purchase Price.
3. ACCESS TO PREMISES.
A. Commencing on the date hereof and
terminating on the Commencement Date (the "Examination Period"), Lessee and
Lessee's agents shall have the right to enter the Real Property at all
reasonable times to examine the Project, provided that Lessee shall not
interfere with Lessor's operations of the Project.
B. Without limiting the generality of the
foregoing, Lessee may perform or cause to be performed soil tests, inspections,
radon and asbestos investigations, environmental audits, surveying and
engineering services, appraisals and to otherwise view and inspect the Project
and all components thereof, any and all of Lessor's financial records in
connection therewith. Any such entry upon the Real Property shall be at Lessee's
sole risk and expense and Lessee shall indemnify and hold Lessor harmless from
any such entry, and of and from any and all costs, expenses, loss, damage, claim
or liability, arising out of or incurred or claimed in connection with the
exercise by Lessee of such right of entry, and any such entry shall be performed
in such a manner so as to minimize damage to the Real Property.
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<PAGE>
C. Lessor also hereby expressly grants Lessee
permission to investigate and to examine any and all governmental records and to
conduct interviews with any and all relevant governmental and regulatory
authorities with respect to the use and ownership of the Project, all of which
examinations and inspections shall be undertaken at the sole cost and expense of
Lessee.
D. Immediately upon the execution hereof,
Lessor shall make available to Lessee for inspection or copying: any and all
zoning and platting information; any soil tests; any existing title insurance
policies and commitments; any existing surveys, together with as-built plans and
specifications; sales tax returns for the last twelve (12) months; real estate
tax bills; existing insurance policies; all Project agreements and any
correspondence in connection therewith; all appraisals, marketing studies and
the like; all management and service contracts; all operating and expense
reports prepared by or for Lessor; all books and records of Lessor or Lessor's
agents concerning the Project and any other documents concerning the Project
reasonably requested by Lessee and which are in the possession or control of
Lessor or its agents.
4. REPRESENTATIONS BY LESSOR.
Lessor represents and warrants to Lessee, as of the date
hereof and the Commencement Date:
A. MARKETABLE TITLE. Lessor has good, marketable and
insurable fee simple title to the Real Property, and Lessor has good and
marketable title to the Assets, free and clear of all mortgages, liens and
security interests, except as set forth on Section 4Q hereof.
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<PAGE>
B. CONDEMNATION PENDING OR THREATENED. There is no
pending or threatened condemnation or similar proceeding affecting the Real
Property or any portion thereof, nor has Lessor knowledge that any such action
is presently contemplated.
C. ADVERSE INFORMATION. Lessor has no information or
knowledge of any change contemplated in any applicable laws, ordinances, or
restrictions, or any judicial or administrative action, or any action by
adjacent landowners, or natural or artificial conditions upon the Real Property,
or the condition thereof, which would prevent, limit, impede, or render more
costly Lessee's continued use of the Project.
D. COMPLIANCE WITH LAWS. Lessor has complied with all
applicable laws, ordinances, regulations, statutes, rules and restrictions
pertaining to and affecting the Project. Performance of this Agreement will not
result in any breach of, or constitute any default under, or result in the
imposition of, any lien or encumbrance upon the Project under any agreement or
other instrument to which Lessor is a party or by which Lessor or the Project
might be bound.
E. PENDING LITIGATION. There are no legal actions,
suits, or other legal or administrative proceedings, including condemnation
cases, pending or threatened, against the Project, and Lessor is not aware of
any facts which might result in any such action, suit or other proceedings.
F. DISCLOSURE OF ADVERSE FACTS. To the knowledge of
Lessor, there is no significant adverse fact or condition relating to the
Project or its continued use by Lessee which has not been specifically disclosed
in writing by Lessor to Lessee, and Lessor knows of no fact or
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<PAGE>
condition of any kind or character whatsoever which adversely affects such
intended use of the Project by Lessee.
G. BUILDING PERMITS. All building permits required
for the Project are in good standing and were validly issued by the appropriate
governmental authorities, and all required certificates of occupancy have been
issued and are outstanding.
H. EXISTING IMPROVEMENTS. All buildings and improvements
have been completed and installed in accordance with the plans and
specifications approved by the various governmental authorities having
jurisdiction. Permanent certificates of occupancy, all licenses, permits,
authorizations, and approvals required by all governmental authorities having
jurisdiction and the requisite certificates of the local board of fire
underwriters (or other body exercising similar functions) have been issued for
the buildings and improvements and have been paid for, and, as of the Closing,
all of the same will be in full force and effect.
I. NO VIOLATIONS OF LAWS, ETC. No building, or similar
law, ordinance or regulation is, or as of the Closing will be, violated by the
continued maintenance, operation, or use of any buildings, improvements, or
structures presently erected on the Real Property or by the continued
maintenance, operation, or use of the parking areas. There are no uncured
violations of federal, state, or municipal laws, ordinances, orders,
regulations, or requirements affecting any portion of the Project. No heating
equipment, incinerators or other burning devices violate, or as of the Closing
will violate, any applicable federal, state, or municipal laws, ordinances,
orders, regulations or requirements.
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<PAGE>
J. SERVICE CONTRACTS. There are no contracts, oral
or written, with any employees nor any service contract, maintenance contract
nor any other contract or agreement which are not terminable at will.
K. CONDITION. All building and operating equipment
and all Assets are in good and proper operating order. The improvements are in
good structural condition, free of termite infestation, roof leakage, wood rot
or decay or any structural defect which substantially impairs the value or life
expectancy.
L. UTILITIES. All utilities, including, but not
limited to sewer, water, electric, gas, telephone, required for the operation of
the improvements pass through adjoining public streets or adjoining private land
in accordance with valid public or private easements and all installation and
connection charges have been paid for in full.
M. HAZARDOUS SUBSTANCES. Lessor hereby represents
and warrants to Lessee that to the knowledge of Lessor, (i) The Project is not
contaminated with any hazardous substance; (ii) Lessor has not caused and will
not cause, and there never has occurred, the release of any hazardous substance
on the Real Property; (iii) the Real Property is not subject to any federal,
state or local "superfund" lien, proceedings, claim, liability or action, or the
threat or likelihood thereof, for the cleanup, removal, or remediation of any
such hazardous substance from the Real Property or from any other real property
owned or controlled by Lessor or in which Lessor has any interest, legal or
equitable; (iv) there is no asbestos (or other regulated material) in any of the
improvements; (v) there is no underground storage tank on the Real Property;
(vi) by
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<PAGE>
acquiring the Real Property, Lessee will not incur or be subjected to any
"superfund" liability for the cleanup, removal or remediation of any hazardous
substance from the Real Property or any liability, cost, or expense for the
removal of any asbestos or underground storage tank from the Real Property.
Lessor will indemnify, defend, and hold Lessee harmless from and against any and
all claims, demands, liabilities, damages, suits, actions, judgments, fines,
penalties, loss, cost and expense (including, without limitation, attorneys
fees) arising or resulting from, or suffered, sustained or incurred by Lessee as
a result of, the material untruth or inaccuracy of any of the foregoing matters
represented and warranted by Lessor to Lessee or the breach of any of the
foregoing covenants and warranties of Lessor. The terms "hazardous substance,"
"release" and "removal" as used herein shall have the same meaning and
definition as set forth in paragraphs (14), (22) and (23), respectively, of
Title 42 U.S.C. /section/ 9601 and under any applicable Pennsylvania law
provided, however, that the term "hazardous substance" as used herein also shall
include "hazardous waste" as defined in paragraph (5) of 42 U.S.C. /section/
6903 and "petroleum" as defined in paragraph (8) of 42 U.S.C. /section/ 6991.
The term "superfund" as used herein means the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, being Title 42 U.S.C.
\section\ 9601 et seq., as amended, and any similar state statute or local
ordinance applicable to the Property, and all rules and regulations promulgated,
administered and enforced by any governmental agency or authority pursuant
thereto. The term "underground storage tank" as used herein shall have the same
meaning and definition as set forth in paragraph (1) of 42 U.S.C. /section/
6991, and applicable Pennsylvania law.
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<PAGE>
N. AUTHORITY. Lessor has the authority and power to
enter into this Agreement and to consummate the transaction provided for by this
Agreement. Consummation of this transaction will not breach any agreement to
which Lessor is a party. Lessor has obtained any necessary approvals of its
limited partners for this transaction, including the approval of the C & L
Agreement.
O. ORGANIZATION. Lessor is duly organized and
existing in good standing under the laws of the State of Pennsylvania.
P. STATEMENTS. Exhibit "C" attached hereto is a true,
correct and complete revenue and expense statement for 1994, 1995 and 1996 to
date.
Q. LIENS. There are no mortgages or deeds of trust
or security agreements (other than those matters referred to on Exhibit "D"
hereto) encumbering the Real Property or the Assets. Exhibit D-1 designates the
Current Liens to be satisfied on or before the Commencement Date. At Closing,
Lessor shall deliver an appropriate non-disturbance agreement from each such
lienholder.
R. LIABILITIES. All liabilities and obligations of
Lessor with respect to the Project are clearly and completely reflected on the
Statements attached hereto as Exhibit "C". No liabilities of the Project arising
prior to Closing shall be assumed by Lessee.
5. ASSIGNMENT. Lessee shall have the right to assign
this Agreement, subject to the restrictions set forth in Article 18 of the
Lease.
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<PAGE>
6. LIABILITIES OF LESSOR. Lessee shall not, except as
expressly set forth herein, become liable for any costs, expenses, liabilities
or obligations of the Project (incurred prior to the Commencement Date) or of
Lessor, and Lessor agrees to defend, indemnify and hold Lessee harmless from any
such liabilities.
Lessor shall comply with all relevant "bulk sales act" or
similar requirements with respect to any Project vendors or creditors.
7. BROKERAGE. Lessee and Lessor each represent to the
other that they have dealt with no broker in connection with this transaction.
Any fees or commissions which may be claimed by any agent, salesman or broker
shall be the sole responsibility of the party who has dealt with any such agent,
salesman or broker. Each party agrees to indemnify and hold harmless the other
party hereto for any and all judgments, costs of suit, attorneys' fees and other
reasonable expenses that the indemnitee may incur by reason of any action or
claim made against the indemnitee by any agent, salesman or broker dealing, or
claiming to have dealt, with indemnitors. This provision shall survive Closing,
or termination of this Agreement, for a period of five (5) years.
8. NOTICES. Any notice provided for by this Agreement
and any other notice or communication that one party may wish to send to another
shall be in writing and sent by (i) overnight commercial courier services (i.e.,
Federal Express or Purolator) or (ii) United States registered or certified
mail, return receipt requested, in a properly sealed envelope and postage
prepaid, addressed to the party for which such notice or communication is
intended, at such
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<PAGE>
party's address set forth below or at any other address provided in writing by
such party to the other party by notice complying with this Section.
Lessor: Mr. Michael Vuick
1400 Smokey Wood Drive
Apartment 911
Pittsburgh, Pennsylvania 15218
With a copy to: Kenneth D. Josephs, Esq.
Rose, Schmit Hasley & Disalle
900 Oliver Building
Pittsburgh, Pennsylvania 15222-2310
Lessee: Golden Bear Golf Centers, Inc.
11780 U.S. Highway #1
North Palm Beach, Florida 33408
Attention: Mr. Gary Rosmarin, President
With a copy to: David M. Shaw, Esq.
Fleming, Haile, Shaw &
Gundlach, P.A.
440 Royal Palm Way, Suite 100
Palm Beach, Florida 33480
9. ATTORNEYS' FEES. If either party commences an action
against the other to enforce any of the terms of this Agreement or because of
the breach by either party of any of the terms hereof, the losing or defaulting
party shall pay to the prevailing party the reasonable attorneys' fees, costs
and expenses incurred in connection with the prosecution or defense of such
action, at trial and all appellate levels.
10. CONFIDENTIALITY. The terms of this Agreement and
the information made available as a result of the investigations which preceded
the consummation of the transactions
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<PAGE>
contemplated by this Agreement are confidential and are personal or trade or
business secrets of the parties. The parties shall not disclose to any other
person the nature, terms, or conditions of this Agreement or any information
concerning the respective parties unless required by this Agreement or as a
result of litigation relating to this Agreement or the respective parties.
11. NON-COMPETE. As part of the consideration to Lessee
for entering into and consummating this transaction, each Lessor for itself and
its agents and nominees covenant and agree not to (i) enter into any competing
business within a 25-mile radius of the Real Property. Lessor and Lessee
covenant and agree that this provision may be enforced by injunction or other
equitable relief without the necessity of Lessee placing a bond with the Court.
Any violation of the covenants (or any of them) set forth herein by Lessor and
Lessee would materially and irrevocably harm Lessee and its business. This
provision shall survive closing for a period of five (5) years.
12. SURVIVAL. All representations, warranties and
indemnities of Lessor, and all applicable covenants and agreements of Lessee and
Lessor, shall survive the Commencement Date for a period of two (2) years.
13. COOPERATION. Lessee and Lessor will cooperate
with respect to all matters pertaining to the transfer of the operation of the
Project.
14. MAINTENANCE AND RISK OF LOSS. Commencing with the
date hereof, Lessor shall maintain the Project in its current condition and with
the same standard of care as it presently
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<PAGE>
maintains the Project. All risk of loss to the Project prior to the
Commencement Date shall be upon the Lessor.
15. AUTHORITY OF LESSOR. Each party signing on behalf
of Lessor hereby represents and warrants to Lessee that he has full authority to
sign the Lease and bind the Lessor on behalf of the Lessor.
16. AUTHORITY OF THE LESSEE. The undersigned
represents that it has full power and authority to execute the Lease on behalf
of the Lessee.
17. ADDITIONAL OPTION TO PURCHASE. In addition to the
Purchase Option set forth in Article 34, Lessee shall have the option to
purchase the Premises for $2,545,000 by providing Lessor with written notice of
such exercise no later than May 15, 1996. In such event, the closing shall occur
on or about June 15, 1996 in accordance with the applicable provisions of
Article 34.
In the event Lessee purchases the Premises pursuant to this
Section 17, the gas well shall remain the property of Lessor and the parties
shall enter into an appropriate agreement (with indemnities from Lessor) at the
closing. In the event Lessee purchases the Premises not pursuant to this Section
17, the gas well shall be conveyed to Lessee.
In all events, Lessor shall convey all of its other mineral
rights (if any) to Lessee.
18. FACSIMILE. The parties agree that a facsimile
transmission of the signed Agreement constitutes an original and binding
document.
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<PAGE>
19. COUNTERPARTS. This Agreement may be executed
simultaneously 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.
20. INITIAL DEPOSIT. In the event Lessee terminates
the Lease prior to the Commencement Date as provided herein, and Lessor desires
to extend the date for return of the Deposit, Lessor shall execute and deliver a
"Note" in form and substance resolvable acceptable to Lessee. The Note shall
provide for a maturity date of October 1, 1996, interest at the Wall Street
Journal Prime Rate plus 1% payable at maturity and shall be guaranteed by
Michael Vuick.
21. BOOKS AND RECORDS. Lessor shall retain all of its
books and records for the Project until December 31, 2000. In the event Lessee
desires to audit these books and records (such audit to be at the cost and
expense of Lessee), Lessor agrees to make said books and records available to
Lessee and its auditors and to cooperate with respect thereto.
22. Lessor and Lessee agree that the Lease is hereby
amended as follows:
A. Section 14(c) is amended to provide that the
prorations reflect commencement and termination dates.
B. Section 34 is amended to provide that, prior to
the date Lessee is required to provide notice of its exercise of option to
purchase, Lessor shall provide the estimate of Rent for the sixth lease year
calculated in accordance with Section 3 of the Lease.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Addendum
for themselves, their respective heirs, executors, personal representatives,
successors and assigns as of the date and year first above written.
LESSEE:
SEEN AND AGREED: GOLDEN BEAR GOLF CENTERS, INC.
By:
- -------------------------- -----------------------------------
Michael Vuick Name:
(as to Section 20) Title:
LESSOR:
MCDAIN GOLF CENTER OF
MONROEVILLE, a Pennslyvania
limited partnership
By:
------------------------------------
Name:
Title: General Partner
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<PAGE>
SCHEDULE OF EXHIBITS
Exhibit "A" Real Estate
Exhibit "B" Improvements and Assets
Exhibit "C" Operating Statements
Exhibit "D" Current Liens
Exhibit "D-1" Current Liens to be Satisfied
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EXHIBITS 10.19
AGREEMENT
THIS AGREEMENT, made and entered as of the 1st day of March,
1996, by and between WILLIAM T. DUCKWORTH ("Duckworth") and Cool Springs Inc., a
Pennsylvania Corporation ("Cool Springs") both having an address of 30 Corrigan
Drive, Bethel Park, PA 15102, collectively referred to as "Seller" and Golden
Bear Golf Centers, Inc., a Florida corporation with an address of 11780 U.S.
Highway #1, North Palm Beach, FL 33408 ("Buyer"), recites and provides as
follows:
RECITALS
A. Duckworth is the owner of the real estate located at 1530
Hamilton Road, Bethel Park, PA 15102 containing approximately 40.833 acres
together with the appurtenances as described on Exhibit "A" (the "Real
Property").
B. Cool Springs is the owner of certain business assets
located at the real property described on Exhibit "B" (the "Assets") where it
operates a golf driving range, miniature golf course, golf school, baseball
batting cages with automatic pitching machines and other activities directly
related thereto, such as instruction, sale of golf or baseball equipment,
accessories, clothing and soft drinks and refreshments solely for the
convenience of the patrons.
C. Duckworth and Cool springs each agree to grant to
Buyer the right to purchase the Real Property and Assets, respectively. The Real
Property and Assets are collectively referred to herein as the "Project."
FOR AND IN CONSIDERATION of the sum of TEN DOLLARS ($10.00)
and other good and valuable consideration, the receipt which is hereby
acknowledged,
THE PARTIES HERETO DO HEREBY MUTUALLY COVENANT AND AGREE AS
FOLLOWS:
1. AGREEMENT.
<PAGE>
A. Duckworth hereby grants to Buyer the exclusive right
to purchase the Real Property on the terms and conditions hereinafter described.
B. Cool Springs hereby grants to Buyer the exclusive right
to purchase the Assets on the terms and conditions hereinafter described.
2. CONTRACTS.
A. Subject to the terms and conditions hereinafter stated,
Buyer shall have the right to purchase the Real Property and the Assets pursuant
to the "Land Contract" and the "Asset Contract" attached hereto as Exhibits "C"
and "D" respectively. The Land Contract and the Asset Contract are sometimes
hereinafter collectively referred to as the "Contracts".
B. A default under either Contract by Buyer or Seller shall
be a default under both contracts. Closing shall occur simultaneously under
the Contracts.
3. TERM.
A. The "Initial Purchase Period" shall begin on the date
hereof and shall extend until May 31, 1996.
B. The "Second Purchase Period" shall begin on June 1,
1996 and shall extend until June 17, 1996.
C. The "Extended Purchase Period" shall begin on June 17, 1996
and shall extend no longer than December 15, 1996, as set forth hereinbelow.
D. At any time prior to the termination of the Purchase
Periods, Buyer may give Seller notice of its desire to proceed to closing, in
which event closing shall occur as hereinafter provided.
<PAGE>
4. DEPOSITS.
A. Seller acknowledged receipt of $150,000.00 from Buyer
which shall be credited as follows: Duckworth $150,000.00 and Cool Springs $0.
B. To extend the Purchase Period for the Second Purchase
Period, Buyer shall pay an additional $150,000.00 to Seller which shall be
credited as follows: Duckworth $150,00.00 and Cool Springs $0.
C. The deposits shall be the property of Seller even if Buyer
does not acquire the project unless (i) either Seller defaults under its
Contract with Buyer; or (ii) there is a material breach of any representation or
warranty of Seller hereunder or (iii) the Phase I environmental audit of the
Real Property indicates material violations of environmental laws or (iv) there
is an uncurable title defect under either of the Contracts. In such event, Buyer
shall have the right to terminate this Agreement, receive its Deposits and
neither party shall have any further rights or obligations hereunder.
D. All Deposits shall be applied to the Purchase Price
under the Contacts in the amounts set forth above.
5. EXTENSION FEES.
In the event Buyer does not close on June 17, 1996, and such
failure to close is not due to any action or inaction by Seller, Buyer may
extend the Closing Date for six consecutive one-month "Extended Periods"
commencing June 17, 1996 and on the 17th day of each of the five successive
months by written notice prior to the termination of (i) the Second Purchase
Period or (ii) the expiration of the then current Extension Period, as the case
may be. At the time of any such extension notice, Buyer shall pay $29,000.00 to
Seller (allocated to each Seller in the same proportion as set forth above).
Each such extension fee shall be non-refundable (except if either Seller
defaults under its Contract) and shall not be applied to the purchase price for
the Project. Failure of Buyer to pay Seller $29,000 as aforesaid, shall
terminate this Agreement and the Contracts.
<PAGE>
6. CLOSING
The right to purchase granted hereunder may be exercised by
Buyer giving written notice of its desire to close to Seller within the Term (as
extended as provided herein) together with an executed original of the
Contracts, which Seller shall execute and return to Buyer. This notice shall
require the parties to proceed with closing under the Contracts, which shall be
modified to include any relevant changes required to conform to the provisions
of this Agreement at the time the notice is delivered. Closing shall occur on
June 17, 1996 or if at a later time, within fifteen (15) days of Buyer's receipt
of The Contracts executed by Seller. If Buyer cannot close on June 17, 1996, it
shall commence paying Seller $29,000 if it desires to extend the Closing date as
set forth in Paragraph 5 herein.
7. ACCESS TO PREMISES.
A. Buyer and Buyer's agents shall have the right to enter the
Real Property at all reasonable times to examine the Project after prior notice,
provided that Buyer shall not interfere with Seller's operations of the Project.
In the event this Agreement is terminated, the right of entry granted hereby
shall likewise be terminated.
B. Without limiting the generality of the foregoing, Buyer may
perform or cause to be performed soil tests, inspections, radon and asbestos
investigations, environmental audits, surveying and engineering services,
appraisals and to otherwise view and inspect the Project and all components
thereof, any and all of Seller's financial records in connection therewith. Any
such entry upon the Real property shall be at Buyer's sole risk and expense and
Buyer shall indemnify and hold Seller harmless from any such entry, and of and
from any and all costs, expenses, loss, damage, claim or liability, arising out
of or incurred or claimed in connection with the exercise by Buyer of such right
of entry, and any such entry shall be performed in such a manner so as to
minimize damage to the Real Property.
C. Seller also hereby expressly grants Buyer permission to
investigate and to examine any and all governmental records and to conduct
interviews with any and all relevant governmental and regulatory authorities
with respect to the use and ownership of the Project, all of which examinations
and inspections shall be undertaken at the sole cost and expense of Buyer.
