AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 7, 1996.
Registration No. 333-_____
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
GOLDEN BEAR GOLF, INC.
----------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
FLORIDA 7999 APPLIED FOR
---------- ------- --------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
11780 U.S. HIGHWAY #1
NORTH PALM BEACH, FLORIDA 33408
TELEPHONE (407) 626-3900
--------------------------
(Address, including Zip Code, and telephone
number, including area code, of registrant's
principal executive offices)
RICHARD P. BELLINGER
PRESIDENT AND CHIEF OPERATING OFFICER
GOLDEN BEAR GOLF, INC.
11780 U.S. HIGHWAY #1
NORTH PALM BEACH, FLORIDA 33408
TELEPHONE (407) 626-3900
--------------
(Name, address, including Zip Code,
and telephone number,
including area code, of agent for service)
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 WEISSLER & JACOBSON
ALHADEFF & SITTERSON, P.A. ONE NEW YORK PLAZA
150 WEST FLAGLER STREET NEW YORK, NEW YORK, 10004
SUITE 2200 (212) 859-8000
MIAMI, FLORIDA 33130
(305) 789-3200
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 [_].
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==============================================================================================================
Title of each class of Proposed maximum aggregate Amount of
securities to be registered offering price(1)(2) registration fee
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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.
</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 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
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.
<TABLE>
<CAPTION>
FORM S-1
ITEM NO. ITEM CAPTION LOCATION IN PROSPECTUS
- -------- ------------ ----------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside Front Forepart of the Registration Statement and
Cover Page of Prospectus................................ Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside Back Cover Pages
Prospectus.............................................. of Prospectus
3. Summary Information, Risk Factors and Ratio of Earnings Prospectus Summary; Risk Factors
to Fixed Charges........................................
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>
PROSPECTUS SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 7, 1996
1,800,000 SHARES
[LOGO] GOLDEN BEAR GOLF, INC.
CLASS A COMMON STOCK
----------
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 having approximately % of the combined voting power of the Company's
Common Stock and % 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 Company intends to file an application for approval of the Class A
Common Stock for quotation on the NASDAQ National Market under the symbol
"JACK."
SEE "RISK FACTORS," BEGINNING ON PAGE 7, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE CLASS
A COMMON STOCK OFFERED HEREBY.
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.
===============================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- -------------------------------------------------------------------------------
PER SHARE.......... $ $ $
- -------------------------------------------------------------------------------
TOTAL(3)........... $ $ $
===============================================================================
(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 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."
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 offers 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.
----------
MERRILL LYNCH & CO.
WILLIAM BLAIR & COMPANY
DEAN WITTER REYNOLDS INC.
----------
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
[PICTURE]
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 ASSUMES 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 believes the highly fragmented golf range industry represents
advantageous opportunities to acquire, upgrade and renovate golf centers over
the next five years. 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 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 its
unique and individualized golf instruction programs designed by Jack W. Nicklaus
and Jim Flick, a world renowned instructor.
The Company currently operates two golf practice and instruction
facilities and has entered into a purchase agreement for a third facility. 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. While the Company's
plan is to acquire an additional seven facilities by the end of 1996 and an
additional twelve facilities by the end of 1997, there is no assurance any such
facilities will be acquired. In addition to the two golf practice and
instruction facilities it currently operates, the Company currently licenses for
operation by third parties 24 golf instruction and practice facilities, 17 of
which are currently in operation 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 and directly provides technical
construction services in connection with the construction and renovation of golf
courses. Since 1983, such services have been provided throughout the world in
the development of over 40 golf courses, most of which were designed by Mr.
Nicklaus through Golden Bear International's ("GBI") golf course design
division, Nicklaus Design ("Nicklaus Design"). In addition, the Company provides
club
- 3 -
<PAGE>
management and consulting services to golf course owners, with five Nicklaus
designed courses currently under management in the United States and one 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 that, based upon estimated
mark-ups of wholesale prices or factory costs, retail sales of the Company's
licensed products, including apparel and accessories, were approximately $320
million worldwide in such year, generating approximately $5.1 million of
licensing revenue for the Company. The Company also operates in its Marketing
Division high-end golf schools under the Nicklaus/Flick Golf School brand name.
The Company has also 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'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 ranges and golf practice facilities that have the potential for improvement
under the Company's management and with improved or expanded facilities; (ii)
developing new golf practice 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. It is anticipated that the
acquisition and development of new golf practice and instruction facilities will
provide the Company with opportunities to market its Nicklaus/Flick Golf School
programs and to sell licensed products at retail pro shops established at such
golf practice and instruction facilities.
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 having approximately % of the voting power of the
Company's Common Stock and % 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 facilities. Two
of the golf practice and instruction facilities are located in the greater
Pittsburgh, Pennsylvania area and the third facility is located in southern New
Jersey. On April 15, 1996, the Company assumed operation of one of the
Pittsburgh golf practice and instruction facilities pursuant to a long-term
lease agreement with an option to purchase; on May 1, 1996, the Company
assumed operation of the New Jersey facility pursuant to a management agreement
with the intent to execute a lease agreement for the property and a purchase
agreement for the assets within the next 60 days; and in June, 1996 the Company
entered into an agreement to purchase the second Pittsburgh golf practice and
instruction facility. Consummation of the lease and purchase of the New Jersey
facility and the second Pittsburgh facility, respectively, are subject to the
satisfaction of certain conditions and there is no assurance that the
transactions will be consummated. While there can be no assurance that any such
additional facilities will be acquired, the Company's strategy is to seek to
acquire an additional seven golf practice facilities in 1996 and an additional
twelve facilities by the end of 1997. See "The Company-Recent Acquisitions."
Assuming the transactions were consummated at the beginning of the year, the
Company's 1995 pro forma revenues and operating income would have been $33.7
million and $3.3 million, respectively.
- 4 -
<PAGE>
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
Class A Common Stock offered: 1,800,000
Common Stock to be outstanding after the Offering:
Class A Common Stock _____ shares(1)
Class B Common Stock _____ shares(2)
Total.......................... 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, estimated to be
approximately $ million, 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 $1.0
million of indebtedness to Mr. Nicklaus incurred by
the Company in connection with the Acquisitions. See
"The Company-The Reorganization" and "Use of
Proceeds."
Proposed NASDAQ National Market Symbol........... JACK
<FN>
- ----------
(1) Does not include an aggregate of up to 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 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 two affiliated companies owned by Nicklaus Family
Members: 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
Golden Bear International, Inc. ("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:
Golf division 4,227 7,703 19,389 1,780 2,392
Marketing division 4,169 4,790 5,533 1,258 1,307
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
======== ======== ======== ======== ========
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 $ $
======== ========
Weighted average number of common
stock and common stock equivalents
outstanding ======== ========
BALANCE SHEET DATA (AT PERIOD END)
Working capital (deficit) $ 609 $ (139) $ 535 (1,289) $ (664)
Total assets 3,676 4,841 8,906 4,016 7,888
Long-term debt -- 113 44 96 25
Shareholders' equity 1,110 256 1,030 (652) 280
INDUSTRY OVERVIEW
Total commercial golf ranges open at year-end 1,588 1,731 1,932
Golf course openings 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
<FN>
- ----------------------
(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.
</FN>
</TABLE>
- 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 ON LICENSED TRADEMARKS
In connection with the Reorganization, 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 (except
for certain exceptions described below) 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 (which shall not be
unreasonably withheld), to obtain the registration of additional trademarks and
service marks related to the Nicklaus name in connection with the future
expansion of the Company. However, there is no assurance that GBI will grant any
approvals sought by the Company. Further, 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 and the creation, development
and editing of books, articles and print media creative works. Pursuant to the
License Agreement, the Company has agreed not to enter into any of these
businesses in the future without the prior written consent of GBI. 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. 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 in which the
Company proposes to engage in Japan or South Korea utilizing any of the Licensed
Marks. Such arrangement could significantly deter the Company's ability to
expand its business into those territories in the future. See "The Company-The
Reorganization" and "Certain Relationships and Related
Transactions-Reorganization-Trademark License."
The License Agreement imposes certain obligations on the Company with
respect to the quality of the products sold and services offered which bear the
Licensed Marks and the sales and promotional materials used in connection with
products bearing the Licensed Marks and services offered in connection
therewith. The License Agreement also provides that it may be terminated by GBI
upon a material breach of the License Agreement which is not cured after receipt
of notice, including a violation by the Company of the quality control
provisions of the License Agreement. In addition, the License Agreement will
terminate 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
countries in which the Company has the right to use the Licensed Marks. 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, 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." GBI
has granted to the Company a security interest in the Licensed Marks. Such
security interest was given for the purpose of securing any damages that the
Company may incur in the event of the rejection of the License Agreement.
However, the security interest does not give the Company any right to the
continued use of the License Marks or assure that the Company will receive
compensation for any damages it may incur.
- 7 -
<PAGE>
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. As a result of the
Company offering new products, utilizing new trademarks, and selling its
products in foreign countries, the Company is in the process of expanding its
trademark rights. There can be no assurance that all 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."
The Company may transfer its rights under the license agreement,
without the consent of GBI, only by assignment or by operation of law to an
entity which acquires all or substantially all of the business developed by
Licensee under the License Agreement 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.
USE OF THE NICKLAUS, JACK NICKLAUS AND GOLDEN BEAR NAMES AND SYMBOLS
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 and are important to the Company's ultimate
success and results. The Company derives significant earnings from the use of
such names and related trademarks and servicemarks, 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
servicemarks 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.
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
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. 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 integrate these
employees and any additional 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 Conditions 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 additional golf practice and instruction facilities by the end
of 1997, the ability of the Company to make acquisitions or develop
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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 may 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 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.
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. Competition associated with the
Company's golf centers primarily relates to the location, the quality of
facilities and service offered, marketing of the centers and the proximity to
other golf centers. 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. Competition associated
with the Company's licensed products and services primarily relates to styling,
quality, price, brand recognition and service. 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. Innovations by the Company's
competitors could have a material adverse effect on the sales of one or more of
the Company's lines of licensed products. 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 UPON JACK W. NICKLAUS; DEPENDENCE ON KEY EMPLOYEES
The Company's success will depend, in large part, on the continued
visibility and reputation of Mr. Nicklaus. Further, 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. The Company is also 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. The
Company maintains key man life insurance in the amount of $5 million and
$300,000 on the lives of Mr. Nicklaus and Mr. Bellinger, respectively. 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 particular, Mr. Nicklaus is also the principal
shareholder of GBI, a private 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,
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production and marketing of golf and other sporting events, and (vii) the
creation, development and editing of books, articles and print media creative
works. GBI will own ___% of the Common Stock of the Company after the Offering.
Further, GBI has retained the exclusive rights to utilize and license the
NICKLAUS, JACK NICKLAUS and GOLDEN BEAR names and symbols in connection with
their existing businesses and has a right to approve their use in connection
with any new business opportunities which the Company wishes to pursue. However,
such approval may not be unreasonably withheld. The Company is restricted from
entering any of the businesses currently operated by GBI without the prior
written consent of GBI, regardless of whether the Company desires to utilize any
of the Licensed Marks in connection with such businesses.
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, Mr. Nicklaus will only be
required to spend two days of personal services or appearances on behalf of the
Company for each licensing contract or arrangement of the Company, up to a
maximum of ten days per year.
In connection with the Reorganization, the Company has entered into a
Trademark License Agreement, Design Services Management Agreement, Golf
Equipment Marketing Support Agreement, Sublease and Sharing Agreement, Office
Staff and Equipment Service Agreement, and Personal Services Management
Agreement (each as defined and collectively, the "Intercompany Agreements"). 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 relative to (i) approval of new uses for the
Licensed Marks and (ii) the Intercompany Agreements, including the Company's
compliance with the terms of the agreements and in connection with the
termination or renewal thereof. The factors and procedures to be utilized by
Messrs. Nicklaus, Bellinger and Bates in making such decisions have not yet been
determined and will be determined in the future on a case-by-case basis.
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."
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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 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
The Company's quarterly operating results may be subject to significant
variation due to factors such as the inherent seasonality of participation in
golf and golf-related activities, weather conditions affecting the level of
participation in golf and golf-related activities and the progress of golf
construction projects, opening of new golf practice and instruction facilities,
the mix of business activities in the particular period and exchange rate
fluctuations. Accordingly, comparisons of the Company's quarterly information
may not be indicative of the Company's ongoing performance or of future results.
Moreover, 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. There can be no assurance
that poor weather conditions will not materially adversely effect the Company's
operations or the utilization of its facilities.
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 the credit risks of the customer
and, as a result, any of these construction projects may be unprofitable. 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. Also, certain of the Company's
construction contracts require that the Company, at its sole cost and expense,
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, the Company has entered into construction
agreements which specify that the Company will be liable for penalties if such
construction projects are not completed within a specified period of time. The
Company may enter into additional contracts containing guarantees of this type
or other types in the future. There can be no assurance that expenses relating
to any guarantees given by the Company 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 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 or constructing golf courses on locations
owned by others, or materially increase the cost of planning, engineering or
constructing golf facilities.
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Further, the operation and management of golf practice and instruction
facilities (whether pursuant to direct ownership, lease or a 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 and local authorities governing the
use and storage of such hazardous materials. Under various federal, state and
local laws, ordinances and regulations, an owner, operator or manager of real
property is generally liable for the costs of removal or remediation of such
hazardous substances that are released on or in its property even if such
releases were by former owners or occupants. Such laws often impose liability
regardless of whether a property owner or operator knew of, or was responsible
for, the release of hazardous materials. The Company believes that it is in
substantial compliance with all such laws, ordinances and regulations applicable
to its properties or operations. Although the Company usually hires
environmental consultants to conduct environmental studies, including invasive
procedures such as soil sampling or ground water analysis on golf facilities or
properties 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 potential environmental liabilities or conditions of which the
Company is not aware.
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
which will represent approximately % of the outstanding shares of Common Stock
and % 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. See "Principal Shareholders."
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 $_____ from the initial public offering price of $_____
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 Company intends to apply to have the Class A Common
Stock approved for quotation on the NASDAQ National Market, there is no
assurance that the shares will be approved for quotation, that any trading
market therefor 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.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have outstanding a
total of ____ shares of Class A Common Stock, _____ shares of Class B Common
Stock and approximately _____ 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 _____ 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 issued to any "affiliate" of the
Company (within the meaning of the Securities Act of 1933, as amended (the
"Securities Act")). All _____ 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 such shares 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 subject to restrictions contained in certain
shareholder agreements. See "Shares Eligible for Future Sale," "Certain
Relationships and Related Transactions-Registration Rights" and "-Shareholders'
Agreements."
No prediction can be made as to 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.
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
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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."
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 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, and the Operating
Subsidiaries will become wholly-owned subsidiaries of the Company. The Company
will acquire all of the capital stock of Club Services from the shareholders of
Club Services for nominal consideration. The foregoing contribution and exchange
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." 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 ______ shares of the Company's Class B Common Stock, which will
represent approximately _____% of the outstanding voting power of the Company's
Common Stock after the Offering and ___% of the Company's outstanding Common
Stock.
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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 purchase, lease and
management agreements pursuant to which it recently acquired a golf practice and
instruction facility pursuant to a long-term lease and will acquire, subject to
the satisfaction of certain conditions, two other existing golf practice
facilities one of which it currently manages (together, 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.
COOL SPRINGS GOLF CENTER
In June, 1996, the Company entered into agreements with Cool Springs,
Inc., and William T. Duckworth regarding the purchase of 40.833 acres of land in
Pittsburgh, Pennsylvania on which there is an existing golf practice and
instruction facility. The purchase price for the land and assets will be $2.9
million. The Company has made non-refundable deposits of $300,000 pursuant to a
letter agreement entered into prior to the execution of the definitive purchase
and sale agreements, which deposits are to be credited against the purchase
price at closing. Pursuant to the agreements, the purchase and sale of the
facility is scheduled to be concluded on or before June 17, 1996. Consummation
of this acquisition is subject to a number of conditions, including the rezoning
of the property and the completion of due diligence by the Company. There is no
assurance that this transaction will be consummated.
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 has entered into an interim management agreement with FSCDA
on April 26, 1996 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.
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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 the
estimated underwriting discounts) are estimated to be approximately $_________
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 $_________ 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, which may
include the acquisition and development of golf practice and instruction
facilities and additional advertising and expansion of the Company's product
development efforts, both domestically and internationally, and to repay
approximately $1 million of indebtedness to Mr. Nicklaus for a bridge loan
provided to the Company in connection with the Acquisitions. See "Certain
Relationships and Related Transactions-Reorganization." Pending utilization of
the funds, the funds will be invested in short term United States government
securities.
DIVIDEND POLICY
The Company has not paid any cash dividends on its capital stock since
its inception. 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.
DILUTION
The net tangible book value of the Common Stock, assuming the
consummation of the Reorganization, as of March 31, 1996 was $2.1 million, or
$____________ 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 (__________ at March 31, 1996, as adjusted). 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 pro forma net tangible book value of the Company as of
March 31, 1996 would have been $_________, or $__________ per share of Common
Stock. This represents an immediate increase in net tangible book value of
$______ per share to existing shareholders and an immediate dilution of $______
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:
Assumed initial public offering price of Class A Common Stock(1).... $________
Net tangible book value per share of
Common Stock before the Offering................................ $________
Increase in net tangible book value per
share of Common Stock attributable to new investors............. ________
Pro forma net tangible book value per
share of Common Stock after the Offering........................ ________
- 16 -
<PAGE>
Dilution in net tangible book value per
share of Common Stock to new investors(2)....................... $
========
- ----------
(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 _________ 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)......... ______ ______% $_______ ______% $________
New investors(3).................... ______ ______% $_______ ______% $________
Totals.......................... % $ % $
====== ====== ======= ====== ========
<FN>
(1) As of the date of this Prospectus (and assuming consummation of the
Reorganization), there are ___ shares of Class A Common Stock and ____
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 _______
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 __________,
________%, $___________, __________% and $___________, respectively.
</FN>
</TABLE>
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, (ii) the pro forma capitalization of the Company as adjusted to reflect
the Acquisitions and (iii) the pro forma 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.
