SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission File Number: 333-05581
GOLDEN BEAR GOLF, INC.
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(Exact name of Registrant as specified in its charter)
FLORIDA 65-0680880
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
11780 U.S. HIGHWAY ONE, NORTH PALM BEACH, FLORIDA 33408
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(Address of principal executive offices) (Zip Code)
(561) 626-3900
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(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Class A Common Stock, $.01 Par Value Nasdaq Stock Market
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None.
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of Class A Common Stock held by non-affiliates of the
Registrant as of March 7, 1997 was $36,006,673. The Registrant had outstanding
2,747,962 shares of Class A Common Stock (par value $.01 per share) and
2,760,000 shares of Class B Common Stock (par value $.01 per share) as of March
7, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement relative to the 1997
Annual Meeting of Shareholders are incorporated by reference in Part III to the
extent provided in Items 10, 11, 12 and 13 hereof.
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Golden Bear Golf, Inc., together with its wholly owned subsidiaries
(collectively, "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 three divisions, the Golf Division, Construction Division
and 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.
The Company was formed on June 7, 1996 to enter into a reorganization agreement
which was consummated on August 1, 1996 upon the closing of an initial public
offering of the Company's Class A Common Stock. Parties to the plan of
reorganization included, among others, the Company's affiliates, Golden Bear
Golf Centers, Inc. ("Golf Centers"), Paragon Golf Construction, Inc. ("Paragon")
(collectively, the "Constituent Companies") and Golden Bear International, Inc.
("International"), a privately owned company controlled by Jack Nicklaus.
Pursuant to the agreement, the Company acquired all of the outstanding common
stock of the Constituent Companies in exchange for shares of its Class A and
Class B Common Stock. In addition, the Company acquired certain assets and
assumed certain liabilities of International in exchange for shares of the
Company's Class B Common Stock. The transaction was accounted for on an
historical cost basis in a manner similar to a pooling of interests as Golden
Bear and the Constituent Companies had common stockholders and management.
The Company's strategy is to increase its worldwide revenue and operating income
by capitalizing on the growth and popularity of the game of golf and Mr.
Nicklaus' reputation, image and accomplishments as one of the greatest golfers
ever to play the game. Specific components of the Company's growth strategy
include (i) acquiring, leasing or entering into joint ventures for well-located
golf practice and instruction facilities that have the potential for improvement
under the Company's management and with improved or expanded facilities; (ii)
developing new golf practice and instruction facilities in locations where
suitable acquisition opportunities are not available; (iii) capitalizing on the
demand for the construction of new golf courses and the renovation of existing
courses; and (iv) broadening the Company's base of branded consumer product
offerings under the NICKLAUS, JACK NICKLAUS and GOLDEN BEAR brand names. The
Company also believes that cross-marketing of its products and services will
provide it with opportunities to maximize its operating performance. To this
end, it is anticipated that the acquisition and development of new golf practice
and instruction facilities will provide the Company with additional
opportunities to market its Nicklaus/Flick Golf School programs and to sell
licensed products at retail pro shops established at such facilities. Similarly,
the Company believes that the Company's arrangement as exclusive marketer of
Nicklaus Design's services will increase the exposure of the Company's products
and provide it with a competitive advantage in obtaining golf course
construction and renovation business.
GOLF DIVISION
The operating activities of the Golf Division are primarily conducted through
Golf Centers. The Golf Division is involved in the operation and licensing of
the Company's golf practice and instruction facilities under the JACK NICKLAUS
GOLF CENTER, JACK NICKLAUS ACADEMY OF GOLF and GOLDEN BEAR GOLF CENTER brand
names, and the providing of golf course management and consulting services
primarily to owners and operators of Nicklaus designed golf courses. In
addition, the Golf Division markets golf course design services for Nicklaus
Design. 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 availability at its facilities of the unique and individualized golf
instruction programs designed by Jack Nicklaus and Jim Flick, a world renowned
instructor.