D. Immediately upon the execution hereof, Seller shall make
available to Buyer for inspection or copying: any and all zoning and platting
information; any soil tests; any existing title insurance policies and
commitments; any existing surveys, together with as-built plans and
specifications; sales tax returns for the last twelve (12) months; real estate
tax bills; existing insurance policies; all Project agreements and any
correspondence in connection therewith; all appraisals, marketing studies and
the like; all management and service contracts; all operating and expense
reports prepared by or for Seller; all books and records of Seller or Seller's
agents concerning the Project and any other documents concerning the Project
reasonably requested by Purchaser and which are in the possession or control of
Seller or its agents.
8. BOOKS AND RECORDS.
Seller shall retain all of its books for the Project until
December 31, 2000. In the event, Buyer desires to audit these books and records
(such audit to be at the cost and expense of Buyer), Seller agrees to make said
books and records available to Buyer and its auditors and to cooperate with
respect thereto.
9. REPRESENTATIONS BY SELLER.
Seller represents and warrants to Buyer as follows:
A. MARKETABLE TITLE. Duckworth has good, marketable and
insurable title to the Real Property. Cool Springs has good and marketable title
to the Assets, free and clear of all mortgages, liens and security interests
except as follows: Cool Springs executed a Guarantee and Suretyship Agreement
and UCC-1 Financing Statements with Integra Bank, Pittsburgh, PA on November 27,
1995, which inter alia, guaranteed and granted a security interest in and to the
Assets. Seller executed these documents to secure the Loan Agreement between
Duckworth and Integra Bank of November 27, 1995 in the amount $1,350,000 in
order to facilitate Duckworth's purchase of the Real Property. The Real Property
is currently subject to a Net Lease Agreement of November 27, 1995 between
Duckworth, as Lessor and Cool Springs, as Lessee. At closing, Duckworth and Cool
Springs obligations above referred shall be satisfied in full and all
agreements, financing statements, and lease shall be terminated.
B. CONDEMNATION PENDING OR THREATENED. There is no
pending or threatened condemnation or similar proceeding affecting the
Real Property or any portion thereof, nor has Seller knowledge that any such
action is presently contemplated.
C. ADVERSE INFORMATION. Seller has no information or knowledge
of any change contemplated in any applicable laws, ordinances or restriction, or
any judicial or administrative action, or any action by adjacent landowners, or
natural or artificial conditions upon the Real Property, or the condition
thereof, which would prevent, limit, impede, or render more costly Seller's
continued use of the Premises. Seller does have a chain link fence along the
northwesterly property line which encroaches on property owned by the Bethel
Park School District. This encroachment has been disclosed to the School
District which has maintained an amicable relationship with Seller to date.
D. COMPLIANCE WITH LAWS. Seller has complied with all
applicable laws, ordinances, regulations, statutes, rules and restrictions
pertaining to and affecting the Project. Performance of this Agreement will not
result in any breach of, or constitute any default under, or result in the
imposition of, any lien or encumbrance upon the project under any agreement or
other instrument to which seller is a party or by which Seller or the Project
might be bound. The Bethel Park Code requires that sidewalks be installed on the
Real Estate. The developer (prior owner) of this property requested and received
approval from the Municipality of Bethel Park for a temporary waiver of this
requirement. Upon termination of this waiver, which may occur at any time, the
owner of the property will be responsible for the immediate installation of
sidewalks at the property owner's expense.
E. PENDING LITIGATION. There are no legal actions,
suits, or other legal administrative proceedings, including condemnation
cases, pending or threatened, against the Project, and Seller is not aware of
any facts which might result in any such action, suit or other proceedings.
F. DISCLOSURE OF ADVERSE FACTS. To the knowledge of Seller,
there is no significant adverse fact or condition relating to the Project or its
continued use by Buyer which has not been specifically disclosed in writing by
Seller to Buyer and Seller knows of no fact or condition of any kind or
character whatsoever which adversely affects such intended use of the Project by
Buyer. However, Buyer should know that screen netting is required at all times
to prevent errant golf balls from landing on the miniature golf course and the
maintenance shed area. It is also possible that a miniature golf patron could
maliciously strike balls on to neighboring properties.
G. BUILDING PERMITS. All building permits required for
the Project are in good standing and were validly issued by the appropriate
governmental authorities, and all required certificates of occupancy have
been issued and are outstanding.
H. EXISTING IMPROVEMENTS. All buildings and improvements have
been completed and installed in accordance with the plans and specifications
approved by the various governmental authorities having jurisdiction.
Certificates of occupancy, all licenses, permits, authorizations, and approvals
required by all governmental authorities having jurisdiction and the requisite
certificates of the local board of fire underwriters (or other body exercising
similar functions) have been issued for the building and improvements and have
been paid for, and, as of the closing, all of the same will be in full force and
affect. Seller has entered into certain agreements with the Municipality of
Bethel Park on December 10, 1973, March 13, 1987, April 6, 1987 and April 15,
1991 regarding the temporary use zoning ordinance with respect to the operation
of miniature golf courses, golf driving ranges, practice batting cages, etc.
which, inter alia, require the permit applicant to agree to remove building
additions in the event the Municipality revokes or fails to renew the temporary
use permit.
I. NO VIOLATIONS OF LAWS, ETC. No building, or similar law,
ordinance or regulation is, or as of the closing will be, violated by the
continued maintenance, operation, or use of any buildings, improvements, or
structures presently erected on the Real Property or by the continued
maintenance , operation, or use of the parking areas. There are no uncured
violations of federal, state, or municipal laws, ordinances, order, regulations,
or requirements affecting any portion of the Project. No heating equipment,
incinerators or other burning devices violate, or as of the Closing will
violate, any applicable federal, state, or municipal laws, ordinances,
regulations or requirements.
J. SERVICE CONTRACTS. There are no contracts, oral or
written, with any employees nor any service contract, maintenance
contract nor any other contract or agreement which are not terminable at
will, except existing telephone, yellow page advertising and Sonitrol Security
system.
K. CONDITION. All building and operating equipment and all
assets are in substantially the same condition on the closing date as on the
date of this Agreement. Other than the aforesaid, Seller makes no further
representation concerning the condition of the assets and buyer acknowledges
that these assets are being purchased "as is, where is" as of the date of this
Agreement.
L. UTILITIES. All utilities (except sewer), including, but not
limited to water, electric, gas, telephone, required for the operation of the
improvements pass through adjoining public streets or adjoining private land in
accordance with valid public or private easements and all installation and
connection charges have been paid for in full. There is no currently existing
community sewage system available to the Real Estate. There are permits for the
operation of two (2) septic tanks on the Real Estate.
M. HAZARDOUS SUBSTANCES. Seller hereby represents and warrants
to Buyer that (i) the Project is not contaminated with any hazardous substance;
(ii) Seller has not caused and will not cause, and to the best of Seller's
knowledge, there never has occurred, the release of any hazardous substances on
the Real Property; (iii) the Real Property is not subject to any federal, state
or local "superfund" lien, proceedings, claim, liability or action, or the
threat or likelihood thereof, for the cleanup, removal or remediation of any
such hazardous substance from the Real Property or from any other real property
owned and or controlled by Seller or in which Seller has any interest, legal or
equitable; (iv) there is no asbestos (or other regulated material) in any of the
improvements, (v) there is no underground storage tank on the Real property;
(vi) by acquiring the Real Property, Buyer will not incur or be subjected to any
"superfund" liability for the cleanup, removal or remediation of any hazardous
substance from the Real Property or any liability, cost, or expense for the
removal of any asbestos or underground storage tank from the Real Property and
(vii) Seller will indemnify, defend, and hold Buyer harmless from and against
any and all claims, demands, liabilities, damages, suits, actions, judgments,
fines, penalties, loss, cost and expense (including, without limitation,
attorneys fees) arising or resulting from, or suffered, sustained or incurred by
Buyer as a result of, the material untruth or inaccuracy of any of the foregoing
matters represented and warranted by Seller to Buyer or the Breach of any of the
foregoing covenants and warranties of Seller, which indemnity shall survive the
closing. The terms "hazardous substance," "release" and "removal" as used herein
shall have the same meaning and definition an set forth in paragraphs (14), (22)
and (23), respectively of Title 42 U.S.C. /section/9601 and under any applicable
Pennsylvania law provided, however, that the term "hazardous substance" as used
herein also shall include "hazardous waste" an defined in paragraph 5 of 42
U.S.C. /section/6903 and "petroleum" as defined in paragraph (8) of 42 U.S.C.
/section/6991. The term "superfund" as used herein means the Comprehensive
Environmental Response Compensation and Liability Act, an amended, being Title
42 U.S.C. /section/9601 et. seq., as amended, and any similar state statute or
local ordinance applicable to the Property, and all rules and regulations
promulgated, administered and enforced by any governmental agency or authority
pursuant thereto. The term "underground storage tank", as used herein shall have
the same meaning and definition as set forth in paragraph (1) of 42
U.S.C. /section/6991 and applicable Pennsylvania law.
N. AUTHORITY. Seller has the authority and power to
enter into this Agreement and to consummate the transaction provided for
by this Agreement. Consummation of this transaction will not breach any
agreement to which Seller is a party.
0. ORGANIZATION . Cool Springs, Inc. is duly organized and
existing in good standing under the laws of the state of Pennsylvania.
P. STATEMENTS. Exhibit "E" attached hereto is a true,
correct and complete revenue and expenses statement for 1993, 1994 and 1995.
Q. LIABILITIES. All liabilities of Seller with respect to the
Project are set forth on Exhibit "F" hereto. All such liabilities shall be paid
by Seller on or before Closing (including all income taxes, sales taxes, and any
other relevant federal, state, or county taxes with respect to the Project,
other than real estate taxes and real estate transfer taxes for proration
between Buyer and Seller under Paragraph 6 of the Land Contract). If not paid,
appropriate escrow arrangements shall be established at closing. Buyer shall
assume no liabilities of the Project at Closing except contracts assigned to
Buyer particularly the telephone and yellow page advertising related to the
business at 1530 Hamilton Road, Bethel Park, PA 15102.
10. REZONING. Buyer and Seller have initiated a rezoning
application for the Real Property that is tentatively scheduled for Final
hearing on May 13, 1996. If the "Final Hearing Date" and zoning approval does
not take place before May 14, 1996, and Buyer desires to proceed, Buyer will
provide the Second Purchase Deposit as set forth hereinabove.
11. ASSIGNMENT. Buyer shall have the right to assign this
Agreement (and the contracts) to a related or affiliated entity.
12. BROKERAGE. Buyer and Seller each represent to the other
that they have dealt with no broker in connection with this transaction. Any
fees or commissions which may be claimed by any agent, salesman or broker shall
be the sole responsibility of the party who has dealt with any such agent,
salesmen or broker. Each party agrees to indemnify and hold harmless the other
party hereto for any and all judgments, costs of suit, attorneys' fees and other
reasonable expenses that the indemnity may incur by reason of any action or
claim made against the indemnity by any agent, salesmen or broker dealing, or
claiming to have dealt, with indemnities. This provision shall survive closing,
or termination of this Agreement for a period or five (5) years.
13. NOTICES. Any notice provided for by this Agreement and any
other notice or communication that one party may wish to send to another shall
be in writing and sent by (i) overnight commercial courier services (i.e.
Federal Express or Purolator) or (ii) United States registered or certified
mail, return receipt requested, in a properly sealed envelope and postage
prepaid, addressed to the party for which such notice or communication is
intended, at such parties addressed as set forth below or at any other address
provided in writing by such party to the other party by notice complying with
this action.
Seller: Cool Springs, Inc.
30 Corrigan Drive
Bethel Park, PA 15102
Attention: William T. Duckworth
With a copy to: Robert M. Entwisle, III, Esquire
1200 Standard Life Building
345 Fourth Avenue
Pittsburgh, PA 15222
Purchaser: Golden Bear Golf Centers Inc.
11780 U.S. Highway, #1
North Palm Beach, Florida 33408
Attention: Gary Rosmarin
With a copy to: David M. Shaw, Esquire
Fleming Haile Shaw & Gundlach, P.A.
440 Royal Palm Way
Palm Beach, Florida 33480
14. ATTORNEY'S FEES. If either party commences an action
against the other to enforce any of the terms of this Agreement or because of
the breach by either party of any of the terms hereof, the losing or defaulting
party shall pay to the prevailing party the reasonable attorneys' fees, costs
and expenses incurred in connection with the prosecution or defense of such
action, at trial and all appellate levels. Each party agrees to venue in
Allegheny County, Pennsylvania.
15. CONFIDENTIALITY. The terms of this Agreement and the
information made available as a result of the investigations which preceded the
consummation of the transactions contemplated by this Agreement are confidential
and are personal or trade or business secrets of the parties. The parties shall
not disclose to any other person the nature, terms, or conditions of this
Agreement or any information concerning the respective parties unless required
by this Agreement or as the result of litigation relating to this Agreement or
the respective parties.
16. SURVIVAL. All representations and warranties of Seller,
and all applicable covenants and agreements of Buyer and Seller shall survive
execution of the Contracts and closing thereunder and shall not merge into
the Contracts or the closing instruments thereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement
for themselves, their respective heirs, executors, personal representatives,
successors and assigns as of the date and year first above written.
BUYER:
GOLDEN BEAR GOLF CENTERS, INC.
by: _______________________________
Name:
Title:
SELLER:
---------------------------------
WILLIAM T. DUCKWORTH
COOL SPRINGS, INC.
by: _______________________________
Name:
Title:
<PAGE>
SCHEDULE OF EXHIBITS
Exhibit "A" Real Property
Exhibit "B" Assets
Exhibit "C" Land Contract
Exhibit "D" Asset Contract
Exhibit "E" Operating Statements
Exhibit "F" Liabilities
<PAGE>
Schedule A
ASSETS
The Assets for sale and transfer pursuant to this Agreement are all of
the assets of Cool Springs of any kind or nature, tangible or intangible which
are located at its business operated at 1530 Hamilton Road, Bethel Park, PA
15102*, except the following:
1) Accounts Receivable and cash on hand
2) The name Cool Springs, Inc. [Cool Springs, Inc. will consent to
the use of the Fictitious Name Golden Bear at Cool Springs]
3) Telephone number 833-1310 at 30 Corrigan Drive, Bethel Park, PA
15102
4) John Deere 450 Highlift
5) 1978 White Chevrolet pick up truck
6) 1978 Ford Bucket truck - blue
7) 1974 Red Ford Truck - stake body
8) 1958 White Ford dump truck (1 ton)
9) Telephone poles: (4) 60 foot steel poles and catwalks;
(4) 35 foot wooden poles (8 poles to remain)
10) 21 rolls of artificial carpeting recently purchased from Three
Rivers Stadium
11) Air compressor on wheels with tow bar
12) Miscellaneous personal property used at the business operated at
Corrigan Drive but stored on the Real Property during the winter months.
13) 1 asphalt paver
14) 1 old acetylene tank and torch on a dolly
15) 2 old air conditioners (roof mounted)
16) Shredder - 6 cylinder on wheels with tow bar
17) Small Sears table saw
18) Small drill press
19) 2 Cushman carts and motors
20) 1958 Chevy utility truck - disabled
21) 1949 Ford farm tractor with the following:
a) York rake
b) tiller
c) scraper
d) woods mower
22) 1978 Chevrolet Dump truck and trailer
23) Assorted cast iron swimming pool pipes and valves
- --------
* Cool Spring owns and operates assets at three separate locations:
(1) 1530 HAMILTON ROAD, BETHEL PARK, PA 15102
(2) 30 CORRIGAN DRIVE, BETHEL PARK, PA 15102
(3) 20th WARD, CITY OF PITTSBURGH (Greentree)
<PAGE>
10
9
Exhibit C
LAND CONTRACT
By and Between
WILLIAM T. DUCKWORTH, an individual having a place of business at 1530 Hamilton
Road, Bethel Park, Pennsylvania 15102 ("Seller")
and
GOLDEN BEAR GOLF CENTER, INC. 11780 U.S. Highway #1, North Palm Beach, FL
33408 ("Buyer").
1. Agreement Date. The effective date of this
Agreement (the "Agreement Date") shall be the date same is executed by both
Seller and Buyer.
2. Sale of Real Estate.
2.1 Conveyance. Seller
and Buyer, intending to be legally bound hereby, covenant and agree as follows:
Seller shall, on the date hereinafter specified, by deed of personal warranty
delivered in recordable form, grant and convey to Buyer, in fee simple, free and
clear of all liens and encumbrances, subject only to the Permitted Exceptions in
/section/ 2.2 or as otherwise hereinafter set forth, good and marketable title
(and such as will be insurable by any responsible title insurance company at
regular rates) to the following real estate ("Real Estate"):
All that certain tract or parcel of property, being Lot No.
3 in the Pittsburgh Terminal Corporation Foundation Plan of Lots, as recorded
with the Recorder of Deeds of Allegheny County, Pennsylvania on November 9, 1995
in Plan Book Volume 194, pages 190-193, situate in the Municipality of Bethel
Park, Allegheny County, Pennsylvania, more particularly bound and described as
follows:
Beginning at a point in the centerline of Hamilton Road, of
variable width, common to lands now or formerly of the Bethel Park School
District and Lot No. 3 and 4 in the Pittsburgh Terminal Corporation Foundation
Plan of Lots as recorded in the Office of the Recorder of Deeds of Allegheny
County, Pennsylvania, in Plan Book Volume 194, pages 190-193; thence from said
point of beginning by the line dividing Lot Nos. 3 and 4 in the Pittsburgh
Terminal Corporation Foundation Plan of Lots, also being the centerline of
Hamilton Road, the following five (5) courses and distances: in an easterly
direction by a curve bearing to the left having a radius of 260.00 feet through
an arc distance of 293.45 feet to a point tangency: S 82(Degree) 00 00 E a
distance of 181.56 feet to a point of curvature; in an easterly direction by a
curve bearing to the right having a radius of 630.00 feet through an arc
distance of 165.94 feet to a point of compound curvature; in an easterly
direction by a curve bearing to the right having a radius of 460.00 feet through
an arc distance of 224.60 feet to a point of compound curvature; in an easterly
direction by a curve bearing to the right having a radius of 700.00 feet through
an arc distance of 149.87 feet to a point of tangency; thence through Hamilton
Road S 26(Degree) 40' 00" E a distance of 882.86 feet; thence through same S
01(Degree) 20' 00" W a distance of 43.69 feet; thence through same and
continuing by the centerline of Baptist Road, also known as State Route 3009, of
variable width, in a southwesterly direction by a curve bearing to the right
having a radius of 1,432.39 feet through an arc distance of 465.37 feet to a
point of tangency; thence continuing by the centerline of Baptist Road S
79(Degree) 31' 09" W a distance of 149.44 feet to a point of curvature; thence
by same in a westerly direction by a curve bearing to the left having a radius
of 1,432.39 feet through an arc distance of 273.99 feet to a point on the line
dividing Lot Nos. 2 and 3 in said plan; thence by said dividing line the
following five (5) courses and distances:
N 50(Degree) 00' 00" W a distance of 471.40 feet;
N 81(Degree) 15' 00" W a distance of 60.00 feet;
N 68(Degree) 25' 00" W a distance of 162.63 feet;
N 78(Degree) 00' 00" W a distance of 174.78 feet;
N 37(Degree) 0' 00" W a distance of 402.85 feet to a point on the line
dividing said Lot No. 3 and lands now or formerly of Leo A. McKenzie;
thence by said dividing line N 32(Degree) 01' 00" W a distance of 175.89 feet
to a point common to the most southeasterly point of the northeasterly terminus
of Ridgeway Drive, 40.00 feet wide, and the line dividing Lot No. 3 and lands
now or formerly of the Bethel Park School District; thence by said dividing line
N 44(Degree) 37' 30" E a distance of 1,008.79 feet to a point; thence by same
and through Hamilton Road N 68(Degree) 43' 33" E a distance of 11.53 feet to the
centerline of Hamilton Road at the point of beginning.
Containing an area of 1,778,705 square feet or 40.833 acres;
together with the appurtenances
NOTICE-THIS DOCUMENT MAY NOT SELL, CONVEY, TRANSFER, INCLUDE OR INSURE
THE TITLE TO THE COAL AND RIGHT OF SUPPORT UNDERNEATH THE SURFACE LAND DESCRIBED
OR REFERRED TO HEREIN, AND THE OWNER OR OWNERS OF SUCH COAL MAY HAVE THE
COMPLETE LEGAL RIGHT TO REMOVE ALL OF SUCH COAL AND, IN THAT CONNECTION, DAMAGE
MAY RESULT TO THE SURFACE OF THE LAND AND ANY HOUSE, BUILDING OR OTHER STRUCTURE
ON OR IN SUCH LAND. THE INCLUSION OF THIS NOTICE DOES NOT ENLARGE, RESTRICT OR
MODIFY AND LEGAL RIGHTS OR ESTATES OTHERWISE CREATED, TRANSFERRED, EXCEPTED OR
RESERVED BY THIS INSTRUMENT. /section/This notice is set forth in the manner
provided in Section I of the Act of July 17, 1957, P.L. 984, as amended, and is
not intended as notice of unrecorded instruments, if any.
2.2 Permitted Exceptions. Buyer shall take
title to the Real Estate subject only to the "Permitted Exceptions" set forth
in Schedule B attached hereto.
3. Other Agreement. This Agreement is being
executed simultaneously with an Agreement to Sell Business Assets between Golden
Bear Golf Centers, Inc., as Purchaser and Seller relating to certain business
assets located on or used in connection with the Real Estate. Said agreement is
hereinafter referred to as the "Collateral Agreement". A party shall not be
obligated to close under this Agreement if an unfulfilled contingency or
condition excuses that party's performance under the Collateral Agreement.
4. Purchase Price. Buyer shall purchase the
Real Estate and pay therefor the sum of $2,200,000 (the "Purchase Price").
Seller acknowledges receipt of $150,000 from Buyer on March 1, 1996 as a deposit
(the Deposit) towards the Purchase Price pursuant to an Agreement entered into
between the parties effective March 1, 1996 (Master Agreement), the terms of
which are herein incorporated by reference. The balance of the Purchase Price
(less any additional deposit made by Buyer pursuant to the Master Agreement)
shall be paid at Closing in the form of cashiers check or other immediately
available funds.
5. Closing.
5.1 Closing Date. The payment of
the Purchase Price to Seller and delivery of the deed to Buyer ("Closing") shall
be on June 17, 1996 (the "Closing Date"), or if at a later time, within fifteen
(15) days of Buyers receipt of this Land Contract executed by Seller. By written
notice to Seller no later than ten business days prior to the Closing Date,
Buyer may designate for Closing a definite time on such date and a definite
place in Allegheny County, Pennsylvania.
6. Allocation of Certain Costs.
6.1 Real Estate Taxes. Real
estate taxes shall be prorated for the calendar year of Closing based upon real
estate taxes levied or estimated to be levied in that year by each taxing body
(without regard to the date of the levy or the fiscal year of the taxing body).
6.2 Other Charges. The cost of
real estate transfer taxes shall be divided equally between Seller and Buyer.