- 17 -
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------
PRO FORMA
PRO FORMA OFFERING
ACTUAL ACQUISITIONS AND ACQUISITIONS
------ ------------ ----------------
(in thousands, except share data)
<S> <C> <C> <C>
Short-term debt:
Current portion of notes payable............................ $ 674 $ 674
==== =======
Long-term debt................................................ $ 25 $ 4,225
---- -------
Shareholders' equity(1):
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, 80 shares issued
and outstanding, actual; ______ shares issued
and outstanding, as adjusted.............................. -- --
Class B Common Stock, $.01 par value, 10,000,000
shares authorized, 920 shares issued
and outstanding, actual; _______ shares issued
and outstanding, as adjusted.............................. -- --
Additional paid-in-capital.................................. 2,670 2,670
Retained earnings (accumulated deficit)..................... (590) (590)
----- -------
Total shareholders' equity.............................. 2,080 2,080
----- -------
Total capitalization............................... $2,779 $6,979
===== =======
<FN>
(1) Does not include the reservation of up to ______ 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>
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, 1996 and 1995 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, 1996 and 1995 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.
- 18 -
<PAGE>
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
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:
Golf division 2,564 1,853 4,227 7,703 19,389 1,780 2,392
Marketing division 3,547 4,194 4,169 4,790 5,533 1,258 1,307
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
======== ======== ======== ======== ======== ======== ========
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 $ $
======== ========
Weighted average number of
common stock and common
stock equivalents outstanding ======== ========
BALANCE SHEET DATA (AT
PERIOD END)
Working capital (deficit) $ 1,549 $ 709 $ 609 $ (139) $ 535 (1,289) $ (664)
Total assets 2,866 2,599 3,676 4,841 8,906 4,016 7,888
Long-term debt -- -- -- 113 44 96 25
Shareholders' equity 1,893 1,439 1,110 256 1,030 (652) 280
<FN>
- ----------
(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.
</FN>
</TABLE>
- 19 -
<PAGE>
MANAGEMENT'S 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 was organized in connection with the Offering. Prior to the
Offering, the Company's business was conducted through the Predecessor
Companies. 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, provides
technical construction services in connection with the construction and
renovation of golf courses, is involved in the marketing of golf course designs
on behalf of designers 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 and
services throughout the world and the operation of the NICKLAUS/FLICK GOLF
SCHOOLS.
The Company's revenues have historically been generated primarily
through the licensing 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 construction of golf courses, most of which were designed
by Mr. Nicklaus, the marketing of golf course design services, the sale of
licensed NICKLAUS, JACK NICKLAUS, and GOLDEN BEAR branded consumer products and
the operation of high-end golf schools under the NICKLAUS/FLICK GOLF SCHOOL
brand name. The Company has achieved significant growth in revenues, operating
income and net income over the past three years. 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) has increased to a profit of
$1.4 million in 1995 from a loss of $0.5 million in 1993. Management believes
that the Company's financial performance has benefitted from the increase in the
number of golf practice and instruction facilities licensed by the Company, an
increase in golf course construction and renovation projects worldwide, 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 improved
profitability of the Company's golf course construction activities, increased
marketing fees relating to the sale of Nicklaus Design services, 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
began to operate two existing golf practice and instruction facilities and
agreed to acquire one additional facility. The Company currently operates one of
the facilities pursuant to a long-term lease and another facility pursuant to a
management contract pending the consummation of the acquisition. The Company is
seeking to acquire an additional seven facilities by the end of 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 such as pro shops, batting cages,
miniature golf courses and revenues associated with golf lessons. Such increases
- 20 -
<PAGE>
may be partially offset by initial losses from pre-opening costs and potential
initial operating losses associated with new golf practice and instruction
facilities.
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 help the Company market 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. 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.
The Company expects that 1996 will be a transition year as it focuses
its efforts on acquiring golf practice and instruction facilities, invests in
management information systems and personnel to support its growth strategy and
substitutes a new licensee in connection with its branded products.
RESULTS OF OPERATIONS
The following table sets forth the pro forma 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 operations reflect
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.
- 21 -
<PAGE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED 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:
Golf Division 35.9 46.3 61.5 41.9 48.1
Marketing Division 35.4 28.8 17.5 29.6 26.3
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 the
licensing of golf practice and instruction facilities to $0.2 million in the
three months ended March 31, 1995 from $0.1 million in the comparable period of
1996, attributable primarily to an increase in the number of opened 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.
Operating income (after corporate overhead) remained relatively
constant at approximately $0.5 million for the three months ended March 31, 1996
and March 31, 1995. Operating income (after corporate overhead)
- 22 -
<PAGE>
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 margins (before corporate overhead) in the Marketing
Division of 45.1% compared to 48.7%, respectively. The decline in the Marketing
Division's operating margins (before corporate overhead) was primarily the
result of decreased revenue from NICKLAUS/FLICK GOLF SCHOOLS. The decline in the
Marketing Division's operating margins (before corporate overhead) was partially
offset by the improved operating margins (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 margins (before corporate
overhead) in the Golf Division resulted primarily from improved profitability of
the Company's marketing of golf course design activities, increased construction
activities in the first quarter of 1996 and increased licensing revenues from
golf practice and instruction facilities.
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 increased revenue in golf
course construction activities to $19.2 million in 1995 from $5.6 million in
1994. Golf Division revenues also improved due to increased revenues from
licensed golf practice and instruction facilities to $0.9 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.
Operating income (after corporate overhead) increased to $3.3 million
in 1995 from $0.9 million in 1994 and the achievement of operating efficiencies
in overhead in 1995 as the higher level of total revenues were spread over a
relatively stable level of corporate overhead. 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 improved 1995 operating margins (before
corporate overhead) in the Golf Division of 9.7% as compared to (2.7)% in 1994.
The improved operating margins (before
- 23 -
<PAGE>
corporate overhead) in the Golf Division om 1995 resulted primarily from
improved profitability of the Company's construction activities. The Marketing
Division's operating margins (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 activities to $5.6 million in 1994 from $2.2 million
in 1993. Golf Division revenues also improved due to increased revenues from
licensing golf practice and instruction facilities, from $0.5 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 sales of branded consumer products and services and
increased revenues generated by the Company's 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 improved 1994 operating margins (before corporate
overhead) in the Golf Division to (2.7)% from (14.3)% in 1993. The improved
operating margins (before corporate overhead) in the Golf Division resulted
primarily from improved profitability of the Company's construction activities
in 1994. The Marketing Division's operating margins (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
- 24 -
<PAGE>
C Corporation, a pro forma income tax benefit of $0.8 million for 1994 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
$0.5 million for the three months ended March 31, 1996, $2.2 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 $0.3
million in the three months ended March 31, 1996, $1.9 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 and mortgage financing secured by the facilities acquired. The
Company may also 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 status 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.
To provide for additional liquidity, the Company is seeking to obtain a
$15 to $20 million line of credit from a bank or other financial institution.
Such credit facility is expected to require 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.
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, it would have sufficient funds through 1997. Beyond this
period, the Company will be required to raise additional capital in order to
meet 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 in a timely manner on favorable terms or at all. To the
extent that the Company is not able to obtain additional capital, the Company
may be required to delay or reduce its planned acquisition and expansion
strategy. In addition, in appropriate situations, the Company may
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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.
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 so 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 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 make seven additional acquisitions by the end of 1996
and 12 additional acquisitions 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.
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 marketing of golf course design
services, the construction and renovation of golf courses 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
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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
development 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 believes the highly fragmented golf range
industry represents advantageous opportunities to acquire, upgrade and renovate
golf centers and driving ranges over the next five years. 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 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 unique and individualized golf instruction
programs designed by Mr. Nicklaus and Jim Flick, a world renowned instructor,
available at its facilities.
The Company currently operates two golf practice and instruction
facilities and recently entered into a purchase agreement for the acquisition of
a third facility. 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. While the Company's strategy is to acquire an additional seven
facilities by the end of 1996 and an additional twelve facilities by the end of
1997, there is no assurance any such facilities will be acquired. In addition to
the two golf practice 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 provides marketing, construction and
technical services in connection with the construction and renovation of golf
courses. Since 1983, such 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 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 that, based upon estimated
mark-ups on wholesale prices or factory costs, retail sales of the Company's
licensed products, including apparel and accessories, were approximately $320
million world-wide in 1995, generating approximately $5.1 million of licensing
revenue for the Company in 1995. The Company also operates in its Marketing
Division its high-end golf schools under the NICKLAUS/FLICK GOLF SCHOOL brand
name. The Company has also developed innovative teaching methods which are
offered at the Nicklaus/Flick Golf Schools throughout the United States and
which serve as the basis for instruction at the Company's golf practice and
instruction facilities worldwide.
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 well-located golf ranges and golf practice
facilities that have the potential for improvement under the Company's
management and with improved or expanded facilities; (ii) developing new golf
practice 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
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golf practice and instruction facilities will provide the Company with
opportunities to market instructional programs offered at the Nicklaus/Flick
Golf Schools and to sell licensed products at retail pro shops established at
such golf practice and instruction facilities. Further, the Company believes
that the Company's arrangement as exclusive marketer for Nicklaus Design 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 Golfer 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 38% of such amount was for golf equipment and other golf
merchandise and approximately 62% 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.
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TABLE 1
==============================================================================
Characteristics of Golfer Segments
(Age 18 years and older)
------------------------------------------------------------------------------
Golfer Segments: Occasional Moderate Avid
- ------------------------------------------------------------------------------
Number of Golfers(000s) 11,341 5,813 5,518
Average Age 37 40 48
Average Years Played 14 16 22
Average Household Income $ 50,800 $ 54,400 $ 56,300
Average Rounds Played 3 14 65
==============================================================================
SOURCE: NGF
TABLE 2
==============================================================================
Total Spending by Golfer Frequency Segment
- ------------------------------------------------------------------------------
Percent of Percent of Average Annual
Golfer Segments: All Golfers Total Spending Expenditures
- ------------------------------------------------------------------------------
Avid 24% 61% $ 1,710
Moderate 26% 27% $ 719
Occasional 50% 12% $ 183
==============================================================================
SOURCE: NGF
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 (according to Golf Asia Magazine), the Company believes the Asian
and South American markets represent attractive markets for growth. As of August
1995, Golf Asia Magazine 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. Golf Range and Recreation Association of America ("GRRA") records
indicate 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; GRAA
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.
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<PAGE>
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 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 1990.
The construction of golf courses has trended upward since 1990. During 1995, 468
golf courses opened in the United States. Approximately 86% of all such openings
occurred at either a daily fee or municipal facility. Golf course openings in
1995 increased by approximately 23% over golf course openings in 1994. From 1990
to 1995, golf course openings experienced an approximately 8.4% annual growth
rate. 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. 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 two golf centers and has entered into a purchase agreement
for a third facility. In addition, there are presently ten licensed GOLDEN BEAR
GOLF CENTERS being operated by licensees of the Company in the United States,
with four 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 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-
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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.
The Company currently operates two golf practice and instruction
facilities and recently entered into a purchase agreement for a third facility.
See "The Company-Recent Acquisitions." While there is no assurance that it will
successfully do so, the Company's goal is to acquire an additional seven
facilities by the end of 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. 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 $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 $461,000, $195,000 and $74,000 for
the years 1995, 1994 and 1993, respectively.
Set forth below is a list of the Company's existing domestic licensees
and the facilities operated or which the Company's licensees have informed the
Company they anticipate opening.
EXISTING ANTICIPATED
LICENSEE GROUP FACILITIES FACILITIES
- -------------- ---------- -----------
Family Golf Centers, Inc. Henrietta, NY Seattle, WA
Farmingdale, NY
Elmsford, NY
Douglaston, NY
Liverpool, NY
Wayne, NJ
El Segundo, CA
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FACILITIES
EXISTING UNDER UNDEVELOPED
LICENSEE GROUP FACILITIES DEVELOPMENT TERRITORIES
- -------------- ---------- ----------- -----------
Highlander Golf Corp. Ltd. Moreno Valley, CA None
Carrollton, TX
East Coast Golf
Centers, Inc. Columbus, OH Ft. Lauderdale, FL
Charlotte, NC
Public Country Clubs, Inc. None Fairfax, VA
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 $553,000, $527,000 and $423,000 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 presently
working in eight countries, including the United States, and is currently
involved in the construction of fourteen active projects. The Company is
currently shaping two golf courses for other architects, one in the United
States and one in Korea.
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 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
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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:
YEAR LOCATION PROJECT DESCRIPTION
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
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 for quality and the Company's contractual
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arrangement as exclusive marketing agent for Nicklaus Design. The Company
markets its services simultaneously with its marketing of 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 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 for quality 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.
- 34 -
<PAGE>
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, generating 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 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.
- 35 -
<PAGE>
The following table sets forth the Company's principal licensees and
products:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Licensed Territories Licensee
Licensee Products Brands Since
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hart, Schaffner & Marx, Slacks, sportscoats, blazers, JACK NICKLAUS United States 1969
a business unit of Hartmarx woven dress shirts
Corporation
Trans-Apparel Group, Men's and women's shirts, JACK NICKLAUS North America 1990
a business unit of Hartmarx slacks, shorts, blazers, socks, NICKLAUS Europe
Corporation sweatshirts, outerwear,
rainwear
The Rockport Corporation Casual and dress shoes, golf JACK NICKLAUS Worldwide 1992
shoes GOLDEN BEAR
Brookville Corporation Neckwear JACK NICKLAUS United States 1995
NICKLAUS
Abba Accessories, Inc. Cufflinks, belt buckles, tie JACK NICKLAUS United States 1995
bars and tacks NICKLAUS Great Britain
Platinum Hosiery Socks JACK NICKLAUS United States 1995
NICKLAUS
American Contract Luggage JACK NICKLAUS United States 1995
Manufacturers, a business NICKLAUS
unit of Boyt
Italian Design Group Belts and small leather goods JACK NICKLAUS United States 1995
NICKLAUS Great Britain
JNAI: Men's and ladies' sportswear JACK NICKLAUS Japan 1973
Partnership with NICKLAUS Southeast Asia
Hartmarx Corporation GOLDEN BEAR Australia
South Africa
South America
JNAI/FE: Men's and ladies' sportswear JACK NICKLAUS Thailand 1973
Partnership between JNAI and accessories NICKLAUS Indonesia
and Kosugi Sangyo to GOLDEN BEAR Korea
license Jack Nicklaus Malaysia
brands in Asia Singapore
Philippines
JNJ: Hats, ties, JACK NICKLAUS Japan 1995
Partnership between JNAI men's/ladies'/children's NICKLAUS
and Kosugi Sangyo to sportswear, gloves, belts, GOLDEN BEAR
serve as master licensee luggage, casual and business MUIRFIELD
in Japan bags and eyewear
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 36 -
<PAGE>
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)
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.
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 over $1.5 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
- 37 -
<PAGE>
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 Magazines 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 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 for 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 in these
areas 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
- 38 -
<PAGE>
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 107 full-time employees and 8
part-time 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 licensed products. The 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," and "Risk Factors-Use of the
NICKLAUS, JACK NICKLAUS and GOLDEN BEAR Names and Symbols."
PROPERTIES
The following table sets forth certain information concerning the
Company's principal properties and facilities:
- 39 -
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE NATURE
SQUARE OF
LOCATION PRIMARY USE FOOTAGE OCCUPANCY
- -------- ----------- ------- ---------
<S> <C> <C> <C>
North Palm Beach, Florida Corporate and administrative offices 19,000 Lease
Singapore Corporate and administrative offices 3,000 Lease
</TABLE>
The Company subleases its corporate headquarters in North Palm Beach,
Florida from GBI, a private company controlled by Nicklaus Family Members. Each
of the leases expire at various times through January 31, 2000, subject to
certain renewal options. The Company believes that its facilities are adequate
and suitable for its current needs. See "Certain Relationships and Related
Transactions-Reorganization-Sublease and Sharing Agreement." The Company has
also begun operating two golf instruction and practice facilities 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 numerous federal, state and local laws and regulations
designed to protect the environment from waste emissions and hazardous
substances. The Company has not been informed by the United States Environmental
Protection Agency or any state or local governmental authority of any
non-compliance or violation of any environmental laws, ordinances or regulations
likely to be material to the Company, and the Company believes that it is in
substantial compliance with all such laws, ordinances and regulations applicable
to its properties and operations. Although the Company has periodically hired
environmental consultants to conduct environmental studies, 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 of which the Company is not aware. The
Company is also subject to the Federal Occupancy 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 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.
- 40 -
<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. Except as set forth in the notes to the table, 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 are shown as beneficially owned by more than one
person.
<TABLE>
<CAPTION>
TOTAL COMMON STOCK
---------------------------------------------
NUMBER OF SHARES NUMBER OF SHARES
OF CLASS A OF CLASS B PERCENT OF PERCENT OF TOTAL
COMMON STOCK COMMON STOCK TOTAL VOTING VOTING POWER
OWNED PRIOR TO OWNED PRIOR TO POWER PRIOR TO AFTER THE
BENEFICIAL OWNER THE OFFERING THE OFFERING(1) THE OFFERING OFFERING
---------------- ------------ --------------- ------------ --------
<S> <C> <C> <C> <C>
Jack W. Nicklaus(2)
Golden Bear International,
Inc.(3)
Richard P. Bellinger and
Barbara B. Nicklaus, as co-
trustees (4)
Richard P. Bellinger(5)
Mark F. Hesemann(5)
Thomas P. Hislop(5)
Jack P. Bates(5)
All Directors and executive
officers as a group (5
persons)(6)
<FN>
- ----------
(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) Does not include _______ shares of Class B Common Stock held in family
trusts for the benefit of Mr. Nicklaus' children, or the ____ 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. Includes the ____ shares of Class B Common Stock
owned of record by GBI.
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<PAGE>
(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) Includes _____ shares of Class B Common Stock beneficially owned or
deemed to be beneficially owned 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 share voting and investment
power with respect to all such shares, but disclaim beneficial
ownership of such shares. All of these shares are subject to a
shareholders' agreement with Mr. Nicklaus which, among other things,
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 and granting Mr. Nicklaus an
irrevocable proxy to vote all of such shares for a period of _____
years or until such shares are sold or transferred to a third party.
See "Certain Relationships and Related Transactions-Shareholder
Agreements."
(5) Messrs. Bellinger, Hesemann, Hislop and Bates acquired shares of the
capital stock of Golf Centers immediately prior to the Reorganization.