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GOLF CENTERS AND ACADEMIES
The Company's golf centers and academies are comprised of golf practice and
instruction facilities designed to provide golf practice opportunities,
affordable golf instruction and related recreational activities. Prior to the
reorganization of the Company on August 1, 1996, the Company owned and operated
two golf practice and instruction facilities. As of December 31, 1996, the
Company operated 10 existing golf practice and instruction facilities and had
one such facility under development. The majority of the golf centers acquired
subsequent to the reorganization were purchased in the last three months of
1996, including two that were acquired on December 31, 1996. In addition,
certain of the golf centers that were acquired during the fourth quarter of
1996, were in geographical regions that are typically out of season during the
fall and winter months. Accordingly, the majority of the golf centers acquired
during 1996 did not contribute significantly to the operating performance of the
Company for the year ended December 31, 1996. The Company attempts to develop a
business plan tailored to the specific markets and renovation requirements of
each golf center facility that is acquired. Although the renovation and upgrade
programs for acquired golf centers have commenced, the majority of the recently
acquired golf center facilities are not expected to contribute significantly to
the Company's operating performance in the near term. Subsequent to December 31,
1996, the Company acquired three additional existing golf center facilities and
is in the process of developing and implementing the respective business plans
for each of these facilities.
All of the golf centers acquired by the Company to-date are located within the
United States. In addition, there are presently seven licensed GOLDEN BEAR GOLF
CENTERS being operated by a licensee of the Company in the United States, with
two additional licensed facilities scheduled to open, one each in 1997 and 1998.
Internationally, the Company's licensees operate eight facilities under the name
JACK NICKLAUS GOLF CENTERS and JACK NICKLAUS ACADEMY OF GOLF that are located in
the Pacific Rim and England, along with two additional facilities under
development that are expected to open in 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.
DOMESTIC OPERATIONS. The owned and licensed domestic golf centers are generally
centered around a practice range designed with target greens, bunkers and traps
to simulate golf course conditions. The ranges generally feature both covered
and uncovered hitting stations to maximize usage under all weather conditions
and are lighted to permit nighttime use. In addition to the practice range, the
golf centers typically include short game practice areas, including putting
greens and sand traps, comprehensive GOLDEN BEAR instruction programs designed
by the internationally recognized NICKLAUS/FLICK GOLF SCHOOL, and JACK NICKLAUS
COACHING STUDIO (a proprietary multimedia video and computer swing analysis
system) and a clubhouse facility that typically includes a full-line retail pro
shop, limited locker facilities and a restaurant or snack bar. The domestic golf
centers generally also include other recreational amenities such as miniature
golf courses and baseball batting areas.
In addition to the 10 existing golf centers and one facility under development
that were owned by the Company at December 31, 1996, together with the three
additional facilities that were acquired subsequent to December 31, 1996, the
Company's strategy is to continue to acquire additional golf practice and
instruction facilities, subject to obtaining sufficient financing and the
successful integration of the acquired facilities into the Company's operations.
Although there is no assurance that it will successfully do so, the Company
seeks to acquire an additional eight facilities by the end of 1997 bringing the
total to 22 facilities. The Company is currently focusing its efforts on
integrating the operations of the golf centers acquired to-date and on
implementing proper internal controls and systems at such centers.
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 center facilities. 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 that it believes can support one or more golf practice and
instruction facilities of the type operated by the Company. 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.
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Currently, there are seven licensed GOLDEN BEAR GOLF CENTERS in the United
States that are operated by one owner, who is not affiliated with the Company.
The licensee has been provided an exclusive license in specified territories to
operate GOLDEN BEAR GOLF CENTERS and is able to utilize certain of the Company's
trademarks, servicemarks and other rights relating to the operation of the
facilities. Additionally, the Company has agreements with two licensees and a
multiunit development agreement that grants the exclusive rights to develop five
GOLDEN BEAR GOLF CENTERS within the Baltimore, Maryland, and Fairfax, Virginia,
areas, one facility in the Seattle, Washington area, and one facility in the
Albany, New York area. 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 between $35,000 and $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 generally are paid,
ranging between $35,000 and $50,000, subject to increases based on the consumer
price index.