Seller shall be responsible for the cost of deed preparation and all matters of
title clearance and a reasonable charge for making disbursements on behalf of
Seller.
<PAGE>
7. Condition of the Real Estate.
7.1 Condition of the Real Estate
at Closing. Seller shall maintain and keep the Real Estate in as good condition
as it was on the date of Buyer's execution of the Agreement, except for ordinary
wear and tear and risk of loss from fire or other casualty, until delivery of
possession of the Real Estate to Buyer.
7.2 Pre-Closing Access. Buyer
shall be permitted access on reasonable notice and at a reasonable time prior to
Closing to review the Real Estate for the purpose of determining whether the
Real Estate is in the same condition as when this Agreement was signed. 8. Risk
of Loss; Insurance. Risk of loss of the Real Estate shall remain upon Seller
until Closing. Seller agrees to maintain Seller's existing property insurance
and to furnish Buyer, promptly upon Buyer's request, with a certificate of
insurance or other satisfactory evidence of the amount of coverage and date of
expiration. Except as otherwise provided herein, if there is material casualty
damage to the Real Estate between the date of Buyer's execution and delivery of
this Agreement and Closing, Buyer shall have the option (a) to terminate this
Agreement by giving Seller written notice of such termination within 10 days
after becoming aware of such damage (unless Seller shall have notified Buyer in
writing, within 10 days after receipt of such notice, of Sellers intent to
repair such damage and such repairs are completed prior to the Closing Date),
whereupon this Agreement shall be null and void, or (b) to proceed to Closing in
accordance with this Agreement and pay the Purchase Price in full, in which
event Seller shall assign to Buyer all insurance proceeds to which Seller may be
entitled as a result of such casualty damage. If Buyer fails to give such notice
or if the casualty damage is caused by Buyer or Buyer's representative or agent,
Buyer shall be conclusively deemed to have chosen option (b).
9. Municipal or Other Governmental
Improvements. Seller shall pay for all work and improvements resulting in an
assessment against the Real Estate where an ordinance or resolution authorizing
such work or improvement is adopted or approved by a municipal or other public
body or authority prior to the date of this Agreement. Buyer shall pay for all
work and improvements resulting in an assessment against the Real Estate where
an ordinance or resolution authorizing such work or improvement is adopted or
approved by a municipal or other public body or authority on or after the date
of this Agreement.
10. Representations, Warranties, and
Acknowledgments Regarding Condition of Property.
10.1 Condition of Property. Seller
has no actual knowledge of any material defects in the Real Estate or of the
violation of any code, ordinance, or regulation. 10.2 Notice of Changes. Seller
shall promptly notify Buyer in writing of any material change affecting the Real
Estate that becomes known to Seller prior to Closing.
11. Representations as to Environmental Matters.
Seller represents to Buyer that, to Seller's actual knowledge: (a) the Property
does not contain any asbestos, polychlorinated biphenyls, petroleum or petroleum
products, or any solid wastes, hazardous substances, toxic pollutants or toxic
substances (collectively, "Hazardous Substances") which are defined in,
determined, or identified as such in any federal, state, or local laws, rules,
regulations, orders, or other governmental requirements pertaining to
environmental matters (the "Legal Requirements") or any judicial or
administrative interpretation thereof, except for properly packaged cleaning
solvents and other materials which may be Hazardous Substances in such
quantities as may be customary in respect of the business conducted on the Real
Estate ("Permitted Substances"); (b) no use, generation, storage, treatment,
disposal, release, or threatened release of Hazardous Substances has occurred on
or about the Real Estate (including, but not limited to, any prior use of
underground storage tanks or any activity which may have used underground
storage tanks), other than Permitted Substances which are used, generated,
stored, treated, disposed of, and released in compliance with all applicable
Legal Requirements and permits; and (c) there are no civil, criminal, or
administrative actions, suits (including suits brought by or on behalf of a
citizen or citizens' group), demands, claims, hearings, investigations, or
proceedings pending or threatened, against Seller or in respect of the Real
Estate nor has Seller received any notice of violation, demand, or other notice
from any governmental authority or agency, citizen, or citizens' group relating
to the use, generation, storage, treatment, disposal, release, or threatened
release of Hazardous Substances on or about the Real Estate.
12. Zoning. Seller represents and warrants
that the Real Estate has the following Zoning Classification: R-3 with respect
to Bethel Park portion of real estate (approx. 99%) and R-4 with respect to
Whitehall portion of the real estate (approx. 1%); that the present use is in
compliance therewith and that there exists no notice of any uncollected
violations of housing, building, safety, or fire ordinances.
13. Sewage Facility. The Pennsylvania Sewage
Facilities Act, 35 P.S. 750.1 et seq., as amended, requires that there be a
statement regarding the availability of a community sewage system.
[ ] (a) The Real Estate is
serviced by a community sewage system.
[x] (b) Buyer is hereby advised that there is no
currently existing community sewage
system available to the Real Estate. There
are permits for the operation of two
septic tanks and said permits have been
exhibited by Seller to Buyer.
[ ] (c) Buyer is hereby advised that there is no
currently existing community sewage
system available to the Real Estate and
that a permit for an individual sewage
system must be obtained from the
appropriate local agency pursuant to
Section 7 of the Pennsylvania Sewage
Facilities Act. Buyer should contact the
appropriate local agency which administers
the Sewage Facilities Act, before signing
this Agreement to determine the procedures
and requirements for obtaining a permit
for an individual sewage system.
14. Survival of Representations and Warranties.
All representations and warranties of Seller and Buyer in this Agreement shall
survive delivery of the deed for the period provided under applicable statutes
of limitation and, unless otherwise noted herein, are true, material, and relied
upon by the other parties hereto in all respects, both as of the Agreement Date
and as of the date of Closing.
15. Default. In the event of default:
15.1 By Buyer: Seller shall
receive the Deposit as liquidated damages, in which event this Agreement shall
become null and void and both parties shall be released of all further liability
hereunder (it being agreed that, without resale, Seller's damages will be
difficult to ascertain and that all monies paid on account of the purchase price
constitute a reasonable liquidation thereof and not a penalty).
15.2 By Seller:
(a) Buyer may waive any
claim for loss of bargain and consequential damages, in which event Seller
hereby agrees to repay to Buyer all monies paid on account of the purchase price
and, in addition, reimburse Buyer for all direct, out-of-pocket costs and
expenses including, but not limited to, title examination; survey; environmental
and other property inspections; and attorneys' fees.
(b) In lieu thereof, Buyer may elect an
action for specific performance.
15.3 Enforcement Expenses: In any proceeding
for damages or equitable relief under this Agreement, the prevailing party shall
be entitled, at the discretion of the court, to reimbursement from the losing
party of all reasonable lawyers' fees, costs, and expenses of litigation
incurred in securing the relief granted by the court.
16. Eminent Domain. If the Real Estate or any
part thereof is taken by eminent domain after the Agreement Date and prior to
Closing, Buyer shall have the option to: (a) void this Agreement, whereupon all
parties shall be relieved of liability hereunder, or (b) elect to proceed with
this Agreement and pay the full consideration, in which event Seller shall
assign to Buyer all damages to which Seller may be entitled and which may be
assigned by Seller pursuant to the Pennsylvania Eminent Domain Code, 26 P. S. I
- - I 0 1 et seq, as amended. Within 5 days after notification of any such taking,
but in no event later than the Closing, Seller shall notify Buyer thereof.
17. Good Faith and Reasonableness Implied. In
all matters contained herein, both parties shall have an implied obligation of
good faith and reasonableness.
18. Waiver of Tender; Notices. Formal tender
of deed and of purchase price are hereby waived. All notices, requests, demands,
directions, and other communications (collectively, "notices") under the
provisions of this Agreement shall be in writing unless otherwise expressly
permitted hereunder and shall be sent by U.S. Postal Service first-class
certified mail -- return receipt requested; U.S. Postal Service express mail or
other overnight courier service; telecopy (fax); or personal delivery; in all
cases with charges prepaid. Any properly given notice shall be effective when
received. All notices shall be sent to the applicable party at the address
stated at the beginning of this Agreement or in accordance with the last
unrevoked notice from such party to the other parties hereto.
19. Entire Contract. This Agreement and the
Master Agreement constitute the entire contract between the parties hereto, and
there are no other understandings, oral or written, relating to the subject
matter hereof. This Agreement and the Master Agreement may not be changed,
modified, or amended, in whole or in part, except in writing signed by all
parties affected thereby.
20. Number; Gender; Headings. Wherever used in
this Agreement, the singular shall include the plural, the plural the singular,
and the use of any gender shall be applicable to all genders. Section and
paragraph headings are inserted for convenience only and do not form part of the
text of this Agreement.
21. Binding Effect. This Agreement and all of
its terms and conditions shall extend to and be binding upon the parties hereto
and upon their respective heirs, executors, administrators, successors, and
assigns.
22. Contract Formation; Counterparts. This
Agreement is effective only upon execution and delivery by all parties hereto.
This Agreement may be executed in any number of counterparts, each of which,
when executed, shall be deemed an original. This Agreement shall be legally
binding upon the parties hereto if the parties transmit identical documents or
identical counterpart documents to one another signed by the parties, including
transmittal via telecopy, showing on the telecopied signature page a signature
which purports to be that of the transmitting party. All parties having
transmitted executed documents via telecopy agree to circulate promptly in
accordance with the notice requirements of /section/18 complete documents
exhibiting original signatures of such parties to this Agreement. Failure to
transmit the originals shall not void this Agreement.
THE BETHEL PARK CODE REQUIRES THAT SIDEWALKS BE INSTALLED ON
THIS PROPERTY. THE DEVELOPER OF THIS PROPERTY HAS REQUESTED
AND RECEIVED APPROVAL FROM THE MUNICIPALITY OF BETHEL PARK
FOR A TEMPORARY WAIVER OF THIS REQUIREMENT. UPON TERMINATION
OF THIS WAIVER, WHICH MAY OCCUR AT ANY TIME, THE OWNER OF THE
PROPERTY WILL BE RESPONSIBLE FOR THE IMMEDIATE INSTALLATION
OF SIDEWALKS AT THE PROPERTY OWNERS EXPENSE.
23. No Brokers. Buyer and Seller mutually
represent and agree that no agent or broker brought about this sale.
WITNESS the due execution of this Agreement as of
the Agreement Date.
ATTEST: GOLDEN BEAR GOLF CENTERS, INC.
_______________________________ By: __________________________________
WITNESS:
_______________________________ __________________________________
William T. Duckworth
<PAGE>
14
Exhibit D
ASSET CONTRACT
THIS AGREEMENT is made at Pittsburgh, Pennsylvania on the
_____ day of ______________, 1996 by Golden Bear Golf Center, Inc. (hereinafter
"Purchaser"), and COOL SPRINGS, INC., a Pennsylvania business corporation
(hereinafter "Seller").
RECITAL
WHEREAS, Seller operates a business (the "Business") on
certain real estate located partly in the Municipality of Bethel Park and partly
in the Borough of Whitehall, Allegheny County, Pennsylvania, at the northwest
corner of the intersection of Hamilton Road and Baptist Road (hereinafter the
"Real Estate"); and
WHEREAS, simultaneously with the execution of this Agreement,
Purchaser, as buyer, and William T. Duckworth, as seller, will execute a Land
Contract whereby the Purchaser agrees to purchase the Real Estate (the Land
Contract) and
WHEREAS, Purchaser wishes to acquire from Seller certain
inventory, furniture, fixtures and other tangible and intangible property used
in or related to the operation of the Business, upon the terms and conditions
set forth below.
THEREFORE, in consideration of the mutual promises and
conditions contained in this Agreement, and intending to be legally bound, the
parties agree as follows:
<PAGE>
PURCHASE AND SALE
1. Purchaser agrees to purchase and accept from
Seller and Seller agrees to sell, assign, transfer and deliver to Purchaser on
the Closing Date (as hereinafter defined), all of Seller's right, title and
interest in and certain assets of Seller, tangible and intangible, which are
used in, and/or located at its Business, operated at 1530 Hamilton Road, Bethel
Park, PA 15102, as same may exist on Closing Date, except for the items
specified on Schedule A hereto attached, including without limitation, Seller's
right, title and interest in and to the following:
(a) all equipment, furniture, fixtures, tools
and other tangible property located at 1530 Hamilton Road,
Bethel Park, PA 15102 (the "Equipment");
(b) all finished goods, inventories and
inventories held by customers on a consignment basis,
stores, supplies and spare parts located at 1530 Hamilton
Road, Bethel Park, PA 1502 ("Inventory");
(c) all agreements, contracts (including,
without limitation, telephone and yellow page advertising),
other contractual rights, equipment, leases (exclusive of
real estate lease between William T. Duckworth and Cool
Springs, Inc., which will be terminated at the closing),
and all sales, supply and purchase orders that are related
to its operation at 1530 Hamilton Road Bethel Park, PA 15102
(the "Contracts"), a list of the material contracts being
set forth as Schedule B hereto attached.
(d) all sales and promotional literature,
books, records, files, data (including customer and supplier
lists, legal, financial and accounting records),
computer software programs, specifications, manuals, and
all written photographic or printed materials or similar
documents that are related to its operation at 1530 Hamilton
Road Bethel Park, PA 15102;
(e) all permits, authorizations, licenses
or other entitlements from any governmental agency or
other responsible parties that are related to its
operation at 1530 Hamilton Road Bethel Park, PA 15102; and
(f) all goodwill associated with the Business
that are related to its operation at 1530 Hamilton Road Bethel Park, PA
15102. The items to be sold (the "Assets") shall not include and Seller shall
retain all accounts receivable and cash on hand on the Closing Date.
CONTINGENCY
2. Purchaser's obligation to buy and Seller's
obligation to sell the Assets are each contingent upon Purchaser successfully
closing the purchase of the Real Estate pursuant to the Land Contract.
PURCHASE PRICE
3. The purchase price ("Purchase Price") for the
Assets is Seven Hundred Thousand Dollars ($700,000), payable on the Closing Date
in the form of a cashier's check or other immediately available funds. The
purchase price shall be allocated as follows:
(1) Equipment $ 14,000.00
(2) Inventory 0.00
(3) Leasehold Improvements/Building 385,000.00
(4) Covenant Not to Compete 1,000.00
(5) Goodwill 300,000.00
------------
Total $700,000.00
===========
PURCHASE PRICE ADJUSTMENTS - PRE-PAID OBLIGATIONS
3 (a) Seller shall give Purchaser a credit against Purchase Price
of $1,000.00 to reimburse Purchaser from honoring any passes, gift certificates,
etc. issued by Seller within 36 months prior to the Closing. To the extent
aforesaid passes and gift certificates exceed $1,000.00 during the 12 months
subsequent to the Closing Date, Seller shall reimburse Purchaser for same.
Purchaser shall furnish Seller with accounting records using generally accepted
accounting principles consistently applied in order to establish the claim for
reimbursement. Purchaser shall give Seller a credit for any services or rents
provided prior to the Closing date but not yet paid. Seller shall provide a list
of such amounts due at the Closing.
SELLER'S DEBTS, LIABILITIES AND OBLIGATIONS
4. Purchaser shall not assume any debts, liabilities
or obligations of Seller, except contracts assigned to Purchaser, particularly
the telephone and yellow page advertising related to the business at 1530
Hamilton Road, Bethel Park, PA 15102
CLOSING DATE
5. Subject to the terms and conditions of this
Agreement, the closing of the transactions contemplated hereby (the "Closing")
shall take place on the date on which Purchaser acquires the Real Estate
pursuant to the Land Contract (the "Closing Date"). The time and place of the
Closing shall be established by Purchaser.
PRORATIONS AT CLOSING
6. Seller and Purchaser agree that all customarily
proratable items (exclusive of rent -- see Schedule 13), including, but not
limited to, the following items, shall be prorated or adjusted between Seller
and Purchaser as of the Closing Date, with Seller to be responsible for and to
receive the benefit of those items properly attributable to the period before
the Closing Date and Purchaser to be responsible for and to receive the benefit
of those items properly attributable to the period from and after the Closing
Date:
(i) personal property taxes and assessments;
(ii) water, and other similar types of charges
or taxes; and
(iii) electric, gas, telephone and other utility
charges. Notwithstanding the foregoing, Seller shall pay all
accrued vacation, sick leave and bonuses due and owing at
Closing.
SELLER'S OBLIGATIONS ON CLOSING
7. On the Closing Date, Seller shall deliver to
Purchaser a bill of sale and other sufficient instruments of conveyance,
assignment and transfer in a form satisfactory to Purchaser's counsel,
containing full warranties of title effective to vest in Purchaser good,
absolute, and marketable title to the Assets, free and clear of all liens,
charges and encumbrances, and restrictions whatsoever.
OTHER CLOSING DELIVERIES
7 (a). Seller shall have delivered the following to Buyer
on Closing:
(i) a Certificate of Good Standing issued by the
Pennsylvania Department of State.
(ii) An Affidavit that the representations and
warranties made by Seller are true and correct as of the date
of Closing.
(iii) A copy of the resolutions adopted by the
Shareholders and Directors consenting to the sale of the
assets.
(iv) Such other documents as may be reasonably be
requested by Sellers counsel including, without limitation,
estoppel letters, consents to assignments, current financial
statement, balance sheet and representation and warranties by
Seller that the aforesaid are true and correct and are
prepared in accordance with standard accounting practices.
SELLER'S CONTINUING OBLIGATIONS
8. From time to time, after the Closing, at the
request of Purchaser, Seller shall execute and deliver to Purchaser other
instruments of conveyance and transfer and take other action as Purchaser may
reasonably require more effectively to convey, transfer to, and vest title in
Purchaser of any of the Assets, and to put Purchaser in possession of any of the
Assets.
PRE-CLOSING COVENANTS
8 (a). Seller covenants that from the date of execution
hereof until the Closing:
(i) Seller shall operate the business at 1530
Hamilton Road, Bethel Park, PA 15202 in the ordinary course,
shall maintain appropriate inventory levels (exclusive of
pro shop which is closed and has no inventory) and shall
incur and pay Accounts Payable in its ordinary and
customary manner, and in ordinary and customary amounts.
Any assets which are used, consumed, expended, or sold
between the date of execution thereof and the Closing Date
shall be replaced by items of similar value and utility.
(ii) Seller will use its best efforts to
preserve the business operated at 1530 Hamilton Road,
Bethel Park, PA 15102, substantially intact; to keep
available the services of its present officers, employees
and consultants; to maintain its present customers,
suppliers and others having business relations with
Seller; to preserve Sellers good will; and to maintain in
force (including any necessary renewal thereof) all material
rights, licenses and privileges and permits owned or used
by Seller, and all insurance policies relating to Seller
or the Assets.
(iii) Seller shall not sell any Assets other than
in the ordinary course of business and shall not enter into
contracts or incur any obligations in excess of $1,000.00
without the written consent of Purchaser.
FINANCIAL STATEMENTS
9. Seller warrants that the revenue and expense
statements for Cool Springs, Inc. for 1993, 1994 and 1995, hereto attached as
Exhibit E are true and correct and reflect the operation of the business at 1530
Hamilton Road, Bethel Park, PA 15102.
EMPLOYEE CONTRACTS/PLANS
10. Seller warrants that there are no union contracts,
collective bargaining agreements, ERISA employee benefit plans, or Health
Benefit Plans.
BOOKS AND RECORDS
11. Seller warrants that it shall retain all of its
books and records for its business at 1530 Hamilton Road, Bethel Park, PA 15102,
until December 31, 2000. In the event, Purchaser desires to audit these books
and records (such audit to be at the cost and expense of Purchaser), Seller
agrees to make said books and records available to Purchaser and its auditors
and to cooperate with respect thereto.
ORGANIZATION OF SELLER
12. Seller warrants that Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the
Commonwealth of Pennsylvania and has all requisite power and authority to own
and possess the Assets to carry on the Business as it is presently being
conducted, to enter into this Agreement, and to carry out and perform the terms
and provisions of this Agreement. Seller has no subsidiaries and, further, has
no direct or indirect interest (other than as a creditor under accounts
receivable), either by way of stock ownership or otherwise, in any firm,
corporation, or association.
SELLERS CONTINUING BUSINESS
12(a) Seller owns and operates and will continue to
own and operate other recreational businesses and assets which are not located
at 1530 Hamilton Road, Bethel Park, PA 15102. Presently, Seller manages and
operates a facility consisting of five pavilions, wading pool, roller skating
rink, and miniature golf course at Allegheny County South Park, located at 30
Corrigan Drive, Bethel Park, PA 15102, same being approximately two (2) miles
from its Hamilton Road business. In addition, Seller owns real estate beyond a
five (5) mile radius of its Hamilton Road business which may be developed into a
golf driving range.
COVENANT NOT TO COMPETE
12.(b) Seller and William T. Duckworth covenant and
agree that they will not directly or indirectly, own, operate, manage, have any
interest in or be employed by a golf driving range, golf school or baseball
batting cages, within a radius of five (5) miles of the 1530 Hamilton Road
business for a period of three (3) years subsequent to the Closing date. The
parties acknowledge that the aforesaid covenant has been bargained for and is
enforceable in any court of competent jurisdiction.
LAWSUITS AND PROCEEDINGS
13. Seller warrants that there are no actions,
suits, or proceedings pending or threatened against Seller or affecting the
Assets or any of its properties or rights, at law or in equity or before any
federal, state, municipal, or other governmental agency or instrumentality,
domestic or foreign, nor is Seller or any of its officers or directors aware of
any facts that, to its or their knowledge, might result in any action, suit, or
proceeding. Seller is not in default with respect to any order or decree of any
court or of any governmental agency or instrumentality.
COMPLIANCE WITH LAW AND OTHER INSTRUMENTS
14. Seller warrants that Seller is not in violation
of any term or provision of any mortgage, indenture, contract, agreement,
instrument, judgment, decree, order, statute, rule, or regulation applicable to
Seller; and Seller's execution and delivery of, and performance and compliance
with, this Agreement will not result in the violation of, or be in conflict
with, or constitute a default under, any term or provision of the foregoing, or
result in the creation of any mortgage, lien, encumbrance, or charge on any of
the properties or assets of Seller pursuant to any such term or provision.
CORPORATE ACTS AND PROCEEDINGS
15. Seller warrants that all actions required by any
applicable law or by the Articles and Bylaws of Seller with regard to the sale
and transfer of Assets by Seller have been accomplished and that this Agreement
has been duly and validly executed and delivered by Seller.
SELLER'S TITLE
16. Seller warrants that Seller has good, absolute,
and marketable title to all of the Assets; and that Seller holds the Assets
subject to no lease, mortgage, pledge, lien, charge, security interest,
encumbrance, or restriction, except as set forth on Schedule 13 hereto attached.
At Closing, Sellers obligation referred in Schedule 13 shall be satisfied in
full and all agreements, financing statements, and lease therein referred shall
be terminated.
COMPLIANCE WITH CONTRACTS
17. The Business is in compliance with the provisions of
all the Contracts and is not in breach or default of any of the Contracts, nor
is any third party in breach thereof. No consents are required for the
assignment of any Contract to Buyer.