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 selling or otherwise disposing of any
such shares for a two year period ending in June 1998 and granting Mr.
Nicklaus an irrevocable proxy to vote all of such shares for a period
of _____ years or until such shares are sold or transferred to a third
party. See "Certain Relationships and Related Transactions-Shareholder
Agreements." Mr. Nicklaus disclaims beneficial ownership of such
shares.
(6) Excludes stock options with respect to a total of ____ 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>
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 will only be
required to spend two days of personal services or appearances on behalf of the
Company for each licensing contract or arrangement of the Company, up to a
maximum of ten days per year. 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.
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
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
- 42 -
<PAGE>
Jack P. Bates 36 Senior Vice President and Chief Financial Officer
JACK W. NICKLAUS will serve 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 will
serve 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 will serve
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 the GBI's business in Asia operating out of the
company's Asian headquarters in Singapore. 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 will serve
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 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 will serve 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
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<PAGE>
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 entirely 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 $______ per year for his or her services as a director plus
reimbursement of travel expenses to board and committee meetings. Pursuant to
the Company's 1996 Stock Option Plan, non-employee directors automatically are
granted each year, on the first business day following the Company's annual
meeting of shareholders, non-qualified options to purchase 1,000 shares of Class
A Common Stock at an exercise price equal to the fair market value of the Common
Stock on the date of grant, and having a term of ten years. Directors who are
also employees of the Company will receive no additional compensation for
service as a director other than reimbursement of any travel expenses to attend
meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the Offering, the Company had no separate compensation
committee or other board committee performing equivalent functions. The
Company's Board of Directors carried out this function. Each of the directors of
the Company participated in deliberations concerning executive compensation.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation earned by the
chief executive officer and the four other most highly compensated executive
officers of the Company for services rendered in all capacities to GBI and the
Operating Subsidiaries for the fiscal year ended December 31, 1995:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ALL OTHER
ANNUAL COMPENSATION(2) COMPENSATION($)(1)
-------------------------------------------------- ------------------
NAME AND OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)
- ------------------ ---- --------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Jack W. Nicklaus, 1995 800,000 -- -- 8,550
Chairman of the
Board
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<PAGE>
Richard P. Bellinger, 1995 400,000 38,000 -- 24,864
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 -- 21,384
Senior Vice President
Jack P. Bates, 1995 150,000 5,417 -- 20,330
Senior Vice President
and Chief Financial
Officer
<FN>
- ----------
(1) The amounts included in the "All Other Compensation" column represent
matching contributions made by the Company under the Company's 401(k)
plan, the allowances for automobile related expenses and profit sharing
contributions.
(2) 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.
</FN>
</TABLE>
1996 STOCK OPTION PLAN
The Company's 1996 Stock Option Plan was adopted on _________, 1996. A
total of ________ 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 _______ 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 ________, ________, ________ and ________ 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.
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<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 Committee shall determine.
Under the 1996 Stock Option Plan, an option to purchase 1,000 shares was
granted to each person who was a non-employee director as of the date the Plan
was adopted and thereafter 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 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 a recipient of a non-qualified stock option to
(i) designate in writing during the optionee's lifetime a family member or a
trust established by 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. 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.
The exercise of any option after termination of employment will 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 five-year terms. 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. Approximately ____ employees are currently 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 ___% 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. No individual may receive under the Annual
Incentive Plan more than $___________ with respect to any fiscal year. 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.
- 47 -
<PAGE>
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
extending through _________, 2001, 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, Mr. Nicklaus
will be obligated to provide, on an annual basis, a minimum of two days of
personal services or appearances on behalf of the Company for each licensing
contract or arrangement of the Company, up to a maximum of ten days per year.
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 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 one-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 agreement), or if such executive terminates the agreement for "good reason"
(as defined in the 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 two years (a) his base salary (as in effect at the time of termination of
the 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 (the "Bonus Compensation");
(ii) continue to participate in the Company's benefit plans during the remainder
of the term of the agreement; and (iii) not be subject to a covenant not to
compete provided for in such agreement. If any of the executives is 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 one year from the date of termination and (ii) any unpaid Bonus
Compensation with respect to calendar years completed prior to such executive's
death or disability plus a pro rata portion of Bonus Compensation for the year
in which such executive's death or disability occurs. If the Company does not
elect to extend such executive's agreement upon the expiration of the original
term or any extension thereof, such executive will be entitled, for a period of
two years from expiration of his employment agreement to (i) receive his Base
Salary, (ii) receive the Bonus Compensation and (iii) participate in the
Company's benefit plans.
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<PAGE>
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 agreement also provides that the Company
may reduce severance payments to be received by the executive if necessary to
avoid imposition of the excise tax imposed by Section 4999 of the Code on
certain types of severance payments. Each agreement also contains certain
confidentiality and non-competition provisions.
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) Mr. 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 Club Services 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 and (vi) the creation, development and editing of books,
articles and print media creative works. 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."
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<PAGE>
TRADEMARK LICENSE
Pursuant to a Trademark 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 which shall not be unreasonably withheld, 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
Trademark License Agreement. Subject to receipt of GBI's approval which 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 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 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; and (vi) the
creation, development and editing of books, articles and print media creative
works.
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 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, 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 and related assets which GBI
desires to transfer to third parties.
The license agreement 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.
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<PAGE>
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 in the event the Company abandons its use 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 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. 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
of 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. 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 to the Company 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 and
maintenance to dedicated and shared phone equipment in the Premises. 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 has retained
the Company as the exclusive manager and representative to market the personal
endorsement services of Jack W. 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
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<PAGE>
licensing relationships with GBI or Mr. Nicklaus (i) to further the interests of
any other professional golfer in obtaining personal service contracts in
competition with the endorsement of Mr. Nicklaus or (ii) to imply the
endorsement of GBI or Mr. Nicklaus for the personal services of such 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) 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 or its division, Nicklaus Design'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 Nicklaus Design 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. However, 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 (ii) any design services provided to
modify, upgrade or redesign any existing golf course which was designed or
previously redesigned by GBI or its predecessor entities. 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 promotional materials and
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<PAGE>
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 GBEC
relating to certain marketing activities. The Company will receive a fee of
approximately $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 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 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 AGREEMENT
Mr. Nicklaus, GBI, certain Family Controlled Trusts and the Company will
enter into a Registration Rights Agreement (the "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 current
holdings or all remaining shares of Class A Common Stock held by Mr. Nicklaus,
GBI and the Family Controlled Trusts. Each of the foregoing parties to the
Registration Rights Agreement (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
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 this
agreement for a period of up to 90 days if the Company believes that
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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
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 division Nicklaus Design. Certain payments under consulting
contracts awarded to Paragon are 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, Paragon contracted to build a
golf course for GBI at cost. The estimated project cost is $1,360,000 and
construction began in February 1995. Approximately 7% 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 20% of net revenues for new endorsement contracts.
SHAREHOLDERS' AGREEMENTS
All Nicklaus Family Members (other than Jack W. Nicklaus) 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"). The Family Shareholders'
Agreement will contain certain limitations on the transfer of shares of Class A
Common Stock and Class B Common Stock. 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 Offering Shareholder intends to sell to
a person (or group of persons) who is not a Nicklaus Family Member, except in
certain circumstances, such as sales in underwritten public offerings or sales
made in compliance with Rule 144. 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. The Family Shareholders'
Agreement will terminate upon the occurrence of certain specified events,
including the transfer of shares of Common Stock by a party to the Family
Shareholders' Agreement that causes
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all parties thereto immediately after such transaction to own beneficially in
the aggregate shares having less than 20% of the total voting power of the
Company.
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 have granted to Mr. Nicklaus an
irrevocable proxy to vote all of such shares (representing approximately ___% of
the voting power of the Company immediately after the Offering ) in Mr.
Nicklaus' discretion for a period of ____ years or until such shares are sold or
transferred to a third party. The Family Controlled Trusts will be prohibited
from selling, disposing or otherwise transferring any such shares for a period
of two years ending June, 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 $900,000. As a consequence of
the Reorganization, Messrs. Bellinger, Hesemann, Hislop and Bates will receive
shares of the Company's Class A Common Stock (representing in the aggregate,
approximately ____% of the voting power of the Company immediately after the
Offering) 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 granted Mr.
Nicklaus an irrevocable proxy to vote all of such shares in Mr. Nicklaus'
discretion for a period of ____ years or 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 selling,
disposing or otherwise transferring any such shares for a period of two years
ending June 1998.
INDEBTEDNESS TO MR. NICKLAUS
Mr. Nicklaus has agreed to provide a bridge loan of approximately $1
million to Golf Centers in connection with the Acquisitions. The loan will be
evidenced by a promissory note, will bear interest at the Federal Mid-Term
annual interest rate in effect at the time the note is executed and will be
repaid from the proceeds of the Offering.
FUTURE TRANSACTIONS WITH AFFILIATES
Following the closing of the Offering, the Company intends to submit
transactions between the Company and its directors 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 disinterested shareholders
of the Company, unless such transactions are approved by a majority of
disinterested members of the Board of Directors.
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 (and after consummation of
the Reorganization) there are ____ shares of Class B Common Stock outstanding
(which may be converted into Class A Common Stock at any time), all
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of which are held of record by Nicklaus Family Members and _____ 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 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, 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 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
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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 _________________________.
LISTING. The Company intends to file an application for the approval for
quotation of the Class A Common Stock on The NASDAQ National Market under the
proposed 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 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 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
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proper notice within the periods specified in the Company's By-laws will result
in the denial of the shareholder's right to make such nominations or propose
such action at the meeting.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Class A
Common Stock. No predictions can be made as to the affect, 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 of the Company in the public market after the lapse of
the restrictions described below, or the potential of such sales, 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.
After completion of the Offering, the Company will have ______ shares of
Class A Common Stock outstanding (_____________ if the Underwriters'
over-allotment option is exercised in full) and ____ shares of Class B Common
Stock outstanding. All of the _________ shares of Class A Common Stock offered
hereby (______ 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 through 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 ______ 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 and the Family Controlled Trusts will each have three
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 along with Messrs. Bellinger, Hesemann, Hislop and Bates,
have unlimited piggyback registration rights to participate in any future
registration of securities by the Company. The Company is not required to effect
more than one registration in any twelve calendar month period. See "Certain
Relationships and Related Transactions Registration Rights Agreement."
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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 outstanding
stock options with respect to an aggregate of approximately ________ shares of
Class A Common Stock as of the date of this Prospectus. 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.
The Company and Nicklaus Family Members and members of the Company's
management who are shareholders of the Company have agreed not to sell, offer to
sell, grant any option for the sale of, assign, pledge, grant any security
interest in or otherwise dispose of, or register for sale by others, any shares
of Common Stock or any security convertible into or exchangeable or exercisable
for shares of Common Stock, except transfers to Nicklaus Family Members, without
the prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated,
on behalf of The Underwriters, for a period of 180 days after the date of this
Prospectus. The transfer of shares of Common Stock held by Nicklaus Family
Members (other than Mr. Nicklaus) and by Messrs. Bellinger, Hesemann, Hislop and
Bates, are subject to restrictions contained in certain shareholder agreements.
See "Certain Relationships and Related Transactions-Shareholders' Agreements"
and "Underwriting."
CERTAIN UNITED STATES 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 Code and regulations thereunder and judicial and administrative
interpretations as of the date hereof, 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 U.S.
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
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prescribed by an applicable tax treaty) unless the dividends are effectively
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 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.
- 61 -
<PAGE>
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.
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement
(the "Purchase Agreement") among the Company and the Underwriters named below,
for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated, 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.
- 62 -
<PAGE>
NUMBER OF SHARES OF
UNDERWRITERS CLASS A COMMON STOCK
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................
William Blair & Company, L.L.C. ...............
Dean Witter Reynolds Inc.......................
-------------
Total..............................
=============
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
______ 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 not to sell, offer
to sell, grant any option for the sale of, assign, pledge, grant any security
interest in, or otherwise dispose of, or register for sale by others, any shares
of Common Stock or securities convertible into or exchangeable or exercisable
for Common Stock, except transfers to Nicklaus Family Members, without the prior
written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated on behalf
of the Underwriters, for a period of 180 days after the date of this Prospectus.
See "Shares Eligible for Future Sales."
At the request of the Company, the Underwriters have initially reserved
up to _____ 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.
- 63 -
<PAGE>
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 Company intends to file an application for the approval for quotation
of the Class A Common Stock on the NASDAQ National Market under the proposed
trading symbol "JACK", subject to official notice of issuance.
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.
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 33130-1557. Certain legal
matters will be passed upon for the Underwriters by Fried, Frank, Harris,
Shriver & Jacobson (a partnership, including professional corporation), New
York, New York 10004-1980. 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.
- 64 -
<PAGE>
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, 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.
- 65 -
<PAGE>
GOLDEN BEAR GOLF, INC.
INDEX TO COMBINED FINANCIAL STATEMENTS
PAGE
----
THE REGISTRANT - GOLDEN BEAR GOLF, INC.:
The Balance Sheet of Golden Bear Golf, Inc., consisting of deferred
offering costs and accrued expenses of $400,000 and common stock and
subscriptions receivable of $10, has not been presented as it is not
considered meaningful.
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-3
Combined Balance Sheets as of December 31, 1994 and 1995 and
March 31, 1996 (Unaudited) F-4
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-5
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-6
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-7
Notes to Combined Financial Statements F-9
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Introduction to Unaudited Pro Forma Financial Information P-1
Unaudited Pro Forma Balance Sheet as of March 31, 1996 P-4
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
F-1
<PAGE>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
COMBINED FINANCIAL STATEMENTS
F-2
<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-3
<PAGE>
<TABLE>
<CAPTION>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
COMBINED BALANCE SHEETS
DECEMBER 31,
-------------------------- MARCH 31,
1994 1995 1996
----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 441,308 $ 377,796 $ 299,784
Restricted cash 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
Due from International 30,089 647,146 253,840
Costs and estimated earnings in excess of billings
on uncompleted contracts 194,177 666,338 869,940
Prepaid expenses and other current assets 188,972 174,032 363,085
----------- ----------- -----------
Total current assets 4,170,237 8,284,100 7,126,146
PROPERTY AND EQUIPMENT, net 620,109 582,586 566,682
OTHER ASSETS 50,400 39,673 195,426
----------- ----------- -----------
Total assets $ 4,840,746 $ 8,906,359 $ 7,888,254
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,307,916 $ 4,268,808 $ 3,463,573
Accrued expenses 1,168,643 1,889,912 1,594,272
Billings in excess of costs and estimated earnings
on uncompleted contracts 829,792 602,990 846,213
Deferred revenue 858,019 700,824 1,144,767
Current portion of notes payable 62,975 219,225 674,145
Provision for estimated losses on construction
contracts in process 82,147 67,288 67,288
----------- ----------- -----------
Total current liabilities 4,309,492 7,749,047 7,790,258
----------- ----------- -----------
NOTES PAYABLE, net of current portion 112,735 43,510 25,158
----------- ----------- -----------
MINORITY INTEREST 162,903 83,484 (207,209)
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
(Notes 8 and 11)
SHAREHOLDERS' EQUITY:
Common stock 2,500 2,500 2,500
Additional paid-in capital 867,500 867,500 867,500
Retained earnings (614,384) 160,318 (589,953)
----------- ----------- -----------
Total shareholders' equity 255,616 1,030,318 280,047
----------- ----------- -----------
Total liabilities and shareholders' equity $ 4,840,746 $ 8,906,359 $ 7,888,254
=========== =========== ===========
</TABLE>
The accompanying notes to combined financial statements
are an integral part of these combined balance sheets.
F-4
<PAGE>
<TABLE>
<CAPTION>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
COMBINED STATEMENTS OF OPERATIONS
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 $ 3,698,509 $ 7,503,898 $21,474,773 $ 1,799,055 $ 2,589,385
Marketing division 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 COSTS AND EXPENSES:
Golf division 4,226,861 7,703,258 19,389,354 1,780,001 2,392,414
Marketing division 4,169,230 4,789,970 5,532,653 1,257,983 1,306,880
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 $ $
=========== ===========
Weighted average number of common stock
and common stock equivalents outstanding
=========== ===========
</TABLE>
The accompanying notes to combined financial statements are an integral part of
these combined statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
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-6
<PAGE>
<TABLE>
<CAPTION>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED 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
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 102,876 534,911 2,234,606 1,675,074 546,880
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (23,259) (248,551) (193,913) (111,876) (56,303)
Decrease (increase) in due from
International 93,744 (69,488) (617,057) (123,548) 393,306
Distributions to minority investors (901,388) (1,002,137) (1,115,000) (347,500) (615,000)
----------- ----------- ----------- ----------- -----------
Net cash used in investing
activities (830,903) (1,320,176) (1,925,970) (582,924) (277,997)
----------- ----------- ----------- ----------- -----------
</TABLE>
(Continued)
F-7
<PAGE>
<TABLE>
<CAPTION>
GOLDEN BEAR GOLF CENTERS, INC.,
PARAGON GOLF CONSTRUCTION, INC. AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
COMBINED STATEMENTS OF CASH FLOWS
(Continued)
FOR THE THREE MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------- --------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
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-8
<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 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. 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 financial statements.
F-9
<PAGE>
The apparel licensing activities of GBI Carve-out are conducted through Jack
Nicklaus Apparel International ("Apparel") and its various partnerships. GBI
Carve-out serves as 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's duties with respect to the various partnerships include ownership of
the various trademarks and licenses, contract negotiation, accounting and
determination and processing of distributions. Accordingly, for financial
reporting purposes, Apparel is considered to be controlled by the Companies.
Notwithstanding the lack of technical majority ownership, consolidation of
Apparel is necessary to fairly present the financial position and results of
operations of the Companies. The operations and balance sheet data of Apparel
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.
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 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.
Contract 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.
F-10
<PAGE>
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.
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 TAX BENEFIT-
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.
F-11
<PAGE>
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 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 sheet 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-12
<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
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-13
<PAGE>
6. STOCKHOLDERS' EQUITY
The combined stockholders' equity accounts include the accounts of the Companies
at December 31, 1995 as follows:
<TABLE>
<CAPTION>
COMMON STOCK
------------------- ADDITIONAL RETAINED EARNINGS/
SHARES AMOUNT PAID-IN CAPITAL DIVISIONAL 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:
YEARS ENDING DECEMBER 31,
-------------------------
1996 $32,712
1997 15,735
-------
$48,447
=======
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 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.