Set forth below is a list of the Company's existing domestic licensees and the
facilities operated by them, along with those that the Company's licensees have
informed the Company that they anticipate opening.
LICENSEE GROUP EXISTING FACILITIES ANTICIPATED FACILITIES
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Family Golf Centers, Inc. Henrietta, NY
Farmingdale, NY
Elmsford, NY
Douglaston, NY
Liverpool, NY
Wayne, NJ
El Segundo, CA
KRIM & Associates, LLC None Albany, NY
JFL Golf Properties None Seattle, WA
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 that 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
generally has granted its foreign licensees an exclusive radius around the site
of each facility.
The Company's foreign licensees currently have eight operating facilities along
with two additional facilities under development that are anticipated to be
operational by the end of 1997. The Company has an agreement with a corporate
affiliate of its British licensee 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.
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MARKETING OF GOLF COURSE DESIGNS
Pursuant to a design services marketing agreement, the Company markets golf
course designs worldwide for Nicklaus Design, the golf course design division of
International, 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 receives 10% of the gross design fees collected by
International. The Company believes the marketing of Nicklaus Design provides a
competitive advantage to the Company in obtaining construction and renovation
contracts as well as club management contracts at Nicklaus Design courses.
GOLF COURSE MANAGEMENT
In 1996, 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 located in the United States and one in Asia.
CONSTRUCTION DIVISION
Through Paragon, 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 other golf course designers and architects in 1995.
Paragon has furnished golf construction and renovation services on approximately
44 golf courses since 1983, 14 domestically and 30 internationally. The Company
completed 11 construction projects in 1996 and is currently involved in
providing construction, shaping and project management services to 19 active
projects located in nine countries, including the United States.
Set forth below are the projects completed and services provided by the Company
during the year ended December 31, 1996:
PROJECT NAME AND LOCATION PROJECT DESCRIPTION
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Hammock Creek, Stuart, Florida 18-hole Construction
James Island, Victoria, Canada 9-hole Construction
Salem Glen, Winston-Salem, North Carolina 18-hole Project Management/Shaping
Indigo Run, South Carolina 18-hole Construction
Country Club of the Rockies, Colorado Course Renovation
Ibis Golf & Country Club, Florida Golf School Construction
Governor's Club, North Carolina 9-hole Construction
Dongpusan, South Korea 18-hole Shaping
Antipolo, Philippines 18-hole Shaping
Spring City Resort, China 18-hole Shaping
Roko Kokusai, Kobe, Japan 9-hole Shaping
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The various golf course projects that are currently under construction in 1997,
together with the services being provided by the Company, are set forth below:
PROJECT NAME AND LOCATION PROJECT DESCRIPTION
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Sea Scapes, Kitty Hawk, North Carolina Shaping
Punta Mita, Puerto Villarta, Mexico 18-hole Construction
Diablo Grande, Patterson, California 18-hole Construction
Economou Farms, Burlington, Vermont 18-hole Construction
Montreux Golf Club, Reno, Nevada 18-hole Construction
Aspen Glen, Carbondale, Colorado 18-hole Construction
Laurel Springs, Cumming, Georgia 18-hole Construction
Great Bear, Marshall Creek, Pennsylvania 18-hole Construction
Nada, Korea 18-hole Shaping
St. David's, England 18-hole Shaping
Shanghai Links, Shanghai, China 18-hole Shaping
Phoenix Park, Seoul, Korea 18-hole Shaping
New Capital Golf Club, Japan 18-hole Shaping
Hangzhou, Hangzhou, China 18-hole Construction
The Classic, New Delhi, India 18-hole Project Management/Shaping
JPH, Brunei, Brunei Project Management/Shaping
Roko Kokusai, Kobe, Japan 9-hole Construction
Suzhou Golf Club, Suzhou, China 18-hole Construction
Eagle's Nest, Korea 27-hole Construction
The Company limited the number of new construction contracts that it undertook
during 1996 in an effort to complete the implementation of new systems and the
integration of new staff into its operations so as to properly position it for
future growth. Approximately 24% of the Company's total consolidated revenues
for 1996 were attributable to two unaffiliated customers of Paragon, comprised
of SEG Hangzhou Development Corporation and Aspen Glen Golf Company. During
1995, revenues from Montreux Golf Club Limited, an unaffiliated Paragon
customer, represented approximately 16% of the Company's total consolidated
revenues.