TAXES
18.(a) All federal, state and local returns, forms or
reports required to be filed with respect to any Tax (as defined in paragraph
15(b)) liability of Seller or the Business have been filed in a timely manner
(taking into account all extensions of due dates) and any Tax of Seller that is
due and payable has been paid and no deficiencies for any Tax in respect of
Seller or the Business have been asserted or assessed against Seller or the
Business in writing which remain unpaid. Any Tax attributable to periods prior
to the Closing Date, but not yet payable shall be paid when due by Seller.
(b) "Tax" means any federal, state or local income,
gross receipts, franchise, privilege, estimated, alternative minimum, add-on
minimum, sales, use, transfer, registration, value added, excise, natural
resources, severance, stamp, occupation, premium, windfall profit, customs,
duties, real property, personal property, ad valorem, capital, stock, social
security, unemployment, disability, payroll, license, employee or other
withholding, or other tax, of any kind whatsoever, and including any interest,
penalties or additions to tax. For purpose of this Agreement, income taxes shall
mean taxes based on or measured by net income but shall not include franchise,
capital, stock, minimum, gross receipts or other taxes not based solely on net
income.
BULK SALES ACT/INDEMNIFICATION
19. Seller covenants that it will obtain a certificate
required by 69 P.S. /section/ 529 from the Pennsylvania Department of Revenue
subsequent to the Closing Date. Seller further indemnifies purchaser and shall
hold Purchaser harmless from any claims, liabilities, actions or other matters
in connection with the Bulk Sales Act 69 P.S. /section/ 529.
CONDITION OF ASSETS
20. Seller makes no representation concerning the
condition of the Assets. Purchaser acknowledges that these Assets are being
purchased "as is, where is", subject to part (c) of paragraph 22 of this
Agreement.
BROKERS
21. Seller and Purchaser each warrant to the other that
the introduction of Seller to Purchaser and all negotiations relative to this
Agreement and the transactions contemplated by this Agreement have been effected
and carried on without the intervention of any broker, finder or other person.
ADDITIONAL CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
22. The obligation of Purchaser to consummate
this Agreement is subject to and conditioned on the satisfaction or waived by
Purchaser, at or prior to the Closing, of all the terms and conditions of this
Agreement to be complied with or performed by Seller, and subject to the
following conditions:
(a) The validity or legality of all actions,
proceedings and documents required to carry out this Agreement
or incidental to this Agreement, and all other related legal
matters, shall be approved by Purchaser's counsel, and Seller
shall furnish to Purchaser's counsel all corporate and other
records of Seller that have been requested for that purpose.
(b) The representations and warranties of
Seller in this Agreement shall be deemed to have been made
again on the Closing Date and then be true and correct.
(c) The Assets are in substantially the same
condition on the Closing Date as on the date of this
Agreement and the Inventory is substantially the same in
value on the Closing Date as on the date of this Agreement.
(d) Seller shall provide Purchaser with payoff and
estoppel letters from Integra Bank and any Consents to
Assignment of Contracts.
OPINION OF SELLER'S COUNSEL
23. Seller shall deliver to Purchaser an opinion dated
on the date of closing, of Seller's counsel to the following effect:
(a) Seller is duly organized and validly
existing corporation in good standing under the laws of the
Commonwealth of Pennsylvania.
(b) Seller has the power to carry on its
business as it is presently being conducted, to enter
into this Agreement, to assign, transfer, and deliver to
Purchaser the properties, assets and business of Seller as
contemplated by this Agreement.
(c) All proceedings required by law or by the
provisions of Seller's articles of incorporation or bylaws
to be taken by the Seller on or before the date of this
Agreement in connection with the consummation of the
transactions contemplated by this Agreement have been
duly and validly taken.
(d) This Agreement and the instruments
executed and delivered to Purchaser pursuant to this
Agreement have been fully and properly authorized, executed
and delivered and constitute the legal, valid and binding
obligation of Seller, enforceable in accordance with
their terms.
(e) The performance of this Agreement and the
consummation of the transactions contemplated by this
Agreement will not result in any breach or violation of any
of the terms or provisions of, Seller's articles of
incorporation or bylaws, or any agreement or instrument
to which Seller is a party or by which it is bound or to
which any of its property is subject.
(f) Seller's counsel has no knowledge of
any litigation, proceeding or governmental investigation
(whether state or federal) or labor dispute or labor trouble
pending or threatened against or relating to Seller or its
properties, assets or business.
FIRE OR CASUALTY
24. Seller assumes all risk of destruction, loss or
damage due to fire or other casualty up to the Closing Date. On the destruction,
loss or damage due to fire or other casualty of all or a material portion of the
Assets, Purchaser shall have the option to terminate this Agreement, and all
rights of Purchaser and Seller shall terminate. Purchaser shall notify Seller
within seven (7) days after receiving written notice of the destruction, loss or
damage due to fire or other casualty, of its decision to terminate this
Agreement. If Purchaser does not timely notify Seller of termination, this
Agreement shall remain in full force and effect, provided, however, that the
Purchase Price shall be adjusted at the closing to reflect the destruction, loss
or damage. If Purchaser and Seller are unable to agree on the amount of the
adjustment, the dispute shall be determined by an independent appraiser, and the
determination shall be binding on both Purchaser and Seller.
ASSIGNMENT
25. Rights under this Agreement shall not be
assignable by Seller or Purchaser without the consent of the other; provided
that Seller shall not withhold its consent to an assignment by Purchaser to any
entity in which the principals of Purchaser have an ownership interest. Nothing
in this Agreement, expressed or implied, is intended to confer on any person,
other than the parties and their successors, any rights or remedies under or by
reason of this Agreement.
SURVIVAL
26. The representations and warranties made in this
Agreement shall survive Closing.
AMENDMENT AND WAIVER
27. No amendment, modification or alteration of the
terms or provisions of this Agreement shall be binding unless the same shall be
in writing and duly executed by the parties hereto, except that any of the terms
or provisions of this Agreement may be waived in writing at any time by the
parties which is entitled to the benefits of such waived terms or provisions. No
single waiver of any of the provisions of this Agreement shall be deemed to or
shall constitute a continuous waiver of such provision or a waiver of any other
provision hereof (whether or not similar). No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
NOTICES
28. Any notices or other communications required or
permitted under this Agreement shall be sufficiently given if delivered
personally or sent by registered or certified mail, postage prepaid, addressed
to Seller at 30 Corrigan Drive, Bethel Park, PA 15102, or to Purchaser at 11780
U.S. Highway #1, North Palm Beach, FL 33408 or at any other address furnished in
writing by either party to the other, and shall be deemed to have been given as
of the date delivered or deposited in the United States mail, as the case may
be.
CHOICE OF LAW
29. It is the intention of the parties that the laws of
the Commonwealth of Pennsylvania should govern the validity of this Agreement,
the construction of its terms, and the interpretation of the right and duties of
the parties.
ARBITRATION
30. Any dispute arising under this Agreement shall
be resolved under the commercial arbitration rules of the American
Arbitration Association.
HEADINGS
31. Headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
COUNTERPART EXECUTION
32. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
<PAGE>
GENDER
33. All personal pronouns used in this Agreement shall
include the other genders whether used in the masculine or feminine or neuter
gender, and the singular shall include the plural whenever and as often as may
be appropriate.
PARTIES IN INTEREST
34. All the terms and provisions of this Agreement
shall be binding on and inure to the benefit of, and be enforceable by, Seller
and Purchaser and their successors and assigns.
INTEGRATED CONTRACT
35. This Agreement along with the Agreement entered
into by the parties effective March 1, 1996 (Master Agreement) constitute the
entire agreement between the parties, and there are no other agreements,
understandings, restrictions, warranties or representations between the parties
other than those set forth or provided for in this Agreement and the Master
Agreement.
ATTEST: GOLDEN BEAR GOLF CENTERS, INC.
___________________________ By: __________________________
Secretary President
ATTEST: COOL SPRINGS, INC.
___________________________ By: __________________________
Secretary President
The provisions of Paragraph 12(b) - Covenant Not Compete - are
accepted and agreed to this _____ day of ___________________, 1996.
__________________________________
William T. Duckworth
<PAGE>
EXHIBIT F - LIABILITIES
UTILITIES
Duguesne Light Co
301 Grant Street
Pittsburgh, PA 15279-0001
(412)393-7100
Golf School Acct. #000663161001
Range Acct. #4000560781001
Baseball Acct. #4000583926001
Mini Golf Acct. #8000569416001
Columbia Gas of PA (Pro Shop)
650 Washington Road
Pittsburgh, PA 15228
(412)343-6800
Acct. #1005-4913-001-9
Equitable Gas (Golf School)
Allegheny Center Mall Suite 2000
Pittsburgh, PA 15212-5352
(412)442-3050
Acct. #1-02-021-108100-1
Pennsylvania American Water Co.
410 Cooke Lane
Pittsburgh, PA 15234-1414
(412)344-4400
Pro Shop Acct. #700-87140974-00; Meter # 8615448
Golf School Acct. #700-87141032-00; Meter # 9272747
Range Acct. #700-02991310-01; Meter # 10442259
Baseball Acct. #700-06232685-04; Meter # 17390034
Mini Golf Acct. #700-02991315-01; Meter # 39104268
Bell Atlantic
PO Box 28000
Lehigh Valley, PA 18002-8000
1-800-329-5050
Golf School - 831-5080-211-77Y
Range - 881-9877-587-81Y
Baseball - 881-9987-653-53Y
Mini Golf - 881-9814-657 -55Y
<PAGE>
LOANS
Integra Bank Guarantee & Suretyship Agreement $1,350,000
William T. Duckworth 256,046
REAL ESTATE TAXES
As a result of a sub-division by Pittsburgh Terminal Corporation
Foundation, 100.933 acres of real estate was sub-divided into four parcels.
William T. Duckworth purchased a 40.833 acres of parcel -- the Real Property of
this Agreement -- for $1,650,000. Prior to the sub-division, the entire 100.933
acres had a fair market value of $810,000 for Allegheny County assessment
purposes. Subsequent to the sub-division, the county reassessed the now
sub-divided four parcels and ascribed a fair market value of $630,000 to the
Duckworth property. The Bethel Park School District has appealed this
reassessment, arguing that the fair market value of the property is $1,650,000,
the stated purchase price on the deed. No hearing date has been set. The millage
rates are as follows:
Municipality of Bethel Park 82.5
Bethel Park School District 98 [estimated - not determined until
mid-summer]
Allegheny County 25.2
The tax is determined by taking 1/4 x FMV x millage.
EXHIBIT 10.20
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
THIS AGREEMENT, made this 26th day of April, 1996, between FIRST
SPORTS CAPITAL ASSOCIATES, LTD., INC., hereinafter referred to as Seller, and
Robert Sacco and Carmine Dell Aquila "Seller's Shareholder's", and GOLDEN BEAR
GOLF CENTERS, INC., or its permitted assigns, hereinafter referred to as
"Buyer."
WITNESSETH
WHEREAS, Seller owns and operates a golf driving range located in
Tom's River New Jersey as hereinafter described; and
WHEREAS, Seller wishes to sell, and Buyer wishes to buy, under the
terms and conditions herein, all of the assets of Seller and Seller's business,
except as specifically excluded by this Agreement:
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein, the parties agree as follows:
1. PROPERTY SUBJECT TO SALE. As of the closing date, Seller shall sell to
Buyer and Buyer shall buy from Seller for the purchase price hereinafter
provided, the following described business and personal property:
(a) All of the assets of that certain business operated by Seller at
1348 Fisher Boulevard known as the Tom's River Driving Range (hereinafter
sometimes called the "Business"), including but not limited to all customer
lists and records owned or maintained by Seller; all supplier and distribution
rights; all contract rights and benefits arising from contracts, licenses and
agreements to which Seller is a party and which relate to the business; designs,
logos and business marks; the post office address, telephone number and goodwill
of the Business. Set forth on Schedule 1 attached hereto, is a list of all
material contracts regarding the operation of the Business, which contracts
shall be assigned to Buyer and assumed by Buyer (the "Contracts") at closing.
(b) The Corporation's rights in such leases of personal property
identified on Schedule 2, as are necessary to the operation of the Business,
subject to Buyer's assumption of said leases pursuant to Paragraph 4.
(c) All of the golf range equipment, office equipment, furniture,
fixtures, maintenance equipment, miscellaneous supplies, leasehold improvements
and signs owned by Seller wherever situated, including, but not limited to,
those assets listed on Exhibit "A" attached and incorporated herein. The assets
listed on Exhibit "B" attached and incorporated herein, shall not be purchased
by Buyer.
<PAGE>
(d) All of Seller's permits and other licenses necessary or incident to
the operation of the Businesses which are identified on Schedule 3. Such permits
and licenses shall be assigned to Buyer at Closing.
2. PROPERTY EXCLUDED FROM SALE. The sale contemplated by this Agreement
shall not include the following property:
(a) Any cash of the Seller, any books and records of the Seller (except
copies of such books and records that deal with work in process, and records of
work done on which there are no guarantees, shall be delivered to Buyer), and
Seller's accounts receivable. Seller agrees that it shall maintain and preserve
its books and records for a period of two years after the closing date and shall
allow Buyer the right to inspect and audit such books and records at Buyer's
cost and expense.
(b) The Assets listed on Exhibit "B" attached and incorporated herein,
which shall include Seller's pro shop inventory.
3. PURCHASE PRICE.
(a) DETERMINATION OF PURCHASE PRICE. The Purchase Price to be paid for the
Asset's by Buyer shall be ONE MILLION NINE HUNDRED THOUSAND DOLLARS
($1,900,000.00), which Purchase Price shall be payable as follows:
1. FIVE HUNDRED THOUSAND DOLLARS ($500,000) payable in cash or
certified funds on the Closing Date.
2. The balance of the Purchase Price of ONE MILLION FOUR HUNDRED
THOUSAND DOLLARS ($1,400,000.00) shall be evidenced by a Promissory Note in the
Form attached hereto as Exhibit "C", to be executed and delivered to Seller by
Buyer at closing. The note will be guaranteed by Purchaser's affiliated company
Golden Bear International, Inc. or GBI's successor in interest.
(b) ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Assets as follows:
Equipment $12,000.
Buildings and
Improvements $1,888,000
-2-
<PAGE>
(c) PRORATIONS. A proration shall be made at closing, for tangible personal
property taxes, all insurance (if transferable) at Buyer's option, customer
deposits, and service and maintenance agreements (if transferable) at Buyer's
option. Seller agrees that if Purchaser honors any prepaid lessons or passes or
other prepaid items, Seller will reimburse Purchaser upon demand for the amount
of such items. If the assessed value or rate of tax with respect thereto shall
not have been determined for the year of closing prior to the closing date, the
value and rate shall be based on the amount thereof for the prior year. All
prepaid deposits shall either be assigned to Buyer with a credit to Seller or
Buyer shall arrange for the return of Seller's deposit to be replaced by a
deposit by Buyer. Purchaser agrees to use its best efforts to have the guaranty
of Seller's principal regarding utilities extinguished, including the posting of
a substitute deposit. The parties hereto shall make adjustments between
themselves at a later date for any change in tax rates or valuations for the
year of closing. Seller shall, at closing, deliver to Buyer, checks made payable
to Seller's employees in an amount equal to the accrued vacation pay, accrued
bonuses or sick bonuses, if any, for said employees which shall then be
distributed.
4. ASSUMPTION OF LIABILITIES, LEASES, AGREEMENTS AND CHARGEBACKS. Buyer
shall assume none of the liabilities, leases or agreements of Seller nor of the
business sold hereunder except as provided on Exhibit "D", attached and
incorporated herein. Seller shall pay all liabilities promptly when due.
5. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller and Buyer have entered
into an Agreement dated as of April 26, 1996 (the "Agreement"), which Agreement
sets forth certain representations and warranties of Seller and Seller's
principals. The representations and warranties set forth in the Agreement, and
the limitations thereon set forth in Section 14 of the Agreement, are hereby
incorporated herein and made a part hereof, all of which are true on the date
hereof, will continue to be true on each day until and including the closing and
as provided in the Agreement, shall survive the closing of the transactions
contemplated hereby for a period of twelve (12) months. In addition, Seller
makes the following representations and warranties, all of which are true on the
date hereof, will continue to be true on each day until and including the
closing and, shall survive the closing of the transactions contemplated hereby
for a period of twelve (12) months:
(a) CONDITION OF ASSETS. The Assets are being sold "AS IS." Seller will
not remove or cause to be removed any such furnishings, fixtures or equipment
without the written consent of Buyer. The furnishings, fixtures and equipment
located on the business premises as of the date hereof are those furnishings,
fixtures and equipment normally used in the business in the normal course of
business. Seller has not removed or caused to have been removed any furnishings,
-3-
<PAGE>
fixtures or equipment normally used in the conduct of the business unless Buyer
as been informed in writing of such removal.
(b) ORGANIZATION; GOOD STANDING; AUTHORITY RELATIVE TO THIS AGREEMENT.
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the State of New Jersey and has the corporate powers to own
its properties and carry on its business as and where its business is now
conducted. Seller's stockholders and Board of Directors, as required by New
Jersey law, have approved this Agreement and this Agreement is a valid and
binding obligation of Seller, enforceable in accordance with its terms.
(c) NO MATERIAL ADVERSE CHANGE. The Financial Statements attached to
the Agreement are true and correct and reflect in all material respects the
operations of the Business. Since December 31, 1995, there has been no material
adverse change in the financial condition of the business, nor any other
material adverse change in the condition of the Business.
(d) OTHER AGREEMENTS. All material Contracts relating to the operation
of the business are set forth on Schedule 1, and Seller is not a party to any
agreement of any kind or form, written or oral, that relates to any of the
assets transferred hereunder beyond the date of closing. Neither the execution
nor delivery of this Agreement by Seller nor its performance by Seller will
result in the breach of any term or provision of, or constitute a default under,
or permit acceleration of, any indenture, mortgage, note, loan agreement, deed
of trust, or other agreement to which the Seller is a party, or by which the
Seller is bound.
(e) SUBSIDIARIES. Seller has no subsidiaries.
(f) TAX RETURNS AND PAYMENTS. The Seller has duly filed all Federal,
state and local tax returns and reports required to be filed and has duly paid
or established adequate reserves for the proper payment of all taxes and other
governmental charges upon it or its properties, assets, income, franchises,
licenses or sales. Neither the Department of Revenue of the State of New Jersey
nor the Internal Revenue Service, nor any other governmental agency has audited
or requested to audit and settle any tax returns of the Seller for any fiscal
year of the Seller. All monies required to be withheld by the Seller from
employees for income taxes, social security and unemployment insurance taxes
have been collected or withheld, and either paid to the respective governmental
agencies or set aside in accounts for such purposes, or accrued, reserved
against, and entered upon the books of the Seller.
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(g) INSURANCE. All insurable properties of the Seller are insured for
its benefit, in amounts and against such risks as deemed adequate by Seller's
management, under valid and enforceable policies issued by insurers of
recognized responsibility.
(h) BONUSES TO EMPLOYEES. Seller has not accrued a bonus for any
employee or independent contractor which contract is to be assumed by Buyer.
Except as listed on Exhibit "F", no incentive bonuses are paid and there is no
accrued vacation or sick time payable to Seller's employees except as listed on
Exhibit "G".
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer hereby makes the
following representations and warranties to the Seller, all of which shall be
true at the closing and shall survive the closing of the transactions
contemplated hereby:
(a) ORGANIZATION; GOOD STANDING. The Buyer shall be a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida with all requisite corporate power to own, operate and lease its
properties and assets and to enter into and perform its obligations hereunder.
At the closing, the Buyer will be qualified to do business and will be in good
standing in the State of New Jersey.
(b) LITIGATION. There shall be no suit, action or litigation,
administrative, arbitration or other proceeding or governmental investigation
pending or, to the knowledge of the officers of the Buyer, threatened which
might, severally or in the aggregate, materially and adversely affect the
financial condition or prospects of the Buyer or the Buyer's ability to perform
its obligations under this Agreement.
(c) AUTHORITY. The Buyer shall have taken prior to closing all
necessary corporate action to approve this Agreement and the performance of its
obligations hereunder.
(d) COMPLIANCE WITH INSTRUMENTS, CONSENTS, ADVERSE AGREEMENTS. Neither
the execution nor the delivery of this Agreement nor the consummation of the
transactions contemplated hereby will conflict with or result in any violation
of or constitute a default under any term of the Articles of Incorporation or
Bylaws of the Buyer or any material agreement, mortgage, indenture, license,
permit lease or other instrument, judgment, decree, order, law or regulation by
which the Buyer shall be bound. No consent, approval or authorization of or
designation, declaration or filing with any governmental authority or other
persons or entities on the part of the Buyer shall be required or shall be
unfulfilled in connection with the
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execution or delivery of this Agreement or the consummation of the transactions
contemplated hereby. The Buyer shall not be a party to or subject to any
agreement or instrument, or subject to any charter or other corporate
restriction or any judgment, order, writ, injunction, decree, rule or regulation
which materially and adversely affects or, so far as the Buyer may foresee, may
in the future materially and adversely affect the business operations,
prospects, properties, assets or condition, financial or otherwise, of the
Buyer.
7. COVENANTS OF SELLER.
(a) CONVEYANCE. Conveyance of assets hereunder shall be by a Warranty
Bill of Sale, executed by Seller, in the form attached hereto as Exhibit H,
conveying all right, title and interest in the assets conveyed, free of any
encumbrances, liens or charges of any kind.
(b) DISCHARGE OF ENCUMBRANCES. Except as expressly assumed by Buyer on
Exhibit "E", Seller will arrange for the release of all encumbrances, liens, or
charges of any kind affecting the Assets transferred hereunder such that all
such encumbrances, liens or charges shall be released at or prior to closing.
This includes, without limitation, performance of all acts and execution and
filing of all documents necessary to release any and all security agreements, as
defined by both applicable common law and the Uniform Commercial Code, that
affect in any way the ownership, use or possession of any of the assets,
properties or rights transferred hereunder.
(c) CONTINUED OPERATIONS. Subject to the terms of the Interim
Management Agreement, Seller shall remain in possession and operate the business
in its customary manner until the closing date. The Seller will maintain all of
its properties in customary repair, order and condition, reasonable wear and
tear excepted, and will maintain insurance upon all of its properties and, with
respect to the conduct of its business, in such amounts and of such kinds
comparable to that in effect on the date of this Agreement. The Seller will
maintain its books, accounts and records in the usual manner on a basis
consistent with prior years.
(d) ACCESS TO PROPERTIES, ETC. Subject to the provisions of Section 5
(a) of the Agreement, Seller will give to the Buyer and to Buyer's counsel,
accountants, investment advisors and other representatives full access during
normal business hours to all of the properties, books, tax records, contracts,
commitments and records of the Seller and will furnish to Buyer all such
documents and information with respect to Seller's affairs as Buyer may from
time to time reasonably request. Seller specifically consents to granting
Buyer's representatives the right to sample sales and use tax compliance and
excise tax compliance, and, if deemed
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warranted by Buyer's representatives after such sampling, Seller shall request
an audit by the respective taxing authority prior to the closing.