F-14
<PAGE>
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.
10. SEGMENT REPORTING AND INTERNATIONAL OPERATIONS
The Companies operate in two business segments, Golf and Marketing. The Golf
Division includes the operating results of Centers, Paragon and the golf club
management services and golf academy activities of GBI Carve-out. The Marketing
Division includes the operating results of apparel licensing and instructional
activities of GBI Carve-out.
F-15
<PAGE>
Operating results of each segment are disclosed on the face of the combined
statement of operations. Identifiable assets and capital expenditures for each
segment are detailed below.
<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>
The Companies derive a portion of their revenues from foreign sources. Foreign
operations are primarily conducted through Paragon and Apparel. 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 Apparel's licensees are generated in
foreign currencies. The licensees pay the license to Apparel 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 Company's 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>
F-16
<PAGE>
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 the
Companies in exchange for ________ shares of Golden Bear's 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.
In connection with the proposed initial public offering, Golden Bear intends to
adopt a stock option plan and enter into employment agreements with certain
officers.
AGREEMENTS-
In connection with the offering described above, Golden Bear intends to enter
into the following agreements:
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 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.
F-17
<PAGE>
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 within
ninety (90) days following the receipt of notice of such breach or violation
from International.
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 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 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 years
terms, subject to its satisfactory performance of its responsibilities under the
agreement through the effective date of such renewal.
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 manufacturing and distributes golf equipment
utilizing the Nicklaus, Jack Nicklaus and Golden Bear trademarks and trade
names.
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 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 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.
F-18
<PAGE>
The agreement also provides for the sharing of 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.
ACQUISITIONS-
Subsequent to year-end, the Companies entered into agreements to lease one
independently owned golf center and to acquire two independently owned golf
centers for approximately $4.8 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 resulting in the recording of goodwill in the amount of
approximately $0.3 million as follows:
Aggregate purchase price $ 4,800,000
Estimated fair value of net assets 4,542,000
-----------
Goodwill $ 258,000
===========
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 $ (866) $ 31,545 $ 1,234 $ 4,972 $ 62
Operating results of
business to be acquired 1,746 138 2,170 121 -- --
Pro forma adjustments,
primarily interest expense
and goodwill, net of tax -- (131) -- (235) -- (140)
-------- -------- -------- -------- -------- --------
Pro forma $ 18,371 $ (879) $ 33,715 $ 1,120 $ 4,972 $ (78)
======== ======== ======== ======== ======== ========
</TABLE>
The operations of the acquired businesses are insignificant during the months of
January through March due to the seasonality of the acquired golf centers'
businesses which are all located in the Northeastern United States.
F-19
<PAGE>
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:
Golf division 1,780 4,546 7,249 5,814
Marketing division 1,258 1,585 1,210 1,480
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-20
<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") 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,
or at the beginning of the period presented.
Golden Bear was formed on June ___, 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. and Certain Operations of Golden Bear
International, Inc. (collectively the "Companies"). Pursuant to the exchange
agreement, Golden Bear will acquire all of the outstanding common stock of the
Companies in exchange for ________ shares of its 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.
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 agreements to acquire or
lease the operations of three previously independently owned golf centers. The
two acquisitions will be made for approximately $4.8 million in cash and notes.
The acquired businesses 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.
P-2
<PAGE>
MCDAIN-
On April 15, 1996, Golden Bear entered into a lease agreement with McDain Golf
Center of Monroeville, a Pennsylvania limited partnership, for the lease of an
existing golf practice facility. 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. Golden Bear has an option to purchase the
premises in 2001 for $2,000,000.
COOL SPRINGS-
Golden Bear entered into a letter agreement with Cool Springs, Inc., and William
T. Duckworth regarding the purchase of 40.833 acres of land in Pittsburgh,
Pennsylvania on which there is an existing golf practice facility. The purchase
price of the land and assets will be $2.9 million. Consummation of this
acquisition is subject to a number of conditions, including the rezoning of the
property and the completion of due diligence by Golden Bear. Pursuant to the
letter agreement, Golden Bear has made nonrefundable deposits of $300,000 which
are to be credited against the purchase price.
TOM'S RIVER-
On April 26, 1996, Golden Bear entered into an agreement with First Sports
Capital Development Associates, Ltd. to lease certain real property and to
purchase certain assets utilized in connection with an existing golf practice
facility located in Tom's River, New Jersey. The lease is for an initial term of
29 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 approximately 9%.
P-3
<PAGE>
<TABLE>
<CAPTION>
GOLDEN BEAR GOLF, INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1996
(IN THOUSANDS)
ASSETS
BUSINESSES ACQUIRED
--------------------------- PRO FORMA
PRO FORMA COOL TOM'S ACQUISITION FOR OFFERING
ACTUAL (A) SPRINGS MCDAIN (B) RIVER ADJUSTMENTS ACQUISITIONS ADJUSTMENTS AS ADJUSTED
-------------- ------- ---------- ------ ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,100 $ -- $ -- $ 2 $ (2)(d) $ 1,500
(600)(l)
Restricted cash 52 -- -- -- 52
Accounts receivable, net 5,287 -- -- -- 5,287
Due from International 254 -- -- -- 254
Costs and estimated earnings
in excess of billings on
uncompleted contracts 870 -- -- -- 870
Prepaid expenses and other
current assets 363 52 -- 12 (64)(d) 363
------- ------ ------ ------ ------- -------
Total current assets 8,926 52 -- 14 (666) 8,326
PROPERTY AND EQUIPMENT, net 567 2,232 -- 2,310 5,109
OTHER ASSETS 195 -- -- 34 258 (c) 453
(34)(d)
------- ------ ------ ------ ------- -------
Total assets $ 9,688 $2,284 $ -- $2,358 $ (442) $13,888
======= ====== ====== ====== ======= =======
</TABLE>
(Continued)
P-4
<PAGE>
<TABLE>
<CAPTION>
GOLDEN BEAR GOLF, INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1996
(IN THOUSANDS)
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
BUSINESSES ACQUIRED
--------------------------- PRO FORMA
PRO FORMA COOL TOM'S ACQUISITION FOR OFFERING
ACTUAL (A) SPRINGS MCDAIN (B) RIVER ADJUSTMENTS ACQUISITIONS ADJUSTMENTS AS ADJUSTED
-------------- ------- ---------- ------ ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 3,464 $ 8 $ -- $ 54 $ (62)(d) $ 3,464
Accrued expenses 1,594 31 -- 44 (75)(d) 1,594
Billings in excess of costs and
estimated earnings on
uncompleted contracts 846 -- -- -- 846
Deferred revenue 1,145 -- -- -- 1,145
Current portion of notes payable 674 -- -- 8 (8)(d) 674
Provision for estimated losses on
construction contracts in process 67 -- -- -- 67
------- ------ ------ ------ ------- -------
Total current liabilities 7,790 39 -- 106 (145) 7,790
------- ------ ------ ------ ------- -------
NOTES PAYABLE, net of current portion 25 219 -- 615 (834)(d) 4,225
------- ------ ------ ------ -------
4,200 (h)
MINORITY INTEREST (207) -- -- -- (207)
------- ------ ------ ------ ------- -------
SHAREHOLDERS' EQUITY:
Common stock 3 23 -- 1 (24)(d) 3
Additional paid-in capital 2,667 5 -- 1,653 (1,658)(d) 2,667
Retained earnings (590) 1,998 -- (17) (1,981)(d) (590)
------- ------ ------ ------ ------- -------
Total stockholders' equity 2,080 2,026 -- 1,637 (3,663) 2,080
------- ------ ------ ------ ------- -------
Total liabilities and
stockholders' equity $ 9,688 $2,284 $ -- $2,358 $ (442) $13,888
======= ====== ====== ====== ======= =======
</TABLE>
P-5
<PAGE>
<TABLE>
<CAPTION>
GOLDEN BEAR GOLF, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA
BUSINESSES ACQUISITION FOR
ACTUAL ACQUIRED (J) ADJUSTMENTS ACQUISITIONS
------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Golf division $ 2,590 $ -- $ 2,590
Marketing division 2,382 -- 2,382
------------- ------------ ------------
4,972 -- 4,972
------------- ------------ ------------
OPERATING COSTS AND EXPENSES:
Golf division 2,392 -- $ 81 (f) 2,473
Marketing division 1,307 -- 1,307
Corporate overhead 750 -- 750
Depreciation and amortization 73 -- 2 (e) 75
------------- ------------ ------------
4,522 -- 4,605
------------- ------------ ------------
Operating income 450 367
OTHER EXPENSE (321) -- (147)(i) (468)
------------- ------------ ------------
Income (loss) before foreign and
pro forma provision for income taxes 129 -- (101)
FOREIGN AND PRO FORMA TAX PROVISIONS 50 -- (90)(g) (40)
------------- ------------ ---------- -------------
Net income (loss) $ 79 $ -- $ (140) $ (61)
============= ============ ========== =============
Net income per share $ $
============= =============
Weighted average number of common stock
and common stock equivalents outstanding =============
</TABLE>
P-6
<PAGE>
<TABLE>
<CAPTION>
GOLDEN BEAR GOLF, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
BUSINESSES ACQUIRED
--------------------------- PRO FORMA
COOL TOM'S ACQUISITION FOR
ACTUAL SPRINGS MCDAIN (B) RIVER ADJUSTMENTS ACQUISITIONS
-------------- ------- ---------- ------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Golf division $ 21,475 $ 1,277 $ 469 $ 424 $ 23,645
Marketing division 10,070 -- -- -- 10,070
-------- ------- ----- ----- --------
31,545 1,277 469 424 33,715
OPERATING COSTS AND EXPENSES:
Golf division 19,389 945 452 384 $ 325 (f) 21,424
(71)(m)
Marketing division 5,533 -- -- -- 5,533
Corporate overhead 3,121 -- -- -- 3,121
Depreciation and amortization 233 41 60 47 9 (e) 330
(60)(f)
-------- ------- ----- ----- --------
28,276 986 512 431 30,408
-------- ------- ----- ----- --------
Operating income (loss) 3,269 291 (43) (7) 3,307
OTHER EXPENSE (1,025) -- (110) (10) 110 (f) (1,328)
(293)(i)
-------- ------- ----- ----- --------
Income (loss) before foreign
and pro forma provision
for income taxes 2,244 291 (153) (17) 1,979
FOREIGN AND PRO FORMA TAX PROVISIONS 875 -- -- -- (151)(g) 724
-------- ------- ----- ----- ------- --------
Net income (loss) $ 1,369 $ 291 $(153) $ (17) $ 235 $ 1,255
======== ======= ===== ===== ======= ========
Net income per share $ $
======== ========
Weighted average number of common stock
and common stock equivalents
outstanding
======== ========
</TABLE>
P-7
<PAGE>
GOLDEN BEAR GOLF, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(a) Reflects the impact of the sale of _____ shares of Class A Common Stock and
______ shares of Class B Common Stock and the receipt of $1,800,000 in
connection with such sale and Reorganization.
(b) McDain will be operated under an operating lease agreement, as such, no
assets will be acquired and no goodwill will be recorded.
(c) Represents the purchase of the two golf centers and the recording of
goodwill as follows (in thousands):
PURCHASE NET ASSETS
PRICE ACQUIRED GOODWILL
--------- --------- --------
Cool Springs $ 2,900 $ 2,232 $ 668
Tom's River 1,900 2,310 (410)
--------- --------- --------
$ 4,800 $ 4,542 $ 258
========= ========= ========
(d) Represents assets, liabilities and equity which are not included in the
acquisition.
(e) 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 $ 668 29 years $ 23 $ 6
Tom's River (410) 29 years (14) (4)
-------- ----- ----
$ 258 $ 9 $ 2
======== ===== ====
(f) Represents elimination of certain McDain expenses (depreciation and interest
expense on debt not assumed) and inclusion of the $325,000 lease entered
into as a result of the McDain transaction.
(g) Represents the tax effect of the pro forma adjustments at an effective
rate of 39%.
(h) Represents debt resulting from the acquisitions. See Note (i).
(i) Represents interest expense at an estimated 9% on debt resulting from the
acquisitions as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
PERIOD DECEMBER 31, MARCH 31,
DEBT RATE OUTSTANDING 1995 1996
------- ---- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cool Springs $ 1,800 9% 12 Months $ 162 $ 81
Tom's River 1,400 9% 6 Months 63 32
Stockholder Note 500 9% 12 Months 45 23
Stockholder Note 500 9% 6 Months 23 11
------- ------ -----
$ 4,200 $ 293 $ 147
======= ====== =====
</TABLE>
P-8
<PAGE>
(j) The operations of the acquired businesses are insignificant during the
months of January through March due to the seasonality of the acquired golf
centers' business which are all located in the Northeastern United States.
(k) Reflects the receipt of the due proceeds of the Offering and the issuance of
1,800,000 shares of common stock offered by the Company at an assumed
initial public offering price of $______ per share for an aggregate of
$_____ million, net of underwriting discount and estimated offering
expenses.
(l) Represents cash used to fund the acquisitions of CoolSprings and Tom's
River.
(m) Represents elimination of lease expense on land and facilities incurred by
Cool Springs prior to the acquisition of such land and facilities in the
last quarter of 1995.
P-9
<PAGE>
================================================================================
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 an offer or solicitation. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any circumstances, create any
implication that there has not been any change in the affairs of the Company or
the information set forth in this Prospectus since the date hereof.
----------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary.......................................
Risk Factors.............................................
The Company...............................................
Use of Proceeds..........................................
Dividend Policy..........................................
Dilution..................................................
Capitalization...........................................
Selected Historical Combined Financial
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..........................
Certain U.S. Federal Tax Considerations for
Non-U.S. Holders of Class A Common Stock...............
Underwriting.............................................
Legal Matters............................................
Experts..................................................
Additional Information...................................
Index to Combined Financial Statements...................
----------
Until ____________, 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may by required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.
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 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.
SEC Registration Fee..................................... $ 11,421
NASD Filing Fee.......................................... 3,812
NASDAQ National Market Quotation Fee.....................
Legal Fees and Expenses*.................................
Registrar and Transfer Agent Fees and Expenses*..........
Accounting Fees and Expenses*............................
Printing and Engraving Expenses*.........................
Blue Sky Qualification Fees and Expenses.................
Miscellaneous .......................................
------------
Total *..................................... $
============
- ------------------
* 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
II-1
<PAGE>
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
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
II-2
<PAGE>
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 Underwriter 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
___, 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 (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 ____- for-one 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:
II-3
<PAGE>
EXHIBITS DESCRIPTION
- -------- -----------
1.1 Form of Underwriting Agreement*
2.1 Agreement and Plan of Reorganization
3.1 Articles of Incorporation of the Registrant
3.3 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 Registration Rights Agreement*
10.2 The Golden Bear Golf, Inc. 1996 Stock Option Plan*
10.3 Employment Agreement, between Golden Bear Holdings, Inc. and
Richard P. Bellinger*
10.4 Employment Agreement, between Golden Bear Holdings, Inc. and Mark
F. Hesemann*
10.5 Employment Agreement, between Golden Bear Holdings, Inc. and
Thomas P. Hislop*
10.6 Employment Agreement, between Golden Bear Holdings, Inc. and Jack
P. Bates*
10.7 Form of Indemnification Agreement between Golden Bear Holdings,
Inc. and each of its Directors and Executive Officers.*
10.8 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.*
10.9 Master Apparel Agreement, dated June 1, 1993, by and between Gold
Bear International, Inc., Hart Schaffner & Marx and Hartmarx
Corporation.*
10.10 Trademark License Agreement, dated ___________, 1996, between
Golden Bear Holdings, Inc. and Golden Bear International, Inc.*
10.11 Design Services Marketing Agreement, dated ______________, 1996,
between Golden Bear Holdings, Inc. and Golden Bear International,
Inc.*
10.12 Personal Services Management Agreement, dated _______________,
1996, between Golden Bear Holdings, Inc. and Golden Bear
International, Inc.*
10.13 Marketing Consulting and Cooperation Agreement, dated
____________, 1996, between Golden Bear Holdings, Inc. and Golden
Bear International, Inc.*
II-4
<PAGE>
10.14 Office Staff and Equipment Service Agreement, dated _____________,
1996, between Golden Bear Holdings, Inc. and Golden Bear
International, Inc.*
10.15 Sublease and Sharing Agreement, dated ________________, 1996,
between Golden Bear Holdings, Inc. and Golden Bear International,
Inc.*
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
24.1 Power of Attorney (included with signature pages to this
Registration Statement)
27.1 Financial Data Schedule
- ----------
* To be filed by amendment.
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
II-5
<PAGE>
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-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this 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 7 day of June, 1996.
GOLDEN BEAR GOLF, INC.
By: /s/ RICHARD P. BELLINGER
-------------------------------------
Richard P. Bellinger
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Richard P. Bellinger, Mark F. Hesemann
and Thomas P. Hislop and each of them acting alone, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments, including post-effective amendments,
to this Registration Statement, or any registration statement relating to this
offering to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that each said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ JACK W. NICKLAUS Director and Chairman June 7, 1996
- ---------------------------- of the Board
Jack W. Nicklaus
/s/ RICHARD P. BELLINGER Director, President and June 7, 1996
- ---------------------------- Chief Executive Officer
Richard P. Bellinger
/s/ JACK P. BATES Senior Vice President and June 7, 1996
- ---------------------------- Chief Financial Officer
Jack P. Bates (Principal Financial and
Accounting Officer)
<PAGE>
/s/ MARK F. HESEMANN Director and Senior June 7, 1996
- ---------------------------- Vice President
Mark F. Hesemann
/s/ THOMAS P. HISLOP Director and Senior June 7, 1996
- ---------------------------- Vice President
Thomas P. Hislop
<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
<TABLE>
<CAPTION>
GOLDEN BEAR GOLF CENTER, INC.,
PARAGON GOLF CONSTRUCTION, INC., AND
CERTAIN OPERATIONS OF GOLDEN BEAR INTERNATIONAL, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS DEDUCTIONS
---------- -----------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND AMOUNT 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 $ 476,692 $ -- $ 572,999
========= ========= ========= =========
1995
Allowance for uncollectible accounts $ 572,999 $ 98,046 $ 159,212 $ 511,833
========= ========= ========= =========
</TABLE>
S-2
<PAGE>
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBITS DESCRIPTION NUMBERED PAGE
- -------- ----------- -------------
2.1 Agreement and Plan of Reorganization
3.1 Articles of Incorporation of the Registrant
3.3 Bylaws of the Registrant
23.1 Consent of Stearns Weaver Miller Weissler
Alhadeff & Sitterson, P.A.