The Company's construction services generally are offered pursuant to either a
general construction contract or a technical services agreement. The Company
also may 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
generally are made in installments over the term of the contract based on the
stage of completion of the project.
A significant portion of Paragon's revenues and earnings are generated through
fixed price contracts for the construction of golf courses. Such fixed price
contracts expose the Company to the risks of cost overruns and inflation as well
as credit risks associated with the customer. The Company recognizes revenues
and expenses on a percentage-of-completion basis whereby revenue and expenses,
and thereby profit, in a given period are determined based on the Company's
estimates as to the status of and the costs remaining to complete a particular
project. To the extent that the Company underestimates the remaining cost to
complete a project, it may overstate the revenues and profit in a particular
period. In addition, certain of Paragon's construction contracts provide for
penalties for failure to timely complete construction or require that the
Company, at its expense, correct and remedy to the satisfaction of the golf
course owner, certain structural, aesthetic or functional defects. The Company
may enter into additional contracts containing provisions of this type or other
performance obligations in the future and there is no assurance that expenses
relating to these provisions will not have a material adverse effect on the
Company. In addition, the nature of Paragon's construction activities expose it
to potential risk associated with weather or other acts of nature that could
have a material adverse effect on the Company.
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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.
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 more than 20
companies that distribute products in over 35 countries. The largest markets for
the Company's branded products currently are 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, calendars, and various forms of artwork and commemoratives.
The Company's licensing of apparel in the Far East is conducted exclusively
through Jack Nicklaus Apparel International ("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 ("JNJ")
and the rest of Asia ("JNAI/FE"). Pursuant to such arrangements, JNAI will
receive from 50% to 75% of the revenues of JNJ and approximately 66-2/3% of
amounts distributed by JNAI/FE.
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 that utilize golf and the Company's marketing capabilities
to help market a partner's 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)
no less than 20% of all such revenues received under any new contract or
arrangement. The Company will receive 100% of any revenues associated with
strategic marketing alliances.
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
also is 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.
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The following table sets forth the Company's principal licensees and products:
<TABLE>
<CAPTION>
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Licensed Territories Licensee
Licensee Products Brands Since
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<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, slacks, JACK NICKLAUS North America 1990
a business unit of Hartmarx shorts, blazers, socks, NICKLAUS Europe
Corporation sweatshirts, outerwear, rainwear
The Rockport Corporation Casual and dress shoes, golf shoes JACK NICKLAUS Worldwide 1992
GOLDEN BEAR
Brookville Corporation Neckwear JACK NICKLAUS United States 1995
NICKLAUS
Abba Accessories, Inc. Cufflinks, belt buckles, tie bars JACK NICKLAUS United States 1995
and tacks NICKLAUS Great Britain
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 and JACK NICKLAUS Thailand 1973
Partnership between JNAI 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 apparel luggage, casual and business bags MUIRFIELD
licensee in Japan and eyewear
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</TABLE>
NICKLAUS/FLICK GOLF SCHOOLS
The Company operates high-end golf schools principally under the NICKLAUS/FLICK
GOLF SCHOOL ("NFGS") brand name. Jack Nicklaus and Jim Flick, a world renowned
instructor, collaborated to develop a program that has been recognized by major
golf publications for its leadership role in the golf instruction industry since
the school's inception in 1991.
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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 developed a proprietary teaching
methodology that includes 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 more than 110 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: Desert Mountain Golf Club located in Carefree, Arizona; Ibis Golf
& Country Club located in West Palm Beach, Florida; Boyne Highlands Resort
located in Harbor Springs, Michigan; Park Meadows located in Park City, Utah;
and Kiawah Island Resort located in Kiawah Island, South Carolina. The Company
currently is 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 commencing operation of a moderately priced golf
school under the NICKLAUS/FLICK FAULTS & CURES 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
more than 3,000) and high net worth golfers; (iii) word-of-mouth referrals; and
(iv) telemarketing.