(e) CERTAIN PROHIBITED TRANSACTIONS. Except with the prior written
consent to Buyer, Seller shall not enter into any contract to merge or
consolidate with or sell its assets, except in the ordinary course of business,
or change the nature or character of its business.
(f) ENCUMBRANCES OF ASSETS. Seller will not, directly or indirectly,
encumber any of its assets except in the ordinary course of business.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. All obligations of
Seller under this Agreement are subject to the fulfillment, at the option of
Seller, at or prior to the date of the closing of each of the following
conditions:
(a) The representations and warranties of the Buyer herein contained
shall be true on and as of the date of closing with the same force and effect as
though made on and as of said date, except as affected by transactions
contemplated hereby.
(b) Buyer shall have performed all of its obligations and agreements
and complied with all of its covenants contained in this Agreement to be
performed and complied with by the Buyer prior to the date of closing.
(c) Seller shall have received a certificate by Buyer, executed by the
President or any Vice President of the Buyer, dated the date of closing, in form
and substance satisfactory to Seller's counsel, certifying as to the fulfillment
of the matters mentioned in Paragraphs 8(a) and (b).
(d) Buyer's counsel shall have delivered to Seller an opinion, dated
the date of the closing, in form and substance satisfactory to Seller's counsel,
to the effect:
(1) Buyer (a) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida,
and (b) has all requisite corporate power and authority to own, operate and
lease its property and assets.
(2) The Buyer has corporate power and authority
to execute and perform this Agreement, and has taken all action required by law,
its
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Articles of Incorporation, bylaws or otherwise to authorize the execution,
delivery and performance by the Buyer of this Agreement, and to consummate the
acquisition contemplated hereby, and this Agreement has been duly executed and
delivered by Buyer and, assuming due execution of this Agreement by Seller, are
valid and binding instruments of the Buyer.
(e) No suit, action or other proceeding shall be pending before any
court or governmental agency in which it is sought to restrain or prohibit or to
obtain damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby or which might materially
and adversely affect the value of the assets and business of the Seller.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER. All obligations of
the Buyer under this Agreement are subject to the fulfillment, at the option of
the Buyer, at or prior to the date of the closing, of each of the following
conditions:
(a) The representations and warranties of the Seller herein contained
shall be true on and as of the date of the closing with the same force and
effect as though made on and as of said date, except as affected by transactions
contemplated hereby.
(b) Seller shall have performed all of its obligations and agreements
and complied with all of its covenants and conditions contained in this
Agreement to be performed and complied with by Seller prior to the date of
closing.
(c) There shall not have been (1) any material adverse change in the
financial condition or in the operations, business, properties or assets of
Seller from that shown on its "operating reports dated December 31, 1995 until
the date of the Interim Management Agreement , or (2) any material damage,
destruction or loss to any of the properties or assets of the Seller, whether or
not covered by insurance, which has adversely affected or impaired or which does
or may adversely affect or impair the ability of Seller to conduct its business,
or (3) any demand for union election, picketing or demand for good faith
negotiations for a collective bargaining agreement. (or any event or condition
of any character which has adversely affected or which does or may adversely
affect or impair the business of Seller).
(d) Buyer shall have received a certificate of the Seller, executed by
the President of the Seller, dated the date of the closing, in form and
substance satisfactory to counsel for the Buyer, certifying as to the
fulfillment of the matters mentioned in Paragraphs 9(a), (b) and (c).
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(e) Counsel for Seller shall have delivered to Buyer an opinion, dated
the date of the closing, in form and substance satisfactory to counsel for
Buyer, to the following effect:
(1) Seller (a) is a corporation duly organized,
validly existing and in good standing under the laws of the State of New Jersey,
and (b) has all requisite corporate power and authority to own its properties
and assets and to carry on its business as now being conducted.
(2) Seller has all requisite corporate power to
execute and perform this Agreement.
(3) The execution, delivery and performance by
the Seller of this Agreement (a) has been duly authorized by all necessary
corporate and stockholder action on the part of the Seller, (b) does not violate
the Articles of Incorporation or bylaws of the Seller, and (c) to the best of
its knowledge, as of the Closing Date, will not result in a breach in, or
constitute a default under, any indenture, agreement or other instrument to
which the Seller is a party or by which the Seller or any of its properties or
assets is bound.
(4) This Agreement has been duly executed and
delivered by the Seller and, assuming due execution by Buyer, the Agreement
constitutes a valid and binding instrument of the Seller.
(5) Seller has the complete and unrestricted power to
transfer, convey and deliver to Buyer all of the assets purchased hereunder.
(6) They are not aware of any action, suit,
proceeding or inquiry at law or in equity or by or before any federal, state or
local governmental instrumentality or other agency now pending or threatened
against or affecting the Seller, or any property or rights of Seller other than
Seller's suit with Seller's landlord described in the Agreement.
(7) To the best of their knowledge, without
independent investigation, the Seller is not in default with respect to any
judgment, writ, injunction or decree of any court or governmental agency, and
the Seller is not in default in the performance, observance or fulfillment of
any material obligation, covenant or agreement by which it is bound or by which
any of its assets is affected.
In giving such opinion such counsel may rely,
as to matters of fact, upon certificates of officers of the Seller, and
certificates of good standing and other certificates of governmental agencies.
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(f) No suit, action or other proceeding shall be pending before any
court or governmental agency in which it will be, or it is, sought to restrain
or prohibit or to obtain damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereunder or
which might materially and adversely affect the value of the assets and business
of the Seller.
(g) The parties shall have entered into the Sublease contemplated by
the Agreement and Buyer shall have received the estoppel certificate from the
owner of the real property in the form attached hereto as Exhibit I.
(h) Buyer or Buyer's representative shall have completed the compliance
check for sales and use taxes and excise taxes and, if applicable, the
appropriate taxing authority shall have completed its audit, and any taxes
resulting from such audit shall have been paid.
10. RISK OF LOSS. Until the closing, the Seller shall bear the entire risk
of loss to the assets sold hereunder.
11. CLOSING. The consummation of the transactions referred to in this
Agreement shall occur on the Closing Date (the "Closing Date") which, provided
all conditions precedent to closing shall have been materially satisfied on or
before such date, shall be within ten (10) business days from the date that
Seller notifies Buyer that all conditions precedent have been satisfied.
Notwithstanding anything herein to the contrary, if the Closing has not occurred
on or before August 1, 1996, other than by reason of default of Seller, or
default of Buyer, either party shall have the right to terminate this Agreement
by providing notice to the other party, whereon this Agreement shall become null
and void and of no further force or effect. The closing contemplated by this
Agreement shall take place at a location to be agreed to by Seller and Buyer.
12. INSTRUMENTS AND OTHER ITEMS TO BE DELIVERED AT CLOSING. At the closing:
(a) Seller shall deliver to Buyer:
(1) Warranty Bill of Sale as to the Assets.
(2) UCC-3 releases or estoppel letters agreeing to
provide UCC-3 releases after payment in full from the security interests in
Seller's assets.
(3) Current certificates of good standing from the
Secretary of State, State of New Jersey.
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(4) Certificate of the Seller required by Paragraph
9(d) hereof.
(5) Certified copy of resolutions of the Board of
Directors and Seller's Shareholders approving the execution, delivery and
performance of this Agreement and designating the officer or officers authorized
to carry out the terms hereof.
(6) Opinion of counsel for Seller required by
Paragraph 9(e) hereunder.
(7) Assignments Assumptions of all Contracts and
Licenses necessary or incident to the operation of the Business.
(b) Buyer shall deliver to Seller:
(1) Current certificate of good standing from the
Secretary of State, State of Florida.
(2) Certificate of the Buyer required by Paragraph
8(c) hereof.
(3) Certified copy of resolutions of the Board of
Directors and Shareholders of Buyer approving the execution, delivery and
performance of this Agreement and designating the officer or officers authorized
to carry out the terms hereof.
(4) Opinion of counsel for Buyer required by
Paragraph 8(d) hereof.
(5) Cash or cashier's check for the purchase price.
(6) The Promissory Note and Guarantee required
by paragraph 3(a)2.
13. ACCOUNTS RECEIVABLE, ETC. At closing, Seller shall provide Buyer with a
list of those accounts receivable of the Seller (hereinafter referred to as
"Seller's receivables") which were generated prior to closing and are retained
by Seller. Buyer agrees, for a twelve (12) month period, to collect Seller's
receivables, for the benefit of Seller. Buyer shall retain for its collection
efforts an amount equal to its actual cost of collections. Buyer is not assuming
any collection liability for Seller's receivables, but is merely agreeing to
collect same for the benefit of Seller. Buyer shall not be obligated to take any
affirmative action concerning the collection of the receivables other than
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transferring the amount collected to Seller. Seller shall be allowed access to
Buyer's books and records to review the collection activities.
14. INDEMNIFICATION OF BUYER .
(a) Seller and Seller's Shareholders, jointly and severally, each shall
indemnify and hold harmless Buyer against and in respect of:
(1) All liabilities and obligations of, or claims
against, the Seller, not expressly assumed hereby by Buyer.
(2) All damages, loss, cost or expense of Buyer
resulting from any misrepresentation, breach of warranty, or nonfulfillment of
any agreement on the part of Seller under this Agreement or from any
misrepresentation in, or omission from, any certificate, or other instrument
furnished or to be furnished by Seller or Seller's Shareholders to Buyer under
this Agreement occurring within twelve (12) months from the closing of the
transaction.
(3) All federal, state and local taxes applicable to
the transaction contemplated hereby, if any.
(4) All actions, suits, proceedings, demands,
assessments, judgments, costs and expenses, including reasonable attorneys'
fees, incident to any of the foregoing.
(b) Seller and Seller's Shareholders, jointly and severally, shall
reimburse Buyer on demand for any payment made by Buyer at any time after the
closing in respect of any liability, obligation, or claim to which the foregoing
indemnity relates. Should any claim covered by the foregoing indemnity be
asserted against Buyer, Buyer shall notify Seller promptly and give Seller an
opportunity to defend the same, and Buyer shall extend reasonable cooperation to
Seller or Seller's Shareholders in connection with such defense. In the event
Seller or Shareholder fails to defend the same within a reasonable time as
determined by Buyer, Buyer shall be entitled to assume the defense thereof, and
Seller and Seller's Shareholders, jointly and severally, shall be liable to
repay Buyer for all of its expenses reasonably incurred in connection with the
defense (including reasonable attorneys' fees and settlement payments).
(c) Buyer shall have the right to set off any payments due Buyer
hereunder against any obligations owed by Buyer to Seller or Seller's
Shareholders, including, but not limited to, the payments due under the
Promissory Note.
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15. INDEMNIFICATION OF SELLER.
(a) Buyer indemnify and hold harmless Seller against and in respect of:
(1) All liabilities and obligations of, or claims
assumed hereby by Buyer.
(2) All damages, loss, cost or expense of Seller
resulting from any misrepresentation, breach of warranty, or nonfulfillment of
any agreement on the part of Buer under this Agreement or from any
misrepresentation in, or omission from, any certificate, or other instrument
furnished or to be furnished by Buyer under this Agreement.
(3) All federal, state and local taxes applicable to
the transaction contemplated hereby, if any.
(4) All actions, suits, proceedings, demands,
assessments, judgments, costs and expenses, including reasonable attorneys'
fees, incident to any of the foregoing.
(b) Buyer, shall reimburse Seller on demand for any payment made by
Seller at any time after the closing in respect of any liability, obligation, or
claim to which the foregoing indemnity relates. Should any claim covered by the
foregoing indemnity be asserted against Seller, Seller shall notify Buyer
promptly and give Buyer an opportunity to defend the same, and Seller shall
extend reasonable cooperation to Buyer in connection with such defense. In the
event Buyer fails to defend the same within a reasonable time as determined by
Seller, Seller shall be entitled to assume the defense thereof, and Buyer, shall
be liable to repay Seller for all of its expenses reasonably incurred in
connection with the defense (including reasonable attorneys' fees and settlement
payments).
16. BROKERS. Each party represents to the other that it has dealt with no
broker in connection with this transaction, and that each party agrees to
indemnify and hold the other party harmless from any and all commissions claimed
by any other broker or third party by virtue of this transaction.
17. WAIVERS AND NOTICES. Any failure by any party to this Agreement to
comply with any of its obligations, agreements or covenants hereunder may be
waived by the Seller or Seller's Shareholder in the case of a default by the
Buyer and by the Buyer in the case of a default by the Seller. All waivers under
this Agreement and all notices, consents, demands, requests, approvals and other
communications which are
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required or may be given hereunder shall be in writing and shall be deemed to
have been duly given if delivered or mailed certified first class mail, postage
prepaid, return receipt requested.
(a) If to the Seller:
First Sports Capital Associates, Ltd., Inc.
1 Waterview Drive
Port Jefferson, New York
with copies to:
Stuart J. Stein, P.C.
Attorney at Law
400 Garden City Plaza
Garden City, New York 11530
(b) If to the Buyer:
Golden Bear Golf Centers, Inc,
11780 U.S. Highway One
North Palm Beach, Florida 33408
Attn: Gary R. Rosmarin, President
with a copy to:
Oren S. Tasini, Esq.
Suite 300
11780 U.S. Highway One
North Palm Beach, Florida 33408
or to such other person or persons at such address or addresses as may be
designated by written notice to the other parties hereunder.
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18. COVENANT NOT TO COMPETE. For a period of three (3) years from the
closing date, Seller and Seller's Shareholders shall not, directly or
indirectly, within the Restricted Area, as defined below, own, manage, operate,
or control, or be employed by or participate in, either directly or indirectly,
or be connected in any manner whatsoever with the ownership, management,
operation or control of any business in competition with the Business. Nothing
herein shall be construed as prohibiting Buyer from pursuing any other remedies
available to it for such breach or threatened breach, including the recovery of
damages from Seller and Seller's Shareholders.
Seller and Seller's Shareholders acknowledge that their breach or
threatened or attempted breach of any provision of this Paragraph 18 would cause
irreparable harm to the Buyer, is not compensable in money damages, and Buyer
shall be entitled, in addition to all other applicable remedies, to a temporary
and permanent injunction in a decree for specific performance of the terms of
this Paragraph 18, without being required to prove damages or furnish any land
or other security. In the event any provision of this Paragraph 18 is determined
to be invalid by any court or any other entity of competent jurisdiction, the
provisions of this Paragraph 18 shall be deemed to have been amended and the
parties hereto agree to execute all documents necessary to evidence such
amendment, so as to eliminate or modify any such invalid provisions so as to
carry out the intent of Paragraph 18 as far as possible and to render the terms
of this Paragraph 18 enforceable in all respects as so modified. The covenant
not to compete shall survive the Closing.
For purposes of this Paragraph 18, "Restricted Area" shall mean a
ten (10) mile radius from the business.
19. COVENANTS OF CONFIDENTIALITY. The Seller and Seller's Shareholders
will not disclose to any person or entity or use for their own benefit, whether
or not for monetary gain, any proprietary and confidential information related
to the business, including, without limitation, know-how, business procedures
and methods, marketing and business plans, financial contacts, financial data
and customer or patient-related information, whether or not such information
would be protectible as trade secrets, without the Buyer's specific prior
written permission.
20. DEFAULT. Upon a default by either Buyer or Seller, the parties
shall have all rights and remedies available at law or in equity, including a
suit for specific performance.
21. SALES TAX. Seller, shall prior to closing, provide Buyer with
evidence that all sales taxes have been paid by Seller and a certificate from
the State of New Jersey absolving Buyer of any liability for sales tax.
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22. BENEFIT. This Agreement shall bind the parties hereto, their
successors and assigns.
23. CONSTRUCTION. This Agreement is being delivered and is intended to
be performed in the State of New Jersey and shall be construed and enforced in
accordance with the laws of that state.
24. WAIVER OF BREACH. Any waiver by the parties of a breach of any
provision of this Agreement by the other party shall not be construed as a
waiver of any subsequent breach by said party.
25. MODIFICATION. This Agreement sets forth the entire understanding of
the parties with respect to the subject matter hereof, and may not be changed
except by written document executed by all of the parties hereto.
26. ASSIGNMENT. This Agreement shall not be assignable by either party
without prior written consent of the other party, except, however, Buyer may
assign this Agreement to a company affiliated with Buyer without the further
consent of Seller, provided that the assignee assume Buyer's obligations under
the Promissory Note.
27. PARAGRAPH HEADINGS. Paragraph headings as used herein are for
convenience only and shall not be construed as limiting this Agreement or any of
its several paragraphs to the provisions described by such paragraph headings.
28. SEVERABILITY. Each paragraph, provision, sentence and part thereof
of this Agreement shall be deemed construed as limiting this Agreement or any of
its several paragraphs to the provisions described by such paragraph headings.
29. ATTORNEYS' FEES. In the event either party breaches this Agreement
and such breach results in litigation, the prevailing party shall have the right
to recover all costs of such litigation before, during, and after trial and all
appeals to include a reasonable attorneys' fee through all such trials and
appeals.
30. ESCROW AGREEMENT. The Escrow Agent receiving funds or equivalent is
authorized and agrees by acceptance of them to deposit them promptly, hold same
in escrow and, subject to clearance, disburse them in accordance with terms and
conditions of Contract. Failure of clearance of funds shall not excuse Buyer's
performance. If in doubt as to Escrow Agent's duties or until a judgment of a
court of competent jurisdiction shall determine the rights of the parties or
Escrow Agent may deposit with the clerk of the circuit court having jurisdiction
of the dispute. Upon notifying all parties concerned of such action, all
liability on the part of Escrow Agent
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shall fully terminate, except to the extent of accounting for any items
previously out of escrow. Any suit between Buyer and Seller where Escrow Agent
is made a party because of acting as Escrow Agent hereunder, or in any suit
wherein Escrow Agent interpleads the subject matter of the escrow, Escrow Agent
shall recover reasonable attorneys' fees and costs incurred with the fees and
costs to be charged and assessed as court costs in favor of the prevailing
party. Parties agree that Escrow Agent shall not be liable to any party or
person for misdelivery to Buyer or Seller of items subject to this escrow,
unless such misdelivery is due to willful breach of Contract or gross negligence
of Escrow Agent.
31. EXPENSES. Except as provided in Section 30 above, regardless of
whether the transactions contemplated by this Agreement shall be consummated,
each party shall pay its own expenses incident to preparing for, entering into
and carrying into effect this Agreement and the transactions contemplated
hereby.
32. TERMINATION. This Agreement may be terminated by written notice
given as provided herein on or prior to the Closing as follows, and in no other
manner:
(a) By mutual consent of the parties;
(b) By Buyer or Seller, if, at or before the closing, any condition
precedent set forth herein for the benefit of Buyer or Seller, respectively,
shall not have been timely met;
(c) By either party if the closing shall not have occurred on or
before September 1, 1996, or such later date as may have been agreed upon in
writing by the parties; or
(d) By Buyer or Seller, respectively, if, at the closing, any
representation or warranty made herein for the benefit of Buyer or Seller,
respectively, or in any Certificate, Schedule, Exhibit or document furnished to
Buyer or Seller, respectively, pursuant to this Agreement is untrue in any
material respect, or Seller or Buyer, respectively, shall have defaulted in any
material respect in the performance of any obligation set forth in this
Agreement.
33. SURVIVE CLOSING. The representations, and warranties set forth in
section 14 of the Agreement and in this Agreement shall survive the Closing for
a period of twelve (12) months and the obligations set forth in Sections 13, 14,
15 and 18 may be enforced after the Closing and said enforcement shall not be
estopped by the Closing of this Agreement. All other representations and
warranties shall not survive the closing.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
SELLER: FIRST SPORTS CAPITAL DEVELOPMENT, LTD., INC.
WITNESSES:
- --------------------------- By:______________________________
- ---------------------------
BUYER:
WITNESSES:
- --------------------------- By:______________________________
- ---------------------------
SELLING SHAREHOLDERS:
WITNESSES:
- ---------------------------
- ---------------------------
- ---------------------------
- ---------------------------
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RIDER TO SUBLEASE
FIRST SPORTS CAPITAL DEVELOPMENT ASSOCIATES, LTD., INC.
WITH
GOLDEN BEAR GOLF CENTERS, INC.
R.1. OPTION TO EXTEND TERM
A. Provided TENANT is not then in default in any of its obligations
under this Sublease, TENANT may extend the term of this Sublease for two (two)
consecutive periods of five (5) years each (the "Option Terms") under the
following conditions:
1. LANDLORD shall have received written notice from
TENANT of its election to exercise either option at
least 6 months prior to the end of the then current
term of this Sublease. Such notice shall constitute
the binding obligation of TENANT.
2. The Basic Annual Rent during the Option Term or Terms
shall be as set forth in Exhibit "A" and all required
payments of additional rent shall remain in effect.
3. Except as herein stated, all of the terms and
conditions of the Sublease shall remain in effect
during the Option Term or Terms except that at the
end of the second Option Term there shall be no
further option.
B. NOTICE OF EXPIRATION OF OPTION
Notwithstanding anything to the contrary above stated, the
time in which TENANT may exercise any option to extend shall not be deemed to
have expired until expiration of fifteen (15) days' notice from LANDLORD that
the current term is due to expire and that the option must be exercised or
waived.
R.2. SUBLEASE PROVISIONS
A. PRIME LEASES:
This lease is a sublease, LANDLORD hereunder being the prime tenant
under the following two prime leases (the "Prime Leases"):
Lease dated March 12, 1994 between Laurie R. Applegate and Ann S.
Applegate as Landlords and First Sports Capital Development Associates,
Ltd. as Tenant, a Short Form of which lease was recorded in the office
of the clerk of Ocean County on July 26, 1994 at Deed Book 5183 Page
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<PAGE>
Lease dated March 12, 1994 between Toms River Skateboard Park,
Inc. as Landlord and First Sports Capital Development
Associates, Ltd. as Tenant, a Short Form of which lease was
recorded in the office of the clerk of Ocean County on July
26, 1994 at Deed Book 5183 Page 0946
Both Prime Leases having been amended by Amendment to Leases dated
March 12, 1994
Both Prime Leases having been further amended by Lease Amendment dated
July 7, 1994.
The above described leases, as amended, are referred to in this
Sublease as the "Prime Leases".
B. PARTIES INITIALLING COPY OF PRIME LEASES
LANDLORD represents that the copy of the Leases and amendments thereto
comprising the Prime Leases, which copies are being initialled by the parties at
the time of the signing of this Sublease, are true and accurate copies of the
originals thereof. TENANT acknowledges that it has received the copy of the
Prime Lease documents and is familiar with the term thereof.