23.2 Consent of Arthur Andersen, LLP
27.1 Financial Data Schedule
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated as of
June 7, 1996, by and among Golden Bear International, Inc., a Florida
corporation ("GBI"), Golden Bear Golf, Inc., a Florida corporation ("GB"), John
G. Hines ("Hines") and those individuals and entities listed on Exhibit A hereto
(the "Shareholders").
W I T N E S S E T H
WHEREAS, the Shareholders collectively own all of the issued and
outstanding shares of capital stock (the "Exchange Stock") of Paragon Golf
Construction, Inc., a Florida corporation ("Paragon") and Golden Bear Golf
Centers, Inc., a Florida corporation ("GBGC");
WHEREAS, Richard P. Bellinger ("Bellinger") and Hines own all
of the issued and outstanding shares of capital stock (the "GBCS
Stock") of Golden Bear Club Services, Inc., a Florida corporation
("GBCS");
WHEREAS, the Shareholders have agreed, subject to the terms and
conditions of this Agreement, to transfer the Exchange Stock to GB in exchange
for newly issued shares of GB's Class A Common Stock, par value $.01 per share
(the "Class A Stock"), and GB's Class B Common Stock, par value $.01 per share
(the "Class B Stock" and, together with the Class A Stock, the "Common Stock");
WHEREAS, GBI has agreed, subject to the terms and conditions of this
Agreement, to contribute to GB certain of GBI's assets (the "Exchange Assets")
relating to (i) its trademark licensing, distribution and sale of golf-related
consumer products business and its marketing activities, including its marketing
activities with respect to golf course design services and Jack W. Nicklaus
marketing relationships and its obligations to Nicklaus Golf Equipment, (ii) its
development, operation and licensing of golf practice and instruction
facilities, (iii) its club management and consulting activities, (iv) the Jack
Nicklaus International Golf Club and (v) its development, ownership and
operation of golf instructional programs (collectively, the "Exchange
Businesses") in exchange for (a) assumption of all liabilities and obligations
of GBI related to or arising out of the operation of the Exchange Businesses
(the "Exchange Liabilities"); and (b) newly issued shares of Class B Stock;
WHEREAS, Bellinger and Hines have agreed, subject to the terms and
conditions of this Agreement, to transfer the GBCS Stock to GB in exchange for
$10.00 (the "GBCS Consideration");
WHEREAS, the parties anticipate that GB will consummate an initial
public offering (the "Offering") of GB's Class A Stock during the third quarter
of 1996;
WHEREAS, the parties intend that the reorganization transactions
contemplated by this Agreement shall qualify as a tax-free non-recognition
transaction pursuant to Section 351 of the Internal Revenue Code of 1986, as
amended.
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. TRANSFER OF SHARES. The Shareholders agree, subject to the
terms and conditions of this Agreement, to transfer to GB all of the Exchange
Shares which they own and GB agrees, in exchange therefore, to issue to the
Shareholders an aggregate of 556 shares of Class A Stock and Class B Stock, as
allocated among the Shareholders as set forth opposite each Shareholder's name
on Exhibit A (the "Shareholder Exchange Shares"). Bellinger and Hines agree,
subject to the terms and conditions of this Agreement, to transfer to GB all of
the GBCS Stock in exchange for the GBCS Consideration.
SECTION 2. TRANSFER OF ASSETS; ASSUMPTION OF LIABILITIES. GBI agrees,
subject to the terms and conditions of this Agreement, to transfer to GB the
Exchange Assets and GB agrees, in exchange therefore, to (i) assume all Exchange
Liabilities and to satisfy and discharge all such Exchange Liabilities as the
same shall become due; and (ii) deliver to GBI 444 shares of Class B Stock (the
"GBI Exchange Shares").
SECTION 3. MANNER OF TRANSFERS.
(a) The transfer of the Exchange Stock by the Shareholders
shall be effected by delivery to the Escrow Agent of certificates representing
the Exchange Stock, duly endorsed in blank for transfer or accompanied by
separate stock powers duly endorsed in blank for transfer, and with all required
documentary and transfer tax stamps affixed.
(b) The transfer of the GBCS Stock by Bellinger and Hines
shall be effected by delivery to the Escrow Agent of certificates representing
the GBCS Stock, duly endorsed in blank for transfer or accompanied by separate
stock powers duly endorsed in blank for transfer, and with all required
documentary and transfer tax stamps affixed.
(c) The transfer of the Exchange Assets shall be effected by
delivery to the Escrow Agent of a duly executed bill of sale or any other duly
executed instruments appropriate to vest in GB good and marketable title to the
Exchange Assets.
(d) The issuance by GB of the Shareholder Exchange Shares and
the GBI Exchange Shares shall be effected by delivery to the Escrow Agent of
certificates in the name of each party entitled to receive such shares hereunder
representing the number of Shareholder Exchange Shares or GBI Exchange Shares,
as applicable, that each such party is entitled to receive hereunder. The
issuance by GB of the GBCS Consideration shall be effected by
-2-
<PAGE>
delivery to the Escrow Agent of cash in the amount of the GBCS Consideration.
SECTION 4. EFFECTIVE DATE.
(a) The transfers of the Exchange Stock, the GBCS Stock and
the Exchange Assets contemplated by this Agreement shall take place on the date
(the "Effective Date") that GB's registration statement on Form S-1 (the
"Registration Statement") filed under the Securities Act of 1933 (the
"Securities Act") with respect to the Offering is declared effective by the
Securities and Exchange Commission.
(b) The certificates representing the Exchange Stock, the GBCS
Stock, the bill of sale relating to the Exchange Assets and the certificates
representing the Shareholder Exchange Shares and the GBI Exchange Shares shall
be deposited in escrow on the Effective Date with Stearns Weaver Miller Weissler
Alhadeff & Sitterson, P.A., as Escrow Agent (the "Escrow Agent"). At the closing
of the Offering (the "Closing"), the Escrow Agent shall deliver (i) the
certificates representing the Exchange Stock, the GBCS Stock and the bill of
sale relating to the Exchange Assets to GB and (ii) the certificates
representing the Shareholder Exchange Shares, the GBI Exchange Shares and the
GBCS Consideration to the parties entitled thereto. If all conditions to the
obligations of the underwriters to purchase GB's Class A Common Stock in the
Offering under the underwriting agreement related to the Offering, other than
conditions relating to the performance of this Agreement, shall not have been
satisfied or waived in writing for any reason within sixty business days after
the Effective Date, the Escrow Agent shall return to each party the respective
items deposited in escrow by each party.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each
Shareholder hereby represents and warrants to GB, severally but not jointly, as
follows:
(a) He is acquiring the shares of Common Stock for his own
account, for investment only, and not with a view to any resale or distribution
thereof.
(b) He has had access to all information he has deemed
material with respect to the transactions contemplated hereby and with respect
to an investment in GB. He is a sophisticated investor who has such knowledge
and experience in financial and business matters so that he is capable of
evaluating the merits and risks of an investment in GB and understands the
speculative nature of an investment in GB.
(c) He understands that the shares of Common Stock to be
acquired hereunder have not been registered under the Securities Act and that
none of the Common Stock acquired hereunder may be
-3-
<PAGE>
sold except pursuant to an effective registration statement under the Securities
Act or in a transaction exempt from registration under the Securities Act. He
further understands that any certificate representing the Common Stock issued in
accordance with this Agreement will bear a legend stating that such Common Stock
has not been registered under the Securities Act and setting forth or referring
to the restrictions on transferability and sale thereof.
(d) The Exchange Stock to be delivered to GB is owned by him
beneficially and of record, free and clear of any and all liens, claims,
encumbrances, security interests or any other charges, except for those imposed
by applicable federal and state securities laws, security interests of Jack W.
Nicklaus in and to certain of the Exchange Stock and those certain Shareholders'
Agreements discussed in Section 10 hereof.
(e) The Exchange Stock to be delivered by each of the
Shareholders constitutes all of the issued and outstanding capital stock of
Paragon and GBGC.
(f) With respect to each Shareholder which is an individual,
such Shareholder has full power and authority to execute and deliver this
Agreement and, when executed by the other parties hereto, will constitute a
valid and binding obligation of such Shareholder enforceable in accordance with
its terms, except to the extent such enforceability may be limited by laws
affecting the enforcement of creditors' rights generally or by general
principles of equity. With respect to each Shareholder which is a trust, the
individual executing on behalf of such Shareholder has full power and authority
to execute and deliver this Agreement in such capacity and to legally bind the
trust of which he is a fiduciary and, when executed by the other parties hereto,
will constitute a valid and binding obligation of such Shareholder enforceable
in accordance with its terms, except to the extent such enforceability may be
limited by laws affecting the enforcement of creditors' rights generally or by
general principles of equity.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF GBI. GBI hereby represents
and warrants to GB as follows:
(a) GBI is acquiring the shares of Class B Stock for its own
account, for investment only, and not with a view to any resale or distribution
thereof.
(b) GBI has had access to all information it deemed material
with respect to the transactions contemplated hereby and with respect to an
investment in GB. GBI is a sophisticated investor who has such knowledge and
experience in financial and business matters so that it is capable of evaluating
the merits and risks of an investment in GB and understands the speculative
nature of an investment in GB.
-4-
<PAGE>
(c) GBI understands that the shares of Class B Stock to be
acquired hereunder have not been registered under the Securities Act and that
none of the Class B Stock acquired hereunder may be sold except pursuant to an
effective registration statement under the Securities Act or in a transaction
exempt from registration under the Securities Act. GBI further understands that
any certificate representing the Class B Stock issued in accordance with this
Agreement will bear a legend stating that such Class B Stock has not been
registered under the Securities Act and setting forth or referring to the
restrictions on transferability and sale thereof.
(d) The Exchange Assets to be delivered to GB are owned by
GBI, and will be delivered to GB, free and clear of any and all liens, claims,
encumbrances, security interests or any other charges except for Permitted
Encumbrances. For purposes of this Agreement, "Permitted Encumbrances" means (a)
liens for Taxes and other governmental charges and assessments which are not yet
due and payable, (b) liens of landlords and liens of carriers, warehousemen,
mechanics and materialmen and other like liens arising in the ordinary course of
business for sums not yet due and payable, and (c) other liens, encumbrances,
easements or imperfections on property which are not material in amount or do
not materially detract from the value of or materially impair the existing use
of the property affected by such lien or imperfection. The Exchange Assets (i)
constitute substantially all the assets used in the Exchange Businesses and (ii)
include all rights, properties and other assets necessary to permit GB to
conduct the Exchange Businesses immediately after their transfer to GB
substantially in the same manner as the Exchange Businesses are currently being
conducted and as they are contemplated to be conducted by the description in the
Registration Statement.
(e) The execution and delivery of this Agreement by GBI have
been duly authorized by all necessary corporate action and, when executed by the
other parties hereto, will constitute a valid and binding obligation of GBI
enforceable in accordance with its terms, except to the extent such
enforceability may be limited by laws affecting the enforcement of creditors'
rights generally or by general principles of equity.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF BELLINGER AND HINES. Each
of Bellinger and Hines hereby represents and warrants to GB, severally but not
jointly, as follows:
(a) The GBCS Stock to be delivered by him to GB is owned by
him beneficially and of record, free and clear of any and all liens, claims,
encumbrances, security interests or any other charges, except for those imposed
by applicable federal and state securities laws.
-5-
<PAGE>
(b) The GBCS Stock to be delivered by each of Bellinger
and Hines constitutes all of the issued and outstanding capital stock of GBCS.
(c) He has full power and authority to execute and deliver
this Agreement and, when executed by the other parties hereto, will constitute a
valid and binding obligation of him enforceable in accordance with its terms,
except to the extent such enforceability may be limited by laws affecting the
enforcement of creditors' rights generally or by general principles of equity.
SECTION 8. REPRESENTATIONS AND WARRANTIES OF GB. GB hereby represents
and warrants to the Shareholders, Hines and GBI as follows:
(a) The execution and delivery of this Agreement by GB have
been duly authorized by all necessary corporate action and, when executed by the
other parties hereto, will constitute a valid and binding obligation of GB
enforceable in accordance with its terms, except to the extent such
enforceability may be limited by laws affecting the enforcement of creditors'
rights generally or by general principles of equity.
(b) The Common Stock to be issued in exchange for the Exchange
Stock and the Exchange Assets pursuant to this Agreement will, when so issued
and delivered, be duly authorized, validly issued, fully paid and
non-assessable.
SECTION 9. FURTHER ASSURANCES. The Shareholders, Hines, GBI and GB
hereby agree to execute such additional instruments and take such action as may
be reasonably requested by any party to confirm or perfect title to any property
or stock transferred hereunder or otherwise to carry out the purposes and intent
of this Agreement.
SECTION 10. SHAREHOLDERS' AGREEMENTS. Certain of the Shareholders are
parties to (i) a Shareholders' Agreement, dated as of December 11, 1992,
relating to shares of capital stock in Paragon (the "Paragon Shareholders'
Agreement"), (ii) a Shareholders' Agreement, dated as of December 7, 1992, as
amended June 6, 1996, relating to shares of capital stock in GBGC (the "GBGC
Shareholders' Agreement") and (iii) a Shareholders' Agreement, dated as of June
30, 1990, relating to shares of capital stock in GBI (the "GBI Shareholders'
Agreement") and, together with the Paragon Shareholders' Agreement and the GBGC
Shareholders' Agreement (the "Shareholders' Agreements"). The Shareholders party
to each of the Paragon Shareholders' Agreement and the GBGC Shareholders'
Agreement, by execution of this Agreement, hereby agree to the termination of
each of the Paragon Shareholders' Agreement and the GBGC Shareholders'
Agreement, effective simultaneously with the closing of the Offering and
delivery of the Exchange Stock to GB in accordance with Section 4(b) hereof.
Further, each of the Shareholders party to the Shareholders'
-6-
<PAGE>
Agreements hereby consent and agree that the Shareholders' Agreements shall be
deemed to be amended to the full extent necessary to permit the execution of
this Agreement and the consummation of the transactions contemplated hereby.
SECTION 11. TERMINATION. This Agreement shall immediately terminate and
be of no further force and effect in the event that all conditions to the
obligations of the underwriters to purchase shares of Class A Stock in the
Offering under the underwriting agreement related to the Offering, other than
conditions relating to performance of this agreement, shall not have been
satisfied or waived in writing, within sixty business days after the Effective
Date.
SECTION 12. MISCELLANEOUS.
(a) Neither this Agreement nor any rights, interests or
obligations hereunder may be assigned by any of the parties hereto without the
prior written consent of the other parties. Subject to the foregoing, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
(b) This Agreement, including the attached Exhibits,
constitutes the entire agreement among the parties with respect to the subject
matter hereof, and supersedes all prior agreements and understandings between
the parties with respect thereto.
(c) This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Florida without
regard to the choice or conflict of law principles thereof.
(d) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning of any of
the terms or provisions hereof.
(e) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which,
when taken together, shall constitute one and the same agreement.
(f) If any portion of this Agreement shall be deemed by a
court of competent jurisdiction to be unenforceable, the remaining portions
shall be valid and enforceable only if, after excluding the portion deemed to be
unenforceable, the remaining terms shall provide for the consummation of the
transactions contemplated herein in substantially the same manner as originally
set forth herein.
(g) With respect to obligations of trustees who are parties
hereto in their capacity as trustees of one or more trusts,
-7-
<PAGE>
this Agreement shall be binding upon such trustees only in their capacities as
trustees, not individually, and not with respect to any Exchange Stock other
than Exchange Stock held by them in their capacity as trustees of such trusts.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first written above.
GOLDEN BEAR INTERNATIONAL, INC.
By: --------------------------------------
Name:
Title:
GOLDEN BEAR GOLF, INC.
By: ---------------------------------------
Name:
Title:
/s/ JACK W. NICKLAUS
-------------------------------------------
Jack W. Nicklaus
/s/ RICHARD P. BELLINGER
-------------------------------------------
Richard P. Bellinger
/s/ JOHN G. HINES
-------------------------------------------
John G. Hines
/s/ MARK F. HESEMANN
-------------------------------------------
Mark F. Hesemann
/s/ THOMAS P. HISLOP
-------------------------------------------
Thomas P. Hislop
-8-
<PAGE>
/s/ JACK P. BATES
-------------------------------------------
Jack P. Bates
JACK W. NICKLAUS, II TRUST u/a
By: /s/ BARBARA B. NICKLAUS
---------------------------------------
Barbara B. Nicklaus, As Trustee
and not Individually
By: /s/ RICHARD P. BELLINGER
---------------------------------------
Richard P. Bellinger, As Trustee
and not Individually
STEVEN NICKLAUS TRUST u/a
By: /s/ BARBARA B. NICKLAUS
---------------------------------------
Barbara B. Nicklaus, As Trustee
and not Individually
By: /s/ RICHARD P. BELLINGER
---------------------------------------
Richard P. Bellinger, As Trustee
and not Individually
NANCY J. NICKLAUS O'LEARY TRUST u/a
By: /s/ BARBARA B. NICKLAUS
---------------------------------------
Barbara B. Nicklaus, As Trustee
and not Individually
By: /s/ RICHARD P. BELLINGER
---------------------------------------
Richard P. Bellinger, As Trustee
and not Individually
-9-
<PAGE>
GARY T. NICKLAUS TRUST u/a/
By: /s/ BARBARA B. NICKLAUS
---------------------------------------
Barbara B. Nicklaus, As Trustee
and not Individually
By: /s/ RICHARD P. BELLINGER
---------------------------------------
Richard P. Bellinger, As Trustee
and not Individually
MICHAEL S. NICKLAUS TRUST u/a
By: /s/ BARBARA B. NICKLAUS
---------------------------------------
Barbara B. Nicklaus, As Trustee
and not Individually
By: /s/ RICHARD P. BELLINGER
---------------------------------------
Richard P. Bellinger, As Trustee
and not Individually
-10-
ARTICLES OF INCORPORATION
OF
GOLDEN BEAR GOLF, INC.