The NFGS teaching faculty currently is comprised of 28 teaching professionals
selected by Jack Nicklaus and Jim Flick, four of whom were included in GOLF
MAGAZINE'S list of the top 100 golf instructors in the United States in 1996.
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 one, two and three-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 NICKLAUS/FLICK 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 (`Golf Club") was founded in mid-1995
to provide additional benefits to Nicklaus Design golf courses. The Golf Club is
a proprietary membership club that 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 Golf Club is by invitation only and is
restricted to members of the golf clubs that agree to participate in the program
("Host Clubs"). There currently are approximately 70 Host Clubs. Members enjoy
reciprocal playing and guest privileges at each of the Host Clubs. The current
membership fee is $295 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 Golf 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 Golf Club
assists the Company's marketing efforts on behalf of Nicklaus Design.
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TICKETMASTER GOLF
Subsequent to December 31, 1996, the Company entered into an agreement with
Ticketmaster Group, Inc. to establish a joint venture that will contract with
golf courses across the United States to offer golfers the benefits of
convenient advance ticketing for specific tee times. The joint venture, called
Ticketmaster Golf will be based in Orlando, Florida and is expected to be
operational in the summer of 1997. Ticketmaster Golf will use Ticketmaster's
proprietary computerized distribution system to eliminate the tedious search for
available tee times at leading daily fee golf courses. Golfers will be able to
purchase tee times by phone or through the Internet as much as one year in
advance, depending on the golf course. Under the terms of the joint venture
agreement, the Company will provide certain marketing services and will be
entitled to a 50% participation interest in the operations of the joint venture.
In addition, under the terms of the agreement, the Company has a financial
commitment for an initial capital contribution of approximately $500,000.
COMPETITION AND SEASONALITY
The Company's competition varies among its business lines. The markets in which
the Company competes in its Golf Division generally are 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. Competition associated with the
Company's golf practice and instruction facilities primarily relates to the
location, the quality of the facilities and services offered, marketing of the
facilities and proximity to other golf centers. In the providing 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 golf course construction is based
primarily on reputation, quality of service, experience and price. While many of
the Company's Golf Division competitors and potential competitors have
considerably greater financial resources and experience than does the Company,
the Company believes that its well recognized brand names and its reputation for
providing high quality, innovative products and services will distinguish it
from its competitors.
The consumer markets for goods and services in which the Company's Marketing
Division competes are extremely competitive, with the Company's products and
services competing against a mix of established brand name consumer products and
services, products and services licensed or endorsed by sports and entertainment
celebrities, private-label products and generic products that have not
established a distinct brand identity. Competition in these products and
services is primarily centered 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.
Certain of the Company's golf centers are located in northern states that
experience decreased demand for the services and products offered through such
golf center facilities in the winter months. In an attempt to mitigate such
seasonal decreases in demand, the Company is seeking to acquire or develop
additional "dome type" golf practice and instruction facilities, which generally
experience increased usage during the winter months. In addition, the Company's
construction projects are located throughout the world in many geographically
diverse locations, many of which are subject to constraints on the amount and
type of construction that can be performed during certain months of the year.
9
<PAGE>
EMPLOYEES
As of December 31, 1996, the Company had approximately 282 full-time employees
and 177 part-time employees. The number of part-time employees typically
increases 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 good.
INTELLECTUAL PROPERTY RIGHTS
The Company's NICKLAUS, JACK NICKLAUS and GOLDEN BEAR brand names are believed
by the Company to be well-recognized by consumers and therefore important in the
sales of its products. The 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. The Company has obtained the exclusive royalty-free rights to utilize
and license the major trademarks and service marks that have been previously
developed under common law, including marks previously registered in the United
States and various foreign countries in which products or services currently are
sold by the Company and its licensees. Subject to the approval of International,
the Company also has the right to obtain the registration of additional
trademarks and service marks for the future expansion of its businesses. The
Company also has the rights to utilize certain customer lists, trade secrets,
know-how, and certain copyrighted materials necessary or useful in the conduct
of its business, including intellectual property that previously used to be
provided to the predecessors of the Company under license from International.