C. In the event of any default by LANDLORD under either of the Prime
Leases, TENANT may pay rent directly to Prime Landlord or otherwise cure the
default under the Prime Lease or Leases and LANDLORD shall promptly reimburse
TENANT for all such payments. In the event reimbursement is not made within
ninety (90) days then TENANT may set off the amounts paid to Prime Landlords
against the next rental payments due hereunder. LANDLORD shall give immediate
notice of any claim of default under the Prime Leases, or either of them, to
Tenant. LANDLORD shall use its best efforts to cause Prime Landlords to
undertake to give notice and right to cure to Tenant of any alleged default
under the Prime Leases, or either of them.
R.3. REAL ESTATE TAXES AND IMPOSITIONS
A. TENANT TO PAY REAL ESTATE TAXES
TENANT shall pay to LANDLORD as and for additional rent all real estate
taxes, assessments (including but not limited to all assessments for public
improvements or benefits, whether or not commenced or completed within the term
of this Sublease) and other governmental charges, general and special, ordinary
and extraordinary, foreseen and unforeseen, of any kind and nature whatsoever,
which at any time prior to or during the term of this Sublease may have been or
may be assessed, levied, imposed upon, or grow or become due or payable out of
or in respect of, or become a lien on, the Premises or any part thereof or any
appurtenance thereto and any tax or other levy upon or measured by the use,
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occupancy or rents from the Premises other than LANDLORD's income tax
(hereinafter referred to as "Real Estate Taxes").
B. APPORTIONMENT
Prepaid or unpaid Real Estate Taxes as of the commencement date of this
Sublease and as of the last day of the term of this Sublease shall be
apportioned. LANDLORD shall use its best efforts to have the Premises separately
assessed by local taxing authorities. Until such time, if at all, that the
Premises are separately assessed, TENANT shall pay 93.6% of the Real Estate
Taxes on the tax lot of which the Premises form a part. Such amount shall be
paid to LANDLORD immediately upon request which request shall include a copy of
the relevant tax bill or bills and LANDLORD shall thereafter promptly pay the
Real Estate Tax then due for the entire lot of which the Premises are a part.
Following receipt by LANDLORD of a receipt of payment of real estate taxes from
the local receiver of taxes, LANDLORD shall promptly furnish a copy thereof the
TENANT.
R.4. UTILITIES
TENANT shall furnish, at its own expense, all utilities of every type
and nature required by it in its use of the Premises and shall pay or cause to
be paid, when due, all bills for water, sewerage, heat, gas, electricity and
other utilities, if any, used on, in connection with, or chargeable against the
Premises until the termination of this Sublease. In the event LANDLORD is
charged for any utility provided to or used in connection with the Premises
after the Commencement Date, TENANT shall immediately pay to LANDLORD the amount
thereof. Notwithstanding the foregoing, TENANT shall utilize the existing
sewerage lines pursuant to article R.7 (A) and (C).
R.5. INDEMNITY AND INSURANCE
A. INDEMNITY
TENANT shall at all times, including any time prior to the Commencement
Date should TENANT have access to the Premises prior thereto, indemnify LANDLORD
for, defend LANDLORD against, and save LANDLORD harmless from, any liability,
loss, cost, injury, damage or other expense whatsoever that may occur or be
claimed by or with respect to any person(s) or property on or about the Premises
and resulting directly or indirectly from the use, misuse, occupancy, possession
or unoccupancy of the Premises by TENANT or any concessionaires, subtenants or
other persons claiming through or under TENANT, or their respective agents,
employees, licensees, invitees, guests or other such persons, or from the
condition of the Premises. TENANT shall, at its cost and expense, defend
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against any and all such actions, claims and demands and shall indemnify
LANDLORD for all costs, expenses and liabilities it may incur in connection
therewith. LANDLORD shall not in any event whatsoever be liable for any injury
or damage to the Premises or to the TENANT or to any concessionaires, subtenants
or other persons claiming through or under TENANT, or their respective agents,
employees, licensees, invitees, guests or other such persons or to any property
of such persons unless caused by the acts or omissions of LANDLORD or any of its
agents or employees. TENANT shall not make any claim or demand upon or institute
any action against the LANDLORD as a result of such injury or damage.
B. GENERAL LIABILITY INSURANCE
TENANT, at its cost and expense, prior to having access to the
Premises, even if such access be prior to the Commencement Date, shall obtain
and maintain in force throughout the term of this Sublease, comprehensive
general liability insurance against any loss, liability or damage on, about or
relating to the Premises, with limits of not less than TWO MILLION
($2,000,000.00) DOLLARS per occurrence. Any such insurance obtained and
maintained by TENANT shall name both LANDLORD and TENANT as the insured parties
therein and shall be obtained and maintained from and with a reputable and
financially sound insurance company(ies) reasonably acceptable to LANDLORD,
authorized to issue such insurance in the State of New Jersey. All rights of
subrogation against LANDLORD under such policy or policies shall be waived. The
policies of insurance required hereunder shall contain an agreement by the
insurer that it will not cancel or modify such policy except after fifteen (15)
days prior written notice by LANDLORD by certified mail, return receipt
requested. Not less than fifteen (15) days prior to the expiration of any such
insurance policy, TENANT shall deliver to LANDLORD a certificate evidencing the
replacement or renewal thereof.
C. POLICIES OR CERTIFICATES DELIVERED TO LANDLORD
TENANT shall furnish LANDLORD with duplicate original(s) or original
certificate(s) of all insurance to be maintained by it under this Sublease,
including renewal and replacement policies, together with written evidence that
the premiums therefor have been paid. The insurance may be blanket policies
covering other locations operated by TENANT, its affiliates or subsidiaries,
provided that such blanket policies otherwise comply with the provisions of this
ARTICLE. Subject to the provisions of this Sublease, TENANT shall comply with
the requirements of any Mortgages relating to the insurance and to the proceeds
of insurance maintained and required to be maintained by TENANT pursuant to the
provisions of this ARTICLE.
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D. WORKER'S COMPENSATION AND OTHER INSURANCE
The TENANT shall, throughout the term of this Sublease, at its own cost
and expense, obtain and maintain in full force and effect and in the name of
LANDLORD,and TENANT
(1) "ALL RISK" casualty insurance covering all
improvements on the Premises at 100% replacement
value.
(2) Worker's Compensation insurance subject to statutory
limits or better in respect of any work or other
operations on or about the Premises.
(3) Such other insurance with respect to the Leased
Premises and in such amounts as LANDLORD from time to
time may reasonably request against such other
insurable hazards which at the time in question are
commonly insured against in the case of property
similar to the Premises including plate glass
insurance.
(4) During the performance of any construction, broad
form Builder's All Risk insurance.
(5) Business interruption insurance in an amount
equivalent to not less than on year's basic rent plus
additional rent.
E. CERTAIN TERMS OF INSURANCE
All insurance to be obtained by TENANT shall:
(1) Be obtained from and maintained with reputable and
financially sound insurance company(ies) reasonably
acceptable to LANDLORD, authorized to issue such
insurance in the State of New Jersey.
(2) Be reasonably satisfactory to LANDLORD.
(3) Provide that the proceeds of any loss shall be
payable to LANDLORD, for the purposes set forth in
this Sublease subject to the provisions of Section
R.6 hereof.
(4) Contain an agreement by the insurer that it will not
cancel or modify such policy except after thirty (30)
days' prior written notice to LANDLORD and any
Mortgagees by certified mail, return receipt
requested.
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(5) Provide that any loss otherwise payable thereunder
shall be payable notwithstanding any act or
negligence of LANDLORD or TENANT which might, absent
such agreement, result in a forfeiture of all or part
of the payment of such loss.
(6) Name, as additional insured parties, LANDLORD and
such other parties having an insurance interest at
LANDLORD may designate.
F. RENEWALS OF INSURANCE-COPIES OR CERTIFICATES OF INSURANCE
Not less than fifteen (15) days prior to the expiration of any such
insurance policy, TENANT shall deliver to LANDLORD a certificate evidencing the
replacement or renewal thereof. TENANT shall furnish LANDLORD and any Mortgagees
with duplicate original(s) or original certificate(s) together with true
copy(ies) of all such insurance policies, including renewal and replacement
policy(ies), together with written evidence that the premiums therefor have been
paid.
G. WAIVER OF SUBROGATION
All insurance policies on the Premises maintained by LANDLORD and
TENANT shall waive the rights of subrogation as against the other.
R.6. RESTORATION
A. DUTY TO RESTORE, APPLICATION OF INSURANCE PROCEEDS
If any portion of the building or improvements now existing or
hereafter erected on the Premises, whether owned by LANDLORD or TENANT is
damaged or destroyed by fire or other casualty TENANT shall restore the building
and/or improvements and the insurance proceeds shall be held by LANDLORD or
LANDLORD's mortgagee to be applied for reimbursement to TENANT of the cost of
TENANT's restoration of the Premises.
B. NO ABATEMENT IN RENT
The obligation to pay the Basic Annual Rent and Additional Rent as set
forth herein and to otherwise perform TENANT's obligations hereunder shall
continue unabated by reason of such damage or destruction; that is, there shall
be no abatement or diminution of Basic Annual Rent or release from any of
TENANT's obligations hereunder by reason of such damage or destruction
regardless of the period of time, if any, during which the Premises or any part
thereof remain untenantable, any Laws to the contrary notwithstanding.
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C. DAMAGE DURING LAST FIVE YEARS OF TERM
Notwithstanding anything above to the contrary, in the event of
substantial damage to any building or improvement on the Premises during the
last 5 years of the term of this Sublease, TENANT or LANDLORD may elect, by
notice given to the other within 21 days of such damage, not to restore same and
the insurance proceeds shall be the property of LANDLORD and this Sublease shall
thereafter be deemed in all respects terminated. TENANT may exercise any option
that it then has to extend the term of this Lease beyond five (5) years (if
there is such a remaining option available). In the event of such option then
the expiration shall be deemed the expiration of the option term rather than the
current term.
D. INSURANCE TRUSTEE
Notwithstanding anything to the contrary contained in this Rider, in
the event the amount of insurance proceeds exceeds $100,000.00, then the
insurance proceeds shall be received by an insurance proceeds trustee to be
agreed upon between the parties. If the parties cannot agree upon such trustee,
then the trustee shall be a lending institution in Toms River, New Jersey, at
which TENANT's operating account is maintained. The insurance trustee shall hold
the funds and shall pay the funds to TENANT against presentation of receipted
bills for restoration work done or, at TENANT's direction, shall pay the
proceeds directly to the contractors or suppliers providing labor and materials
in connection the restoration.
R.7. LICENSE TO USE COMMON AREAS, SEWERAGE
A. LICENSE TO USE COMMON AREAS
Provided TENANT is not in material default of any of its obligations
under this Sublease, after any applicable grace or cure periods, TENANT, its
employees and customers shall have the non-exclusive right to use the parking
areas and driveways shown on Schedule "A" as The Common Areas and the Sewer
pipes and systems servicing the Premises (together referred to as the "Common
Areas").
B. LANDLORD'S OBLIGATIONS REGARDING COMMON AREAS
TENANT shall maintain the Common Areas in good working order and
repair, with the land comprising the Common Area being free of accumulations of
rubbish. TENANT shall not permit ice or snow to accumulate so as to interfere
with the operation of other business of LANDLORD or adjoining property of
LANDLORD serviced by the Common Areas at the Premises. TENANT shall further
cause the lands comprising the Common Areas to be lighted during evening hours,
in such manner as it deems appropriate.
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C. PARTICIPATION IN COMMON AREA AND SEWERAGE COSTS
(i) TENANT shall pay to LANDLORD its proportionate share of sewer and
water costs on the first day of each month during the term hereof as reasonably
estimated from time to time by LANDLORD based on actual purchase orders and
service and maintenance contracts. In the event that, at the end of any fiscal
year or half year accounting period of LANDLORD, the amount of TENANT's
proportionate share of sewer and water costs is greater or lesser than the
monthly estimated payments received, then the difference shall be paid or
credited immediately upon completion of such accounting. For the avoidance of
doubt, the costs of operating and maintaining the water and sewer systems shall
include insurance, testing, permits, maintenance, service and repair. The cost
of the water shall include hydrant flushing, actual water consumed and
governmental testing and cost of permits, together with the cost of maintenance
and repair. TENANT's proportionate share of sewer and water costs, at the outset
of this Lease, shall be 44%, taking into consideration that there is only one
other user of the sewer and water systems. In the event of any future
construction at the Premises or at the property of LANDLORD adjoining the
Premises or TENANT, then TENANT's proportionate share of sewer and water system
charges shall be re-determined based on sewerage flows as determined by the
applicable governmental authority.
(ii) Simultaneously herewith TENANT is paying to LANDLORD, as
a "tap-in fee" for the sewerage the sum of EIGHTY-SEVEN THOUSAND
FIVE HUNDRED 00/100 ($87,500.00) DOLLARS.
(iii) LANDLORD shall maintain the sewer collection and pumping facility
at the Premises in good condition and repair throughout the term of this Lease.
R.8. RIGHT TO ASSIGN
TENANT may assign this Sublease to an affiliate or franchisee provided
that such assignment:
(i) shall not be effective until LANDLORD shall have received
an executed and acknowledged counterpart of the assignment and
assumption agreement in form reasonable satisfactory to it;
and
(ii) shall not be deemed to release TENANT from its obligation
under this Sublease
(iii) TENANT may further sublease or may assign this Lease to any other
entity subject to LANDLORD's consent not to be unreasonably withheld.
TENANT shall provide LANDLORD with such financial and biographical
information regarding the proposed assignee or subtenant as LANDLORD
may reasonably
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require. LANDLORD may condition its consent upon the posting of
security deposits in LANDLORD's reasonable discretion. In the event of
such sublease or assignment to a non-affiliated entity, all income
received by reason of such sublease or assignment, in excess of that
being paid by TENANT to LANDLORD, shall be divided between LANDLORD and
TENANT and TENANT shall pay 50% thereof as additional rent to LANDLORD.
R.9. COVENANT AGAINST LIENS
If, because of any act or omission (or alleged act or omission) of
TENANT or anyone claiming through TENANT, any mechanic's or other lien, or
charge or for the payment of money or other encumbrance shall be filed against
any portion of the Premises (whether or not such charge, order or encumbrance is
valid or enforceable as such) TENANT shall, at its cost and expense, cause same
to be discharged or bonded within thirty (30) days (or such shorter time as may
be required under any Mortgage) after notice to TENANT of the filing or
imposition thereof; and TENANT does hereby indemnify and hold LANDLORD harmless
from all losses, damages, expenses, liabilities, suits, penalties, claims, and
obligations, including, without limitation, reasonable attorneys' fees,
resulting therefrom. All materialmen, contractors, artisans, mechanics,
contractors, subcontractors and any other persons now or hereafter furnishing
any services, materials, supplies or equipment to TENANT with respect to any
portion of the Premises, are hereby charged with notice that they must look
exclusively to TENANT to obtain payment for same. Notice is hereby given that
the LANDLORD shall not be liable for any labor, services, materials or supplies
furnished or to be furnished to the TENANT upon credit, and that no mechanic's
or other lien for any such labor, services, materials, supplies or equipment
shall attach to or affect the interest of the LANDLORD in and to the Premises.
R.10. LANDLORD'S AND TENANT'S CERTIFICATES
A. LANDLORD and TENANT shall, each without charge at any time and
from time to time, within ten (10) days after request by the other party,
certify by written instrument, duly executed, acknowledged and delivered to any
Superior Landlord, Mortgagee, assignee of any Mortgagee or purchaser, or any
proposed Mortgagee, or proposed assignee or sub-tenant of TENANT or any other
person, firm or corporation specified by LANDLORD or TENANT:
(1) That this Sublease is unmodified and in full force
and effect (or, if there has been modification, that
the same is in full force and effect as modified and
stating the modifications).
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(2) Whether or not there are then existing any breaches
or defaults by the other party under any of the terms
of this Sublease and specifying such breach or
default or any set-offs or defenses against the
enforcement of any of the agreements, terms,
covenants or conditions of this Sublease upon the
part of the LANDLORD or TENANT, as the case may be,
to be performed or complied with (and, if so,
specifying the same and the steps being taken, if
any, to remedy the same).
(3) The dates, if any, to which the Basic Annual Rent,
additional rent and other charges under this Sublease
have been paid in advance.
R.11. CHANGES AND ALTERATIONS BY TENANT
A. TENANT, at its own cost and expense, may erect improvements on the
Premises, including a miniature golf course, and shall have the right at any
time and from time to time during the term of this Sublease to make other
changes and alterations to the Premises. (All of the foregoing are hereinafter
collectively called "TENANT CHANGES"), subject, however, IN ALL CASES, to the
following:
(1) LANDLORD's prior written consent shall be required in
each instance of any TENANT's Changes involving the
structure or exterior of the any building on the
premises which consent shall not be unreasonably
withheld or delayed.
(2) No TENANT Changes shall be undertaken until the
TENANT shall have procured and paid for all required
permits, certificates, notices and authorizations of
all municipal departments and governmental
subdivisions having jurisdiction; and, at TENANT's
expense, the LANDLORD shall join in the application
for such permits and authorizations whenever it is
necessary provided LANDLORD incurs no cost or
liability thereby and further provided that such
application does not affect the use of LANDLORD'S
adjoining property.
B. If any TENANT Changes, other than the Initial Construction,
involves an estimated cost in excess of ONE HUNDRED THOUSAND
($100,000.00) DOLLARS then
(i) Such change shall only be done under the
supervision of a licensed architect or engineer
selected by TENANT and reasonably satisfactory to
LANDLORD and shall be made in accordance with
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detailed plans and specifications (the "PLANS AND
SPECIFICATIONS") and cost estimates prepared by such
architect or engineer and approved in writing by the
LANDLORD which approval LANDLORD agrees not to
unreasonably withhold or delay.
(ii) Prior to the commencement of such TENANT Change
the total cost for such TENANT Changes shall be
placed in escrow in an account at a federally insured
lending institution which account shall require the
signature of a designated representative of both
LANDLORD and TENANT for withdrawal. Withdrawals shall
be permitted against percentage of work completed as
certified by the aforementioned architect or
engineer.
(iii) Any TENANT Changes shall be made promptly,
prosecuted diligently to completion and complete in a
good workmanlike manner and in compliance with all
applicable permits and authorizations and building
and zoning laws and all laws and in accordance with
the orders, rules and regulations of the Board of the
Fire Underwriters and any other body hereafter
exercising similar functions having or asserting
jurisdiction over the Premises.
(iv) In lieu of the escrow account described above,
LANDLORD shall accept a payment and performance bond
in the amount of the cost of the improvements, as
certified by the above mentioned architect or
engineer, which bond shall be issued by an insurance
company licensed to do business in the State of New
Jersey and reasonably satisfactory to LANDLORD which
bond shall be in a form satisfactory to LANDLORD and
which shall permit LANDLORD to elect to have the
Premises completed or demolished.
(v) In the alternative, in lieu of the provisions of
paragraphs (iii) through (iv) TENANT may guaranty
payment for all labor and materials in connection
with the work to be done and completion of all such
work PROVIDED that TENANT, if other than Golden Bear
Golf Centers, Inc., shall have a net worth, according
to a certified statement prepared by outside
certified public accountants in an amount of not less
than TWENTY FIVE MILLION ($25,000,000.00) DOLLARS.
R.12. CONDEMNATION
A. In the event that at any time during the term of this
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Sublease, title to the whole or materially all of the Premises shall be taken by
the exercise of the right of condemnation or eminent domain or by agreement
between the LANDLORD and those authorized to exercise such right, this Sublease
shall terminate and expire on the date of such taking (herein called the "Taking
Date") and the rent provided to be paid by the TENANT shall be apportioned and
paid to the Taking Date.
B. If a portion of the Premises is taken such that it would be
impossible to conduct the TENANT's business or if all reasonable means of
ingress and egress to and from the Premises are permanently eliminated by reason
of such a taking then, in any of such events this Sublease shall terminate on
the date the condemning authority acquires possession of the Premises or
eliminates ingress or egress.
C. In the event of any taking of a portion of the Premises and if this
Sublease shall not terminate as provided herein, then this Sublease shall
continue unaffected and there shall be no abatement in the Basic Annual Rent, or
Additional Rents due hereunder.
D. In the event of any taking as above described, LANDLORD shall be
entitled to all awards, damages, consequential damages and compensation for such
taking, including the value of the leasehold, EXCEPT THAT TENANT shall be solely
entitled to any award made and designated as being for loss of income to TENANT
or other loss to TENANT by reason of the cessation of its business or any award
made for the value of improvements owned by TENANT taking into consideration the
balance of the term of this Sublease.
R.13. IMPROVEMENTS ON THE PREMISES; NO WASTE
A. TENANT shall maintain all improvements on the Premises, whether
owned by TENANT, LANDLORD, or otherwise, in good condition and repair throughout
the entire term of this Sublease and at the expiration of this Sublease such
improvements shall become the property of LANDLORD.
B. TENANT shall not permit waste to occur at the Premises or
to the improvements thereon.
R.15. MISCELLANEOUS PROVISIONS
A. Neither a failure by the LANDLORD to exercise any of its options
hereunder, nor failure to enforce its rights or seek its remedies upon any
default, nor the acceptance by the LANDLORD of any rent accruing before or after
any default, shall effect or constitute a waiver of the LANDLORD's right to
exercise such option, to enforce such right, or to seek such remedy with respect
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to that default or to any prior or subsequent default. The remedies provided in
this Sublease shall be cumulative and shall not in any way abridge, modify or
preclude any other rights or remedies to which the LANDLORD may be entitled
either at law or in equity.
B. Any notice, exercise of option or election, communication, request
or other document or demand required or permitted under this Sublease shall be
in writing and shall be given to LANDLORD or TENANT by first class certified or
registered mail, return receipt requested, or by overnight carrier service such
as Federal Express, Purolator Courier, (etc).
(1) to the LANDLORD as follows:
FIRST SPORTS CAPITAL DEVELOPMENT
ASSOCIATES, LTD., INC.
c/o Carmine Dell Aquila
1 Waterview Drive
Port Jefferson, New York 11777
with copy by regular mail and "FAX" to:
STUART J. STEIN, P.C.
400 Garden City Plaza
Garden City, New York 11530
Attn: Stuart J. Stein, Esq.
Fax No. 516-742-7848
(2) to the TENANT as follows:
GOLDEN BEAR GOLF CENTERS, INC.
11780 U. S. Highway 1
North Palm Beach, Florida 33408
with copy by regular mail and "FAX" to:
FLEMING, HAILE, SHAW & GUNDLACH, P.A.
440 Royal Palm Way
Palm Beach, Florida 33480
Attn: David M. Shaw, Esq.
Fax No. 407-833-5604
Either party may, from to time, change the address at which such
written notices, exercise of options or elections, communications, requests, or
other documents or demands are to be mailed, by giving the other party(ies)
written notice of such changed address, pursuant to the terms hereinabove set
forth. At LANDLORD's option, which may be exercised at any time hereafter,
TENANT shall send copies of any and all said notices and other communications
designated by LANDLORD, to any Mortgagees and
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Superior Lessors designated by LANDLORD.