ARTICLE I - NAME AND ADDRESS
The name of this corporation is Golden Bear Golf, Inc. (the
"Corporation"). The address of the principal office and the mailing address of
this Corporation is 11780 U.S. Highway One, North Palm Beach, Florida 33408.
ARTICLE II - PURPOSE
This Corporation is organized for the purpose of transacting any and
all lawful business for corporations organized under the Florida Business
Corporation Act.
ARTICLE III - CAPITAL STOCK
The aggregate number of shares which this Corporation shall have
authority to issue is one hundred million (100,000,000) shares, consisting of
(a) seventy million (70,000,000) shares of Class A Common Stock, par value $0.01
per share (the "Class A Common Stock"); (b) ten million (10,000,000) shares of
Class B Common Stock, par value $.01 per share (the "Class B Common Stock"); and
twenty million (20,000,000) shares of preferred stock, par value $.01 per share
(the "Preferred Stock"), issuable in one or more series as hereinafter provided.
The Class A Common Stock and the Class B Common Stock shall hereinafter
collectively be called "Common Stock."
ARTICLE IV - INITIAL REGISTERED OFFICE AND AGENT
The street address of the initial registered office of this Corporation
and the name of the initial registered agent of this Corporation at such office
are:
NAME ADDRESS
---- -------
CT Corporation System 1200 South Pine Island Road
Plantation, Florida 33324
<PAGE>
ARTICLE V - INCORPORATOR
The name and address of the person filing these Articles of
Incorporation as incorporator are:
NAME ADDRESS
---- -------
Steven D. Rubin 150 West Flagler Street
Miami, Florida 33130
ARTICLE VI - SPECIAL MEETINGS OF SHAREHOLDERS
The shareholders of this Corporation may only call a special meeting of
shareholders if the holders of at least 50% of the voting power of all of the
shares of the capital stock of the Corporation all of the votes entitled to be
cast on any issue proposed to be considered at the proposed special meeting
sign, date and deliver to this Corporation's secretary one or more written
demands for the meeting describing the purpose or purposes for which it is to be
held.
ARTICLE VII - BOARD OF DIRECTORS
7.1 FUNCTION. All corporate powers shall be exercised by or under the
authority of, and the business and affairs of the Corporation shall be managed
under the direction of, the Board of Directors. Directors must be natural
persons who are at least 18 years of age but need not be residents of Florida or
shareholders of the Corporation.
7.2 NUMBER OF DIRECTORS.
(i) The Board of Directors of the Corporation shall
consist of not less than four persons, the exact number to be determined from
time to time by resolution adopted by the affirmative vote of a majority of all
directors of the Corporation then holding office at any special or regular
meeting. Any such resolution increasing or decreasing the number of directors
shall have the effect of creating or eliminating a vacancy or vacancies, as the
case may be, provided that no such resolution shall reduce the number of
directors below the number then holding office and provided further that no such
resolution may increase or decrease the number
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<PAGE>
of directors by more than 30% of the number of directors last approved by the
shareholders at any special or annual meeting of the shareholders of the
Corporation.
(ii) Commencing with the first annual meeting of
shareholders of the Corporation following the consummation of the initial
offering and sale by the Corporation of shares of its common stock pursuant to
an effective registration statement under the Securities Act of 1933, as
amended, the Board of Directors shall be divided into three (3) classes;
designated Class I, Class II and Class III, with each class having as nearly an
equal number of directors as possible. At the annual meeting, directors of Class
I shall be initially elected to hold office for a one-year term, directors of
Class II shall be initially elected to hold office for a two-year term, and
directors of Class III shall be initially elected to hold office for a
three-year term with each director in each class to hold office until his
successor is elected and qualified, or until his earlier resignation, removal
from office or death. At each succeeding annual meeting of shareholders
beginning at the annual meeting after such first meeting, the successors of the
class of directors whose term expires at the meeting will be elected to hold
office for a term expiring at the annual meeting of shareholders held in the
third year following the year of their election or until their successors are
duly elected and qualified. The original allocation among the three classes of
directors elected at such first annual meeting shall be determined by a
resolution of the Board of Directors.
7.3 ELECTION OF DIRECTORS. Directors shall be elected at the annual
meeting of shareholders, but when the annual meeting is not held or directors
are not elected thereat, they may be elected at a special meeting called and
held for that purpose. Directors shall be elected by a plurality of the votes
cast by the shares entitled to vote in the election at a meeting at which a
quorum is present.
7.4 VACANCIES. Any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of directors, may be
filled only by the Board of Directors
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<PAGE>
(and not by the shareholders), by resolution adopted by the affirmative vote of
a majority of the remaining directors though less than a quorum of the Board of
Directors; provided, however, that if not so filled, any such vacancy shall be
filled by the shareholders at the next annual meeting or at a special meeting
called for that purpose. Any director so elected or appointed shall hold office
for the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred, as the case may be, and until
such director's successor is elected and qualified.
7.5 REMOVAL OF DIRECTORS. At a meeting of shareholders, any director or
the entire Board of Directors may be removed, solely with cause and provided the
notice of the meeting states that one of the purposes of the meeting is the
removal of the director. A director may be removed only if the number of votes
cast to remove him constitutes at least 66 2/3% of the voting power of all of
the shares of capital stock then entitled to vote generally in the election of
directors, voting together as a single class. For purposes of this Section 7.5
of Article VII, "cause" shall mean the failure of a director to substantially
perform such director's duties to the Corporation (other than any such failure
resulting from incapacity due to physical or mental illness) or the willful
engaging by a director in gross misconduct injurious to the Corporation.
ARTICLE VIII - INDEMNIFICATION
This Corporation shall indemnify any director, or any former director
of this Corporation, to the fullest extent permitted by law.
ARTICLE IX - BYLAWS
The Bylaws of the Corporation may be altered, amended or repealed, and
new Bylaws adopted, by the affirmative vote of at least a majority of the
members of the Board of Directors then in office or by the affirmative vote of
the holders of not less than 66 2/3% of the voting power of all shares of
capital stock of the Corporation then entitled to vote generally in the election
of directors, voting as a single class.
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<PAGE>
ARTICLE X - AMENDMENT OF ARTICLES OF INCORPORATION
The Corporation hereby reserves the right from time to time to amend,
alter, change or repeal any provision contained in these Articles of
Incorporation in any manner permitted by law and all rights and powers conferred
upon shareholders, directors and officers herein are granted subject to this
reservation. In addition to any vote otherwise required by law, any such
amendment, alteration, change or repeal shall require approval of both (a) the
Board of Directors by the affirmative vote of a majority of the members then in
office and (b) the holders of a majority of the voting power of all the shares
of capital stock of the Corporation entitled to vote generally in the election
of directors, voting together as a single class; provided, however, that any
proposal to amend, alter, change or repeal the provisions of Article VII and
this Article X shall require the affirmative vote of the holders of at least 66
2/3% of the voting power of all the shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation on June 6, 1996.
/s/ STEVEN D. RUBIN
--------------------------------
Steven D. Rubin, Incorporator
BYLAWS
OF
GOLDEN BEAR GOLF, INC.,
A FLORIDA CORPORATION
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I MEETINGS OF SHAREHOLDERS...................... 1
Section 1. Annual Meeting................................ 1
Section 2. Special Meeting............................... 1
Section 3. Place......................................... 2
Section 4. Notice........................................ 2
Section 5. Shareholder Quorum............................ 2
Section 6. Shareholder Voting............................ 3
Section 7. Fixing Record Dates........................... 3
Section 8. Proxies....................................... 3
Section 9. Action by Written Consent of Shareholders
Without Meeting............................... 3
Section 10. Notification of Nomination of Directors....... 4
Section 11. Notice of Business at Annual Meetings......... 5
ARTICLE II DIRECTORS..................................... 6
Section 1. Function...................................... 6
Section 2. Compensation.................................. 6
Section 3. Presumption of Assent......................... 6
Section 4. Number of Directors........................... 6
Section 5. Election of Directors......................... 7
Section 6. Vacancies..................................... 7
Section 7. Removal of Directors.......................... 7
Section 8. Quorum and Transaction of Business............ 7
Section 9. Place of Meeting.............................. 8
Section 10. Time, Notice and Call of Meetings............. 8
Section 11. Action Without a Meeting...................... 8
ARTICLE III COMMITTEES.................................... 9
Section 1. Executive Committee........................... 9
Section 2. Meetings of Executive Committee............... 9
Section 3. Other Committees.............................. 9
ARTICLE IV OFFICERS...................................... 10
Section 1. General Provisions............................ 10
Section 2. Term of Office................................ 10
Section 3. Chairman of the Board......................... 10
Section 4. Chief Executive Officer....................... 10
Section 5. President..................................... 10
Section 6. Chief Operating Officer....................... 11
Section 7. Vice President................................ 11
<PAGE>
Section 8. Secretary..................................... 11
Section 9. Treasurer..................................... 11
Section 10. Assistant and Subordinate Officers; Special
Officers to the Chairman of the Board......... 12
Section 11. Duties of Officers May be Delegated........... 12
ARTICLE V SHARE CERTIFICATE AND SEAL.................... 12
Section 1. Form and Execution............................ 12
Section 2. Registration of Transfer...................... 13
Section 3. Lost, Stolen or Destroyed Certificates........ 13
Section 4. Seal.......................................... 13
ARTICLE VI DISTRIBUTIONS................................. 13
ARTICLE VII MISCELLANEOUS PROVISIONS...................... 13
Section 1. Fiscal Year................................... 13
Section 2. Resignation................................... 14
Section 3. Voting Upon Stocks of Other Corporations...... 14
ARTICLE VIII CORPORATE RECORDS, SHAREHOLDERS'
INSPECTION RIGHTS; FINANCIAL INFORMATION...... 14
Section 1. Corporate Records............................. 14
Section 2. Shareholders' Inspection Rights............... 15
Section 3. Financial Statements for Shareholders......... 15
Section 4. Other Reports to Shareholders................. 16
ARTICLE IX INDEMNIFICATION............................... 16
Section 1. Right to Indemnification...................... 16
Section 2. Advancement of Expenses....................... 17
Section 3. Procedure for Indemnification and Obtaining
Advancement of Expenses....................... 17
Section 4. Other Rights, Continuation of Right to
Indemnification and Advancements.............. 17
Section 5. Insurance..................................... 18
Section 6. Savings Clause................................ 18
Section 7. Terms......................................... 18
ARTICLE X AMENDMENT..................................... 19
<PAGE>
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of shareholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held on the date, time and place
designated by the Board of Directors.
SECTION 2. SPECIAL MEETING.
(a) Special meetings of the shareholders
shall be held when directed by the Chairman of the Board or the Board of
Directors or when requested in writing by shareholders holding at least 50% of
the voting power of all of the corporation's capital stock having the right and
entitled to vote at such meeting. The call for the meeting shall be issued by
the secretary, unless the Chairman of the Board, the Board of Directors or the
shareholders requesting the calling of the meeting designate another person to
do so. Only business within the purposes described in the notice required in
Section 4 of this Article I may be conducted at a special shareholders' meeting.
(b) Any shareholder of record seeking to
have the shareholders request a special meeting may, by written notice to the
secretary, request the Board of Directors to fix a record date pursuant to
Section 7 of this Article I. The Board of Directors shall promptly, but in all
events within 10 business days after the date upon which such a request is
received, adopt resolutions fixing the record date. In the event of the
delivery, in the manner provided by Section 7 of this Article I, to the
corporation of such a request or requests and/or any related revocation or
revocations, the corporation shall engage nationally recognized independent
inspectors of elections for the purpose of promptly performing a ministerial
review of the validity of the requests and revocations. Every written request
for a special meeting shall set forth the purpose or purposes for which the
special meeting is requested, the name and address, as they appear in the
corporation's books, of each shareholder making the request, the class and
number of shares of the corporation which are owned of record by each such
shareholder, and shall bear the date of signature of each such shareholder. No
such request shall be effective to request such a meeting unless, within 60 days
of any record date established in accordance with Section 7 of this Article I, a
written request signed by a sufficient number of record holders as of such date
to request a special meeting in accordance with Section 2(a) of this Article I
and, if applicable, the Articles of Incorporation are delivered to the
corporation in the manner prescribed in this Article I. For the purposes of
permitting a prompt ministerial review by the independent inspectors, no request
by shareholders for a special meeting shall be effective until such date as the
independent inspectors certify to the corporation that the requests delivered to
the corporation in accordance with this Article I represent at least the minimum
number of shares that would be necessary to request such meeting. Within 10
business days after the independent inspectors deliver such a certified report
to the corporation, the Board of Directors shall adopt a resolution calling a
special meeting of the shareholders and fixing a record date for such meeting in
accordance with Section 7 of this Article I. In setting a meeting date, the
Board of Directors may consider such factors as it deems relevant within the
good faith exercise of its business judgment including, without limitation, the
nature of the action proposed
<PAGE>
to be taken, the facts and circumstances surrounding the request, and any plan
of the Board of Directors to call a special or annual meeting of shareholders
for the conduct of related business. Nothing contained in this section shall in
any way be construed to suggest or imply that the Board of Directors or any
shareholder shall not be entitled to contest the validity of any request or
revocation thereof, or to take any other action (including, without limitation,
the commencement, prosecution or defense of any litigation with respect
thereto).
SECTION 3. PLACE. Meetings of the shareholders shall be held at the
principal office of the corporation or as determined by the Chairman of the
Board, unless otherwise designated by resolution from time to time by the Board
of Directors.
SECTION 4. NOTICE. A written notice of each meeting of shareholders,
signed by the secretary, president or the person authorized to call the meeting,
shall be mailed to each shareholder having the right and entitled to vote at the
meeting at the address as it appears on the records of the corporation, not less
than 10 nor more than 60 days before the date set for the meeting. The notice
shall state the time and place the meeting is to be held. A notice of a special
meeting shall also state the purposes of the meeting. A notice of meeting shall
be sufficient for that meeting and any adjournment of it. If a shareholder
transfers any shares after the notice is sent, it shall not be necessary to
notify the transferee. All shareholders may waive notice of a meeting before, at
or after the meeting.
SECTION 5. SHAREHOLDER QUORUM. Except as otherwise required by law, or
by the Articles of Incorporation, a majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. Any number of shareholders, even if less than a quorum, may
adjourn the meeting from time to time and place to place without further notice
until a quorum is obtained. Except as otherwise required by law, or by the
Articles of Incorporation, a majority of the outstanding shares entitled to vote
on a matter shall be present, in person or by proxy, at all meetings of the
shareholders to constitute a quorum for the transaction of business on such
matter, except to adjourn. When a specified item of business is required to be
voted on separately by a particular class or series of stock, the presence of a
majority of the shares of such class or series shall constitute a quorum for the
transaction of such item of business by that class or series. If less than a
quorum of shares entitled to vote on a matter, as above defined, shall be
present at the time and place for which a meeting shall be called, the Chairman
of the Board, chief executive officer or secretary or the holders of a majority
of the shares represented may adjourn any such meeting from time to time without
notice other than by announcement at such meeting, until the number of shares
requisite to constitute a quorum shall be present. At any adjourned meeting at
which a quorum, as above defined, shall be present, in person or by proxy, any
business may be transacted which might have been transacted at the meeting as
originally called. Once a share is represented for any purpose at a meeting, it
is deemed present for quorum purposes for the remainder of the meeting and for
any adjournment of that meeting unless a new record date is or must be set for
that adjourned meeting.
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<PAGE>
SECTION 6. SHAREHOLDER VOTING. If a quorum is present, action on a
matter is approved and shall be the act of the shareholders if the votes cast
favoring the action exceed the votes cast against the action, except as
otherwise provided in Section 6 of Article II or the Articles of Incorporation
or as required by law. Except as otherwise provided in the Articles of
Incorporation or as required by law, each outstanding share shall be entitled to
one vote on each matter submitted to a vote at a meeting of shareholders. The
books of record of shareholders shall be produced at a shareholders' meeting
upon the request of any shareholder.
SECTION 7. FIXING RECORD DATES. For the purpose of determining
shareholders entitled (a) to notice of or to vote at any meeting of shareholders
or any adjournment thereof, (b) to request a special meeting of shareholders
pursuant to Section 2 of this Article I, (c) to act by written consent, (d) to
receive payment of any dividend, or (e) to make a determination of shareholders
for any other proper purpose, the Board of Directors shall have the power to fix
a date, not more than 60 days (or such longer period as may be permitted by
current or future law) prior to the date on which the particular action
requiring a determination of shareholders is to be taken, as the record date for
any such determination of shareholders. A record date for the determination of
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof shall not be a date less than 10 days prior to such
meeting. In setting a record date, whether in response to a request from a
shareholder or otherwise, the Board of Directors may consider such factors as it
deems relevant within the good faith exercise of its business judgment
including, without limitation, the nature of the action proposed to be taken,
the facts and circumstances surrounding the request, and any plan of the Board
of Directors to call a special or annual meeting of shareholders for the conduct
of related business. In any case where a record date is set under any provision
of this Article I, only shareholders of record on the record date shall be
entitled to participate in the action for which the determination of
shareholders of record is made, and, if the record date is set for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, only such shareholders of record shall be entitled to such notice
or vote, notwithstanding any transfer of any shares on the books of the
corporation after such record date.
SECTION 8. PROXIES. A shareholder entitled to vote at any meeting of
shareholders or any adjournment thereof may vote in person or by proxy executed
in writing and signed by the shareholder or his attorney-in-fact. The
appointment of proxy will be effective when received by the corporation's
secretary or other officer or agent authorized to tabulate votes. If a proxy
designates two or more persons to act as proxies, a majority of these persons
present at the meeting, or if only one is present, that one, has all of the
powers conferred by the instrument upon all the persons designated unless the
instrument otherwise provides. No proxy shall be valid more than 11 months after
the date of its execution unless a longer term is expressly stated in the proxy.
SECTION 9. ACTION BY WRITTEN CONSENT OF SHAREHOLDERS WITHOUT MEETING.