GOVERNMENTAL REGULATION
The Company's golf centers and its golf course and construction operations are
subject to various federal, state, local and foreign laws and regulations
designed to protect the environment from waste emissions, the handling,
treatment and disposal of solid and hazardous wastes and the remediation of
contaminates associated with the use and disposal of hazardous substances.
Although the Company believes that it is in substantial compliance with all such
laws, ordinances and regulations applicable to its properties and operations,
there can be no assurance that compliance with such requirements in the future
will not have a material adverse effect on the Company's financial condition. It
is the Company's general practice to hire environmental consultants to conduct
environmental assessments, including invasive procedures such as soil sampling
or ground water analysis, on golf center facilities it owns, operates or intends
to acquire or develop, in some cases only limited invasive procedures are
conducted on such properties. Accordingly, there may be environmental
liabilities or conditions associated with such properties of which the Company
is not aware. The Company is also subject to the federal 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 is also subject to foreign immigration, labor, safety
and environmental laws in those jurisdictions where the Company performs
services.
10
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information as of March 7, 1997 with
respect to the executive officers of the Company. The executive officers serve
at the discretion of the Company's Board of Directors.
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
Jack W. Nicklaus 57 Chairman of the Board
Richard P. Bellinger 45 President, Chief Executive Officer and Director
Mark F. Hesemann 44 Senior Vice President and Director
Thomas P. Hislop 40 Senior Vice President and Director
Jack P. Bates 37 Senior Vice President and Chief Financial Officer
JACK W. NICKLAUS serves as the Chairman of the Board of the Company. Mr.
Nicklaus founded International, the predecessor of the current Company in 1970
and has served as Chairman of its Board since 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 138 courses in 23
countries. Mr. Nicklaus received the Athlete of the Decade Award (1970-1979)
from SPORTS ILLUSTRATED magazine and the Golfer of the Century Award in 1988.
RICHARD P. BELLINGER is a member of the Company's Board of Directors and serves
as the President and Chief Executive Officer of the Company. Mr. Bellinger
joined International in 1979 as Controller for the golf course and real estate
development areas of International. In 1981, he was promoted to Treasurer, and
in 1984, became International's Chief Financial Officer. Mr. Bellinger was
promoted to Chief Operating Officer of International in 1985 and was named
President in 1989. Mr. Bellinger graduated from the University of Miami where he
earned both his BBA in accounting and his MBA.
MARK F. HESEMANN is a member of the Company's Board of Directors and serves as
the Senior Vice President of the Company, with primary responsibility for the
Company's Golf Division. Mr. Hesemann joined International in 1982 as Director
of Marketing. He became Executive Vice President of Jack Nicklaus Club
Management, a division of International in 1984 and was named Vice President of
International in 1985 with responsibility for marketing of Jack Nicklaus Golf
Services, the golf course design division of International. He became General
Manager of Jack Nicklaus Golf Services in 1986 and assumed the additional
responsibility of Senior Vice President of International in 1992. From October
1994 to January 1996, Mr. Hesemann served as Managing Director in charge of all
of International's business in Asia. Mr. Hesemann graduated from Indiana
University where he earned both a BS in Marketing and an MBA in International
Finance.
THOMAS P. HISLOP is a member of the Company's Board of Directors and serves as a
Senior Vice President of the Company, with primary responsibility for the
Company's Marketing Division. Mr. Hislop joined International in 1984 as
Director of Marketing. Mr. Hislop became Vice President of Marketing in 1985
with the 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 International in 1992 and member of
International's Executive Committee in 1994. Mr. Hislop completed his
undergraduate education at Bucknell University and obtained his MBA from Harvard
Business School.