C. If any term or provision of this Sublease or the application thereof
to any person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Sublease, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term and provision of this
Sublease shall be valid and be enforced to the fullest extent permitted by law.
D. This Sublease sets forth all the promises, inducements, agreements,
conditions and understandings between LANDLORD and TENANT relative to the
Premises, and there are no promises, agreements, conditions or understandings,
either oral or written, express or implied between them, other than as herein
set forth. Except as herein otherwise provided, no subsequent alteration,
amendment, change or addition to this Sublease shall be binding upon LANDLORD or
TENANT, unless reduced to writing and signed by the party(ies) to be charged
therewith.
E. The captions of the several Sections and Subsections of this
Sublease are not a part of the context hereof and shall be ignored in construing
this Sublease. They are intended only as aids in locating various provisions
hereof.
F. Except as may be expressly otherwise provided herein, the terms,
covenants and conditions hereof shall insure to the benefit of and shall be
binding upon LANDLORD and TENANT and their successors and assigns.
G. TENANT shall obtain and deliver to LANDLORD, with reasonable
promptness, such information respecting the operation of the Premises or the
financial condition and affairs of TENANT and of any guarantors, as LANDLORD may
from time to time reasonably request.
H. Each of LANDLORD and TENANT warrant and represent to the other that
it has dealt with no broker in connection with this transaction and has had no
conversations or dealings with any broker. Each of LANDLORD and TENANT,
respectively ("Indemnitor"), hereby indemnifies the other ("Indemnitee") against
any claims of any broker by reason of said broker having had a conversations or
dealing with the Indemnitor in connection with this transaction and agrees to
reimburse the Indemnitee for any damages the Indemnitee might sustain by reason
of such claims including Indemnitee's cost of defending any action in connection
therewith and reasonable legal fees of the Indemnitee in connection therewith.
I. Either party, at the request of the other, at any time, shall
execute and acknowledge a Short Form Lease for recording prepared by Counsel to
requesting party in form reasonably
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acceptable to counsel to the other.
J. All sums due from TENANT to LANDLORD under this Sublease, other than
the Basic Rent, shall be due as and for additional rent and the failure to pay
same shall entitle the LANDLORD to the same remedies it has as if there were a
default in the payment of the Basic Rent.
R.16. MODIFICATION TO PARAGRAPH 12 OF LEASE FORM
Paragraph 12 of the lease form to which this rider is attached is
amended to add the following at the end thereof:
"This provision shall not apply to Common Areas for which
LANDLORD has maintenance obligations as set forth in Section
R.7 of the Rider hereto."
R.17. NON-DISTURBANCE AGREEMENT
Paragraph 14 of the lease from to which this rider as attached is
amended to add the following at the end thereof:
"This lease shall only be subordinate to such mortgage or
mortgages provided the holder thereof shall have provided TENANT with an
agreement providing that, in the event of any default by LANDLORD as mortgagor,
such Mortgagee will not disturb the Tenancy herein granted provided TENANT
attorns to Mortgagee."
R.18. In the event of any discrepancy between the parties the prevailing party
shall be entitled to recover Court costs and attorneys' fees from the
non-prevailing party.
R.19. Either party at the request of the other shall execute a short form of
this Lease and acknowledge same in form for recording.
R.20. Included in the Premises herein subleased is all right of LANDLORD in
connection with a Cross-Easement Agreement affecting the Premises and effecting
Block 442, Lot 40, on the Tax Map of Ocean County. TENANT shall have the
non-exclusive benefits and burdens of said Cross-Easement Agreement.
R.21. Notwithstanding anything to the contrary contained herein, TENANT shall
have thirty (30) days to cure any non-monetary default. TENANT shall have
additional time to cure such non-monetary default provided TENANT promptly
commences and diligently proceeds with such cure. Notwithstanding anything to
the contrary herein, TENANT may cease operating and provided all other
obligations of TENANT under the Lease are complied with, such cessation shall
not be a default hereunder.
15
<PAGE>
R.22. TENANT shall have the right to obtain bona fide leasehold financing
provided that in no event shall LANDLORD have any obligations or liabilities in
connection therewith nor shall such leasehold financing constitute a lien on the
LANDLORD's leasehold interest. LANDLORD shall cooperate with the reasonable
requirements of TENANT's lender in connection therewith provided that it incurs
no expense or liability and further provided that LANDLORD is not required to
diminish its remedies nor incur any prospective economic harm.
<PAGE>
SCHEDULE "B"
PAYMENT SCHEDULE
FIRST SPORTS CAPITAL DEVELOPMENT ASSOCIATES, LTD., INC.
WITH
GOLDEN BEAR GOLF CENTERS, INC.
TENANT shall pay to LANDLORD, as BASIC ANNUAL RENT as herein set forth.
For the first year of the term hereof period ("First Lease Year") the
Basic Annual Rent shall be TWO HUNDRED FORTY THOUSAND AND 00/100 ($240,000.00)
Dollars, due and payable in equal monthly installments on the first day of each
month during said First Lease Year in the amount of TWENTY THOUSAND AND 00/100
($20,000.00).
Commencing on the first day of each of the two succeeding lease years,
(that is, from May 1, 1997 and May 1 of each succeeding year) the Basic Annual
Rent shall be the greater of:
A. The Basic Annual Rent for the immediately preceding Lease
year multiplied by 104%; or
B. The Basic Annual Rent for the immediately preceding lease
year plus the "CPI Increase" during the immediately preceding
lease year.
Commencing on the first day of the fourth lease year the Basic Annual
Rent shall be the sum of $252,000 increased by the greater of 4% or the "CPI
Increase" during the first lease year, which Basic Annual Rent as calculated
shall be further increased by the greater of 4% or the CPI Increase during the
second lease year; which Basic Annual Rent as calculated shall be further
increased by the greater of 4% or the CPI Increase during the third lease year.
Commencing on the first day of the fifth lease year and for each lease
year thereafter, the Basic Rent Annual Rent shall be the Basic Annual Rent for
the immediately preceding lease year increased by the greater of 4% or the "CPI
Increase" during the immediately preceding lease year.
The Basic Annual Rent for each succeeding lease year shall be due and
payable in equal monthly installments on the first day of each month during such
year.
<PAGE>
The term Consumer Price Index, as used herein shall mean the Consumer
Price Index for All Urban Consumers, (1982-84=100) All Items, U.S. City Average,
unadjusted as published by the United States Department of Labor, Bureau of
Labor Statistics. In the event the Consumer Price Index is no longer made
available, then such other index as is then substituted therefor in the real
estate industry in the New York-New Jersey area shall be deemed substituted for
the Consumer Price Index.
The "CPI Increase" as used herein shall be calculated as follows. The
Consumer Price Index for the month in which the immediately preceding lease year
commenced (the "Base Index") shall be subtracted from the Consumer Price Index
for the month in which the current lease year commenced (the "Current Index").
The difference between the Current Index and the Base Index shall be divided by
the Base Index to obtain the percentage increase in the Consumer Price Index.
The Basic Annual Rent for the immediately preceding lease year shall be
multiplied by the percentage increase in the Consumer Price Index and the result
shall be the "CPI Increase".
In the event the Index is not published in time for the computation to
be made at the beginning of any lease year, the computation shall be made as
soon as the Index is available and any increase in rent shall be adjusted as of
the first day of the respective lease year. Failure of Landlord to invoice
Tenant for any annual increase shall not be a waiver thereof.
By way of example, if the Basic Annual Rent for the immediately
preceding lease year is $21,000, the Base Index is 153.5, and the Current index
is 157.5, then the difference between the Base Index and Current Index, namely:
4, is divided by 153.5 and the quotient is 2.6. This is the percentage increase
in the Consumer Price Index. This percentage increase in the Consumer Price
Index, 2.6%, is multiplied by the Basic Annual Rent for the immediately
preceding year, $21,000 and the result, $546.00 is the CPI Increase. This
increase is added to the Basic Annual Rent for the immediately preceding year,
$21,000 to determine the Basic Annual Rent for the then current year,
$21,546.00.
2
EXHIBIT 10.21
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT, dated as of the 15th day of July, 1996,
between and among Jack W. Nicklaus ("JWN"), and Jack P. Bates, Thomas P. Hislop,
Mark Hesemann, and Richard P. Bellinger (each a "Shareholder" and collectively
the "Shareholders"), and Golden Bear Golf, Inc. a Florida corporation (the
"Company").
WITNESSETH:
WHEREAS, the Shareholders are currently the owners and holders of Class
"A" voting common stock of Golden Bear Golf Centers, Inc. ("GBGC"), and are
parties to that certain Shareholders' Agreement of GBGC dated as of December 7,
1992, as amended by Amendment dated June 6, 1996 (the "Old Shareholders'
Agreement") which contains certain restrictions upon transferability and
authorizes JWN to exercise all voting rights appurtenant to such common stock of
GBGC;
WHEREAS, the Shareholders have agreed, pursuant to an Agreement and
Plan of Reorganization dated June 6, 1996, to exchange the shares of GBGC Class
"A" common stock owned and held by them for shares of the Class "A" voting
common stock of the Company (the "Shares");
WHEREAS, under the Old Shareholders' Agreement, the Shareholders have
agreed with JWN that, as a condition to JWN's approval of any corporate
reorganization, they would enter into a restrictive agreement providing for
continuation of the voting arrangements under the Old Shareholders' Agreement
and for continuing restrictions upon the transfer of any shares received or
receivable in exchange for the Class "A" common stock of GBGC held under the Old
Shareholders' Agreement;
WHEREAS, in contemplation of the effectuation of the public offering
contemplated by the Agreement and Plan of Reorganization, the Shareholders, JWN
and the Company have entered into this Agreement with respect to the rights of
the Shareholders to vote and transfer the Shares, such Agreement to be effective
as provided below and to continue thereafter as set forth herein;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
herein, and intending to be legally bound, the parties agree as follows:
1. EFFECTIVE DATE. This Agreement shall become effective only upon the
issuance by the Company of the Shares to the Shareholders pursuant to the
Agreement and Plan of Reorganization, and such effectiveness shall be a
simultaneous condition to the delivery of such Shares to the Shareholders. If
the Reorganization is not consummated and the Agreement and Plan of
Reorganization is terminated as provided therein, then this Agreement shall be
null and void and of no further force and effect.
2. RESTRICTION ON TRANSFER. Except as otherwise provided in this
Agreement, no Shareholder shall assign, encumber, pledge, transfer, or otherwise
dispose of any of the Shares to any person without first receiving the written
consent of the other Shareholder(s) for the greater of two (2) years or the
applicable holding period under Rule 144 promulgated by the Securities and
Exchange Commission, or any subsequent securities regulation which expressly
supersedes such Rule. The restriction on transfer set forth in this Section 2,
shall not apply to: (i) the delivery of the Shares by a Shareholder to JWN as
substitute collateral security for a loan from JWN to such Shareholder evidenced
by a Promissory Note and Security Agreement dated
<PAGE>
as of June 6, 1996 (the "Loan(s)"), or (ii) any assignment, conveyance or
disposition of Shares to JWN or a party designated by JWN to hold or receive a
security interest in such Shares, provided that such transfer is made in full
compliance with all applicable securities regulations.
3. RIGHT OF FIRST REFUSAL TO JWN. Following the expiration of the
period set forth in Section 2, above, no Shareholder shall assign, encumber,
pledge, transfer, or otherwise dispose of any of his Shares to any person
without first making an offer to sell such Shares to JWN in accordance with the
provisions of this Section, unless such right of first refusal is waived in a
written document signed by JWN. Notwithstanding the foregoing, the option rights
set forth in this Section 3 shall not apply to any assignment, encumbrance,
pledge, transfer or other disposition of the Shares to any of the holders of the
Class "B" common stock of the Company, provided that such person shall
acknowledge and agree to be bound by this Agreement as a holder or potential
holder of such Shares prior to the time record ownership or a security interest
in such Shares is conveyed to such person.
(a) Any Shareholder desiring to enter into a transaction subject to
this Section (a "Transferor") shall give written notice of such intention (the
"Notice") to JWN, which Notice shall set forth the name and address of the
prospective purchaser or lienor, the number of Shares involved in the proposed
transaction, and the terms of such proposed transaction. Any Notice given under
this subsection shall constitute an offer to sell to JWN all of the Shares
identified in such Notice, at the option of JWN as set forth in subsection (b),
below.
(b) JWN shall have the option, which option shall be exercised within
ten (10) days after his receipt of the Notice, to purchase all, but not
less than all, of the Shares identified in the Notice from the Transferor at a
purchase price determined in accordance with subsection (c), below. Any notice
of exercise given by JWN shall specify a date for the closing of the purchase of
Shares that shall not be more than fifteen (15) days after the date such
notice is given by JWN. Unless JWN exercises his option to purchase by giving
written notice of his acceptance of the offer to sell the Shares to the
Transferor within the required ten (10) day period, the Transferor shall
be free to consummate the transaction identified in the Notice. If the
Transferor fails to consummate the proposed transaction within thirty (30) days
following the expiration of such period, the Shares shall again become subject
to all the restrictions of this Agreement.
(c) If the proposed transaction is a private sale to a third party at a
negotiated price, the purchase price payable by JWN for the Shares to be
acquired from the Transferor and the terms of payment of such price shall be, at
the option of JWN: (i) the purchase price (net of broker's commissions) and
terms negotiated by the Transferor for such Shares as set forth in the Notice,
or (ii) the "Market Price" of the Shares, which except as otherwise provided
below shall be a per Share price equal to the average closing price of the
Company's Class "A" common stock on NASDAQ or any other recognized securities
market on which such stock is actively traded for the ten (10) day period
immediately preceding JWN's exercise of his election to purchase the Shares,
which Market Price shall be payable in cash at closing. The purchase price
payable by JWN for the Shares to be acquired from the Transferor in connection
with any proposed transaction subject to this Section other than a negotiated
sale shall be the Market Price, and shall be payable in cash at closing. If the
Company's Class "A" common stock is no longer actively traded on NASDAQ or any
other recognized securities market, then the Market Price shall be an amount per
Share equal to the average between the most recent bid and offer price quoted
for the Class "A" common stock on a Qualifying Electronic Quotation System
recognized by the Securities and Exchange Commission, or if no such quotations
are available, an amount equal to the fair market
-2-
<PAGE>
value of such Shares as of the Company's most recent quarterly financial
statements preceding the date of JWN's acceptance of the offer as determined by
a valuation to be prepared by an independent appraiser agreed upon by the
parties.
4. PURCHASE OPTION UPON INCAPACITY. Upon the "Incapacity" of any
Shareholder, which shall be defined as the death, declaration or adjudication of
personal bankruptcy, or legal declaration of incompetency of any Shareholder,
JWN shall have the option to purchase all Shares then held by such Shareholder,
and/or his legal representatives, heirs or distributees as the case may be (the
"Incapacity Shares"), as set forth in this Section 4.
(a) Upon the Incapacity of any Shareholder, JWN shall have the first
option to purchase all of the Incapacity Shares from the holders thereof at the
Market Price, payable in cash at closing unless otherwise mutually agreed, which
option shall be exercised by written notice given within the last to expire of:
(i) thirty (30) days after JWN's receipt of written notice of appointment or
qualification of the legal representative(s) of the deceased, bankrupt, or
incapacitated Shareholder, or (ii) sixty (60) days after the date such
Incapacity is legally declared. Such option shall be exercised by written notice
to such legal representatives, which notice shall constitute a legally binding
agreement on the part of JWN to purchase all of the Incapacity Shares at the
Market Price.
(b) If JWN fails or declines to exercise such option rights with
respect to any of the Incapacity Shares, such action shall be deemed an election
to allow the holders of such Incapacity Shares to be substituted for the
Shareholder subject to Incapacity under this Shareholders' Agreement, and the
holders of such Incapacity Shares shall thereafter hold such Shares subject to
all of the rights and obligations of the original Shareholder under this
Agreement, including without limitation, the restrictions upon further transfer
of such Shares set forth in Sections 2 and 3, above. In the event any party is
so substituted, the Company may require such party to furnish written evidence
of his intention to be bound by this Agreement as a condition to receiving any
rights or benefits with respect to the Shares.
(c) Notwithstanding any of the foregoing, any Shares held by a
Shareholder, which at the time of his Incapacity are subject to a binding
commitment of purchase or sale pursuant to another Section of this Agreement,
shall be purchased pursuant thereto. Any other Shares held by a Shareholder at
the time of his Incapacity, whether or not the subject of any offer not accepted
at the time of such Incapacity, shall be deemed Incapacity Shares and disposed
of in accordance with the provisions of this Section.
-3-
<PAGE>
5.CLOSINGS. The closing of any purchase or sale of Shares
contemplated by this Agreement shall take place at the office of the
Corporation's legal counsel at the time selected by JWN, subject to the terms of
this Agreement. Except as otherwise provided in clause (i) of subsection 3(c),
above, the purchase price shall be paid in cash by JWN at closing in exchange
for the tender and conveyance of the Shares. In the event that JWN has exercised
his option under such clause to accept the terms of sale by a Transferor as set
forth in the Notice given under Section 3, above, JWN shall make such payment at
closing as may be called for under the payment terms set forth in such Notice
and deliver such other consideration to the Transferor in exchange for such
Shares as may reasonably be required in order to meet such terms. At closing,
the balance of any Loan which remains outstanding, including unpaid principal
and interest accrued through the closing date, shall be offset against the
purchase price due from JWN, and JWN shall be required only to pay the net
amount due to the Shareholder after application of such offset or the
Shareholder shall receive credit against the Loan to the full amount of the
purchase price, as the case may be. The Shareholder shall tender a legal
conveyance of his Shares to JWN at closing by endorsement of his certificate(s)
for such Shares or by separate stock power, and shall provide JWN and the
Company with such other documents and instruments as are necessary to convey all
right, title and interest in the Shares to JWN, free and clear of any liens or
encumbrances other than the pledge securing the Loan to such Shareholder, if
such Loan remains outstanding. Unless the Loan has been previously discharged,
JWN in turn will provide the Shareholder with a receipt for payment against the
Loan in the amount of the purchase price credited as a result of the foregoing
offset, together with any instruments or documents necessary to document the
satisfaction and discharge of the remaining obligations of the Shareholder with
respect to the pledge of the Shares. If the purchase price offset due from JWN
is sufficient to fully pay and discharge the Loan, JWN will return the original
Non-Negotiable Promissory Note and Security Agreement reflecting such Loan to
the Shareholder at closing marked paid in full, and otherwise the Loan shall
continue as an unsecured debt until the balance becomes due and payable in
accordance with the terms of the Promissory Note.
6.GRANT OF VOTING RIGHTS TO JWN . The Shareholders owning and
holding any shares of Class "A" voting common stock hereby assign to JWN all of
their right to vote the Shares on any and all corporate matters on which the
Shareholders are entitled to vote, including without limitation, the election of
directors, the sale of all or substantially all of the assets of the Company,
and any merger or consolidation with another company. The Shareholders, upon
demand by JWN, shall deliver appointment forms to JWN, irrevocably appointing
him as a proxy to vote at all meetings and upon all matters subject to vote by
the Shareholders, such proxy being coupled with an interest as set forth in
Florida Statute 607.0722(5)(e). The Shareholders acknowledge that their
relinquishment of all of their right to vote the Shares is a material inducement
to their admission as shareholders of the Company and their obligations
hereunder may be specifically enforced by JWN.
7.ENDORSEMENT OF CERTIFICATES. All of the Shares shall bear the
following endorsement:
"This certificate is transferable only upon compliance with the
provisions of an agreement dated June 6, 1996 among the holder and others, a
copy of which is on file in the office of the Secretary of the issuer."
All certificates for Shares hereafter issued to the Shareholders shall bear the
same endorsement.
8. APPLICABILITY TO OTHER STOCK HELD BY SHAREHOLDERS. It is understood
and agreed that the provisions of this Agreement shall be deemed to apply to the
Shares held by the Shareholders, and to any
-4-
<PAGE>
other securities hereafter received or receivable by the Shareholders during the
term of this Agreement with respect to the Shares, including, without
limitation, any securities received as a result of a share dividend or other
distribution of securities or as a result of any recapitalization,
reorganization or exchange transaction involving such Shares. This Agreement
shall not apply to any other shares of the Company's Class "A" common stock
acquired by the Shareholders after the date of this Agreement, or any other
securities hereafter received or receivable by the Shareholders with respect to
such shares of the Company, including, without limitation, any shares acquired
as a result of the exercise by a Shareholder of any options or warrants granted
by the Company to such Shareholder or as a result of the purchase of such shares
on the open market.
9. SPECIFIC PERFORMANCE. The Shareholders agree that they would be
irreparably damaged if the terms of this Agreement were not capable of being
specifically enforced. For this reason the Shareholders agree that the terms of
this Agreement shall be specifically enforceable. The Shareholders further agree
that any sale or disposition, including an involuntary transfer or a transfer by
operation of law, that does not strictly comply with the terms and conditions of
this Agreement may be specifically restrained.
10. FURTHER ASSURANCES. The Shareholders agree that upon the issuance
of the Shares by the Company, each Shareholder shall do all things, and execute
and deliver all papers, instruments and documents and perform any further acts
necessary to carry out the provisions of this Agreement.
11. MISCELLANEOUS.
(a) NOTICES. Any and all notices, designations, consents, offers,
acceptances, or any other communications provided for herein shall be given in
writing by certified mail or recognized commercial courier service, which shall
be addressed to the Company at its principal offices and to JWN and the
Shareholders at the addresses given by them on the signature page of this
Agreement, or to such other address as may be designated by a party in a written
notice meeting the requirements of this Section. Any notice given under this
Section shall be deemed effective three (3) days following the date of its
deposit with the United States Postal Service, if sent by mail, or on the date
of its confirmed receipt at the address of the recipient if sent by courier
service.
(b) SEVERABILITY. If any provision of this Agreement is held to be
unenforceable or invalid by any court of competent jurisdiction, the validity
and enforceability of the remaining provisions shall not be affected thereby.
(c) CONSTRUCTION. Whenever used herein, the singular number shall
include the plural, and the plural number shall include the singular, and use of
any gender shall include all genders. The Section headings in this Agreement are
for convenience of reference only and shall not be used as an aid in the
construction of any provision. This Agreement shall be deemed to have been
prepared by each of the parties and there shall be no canon of construction
applied hereto for or against any party by reason of the preparation hereof.
(d) GOVERNING LAW. This Agreement has been executed in and shall
be governed by and construed in accordance with the internal laws of the State
of Florida, notwithstanding conflicts of laws rules which might otherwise be
applied.
-5-
<PAGE>
(e) SUCCESSORS AND ASSIGNS. Subject to the restrictions against
transfer or assignment as herein contained, the provisions of this Agreement
shall inure to the benefit of and shall be binding on the assigns, successors in
interest, personal representatives, estates, heirs, and legatees of each of the
parties. Each Shareholder agrees that he will not attempt or purport to grant
any beneficial interest in his Shares, or hypothecate or otherwise create or
permit to exist any lien, claim, or encumbrance upon any of the Shares at any
time subject to this Agreement, other than the encumbrances created by this
Agreement or an encumbrance permitted hereby.