Any shareholder of record seeking to have the shareholders authorize or take
corporate action by written consent may, by written notice to the secretary,
request the Board of Directors to fix a record date pursuant to Section 7 of
this Article I. The Board of Directors shall promptly, but
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<PAGE>
in all events within 10 business days after the date on which such a request is
received, adopt a resolution fixing the record date. In the event of the
delivery, in the manner provided by this Section, to the corporation of a
consent or consents by shareholders to action without a meeting and/or any
related revocation or revocations, the corporation shall engage nationally
recognized independent inspectors of elections for the purpose of promptly
performing a ministerial review of the validity of the consents and revocations.
For the purpose of permitting a prompt ministerial review by the independent
inspectors, no consent by shareholders to action without a meeting shall be
effective until such date as the independent inspectors certify to the
corporation that the consents delivered to the corporation represent at least
the minimum number of shares that would be necessary to take action without a
meeting. Nothing contained in this Section 9 shall in any way be construed to
suggest or imply that the Board of Directors or any shareholder shall not be
entitled to contest the validity of any consent or revocation thereof, or to
take any other action (including, without limitation, the commencement,
prosecution or defense of any litigation with respect thereto). Within 10 days
after obtaining an authorization of an action by written consent, notice shall
be given to those shareholders who have not consented in writing or who are not
entitled to vote on the action. The notice shall fairly summarize the material
features of the authorized action. If the action creates dissenters' rights, the
notice shall contain a clear statement of the right of dissenting shareholders
to be paid the fair value of their shares upon compliance with and as provided
for by the Florida Business Corporation Act.
SECTION 10. NOTIFICATION OF NOMINATION OF DIRECTORS. Nominations for
election to the Board of Directors of the corporation at a meeting of
shareholders may be made by the Board of Directors or by any shareholder of the
corporation entitled to vote for the election of directors at such meeting who
complies with the notice procedures set forth in this Section 10. Such
nominations, other than those made by or on behalf of the Board of Directors,
may be made only if notice in writing is personally delivered to, or mailed by
first class United States mail, postage prepaid, and received by, the secretary
not less than 60 days nor more than 90 days prior to such meeting; PROVIDED,
HOWEVER, that if less than 70 days' notice or prior public disclosure of the
date of the meeting is given to shareholders, such nomination shall have been
mailed by first class United States mail, postage prepaid, and received by, or
personally delivered to, the secretary not later than the close of business on
the tenth (10th) day following the day on which notice of the date of the
meeting was mailed or such public disclosure was made, whichever occurs first.
Such notice shall set forth (a) as to each proposed nominee (i) the name, age,
business address and, if known, residence address of each such nominee, (ii) the
principal occupation or employment of each such nominee, (iii) the number of
shares, if any, of stock of the corporation that are beneficially owned by each
such nominee and (iv) any other information concerning the nominee that must be
disclosed in proxy solicitations pursuant to the proxy rules of the Securities
and Exchange Commission if such person had been nominated, or was intended to be
nominated, by the Board of Directors (including such person's written consent to
be named as a nominee and to serve as a director if elected); and (b) as to the
shareholder giving the notice (i) the name and address, as it appears on the
corporation's books, of such shareholder, (ii) a representation that such
shareholder is a holder of record of shares of stock of the corporation entitled
to vote at the meeting and the class and number of shares of
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<PAGE>
the corporation which are beneficially owned by such shareholder, (iii) a
representation that such shareholder intends to appear in person or by proxy at
the meeting to nominate the person or persons specified in the notice and (iv) a
description of all arrangements or understandings between such shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by such
shareholder. The corporation also may require any proposed nominee to furnish
such other information as may reasonably be required by the corporation to
determine the eligibility of such proposed nominee to serve as a director of the
corporation.
The chairman of the meeting may, if the
facts warrant, determine and declare to the meeting that a nomination was not
made in accordance with the foregoing procedure, and if he should so determine,
he shall so declare to the meeting, and that the defective nomination shall be
disregarded.
SECTION 11. NOTICE OF BUSINESS AT ANNUAL MEETINGS. At an annual meeting
of the shareholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors or (c) otherwise properly brought before the meeting by a
shareholder. For business to be properly brought before an annual meeting by a
shareholder, if such business relates to the election of directors of the
corporation, the procedures in Section 10 of this Article I must be complied
with. If such business relates to any other matter, the shareholder must have
given timely notice thereof in writing to the secretary. To be timely, a
shareholder's notice must be personally delivered to, or mailed by first class
United States mail, postage prepaid, and received by, the secretary not less
than 60 days not more than 90 days prior to such meeting; PROVIDED, HOWEVER,
that if less than 70 days' notice or prior public disclosure of the date of the
meeting is given to shareholders, such notice, to be timely, must have been
mailed by first class United States mail, postage prepaid, and received by, or
personally delivered to, the secretary not later than the close of business on
the tenth (10th) day following the day on which notice of the date of the
meeting was mailed or such public disclosure was made, whichever occurs first. A
shareholder's notice to the secretary shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and address,
as they appear on the corporation's books, of the shareholder proposing such
business, (iii) a representation that the shareholder is a holder of record of
shares of stock of the corporation entitled to vote at the meeting and the class
and number of shares of the corporation which are beneficially owned by the
shareholder and (iv) any material interest of the shareholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this Section 11 and except that any shareholder proposal which complies
with Rule 14a-8 of the proxy rules (or any successor provision) promulgated
under the Securities Exchange Act of 1934, as amended, as is to be included in
the corporation's proxy statement for an annual meeting of shareholders shall be
deemed to comply with the requirements of this Section 11.
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<PAGE>
The chairman of the meeting may, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Section 11, and if he should so determine, he shall so declare to the meeting
and the business not properly brought before the meeting shall be disregarded.
ARTICLE II
DIRECTORS
SECTION 1. FUNCTION. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of, the Board of Directors. Directors must be
natural persons who are at least 18 years of age but need not be residents of
Florida or shareholders of the corporation.
SECTION 2. COMPENSATION. The directors, as such, shall be entitled to
receive such reasonable compensation for their services as may be fixed from
time to time by resolution of the Board of Directors. In addition, the directors
may be reimbursed for expenses of attending meetings of the Board of Directors
and committees thereof. Nothing herein contained shall be construed to preclude
any director from serving the corporation in any other capacity and receiving
compensation therefor. Members of the executive committee or of any standing or
special committee of the Board of Directors may by resolution of the Board be
allowed such compensation for their services as the Board of Directors may deem
reasonable, and additional compensation may be allowed to directors for special
services rendered.
SECTION 3. PRESUMPTION OF ASSENT. A director who is present at a
meeting of the Board of Directors or a committee of the Board of Directors at
which action on any corporate matter is taken shall be presumed to have assented
to the action taken unless he objects at the beginning of the meeting (or
promptly upon arriving) to the holding of the meeting or transacting the
specified business at the meeting, or if the director votes against the action
taken or abstains from voting because of an asserted conflict of interest.
SECTION 4. NUMBER OF DIRECTORS.
(a) The Board of Directors of the corporation
shall consist of not less than four persons, the exact number to be determined
from time to time by resolution adopted by the affirmative vote of a majority of
all directors of the corporation then holding office at any special or regular
meeting. Any such resolution increasing or decreasing the number of directors
shall have the effect of creating or eliminating a vacancy or vacancies, as the
case may be, provided that no such resolution shall reduce the number of
directors below the number then holding office and provided further that no such
resolution may increase or decrease the number of directors by more than 30% of
the number of directors last approved by the shareholders at any special or
annual meeting of the shareholders of the corporation.
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<PAGE>
(b) Commencing with the first annual meeting of
shareholders of the Corporation following the consummation of the initial
offering and sale by the Corporation of shares of its common stock pursuant to
an effective registration statement under the Securities Act of 1933, as
amended, the Board of Directors shall be divided into three (3) classes;
designated Class I, Class II and Class III, with each class having as nearly an
equal number of directors as possible. At the annual meeting, directors of Class
I shall be initially elected to hold office for a one-year term, directors of
Class II shall be initially elected to hold office for a two-year term, and
directors of Class III shall be initially elected to hold office for a
three-year term with each director in each class to hold office until his
successor is elected and qualified, or until his earlier resignation, removal
from office or death. At each succeeding annual meeting of shareholders
beginning at the annual meeting after such first meeting, the successors of the
class of directors whose term expires at the meeting will be elected to hold
office for a term expiring at the annual meeting of shareholders held in the
third year following the year of their election or until their successors are
duly elected and qualified. The original allocation among the three classes of
directors elected at such first annual meeting shall be determined by a
resolution of the Board of Directors.
SECTION 5. ELECTION OF DIRECTORS. Directors shall be elected at the
annual meeting of shareholders, but when the annual meeting is not held or
directors are not elected thereat, they may be elected at a special meeting
called and held for that purpose. Directors shall be elected by a plurality of
the votes cast by the shares entitled to vote in the election at a meeting at
which a quorum is present.
SECTION 6. VACANCIES. Any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of directors, may be
filled only by the Board of Directors (and not by the shareholders), by
resolution adopted by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors; provided,
however, that if not so filled, any such vacancy shall be filled by the
shareholders at the next annual meeting or at a special meeting called for that
purpose. Any director so elected or appointed shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred, as the case may be, and until
such director's successor is elected and qualified.
SECTION 7. REMOVAL OF DIRECTORS. At a meeting of shareholders, any
director or the entire Board of Directors may be removed, solely with cause and
provided the notice of the meeting states that one of the purposes of the
meeting is the removal of the director. A director may be removed only if the
number of votes cast to remove him constitutes at least 66 2/3% of the voting
power of all of the shares of capital stock then entitled to vote generally in
the election of directors, voting together as a single class. For purposes of
this Section 7 of Article II, "cause" shall mean the failure of a director to
substantially perform such director's duties to the corporation (other than any
such failure resulting from incapacity due to physical or mental illness) or the
willful engaging by a director in gross misconduct injurious to the corporation.
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SECTION 8. QUORUM AND TRANSACTION OF BUSINESS. A majority of the number
of directors fixed pursuant to these Bylaws shall constitute a quorum for the
transaction of business, except that a majority of the directors in office shall
constitute a quorum for filling a vacancy on the Board. Whenever less than a
quorum is present at the time and place appointed for any meeting of the Board,
a majority of those present may adjourn the meeting from time to time and place
to place, until a quorum shall be present and no notice of any such adjourned
meeting shall be required. The act of a majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors.
SECTION 9. PLACE OF MEETING. Regular and special meetings of the Board
of Directors shall be held at the principal office of the corporation or as
determined by the Chairman of the Board, unless otherwise designated by
resolution from time to time by the Board of Directors.
SECTION 10. TIME, NOTICE AND CALL OF MEETINGS. Regular meetings of the
Board of Directors shall be held without notice at the time and on the date
designated by resolution of the Board of Directors. Meetings of the Board of
Directors may be called by the Chairman of the Board. Upon determining the need
for a special meeting, the Chairman of the Board shall direct the secretary of
the corporation to provide written notice of the time, date and place of such
special meeting of the Board of Directors to each director by personal delivery,
mail delivery or by facsimile at least two but not more than 15 days before the
meeting. Notice of a meeting of the Board of Directors need not be given to a
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting constitutes a waiver of notice of that
meeting and waiver of all objections to the place of the meeting, the time of
the meeting, and the manner in which it has been called or convened, except when
a director states at the beginning of the meeting or promptly upon arrival at
the meeting, objection to the transaction of business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Board of Directors must be
specified in the notice or waiver of notice of the meeting. A majority of the
directors present, whether or not a quorum exists, may adjourn any meeting of
the Board of Directors to another time and place. Notice of an adjourned meeting
shall be given to the directors who were not present at the time of the
adjournment and, unless the time and place of the adjourned meeting are
announced at the time of the adjournment, to the other directors. Members of the
Board of Directors (and any committee of the Board) may participate in a meeting
of the Board (or committee) by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time. Participation by these means
constitutes presence in person at a meeting.
SECTION 11. ACTION WITHOUT A MEETING. Any action required to be taken
at a meeting of the Board of Directors (or a committee of the Board), and any
action which may be taken at a meeting of the Board of Directors (or a committee
of the Board) may be taken without a meeting if a consent in writing, setting
forth the action to be taken and signed by all of the directors (or members of
the committee), is filed in the minutes of the proceedings of the Board of
Directors. The action taken shall be deemed effective when the last director
signs the consent, unless the consent specifies otherwise.
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ARTICLE III
COMMITTEES
SECTION 1. EXECUTIVE COMMITTEE. The Board of Directors may from time to
time, by resolution passed by a majority of the whole Board, create an executive
committee of three or more directors, the members of which shall be elected by
the Board of Directors to serve at the pleasure of the Board. If the Board of
Directors does not designate a chairman of the executive committee, the
executive committee shall elect a chairman from its own members. Except as
otherwise provided herein and in the resolution creating an executive committee,
such committee shall, during the intervals between the meetings of the Board of
Directors, possess and may exercise all of the powers of the Board of Directors
in the management of the business and affairs of the corporation, other than
that of filling vacancies among the directors or in any committee of the
directors and except as required by law. The executive committee shall keep full
records and accounts of its proceedings and transactions. All action by the
executive committee shall be reported to the Board of Directors at its meeting
next succeeding such action and shall be subject to control, revision and
alteration by the Board of Directors, provided that no rights of third persons
shall be prejudicially affected thereby. Vacancies in the executive committee
shall be filled by the directors, and the directors may appoint one or more
directors as alternate members of the committee who may take the place of any
absent member or members at any meeting.
SECTION 2. MEETINGS OF EXECUTIVE COMMITTEE. Subject to the provisions
of these Bylaws, the executive committee shall fix its own rules of procedure
and shall meet as provided by such rules or by resolutions of the Board of
Directors, and it shall also meet at the call of the Chairman of its Board, the
chairman of the executive committee or any two members of the committee. Unless
otherwise provided by such rules or by such resolutions, the provisions of
Section 11 of Article II relating to the notice required to be given for
meetings of the Board of Directors shall also apply to meetings of the executive
committee. A majority of the executive committee shall be necessary to
constitute a quorum.
SECTION 3. OTHER COMMITTEES. The Board of Directors may by resolution
provide for such other standing or special committees as it deems desirable, and
discontinue the same at its pleasure. Each such committee shall have such powers
and perform such duties, not inconsistent with law, as may be delegated to it by
the Board of Directors. The provisions of Section 1 and Section 2 of this
Article shall govern the appointment and action of such committee so far as
consistent, unless otherwise provided by the Board of Directors. Vacancies in
such committees shall be filled by the Board of Directors or as the Board of
Directors may provide.
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ARTICLE IV
OFFICERS
SECTION 1. GENERAL PROVISIONS. The Board of Directors shall appoint a
Chairman of the Board of Directors, a chief executive officer, a chief operating
officer, a president, such number of vice presidents, if any, as the Board may
from time to time determine, a secretary and a treasurer. The Board of Directors
may from time to time create such offices and appoint such other officers,
subordinate officers and assistant officers as it may determine. The Chairman of
the Board, shall be, but the other officers need not be, chosen from among the
members of the Board of Directors. Any two of such offices, other than those of
president and vice president, may be held by the same person, but no officer
shall execute, acknowledge or verify any instrument in more than one capacity.
SECTION 2. TERM OF OFFICE. The officers of the corporation shall hold
office at the pleasure of the Board of Directors, and, unless sooner removed by
the Board of Directors, until the annual meeting of the Board of Directors
following the date of their appointment and until their successors are chosen
and qualified. The Board of Directors may remove any officer at any time, with
or without cause. A vacancy in any office created shall be filled by the Board
of Directors.
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of the Board of Directors and meetings of shareholders
and shall be the senior officer of the corporation and, subject to the control
of the Board of Directors, shall exercise supervision over the management of the
business of the corporation. He shall have authority to sign all certificates
for shares and all deeds, mortgages, bonds, agreements, notices, and other
instruments requiring his signature; and shall have all the powers and duties
prescribed by the Florida Business Corporation Act and such others as the Board
of Directors may from time to time assign to him.
SECTION 4. CHIEF EXECUTIVE OFFICER. The chief executive officer shall
exercise supervision over the management of the business of the corporation and
its several officers, subject, however, to the oversight of the Chairman of the
Board. In the absence of the Chairman of the Board, he shall preside at meetings
of the shareholders. He shall have authority to sign all certificates for shares
and all deeds, mortgages, bonds, agreements, notices, and other instruments
requiring his signature; and shall have all the powers and duties prescribed by
the Florida Business Corporation Act and such others as the Board of Directors
may from time to time assign to him.
SECTION 5. PRESIDENT. The president shall exercise supervision over the
business of the corporation and over its several officers, subject, however, to
the oversight of the Chairman of the Board and the chief executive officer. In
the absence of the Chairman of the Board and chief executive officer, he shall
preside at meetings of the shareholders. He shall have authority to sign all
certificates for shares and all deeds, mortgages, bonds, agreements, notices,
and other
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instruments requiring his signature; and shall have all the powers and duties
prescribed by the Florida Business Corporation Act and such others as the Board
of Directors may from time to time assign to him.
SECTION 6. CHIEF OPERATING OFFICER. The chief operating officer shall
exercise supervision over the business of the corporation and over its several
officers, subject, however, to the oversight of the Chairman of the Board, the
chief executive officer and the president. In the absence of the Chairman of the
Board, chief executive officer and president, he shall preside at meetings of
the shareholders. He shall have authority to sign all deeds, mortgages, bonds,
agreements, notices, and other instruments requiring his signature; and shall
have all the powers and duties prescribed by the Florida Business Corporation
Act and such others as the Board of Directors may from time to time assign to
him.
SECTION 7. VICE PRESIDENT. The vice presidents shall have such powers
and duties as may from time to time be assigned to them by the Board of
Directors or the president. At the request of the president, or in the case of
his absence or disability, the vice president designated by the president (or in
the absence of such designation, the vice president designated by the Board)
shall perform all the duties of the president and, when so acting, shall have
all the powers of the president. The authority of vice presidents to sign in the
name of the corporation certificates for shares and deeds, mortgages, bonds,
agreements, notes and other instruments shall be coordinate with like authority
of the president.
SECTION 8. SECRETARY. The secretary shall keep minutes of all the
proceedings of the shareholders and the Board of Directors and shall make proper
record of the same, which shall be attested by him; shall have authority to
execute and deliver certificates as to any of such proceedings and any other
records of the corporation; shall have authority to sign all certificates for
shares and all deeds, mortgages, bonds, agreements, notes and other instruments
to be executed by the corporation which require his signature; shall give notice
of meetings of shareholders and directors; shall produce on request at each
meeting of shareholders a certified list of shareholders arranged in
alphabetical order; shall keep such books and records as may be required by law
or by the Board of Directors; and, in general, shall perform all duties incident
to the office of secretary and such other duties as may from time to time be
assigned to him by the Board of Directors or the president.
SECTION 9. TREASURER. The treasurer shall have general supervision of
all finances of the corporation; he shall be in charge of all money, bills,
notes, deeds, leases, mortgages and similar property belonging to the
corporation, and shall do with the same as may from time to time be required by
the Board of Directors. He shall cause to be kept adequate and correct accounts
of the business transactions of the corporation, including accounts of its
assets, liabilities, receipts, disbursements, gains, losses, stated capital and
shares, together with such other accounts as may be required; and he shall have
such other powers and duties as may from time to time be assigned to him by the
Board of Directors or the president.
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SECTION 10. ASSISTANT AND SUBORDINATE OFFICERS; SPECIAL OFFICERS TO THE
CHAIRMAN OF THE BOARD. The Board of Directors may appoint such assistant and
subordinate officers as it may deem desirable, and the Chairman of the Board may
appoint such assistant or special officers as he may deem desirable. Each such
officer shall hold office at the pleasure of the Board of Directors, in the case
of an officer appointed by the Board of Directors, or the Chairman of the Board,
in the case of an officer appointed by the Chairman of the Board, and perform
such duties as the Board of Directors, in the case of an officer appointed by
the Board of Directors, or the Chairman of the Board, in the case of an officer
appointed by the Chairman of the Board, may prescribe. The Board of Directors
may, from time to time, authorize any officer to appoint and remove subordinate
officers, to prescribe their authority and duties, and to fix their
compensation.
SECTION 11. DUTIES OF OFFICERS MAY BE DELEGATED. In the absence of any
officer of the corporation, or for any other reason the Board of Directors may
deem sufficient, the Board of Directors may delegate, for such period of time as
the Board of Directors deem appropriate, the powers or duties, or any of them,
of such officers to any other officer or to any director.
ARTICLE V
SHARE CERTIFICATE AND SEAL
SECTION 1. FORM AND EXECUTION. Certificates for shares, certifying the
number of fully-paid shares owned, shall be issued to each shareholder in such
form as shall be approved by the Board of Directors. Such certificates shall be
signed by the Chairman of the Board or the president or a vice president and by
the secretary or the treasurer; provided, however, that if such certificates are
countersigned by a transfer agent and/or registrar the signatures of any of said
officers and the seal of the corporation upon such certificates may be
facsimiles, engraved, stamped or printed. If any officer or officers who shall
have signed, or whose facsimile signature shall have been used, printed or
stamped on any certificate or certificates for shares, shall cease to be such
officer or officers, because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the corporation, such
certificate or certificates, if authenticated by the endorsement thereon of the
signature of a transfer agent or registrar, shall nevertheless be conclusively
deemed to have been adopted by the corporation by the use and delivery thereof
and shall be as effective in all respects as though signed by a duly elected,
qualified and authorized officer or officers, and as though the person or
persons who signed such certificate or certificates, or whose facsimile
signature or signatures shall have been used thereon, had not ceased to be an
officer or officers of the corporation. The failure of the corporation to note
upon a certificate a restriction on the transfer of shares imposed or which may
be imposed by law, contract or otherwise, shall not be deemed to imply that such
shares are free of any such restriction or create in favor of the person to whom
such certificate is issued, or any successor, assign, devise or heir of such
recipient, any cause of action of any nature against the corporation.
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SECTION 2. REGISTRATION OF TRANSFER. Any certificate for shares of the
corporation shall be transferable (subject to any applicable restrictions
imposed or which may be imposed by law, contract or otherwise) in person or by
attorney upon the surrender thereof to the corporation or any transfer agent
therefor (for the class of shares represented by the certificate surrendered)
properly endorsed for transfer and accompanied by such assurances as the
corporation or such transfer agent may require as to the genuineness and
effectiveness of each necessary endorsement.
SECTION 3. LOST, STOLEN OR DESTROYED CERTIFICATES. The corporation
shall, upon the authorization of the Chairman of the Board, the secretary or
such other person as is authorized by resolution of the Board of Directors,
issue a new stock certificate in the place of any certificate previously issued
if the holder of record of the certificate (a) makes proof in affidavit form
that it has been lost, destroyed or wrongfully taken; (b) requests the issue of
a new certificate before the corporation has notice that the certificate has
been acquired by a purchaser for value in good faith and without notice of any
adverse claim; (c) gives bond in such form as the corporation may direct to
indemnify the corporation and any transfer agent and registrar against any claim
that may be made on account of the alleged loss, destruction, or theft of a
certificate; and (d) satisfies any other reasonable requirements imposed by the
corporation.
SECTION 4. SEAL. The corporate seal shall be circular in form and
include the name of the corporation.
ARTICLE VI
DISTRIBUTIONS
The Board of Directors may, from time to time, declare distributions to
its shareholders in cash, property, or its own shares, unless the distribution
would cause (i) the corporation to be unable to pay its debts as they become due
in the usual course of business, or (ii) the corporation's assets to be less
than its liabilities plus the amount necessary, if the corporation were
dissolved at the time of the distribution, to satisfy the preferential rights of
shareholders whose rights are superior to those receiving the distribution. The
shareholders and the corporation may enter into an agreement requiring the
distribution of corporate profits, subject to the provisions of applicable law.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 1. FISCAL YEAR. The fiscal year of the corporation shall be the
calendar year.
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SECTION 2. RESIGNATION. Any director or officer of the corporation may
resign his office at any time upon presenting his written resignation to the
Board of Directors, the Chairman of the Board, the chief executive officer, the
chief operating officer, the president or the secretary, and, unless some time
be fixed in such resignation as the date upon which it is to become effective,
the same shall become effective immediately upon presentation. The acceptance of
a resignation shall not be required to make it effective, unless otherwise so
stated in such resignation, and in that event it shall become effective at the
pleasure of the Board.
SECTION 3. VOTING UPON STOCKS OF OTHER CORPORATIONS. Unless otherwise
ordered by the Board of Directors, the Chairman of the Board, the chief
executive officer, the chief operating officer, or the president shall, in the
order above stated, have full power and authority on behalf of the corporation
to attend, act and vote at any meeting or meetings of shareholders of any
corporation in which this corporation may hold stock or other securities, and at
any such meeting shall possess and may exercise on behalf of the corporation any
and all of the rights and powers incident to the ownership of such stock or
other securities. The person having the power and authority as set forth above
may in his discretion delegate same to another person that he designates to act
on behalf of the corporation at any given meeting. The Board of Directors, by
resolution, may from time to time confer like powers upon any other person or
persons.
ARTICLE VIII
CORPORATE RECORDS, SHAREHOLDERS'
INSPECTION RIGHTS; FINANCIAL INFORMATION
SECTION 1. CORPORATE RECORDS.
(a) The corporation shall keep as
permanent records minutes of all meetings of its shareholders and Board of
Directors, a record of all actions taken by the shareholders or Board of
Directors without a meeting, and a record of all actions taken by a committee of
the Board of Directors on behalf of the corporation.
(b) The corporation shall maintain
accurate accounting records and a record of its shareholders in a form that
permits preparation of a list of the names and addresses of all shareholders in
alphabetical order by class of shares showing the number and series of shares
held by each.
(c) The corporation shall keep a copy
of: its articles or restated articles of incorporation and all amendments to
them currently in effect; these Bylaws or restated Bylaws and all amendments
currently in effect; resolutions adopted by the Board of Directors creating one
or more classes or series of shares and fixing their relative rights,
preferences, and limitations, if shares issued pursuant to those resolutions are
outstanding; the minutes of all shareholders' meetings and records of all
actions taken by shareholders without a meeting for the past three years;
written communications to all shareholders generally or all shareholders of
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a class of series within the past three years, including the financial
statements furnished for the last three years; a list of names and business
street addresses of its current directors and officers; and its most recent
annual report delivered to the Department of State.
(d) The corporation shall maintain its
records in written form or in another form capable of conversion into written
form within a reasonable time.
SECTION 2. SHAREHOLDERS' INSPECTION RIGHTS. A shareholder is entitled
to inspect and copy, during regular business hours at the corporation's
principal office, any of the corporate records described in Section 1(c) of this
Article if the shareholder gives the corporation written notice of the demand at
least 5 business days before the date on which he wishes to inspect and copy the
records.
A shareholder is entitled to inspect and
copy, during regular business hours at a reasonable location specified by the
corporation, any of the following records of the corporation if the shareholder
gives the corporation written notice of this demand at least 5 business days
before the date on which he wishes to inspect and copy provided (a) the demand
is made in good faith and for a proper purpose; (b) the shareholder describes
with reasonable particularity the purpose and the records he desires to inspect;
and (c) the records are directly connected with the purpose: (i) excerpts from
minutes of any meeting of the Board of Directors, records of any action of a
committee of the Board of Directors while acting in place of the Board on behalf
of the corporation; (ii) accounting records; (iii) the record of shareholders;
and (iv) any other books and records of the corporation.
This Section 2 does not affect the right of a
shareholder to inspect and copy the shareholders' list described in Section 6 of
Article I, if the shareholder is in litigation with the corporation to the same
extent as any other litigant or the power of a court to compel the production of
corporate records for examination.
The corporation may deny any demand for
inspection if the demand was made for an improper purpose, or if the demanding
shareholder has within the two years preceding his demand, sold or offered for
sale any list of shareholders of the corporation or of any other corporation,
has aided or abetted any person in procuring any list of shareholders for that
purpose, or has improperly used any information secured through any prior
examination of the records of this corporation or any other corporation.
SECTION 3. FINANCIAL STATEMENTS FOR SHAREHOLDERS. Unless modified by
resolution of the shareholders within 120 days after the close of each fiscal
year, the corporation shall furnish its shareholders with annual financial
statements which may be consolidated or combined statements of the corporation
and one or more of its subsidiaries, as appropriate, that include a balance
sheet as of the end of the fiscal year, an income statement for that year, and a
statement of cash flows for that year. If financial statements are prepared for
the corporation on the basis of generally accepted accounting principles, the
annual financial statements must also be prepared on that basis.
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If the annual financial statements are
reported upon by a public accountant, his report must accompany them. If not,
the statements must be accompanied by a statement of the chief financial officer
or the person responsible for the corporation's accounting records stating his
reasonable belief whether the statements were prepared on the basis of generally
accepted accounting principles and, if not, describing the basis of preparation
and describing any respects in which the statements were not prepared on a basis
of accounting consistent with the statements prepared for the preceding year.
The corporation shall mail the annual
financial statements to each shareholder within 120 days after the close of each
fiscal year or within such additional time thereafter as is reasonably necessary
to enable the corporation to prepare its financial statements. Thereafter, on
written request from a shareholder who was not mailed the statements, the
corporation shall mail him the latest annual financial statements.
SECTION 4. OTHER REPORTS TO SHAREHOLDERS. If the corporation
indemnifies or advances expenses to any director, officer, employee or agent
otherwise than by court order or action by the shareholders or by an insurance
carrier pursuant to insurance maintained by the corporation, the corporation
shall report the indemnification or advance in writing to the shareholders with
or before the notice of the next annual shareholders' meeting, or prior to the
meeting if the indemnification or advance occurs after the giving of the notice
but prior to the time the annual meeting is held. This report shall include a
statement specifying the persons paid, the amounts paid, and the nature and
status at the time of such payment of the litigation or threatened litigation.
If the corporation issues or authorizes the
issuance of shares for promises to render services in the future, the
corporation shall report in writing to the shareholders the number of shares
authorized or issued, and the consideration received by the corporation, with or
before the notice of the next shareholders' meeting.
ARTICLE IX
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION. Each person (including here and
hereinafter, the heirs, executors, administrators, or estate of such person) (i)
who is or was a director or officer of the corporation, (ii) who is or was an
agent or employee of the corporation other than an officer and as to whom the
corporation has agreed to grant such indemnity, or (iii) who is or was serving
at the request of the corporation as its representative in the position of
director, officer, agent or employee of another corporation, partnership, joint
venture, trust or other enterprise and as to whom the corporation has agreed to
grant such indemnity shall be indemnified by the corporation as of right to the
fullest extent permitted or authorized by current or future legislation or by
current or future judicial or administrative decision (but, in the case of any
such future legislation or decision, only to the extent that it permits the
corporation to
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provide broader indemnification rights than permitted prior to such legislation
or decision), against any liability or expense, awarded or assessed against him,
or incurred by him, in his capacity as such director, officer, agent, employee
or representative, or arising out of his status as such director, officer,
agent, employee, or representative, including (in the case of derivative
actions) expenses and amounts paid by him in settlement of any proceeding
asserted or brought against him in his aforesaid capacity or arising out of his
status as such.
SECTION 2. ADVANCEMENT OF EXPENSES. Expenses incurred by a person
referred to in Section 1 of this Article IX in defending a civil or criminal
proceeding shall be paid by the corporation in advance of the final disposition
of such proceeding, (i) upon receipt, in the case of a director or officer, of
an undertaking by or on behalf of the director or officer to repay all amounts
so advanced if he is ultimately found not to be entitled to be indemnified by
the corporation pursuant to this Article IX, and (ii) upon satisfaction of such
other conditions as are required by current or future legislation (but, with
respect to future legislation, only to the extent that it provides conditions
less burdensome to the director, officer, employee, agent or representative, and
to the corporation, than those provided previously). Such expenses incurred by
other employees, agents and representatives may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate. The Board of
Directors may, in the manner set forth above, and upon approval of such
director, officer, employee, agent or representative of the corporation,
authorize the corporation's counsel to represent such person, in any proceeding,
whether or not the corporation is a party to such proceeding.
SECTION 3. PROCEDURE FOR INDEMNIFICATION AND OBTAINING ADVANCEMENT OF
EXPENSES. Any indemnification of liabilities and expenses or advancement of
expenses under this Article shall be made promptly, and in any event within 60
days, upon the written request of the director, officer, employee, agent or
representative seeking indemnification or an advancement. If the corporation
denies such request in whole or in part or if no disposition thereof is made
within 60 days of its receipt of such request or if the corporation otherwise
fails to provide indemnification or advancement provided for in this Article IX,
and despite any contrary determination by the corporation (including its Board
of Directors or a committee thereof, its independent legal counsel or its
shareholders) in the specific case, a director, officer, employee, agent or
representative may apply for indemnification or advancement, or both, in an
appropriate proceeding brought in a court of competent jurisdiction and shall be
entitled to such indemnification or advancement, or both, as the court shall by
order direct. Such person's reasonable expenses in obtaining court-ordered
indemnification or advancement shall be reimbursed by the corporation. No such
contrary determination by the corporation (including the Board of Directors or a
committee thereof, its independent legal counsel or its shareholders) shall be a
defense to such proceeding or create a presumption that the claimant has not met
the applicable standard of conduct, if any, for indemnification or an
advancement.
SECTION 4. OTHER RIGHTS, CONTINUATION OF RIGHT TO INDEMNIFICATION AND
ADVANCEMENTS. The indemnification and advancements provided by this Article
shall not be deemed exclusive of any other or further rights to which a person
seeking indemnification or advancements may be entitled under any law (common or
statutory), agreement, vote of
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shareholders or disinterested directors or otherwise, either as to action taken
or omitted to be taken in his official capacity or as to action taken or omitted
to be taken in another capacity while holding office or while employed by or
acting as agent for the corporation. All rights to indemnification and to
advancements of expenses under this Article shall be deemed to be a contract
between the corporation and each director, officer, employee, agent or
representative of the corporation described in Section 1 of this Article who
serves or has served in any such capacity at any time while this Article is in
effect.
Any repeal or modification of this Article
IX, or any repeal or modification of relevant provisions of the Florida Business
Corporation Act or any other applicable law, shall not in any way diminish any
right to indemnification or to advancement of expenses of such director,
officer, employee, agent or representative, or the obligations of the
corporation, arising hereunder.
SECTION 5. INSURANCE. The corporation may purchase and maintain
insurance, at its expense, to protect itself and any person who is or was or has
agreed to become a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
or on his behalf in any such capacity, or arising out of his status as such,
whether or not the corporation would have the legal power to directly indemnify
him against such liability.
SECTION 6. SAVINGS CLAUSE. If this Article IX or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the corporation shall nevertheless indemnify each director and officer, and each
employee, agent and representative of the corporation described in Section 1 of
this Article IX, as to liabilities and expenses, and amounts paid in settlement
with respect to any proceeding, including any action by or in the right of the
corporation, to the full extent permitted by any applicable portion of this
Article IX that shall not have been invalidated and to the full extent permitted
by applicable law.
SECTION 7. TERMS. For purposes of this Article IX, the term "other
enterprises" includes employee benefit plans; the term "expenses" includes
counsel fees, including those for appeal; the term "liability' includes
obligations to pay a judgment, settlement, penalty, fine (including an excise
tax assessed with respect to any employee benefit plan), and expenses actually
and reasonably incurred with respect to a proceeding; the term "proceeding"
includes any threatened, pending, or completed action, suit, or other type of
proceeding, whether civil, criminal, administrative, or investigative and
whether formal or informal; the term "agent" includes a volunteer; and the term
"serving at the request of the corporation" includes any service as a director,
officer, employee or agent of the corporation that imposes duties on such
persons, including duties relating to an employee benefit plan and its
participants or beneficiaries.
- 18 -
<PAGE>
ARTICLE X
AMENDMENT
These Bylaws may be altered, amended or repealed, and new Bylaws
adopted, by the affirmative vote of at least a majority of the members of the
Board of Directors then in office or by the affirmative vote of the holders of
not less than 66 2/3% of the voting power of all shares of capital stock of the
corporation then entitled to vote generally in the election of directors, voting
as a single class.
- 19 -
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
June 7, 1995
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent 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
Miami, Florida,
June 7, 1996.
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