(f) ENTIRE AGREEMENT; WAIVER AND AMENDMENT. This Agreement contains the
entire understanding between the parties concerning the subject matter contained
herein. There are no representations, agreements, arrangements, or
understandings, oral or written, between or among the parties relating to the
subject matter of this Agreement that are not fully expressed herein. This
Agreement cannot be changed or modified except in a written document signed by
all of the parties which recites the intention of the parties to amend this
Agreement and sets forth the specific changes and modifications to be made
thereby. No waiver of any right granted or release of any obligation imposed by
this Agreement shall be effective unless made in a writing signed by the party
sought to be charged therewith.
(g) COUNTERPARTS. This Agreement may be executed in one or more
identical counterparts, and in making proof of this Agreement it shall not be
necessary to produce or account for more than one fully executed counterpart
hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
Attest: GOLDEN BEAR GOLF, INC.
By:
- ---------------------------- ----------------------------
Secretary Richard P. Bellinger
President
SHAREHOLDERS:
-------------------------------
Jack W. Nicklaus
-------------------------------
Richard P. Bellinger
-6-
<PAGE>
-------------------------------
Mark F. Hesemann
-------------------------------
Thomas P. Hislop
-------------------------------
Jack P. Bates
-7-
EXHIBIT 10.22
d
[Draft: 7-15-96]
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT, dated as of the 15th day of July, 1996,
between and among Jack W. Nicklaus ("JWN"), and Jack P. Bates, Thomas P. Hislop,
Mark Hesemann, and Richard P. Bellinger (each a "Shareholder" and collectively
the "Shareholders"), and Golden Bear Golf, Inc. a Florida corporation (the
"Company").
WITNESSETH:
WHEREAS, the Shareholders are currently the owners and holders of Class
"A" voting common stock of Golden Bear Golf Centers, Inc. ("GBGC"), and are
parties to that certain Shareholders' Agreement of GBGC dated as of December 7,
1992, as amended by Amendment dated June 6, 1996 (the "Old Shareholders'
Agreement") which contains certain restrictions upon transferability and
authorizes JWN to exercise all voting rights appurtenant to such common stock of
GBGC;
WHEREAS, the Shareholders have agreed, pursuant to an Agreement and
Plan of Reorganization dated June 6, 1996, to exchange the shares of GBGC Class
"A" common stock owned and held by them for shares of the Class "A" voting
common stock of the Company (the "Shares");
WHEREAS, under the Old Shareholders' Agreement, the Shareholders have
agreed with JWN that, as a condition to JWN's approval of any corporate
reorganization, they would enter into a restrictive agreement providing for
continuation of the voting arrangements under the Old Shareholders' Agreement
and for continuing restrictions upon the transfer of any shares received or
receivable in exchange for the Class "A" common stock of GBGC held under the Old
Shareholders' Agreement;
WHEREAS, in contemplation of the effectuation of the public offering
contemplated by the Agreement and Plan of Reorganization, the Shareholders, JWN
and the Company have entered into this Agreement with respect to the rights of
the Shareholders to vote and transfer the Shares, such Agreement to be effective
as provided below and to continue thereafter as set forth herein;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
herein, and intending to be legally bound, the parties agree as follows:
1. EFFECTIVE DATE. This Agreement shall become effective only upon the
issuance by the Company of the Shares to the Shareholders pursuant to the
Agreement and Plan of Reorganization, and such effectiveness shall be a
simultaneous condition to the delivery of such Shares to the Shareholders. If
the Reorganization is not consummated and the Agreement and Plan of
Reorganization is terminated as provided therein, then this Agreement shall be
null and void and of no further force and effect.
- 1 -
<PAGE>
2. RESTRICTION ON TRANSFER. Except as otherwise provided in this
Agreement, no Shareholder shall assign, encumber, pledge, transfer, or otherwise
dispose of any of the Shares to any person without first receiving the written
consent of the other Shareholder(s) for the greater of two (2) years or the
applicable holding period under Rule 144 promulgated by the Securities and
Exchange Commission, or any subsequent securities regulation which expressly
supersedes such Rule. The restriction on transfer set forth in this Section 2,
shall not apply to: (i) the delivery of the Shares by a Shareholder to JWN as
substitute collateral security for a loan from JWN to such Shareholder evidenced
by a Promissory Note and Security Agreement dated as of June 6, 1996 (the
"Loan(s)"), or (ii) any assignment, conveyance or disposition of Shares to JWN
or a party designated by JWN to hold or receive a security interest in such
Shares, provided that such transfer is made in full compliance with all
applicable securities regulations.
3. RIGHT OF FIRST REFUSAL TO JWN. Following the expiration of the
period set forth in Section 2, above, no Shareholder shall assign, encumber,
pledge, transfer, or otherwise dispose of any of his Shares to any person
without first making an offer to sell such Shares to JWN in accordance with the
provisions of this Section, unless such right of first refusal is waived in a
written document signed by JWN. Notwithstanding the foregoing, the option rights
set forth in this Section 3 shall not apply to any assignment, encumbrance,
pledge, transfer or other disposition of the Shares to any of the holders of the
Class "B" common stock of the Company, provided that such person shall
acknowledge and agree to be bound by this Agreement as a holder or potential
holder of such Shares prior to the time record ownership or a security interest
in such Shares is conveyed to such person.
(a) Any Shareholder desiring to enter into a transaction subject to
this Section (a "Transferor") shall give written notice of such intention (the
"Notice") to JWN, which Notice shall set forth the name and address of the
prospective purchaser or lienor, the number of Shares involved in the proposed
transaction, and the terms of such proposed transaction. Any Notice given under
this subsection shall constitute an offer to sell to JWN all of the Shares
identified in such Notice, at the option of JWN as set forth in subsection (b),
below.
(b) JWN shall have the option, which option shall be exercised within
ten (10) days after his receipt of the Notice, to purchase all, but not less
than all, of the Shares identified in the Notice from the Transferor at a
purchase price determined in accordance with subsection (c), below. Any notice
of exercise given by JWN shall specify a date for the closing of the purchase of
Shares that shall not be more than fifteen(15) days after the date such notice
is given by JWN. Unless JWN
- 2 -
<PAGE>
exercises his option to purchase by giving written notice of his acceptance of
the offer to sell the Shares to the Transferor within the required ten (10) day
period, the Transferor shall be free to consummate the transaction identified in
the Notice. If the Transferor fails to consummate the proposed transaction
within thirty (30) days following the expiration of such period, the Shares
shall again become subject to all the restrictions of this Agreement.
(c) If the proposed transaction is a private sale to a third party at a
negotiated price, the purchase price payable by JWN for the Shares to be
acquired from the Transferor and the terms of payment of such price shall be, at
the option of JWN: (i) the purchase price (net of broker's commissions) and
terms negotiated by the Transferor for such Shares as set forth in the Notice,
or (ii) the "Market Price" of the Shares, which except as otherwise provided
below shall be a per Share price equal to the average closing price of the
Company's Class "A" common stock on NASDAQ or any other recognized securities
market on which such stock is actively traded for the ten (10) day period
immediately preceding JWN's exercise of his election to purchase the Shares,
which Market Price shall be payable in cash at closing. The purchase price
payable by JWN for the Shares to be acquired from the Transferor in connection
with any proposed transaction subject to this Section other than a negotiated
sale shall be the Market Price, and shall be payable in cash at closing. If the
Company's Class "A" common stock is no longer actively traded on NASDAQ or any
other recognized securities market, then the Market Price shall be an amount per
Share equal to the average between the most recent bid and offer price quoted
for the Class "A" common stock on a Qualifying Electronic Quotation System
recognized by the Securities and Exchange Commission, or if no such quotations
are available, an amount equal to the fair market value of such Shares as of the
Company's most recent quarterly financial statements preceding the date of JWN's
acceptance of the offer as determined by a valuation to be prepared by an
independent appraiser agreed upon by the parties.
4. PURCHASE OPTION UPON INCAPACITY. Upon the "Incapacity" of any
Shareholder, which shall be defined as the death, declaration or adjudication of
personal bankruptcy, or legal declaration of incompetency of any Shareholder,
JWN shall have the option to purchase all Shares then held by such Shareholder,
and/or his legal representatives, heirs or distributees as the case may be (the
"Incapacity Shares"), as set forth in this Section 4.
(a) Upon the Incapacity of any Shareholder, JWN shall have the first
option to purchase all of the Incapacity Shares from the holders thereof at the
Market Price, payable in cash at closing unless otherwise mutually agreed, which
option shall be exercised by written notice given within the last to expire of:
(i) thirty (30) days after
- 3 -
<PAGE>
JWN's receipt of written notice of appointment or qualification of the legal
representative(s) of the deceased, bankrupt, or incapacitated Shareholder, or
(ii) sixty (60) days after the date such Incapacity is legally declared. Such
option shall be exercised by written notice to such legal representatives, which
notice shall constitute a legally binding agreement on the part of JWN to
purchase all of the Incapacity Shares at the Market Price.
(b) If JWN fails or declines to exercise such option rights with
respect to any of the Incapacity Shares, such action shall be deemed an election
to allow the holders of such Incapacity Shares to be substituted for the
Shareholder subject to Incapacity under this Shareholders' Agreement, and the
holders of such Incapacity Shares shall thereafter hold such Shares subject to
all of the rights and obligations of the original Shareholder under this
Agreement, including without limitation, the restrictions upon further transfer
of such Shares set forth in Sections 2 and 3, above. In the event any party is
so substituted, the Company may require such party to furnish written evidence
of his intention to be bound by this Agreement as a condition to receiving any
rights or benefits with respect to the Shares.
(c) Notwithstanding any of the foregoing, any Shares held by a
Shareholder, which at the time of his Incapacity are subject to a binding
commitment of purchase or sale pursuant to another Section of this Agreement,
shall be purchased pursuant thereto. Any other Shares held by a Shareholder at
the time of his Incapacity, whether or not the subject of any offer not accepted
at the time of such Incapacity, shall be deemed Incapacity Shares and disposed
of in accordance with the provisions of this Section.
5.CLOSINGS. The closing of any purchase or sale of Shares contemplated
by this Agreement shall take place at the office of the Corporation's legal
counsel at the time selected by JWN, subject to the terms of this Agreement.
Except as otherwise provided in clause (i) of subsection 3(c), above, the
purchase price shall be paid in cash by JWN at closing in exchange for the
tender and conveyance of the Shares. In the event that JWN has exercised his
option under such clause to accept the terms of sale by a Transferor as set
forth in the Notice given under Section 3, above, JWN shall make such payment at
closing as may be called for under the payment terms set forth in such Notice
and deliver such other consideration to the Transferor in exchange for such
Shares as may reasonably be required in order to meet such terms. At closing,
the balance of any Loan which remains outstanding, including unpaid principal
and interest accrued through the closing date, shall be offset against the
purchase price due from JWN, and JWN shall be required only to pay the net
amount due to the Shareholder after application of such offset or the
Shareholder shall receive credit against the Loan to the full amount of the
purchase price, as the case may be. The Shareholder shall tender a legal
conveyance of his Shares to JWN at closing by endorsement of his certificate(s)
for such Shares or by separate stock power, and shall provide JWN and the
Company with such other documents and instruments as are necessary to convey all
right, title and interest in the Shares to JWN, free and clear of any liens or
encumbrances other than the pledge securing the Loan to such Shareholder, if
such Loan remains outstanding. Unless the Loan has been previously discharged,
JWN in turn will provide the Shareholder with a receipt for payment against the
Loan in the amount of the purchase price credited as a result of the foregoing
offset, together with any instruments or documents necessary to document the
satisfaction and discharge of the remaining obligations of the Shareholder with
respect to the pledge of the Shares. If the purchase price offset due from JWN
is sufficient to fully pay and discharge the Loan, JWN will return the original
Non-Negotiable Promissory Note and Security Agreement reflecting such Loan to
the Shareholder at closing marked paid in full, and otherwise the Loan shall
continue as an unsecured debt until the balance becomes due and payable in
accordance with the terms of the Promissory Note.
6.GRANT OF VOTING RIGHTS TO JWN . The Shareholders owning and holding
any shares of Class "A" voting common stock hereby assign to JWN all of their
right to vote the Shares on any and all corporate matters on which the
Shareholders are entitled to vote, including without limitation, the election of
directors, the sale of all or substantially all of the assets of the Company,
and any merger or consolidation with another company. The Shareholders, upon
demand by JWN, shall deliver appointment forms to JWN, irrevocably appointing
him as a proxy to vote at all meetings and upon all matters subject to vote by
the Shareholders, such proxy being coupled with an interest as set forth in
Florida Statute 607.0722(5)(e). The Shareholders acknowledge that their
relinquishment of all of their right to vote the Shares is a material inducement
to their admission as shareholders of the Company and their obligations
hereunder may be specifically enforced by JWN.
7.ENDORSEMENT OF CERTIFICATES. All of the Shares shall bear the
following endorsement:
"This certificate is transferable only upon compliance with the
provisions of an agreement dated June 6, 1996 among the holder and
others, a copy of which is on file in the office of the Secretary of
the issuer."
All certificates for Shares hereafter issued to the Shareholders shall bear the
same endorsement.
8. APPLICABILITY TO OTHER STOCK HELD BY SHAREHOLDERS. It is understood
and agreed that the provisions of this Agreement shall be deemed to apply to the
Shares held by the Shareholders, and to any other securities hereafter received
or receivable by the Shareholders during the term of this Agreement with respect
to the Shares, including, without limitation, any securities received as a
result of a share dividend or other distribution of securities or as a result of
any recapitalization, reorganization or exchange transaction involving such
Shares. This Agreement shall not apply to any other shares of the Company's
Class "A" common stock acquired by the Shareholders after the date of this
Agreement, or any other securities hereafter received or receivable by the
Shareholders with respect to such shares of the Company, including, without
limitation, any shares acquired as a result of the exercise by a Shareholder of
any options or warrants granted by the Company to such Shareholder or as a
result of the purchase of such shares on the open market.
9. SPECIFIC PERFORMANCE. The Shareholders agree that they would be
irreparably damaged if the terms of this Agreement were not capable of being
specifically enforced. For this reason the Shareholders agree that the terms of
this Agreement shall be specifically enforceable. The Shareholders further agree
that any sale or disposition, including an involuntary transfer or a transfer by
operation of law, that does not strictly comply with the terms and conditions of
this Agreement may be specifically restrained.
10. FURTHER ASSURANCES. The Shareholders agree that upon the issuance
of the Shares by the Company, each Shareholder shall do all things, and execute
and deliver all papers, instruments and documents and perform any further acts
necessary to carry out the provisions of this Agreement.
11. MISCELLANEOUS.
(a) NOTICES. Any and all notices, designations, consents, offers,
acceptances, or any other communications provided for herein shall be given in
writing by certified mail or recognized commercial courier service, which shall
be addressed to the Company at its principal offices and to JWN and the
Shareholders at the addresses given by them on the signature page of this
Agreement, or to such other address as may be designated by a party in a written
notice meeting the requirements of this Section. Any notice given under this
Section shall be deemed effective three (3) days following the date of its
deposit with the United States Postal Service, if sent by mail, or on the date
of its confirmed receipt at the address of the recipient if sent by courier
service.
(b) SEVERABILITY. If any provision of this Agreement is held to be
unenforceable or invalid by any court of competent jurisdiction, the validity
and enforceability of the remaining provisions shall not be affected thereby.
(c) CONSTRUCTION. Whenever used herein, the singular number shall
include the plural, and the plural number shall include the singular, and use of
any gender shall include all genders. The Section headings in this Agreement are
for convenience of reference only and shall not be used as an aid in the
construction of any provision. This Agreement shall be deemed to have been
prepared by each of the parties and there shall be no canon of construction
applied hereto for or against any party by reason of the preparation hereof.
(d) GOVERNING LAW. This Agreement has been executed in and shall be
governed by and construed in accordance with the internal laws of the State of
Florida, notwithstanding conflicts of laws rules which might otherwise be
applied.
(e) SUCCESSORS and ASSIGNS. Subject to the restrictions against
transfer or assignment as herein contained, the provisions of this Agreement
shall inure to the benefit of and shall be binding on the assigns, successors in
interest, personal representatives, estates, heirs, and legatees of each of the
parties. Each Shareholder agrees that he will not attempt or purport to grant
any beneficial interest in his Shares, or hypothecate or otherwise create or
permit to exist any lien, claim, or encumbrance upon any of the Shares at any
time subject to this Agreement, other than the encumbrances created by this
Agreement or an encumbrance permitted hereby.
(f) Entire Agreement; Waiver and Amendment. This Agreement contains the
entire understanding between the parties concerning the subject matter contained
herein. There are no representations, agreements, arrangements, or
understandings, oral or written, between or among the parties relating to the
subject matter of this Agreement that are not fully expressed herein. This
Agreement cannot be changed or modified except in a written document signed by
all of the parties which recites the intention of the parties to amend this
Agreement and sets forth the specific changes and modifications to be made
thereby. No waiver of any right granted or release of any obligation imposed by
this Agreement shall be effective unless made in a writing signed by the party
sought to be charged therewith.
(g) COUNTERPARTS. This Agreement may be executed in one or more
identical counterparts, and in making proof of this Agreement it shall not be
necessary to produce or account for more than one fully executed counterpart
hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
Attest: GOLDEN BEAR GOLF, INC.
By:
- ------------------------- -----------------------------
Secretary Richard P. Bellinger
President
SHAREHOLDERS:
---------------------------
Jack W. Nicklaus
---------------------------
Richard P. Bellinger
---------------------------
Mark F. Hesemann
---------------------------
Thomas P. Hislop
---------------------------
Jack P. Bates
- 4 -
EXHIBIT 10.23
PROMISSORY NOTE
$1,650,000 Palm Beach Gardens, Florida
June ____, 1996
FOR VALUE RECEIVED the undersigned "Maker" promises to pay to the order
of JACK W. NICKLAUS (such payee and any subsequent holder or holders of this
Note are hereinafter called "Holder"), c/o Golden Bear International, Inc.,
located at 11780 U.S. Highway One, North Palm Beach, Florida 33408, or at such
other place as the Holder hereof may from time to time in writing designate, in
lawful money of the United States of America, the principal sum of ONE MILLION
SIX HUNDRED FIFTY THOUSAND DOLLARS ($1,650,000.00), together with interest
thereon at the Federal Mid-Term annual interest rate in effect on June ___,
1996, such principal and interest to be due and payable on demand.
Nothing herein, nor with respect to the loan transaction related hereto,
shall be construed or operate so as to require the Maker to pay interest at a
greater rate than is lawful. In the event any interest or other charges paid by
the Maker in connection with the loan evidenced by this Note result in the
computation or earning of interest in excess of the maximum legal rate of
interest than applicable , any and all such excess shall be, and the same is,
waived by the holder, and any and all such excess shall be automatically
credited against and in reduction of the balance due hereunder, and the portion
of said excess (if any) which exceeds the balance due under this Note shall be
paid by the Holder to the Maker.
The Maker hereby waives presentment, protest and demand, notice of
protest, demand and of dishonor and nonpayment of this Note.
Maker agrees to pay all costs of collection, including a reasonable
attorneys' fee and all costs of levy, appellate proceedings and review in case
this Note or any payment hereunder is not paid when due, or in case it becomes
necessary to protect the security hereof, whether suit be brought or not.
Any of the following shall constitute an "Event of Default" hereunder:
(1) failure of Maker to repay the principal and interest when such amounts
become due and payable; (2) failure of Maker to comply with the terms and
conditions of this Note; or (3) the filing of any petition in bankruptcy by
Maker, or an institution of any action for an assignment for the benefit of
creditors or the insolvency of Maker.
Upon the occurrence of an Event of Default, this Note and all other
obligations of Maker to Holder in connection with the loan evidenced hereby,
shall become due and payable, in full, immediately at the option of the Holder
without demand or notice.
Upon acceleration of the Note as a result of an Event of Default, the
entire amount of principal, interest and other charges due as of the date of
acceleration shall bear interest thereafter at a rate equal to the lesser of
(i) 17.9% per annum or (ii) the maximum amount permitted by Florida law.
This Note may be prepaid in whole or in part at any time without premium
or penalty.
Time is of the essence hereof. This Note may not be changed or
discharged orally, but only
<PAGE>
by an agreement in writing and designed by the party against whom enforcement of
any waiver, change, modification or discharge is sought. This Note shall be
construed and enforced in accordance with the laws of the State of Florida, both
substantive and remedial. Maker hereby consents to a suit hereon in a court of
competent jurisdiction in Palm Beach County, Florida; but such consent does not
limit the right of Holder to bring suit elsewhere. The remedies of Holder shall
be cumulative and concurrent and may be pursued singly, successively or
together, at the sole discretion of Holder, and may be exercised as often as
occasion therefor shall occur. Failure by Holder to exercise any right or remedy
available to it upon the occurrence of an Event of Default (and the expiration
of any applicable cure period) shall not constitute a waiver of the right of the
Holder to exercise same at a later date or in the event of any subsequent Event
of Default.
MAKER IN ANY LITIGATION ARISING OUT OF OR RELATING TO THIS NOTE WAIVES TRIAL BY
JURY AND THE RIGHT TO INTERPOSE ANY DEFENSE, SET OFF OR COUNTERCLAIM OF ANY
NATURE OR DESCRIPTION.
GOLDEN BEAR GOLF CENTER, INC.
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Upon consummation of the Reorganization, Golden Bear Golf, Inc. will have
the following subsidiaries, all of which are corporations incorporated under
the laws of the State of Florida:
Golden Bear Golf Centers, Inc.
Paragon Golf Construction, Inc.
Golden Bear Club Services, Inc.
EXHIBIT 23.1
CONSENT OF COUNSEL
We hereby consent to the use of our opinion included herein and to all
references to this firm under the heading "Legal Matters" in the Prospectus
constituting a part of this Registration Statement on Form S-1 of Golden Bear
Golf, Inc.
STEARNS WEAVER MILLER WEISSLER
ALHADEFF & SITTERSON, P.A.
Miami, Florida
July , 1996
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use
of our reports and to all references to our Firm included in or made a part of
this registration statement.
Arthur Andersen LLP
West Palm Beach, Florida,
July 17, 1996.
EXHIBIT 23.3
NATIONAL GOLF FOUNDATION
[LETTERHEAD]
July 16, 1996
Mr. Thomas Hislop
Senior Vice President
Golden Bear International
11780 U.S. Highway One
North Palm Beach, Florida 33406
Dear Tom:
We hereby consent to all references to the National Golf Foundation included
in this Registration Statement of Golden Bear Golf, Inc., on Form S-1,
registration number 383-05581.
Yours truly,
/s/ RICHARD L. NORTON
- -------------------------
Richard L. Norton
Vice President
cc: Gary Crist, NGF Council