JACK P. BATES serves as a Senior Vice President and the Chief Financial Officer
of the Company. Mr. Bates joined International in 1984. From 1985 to 1993, he
served as Treasurer and became Chief Financial Officer, Senior Vice President
and an Executive Committee member of International in 1993. Mr. Bates received a
Bachelor of Science Degree in Accounting from Florida Southern College.
11
<PAGE>
ITEM 2. PROPERTIES
The Company's principal executive and administrative offices are located in
North Palm Beach, Florida in approximately 16,000 square feet of space leased
from International under a sublease agreement with a term that expires in 2000.
The Company also leases approximately 3,000 square feet of space in Singapore
that is utilized for administrative offices under a lease that expires in 1997.
Although the Company considers its executive and administrative offices as
adequate and suitable for its current needs, it is evaluating its options with
respect to acquiring additional office capacity to accommodate anticipated
increased requirements in the near future.
As of December 31, 1996, the Company also operated ten separate golf instruction
and practice facilities along with one such facility that was under development.
With the exception of one Company owned facility located on approximately 40.8
acres of land in Pittsburgh, Pennsylvania, the underlying real property
associated with all of these golf instruction and practice facilities is leased
under long-term lease arrangements.
Subsequent to December 31, 1996, the Company acquired three additional existing
golf instruction and practice facilities and entered into long-term ground lease
agreements for the real property underlying the acquired facilities.
ITEM 3. LEGAL PROCEDINGS
The Company is a party to various legal proceedings which have arisen in the
ordinary course of its business. While the ultimate outcome of these matters
cannot be predicated with certainty, 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 the Company's
business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the stockholders of the Company during
the fourth quarter of the fiscal year ended December 31, 1996.
12
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Class A Common Stock, which was recently issued to the public in
its initial public offering on August 1, 1996, is traded on the Nasdaq Stock
Market under the symbol "JACK." The high and low sales prices per share of the
Class A Common Stock were $20-1/2 and $11, respectively, for the fourth quarter
ended December 31, 1996, which represented the first full quarterly period of
trading for the stock. As of March 7, 1997, there were 389 registered
shareholders of record and approximately 2,850 beneficial shareholders in
"street name" of the Company's Class A Common Stock.
The Company's Class B Common Stock is not publicly traded in that all of the
outstanding shares of such stock are beneficially owned by members of the
Nicklaus family. See Note 7 to the Consolidated Financial Statements included at
Item 8 of this Form 10-K.
No cash dividends have been declared on the Company's Class A Common Stock and
Class B Common Stock since the initial public offering on August 1, 1996.
Moreover, the Company currently intends to retain any earnings to finance the
development and expansion of its business and does not anticipate paying any
cash dividends in the foreseeable future.
13
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below was derived from the respective
year's audited financial statements and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included at Item 7 herein, together with the Consolidated Financial
Statements, including the notes thereto, included at Item 8 of this Form 10-K.
Note that the amounts attributable to the operations of JNAI, which were
included in the prior years' financial statements on a consolidated basis, have
been reclassified to conform to the current year's presentation.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues:
Golf division $ 4,934 $ 2,298 $ 1,905 $ 1,522 $ 2,764
Construction division 20,454 19,177 5,599 2,177 ---
Marketing division 8,119 7,306 6,476 5,509 4,868
---------- ---------- ---------- ---------- ---------
Total revenues 33,507 28,781 13,980 9,208 7,632
---------- ---------- ---------- ---------- ---------
Operating costs and expenses:
Construction and shaping costs 17,052 16,500 4,737 1,894 ---
Operating expenses 11,995 7,327 6,693 5,440 5,172
Compensation recorded on sale of shares
to management(1) 3,000 --- --- --- ---
Corporate overhead 3,479 3,121 3,051 2,994 3,315
Depreciation and amortization 485 233 199 243 265
---------- ---------- ---------- ---------- ---------
Total costs and expenses 36,011 27,181 14,680 10,571 8,752
---------- ---------- ---------- ---------- ---------
Income (loss) from operations (2,504) 1,600 (700) (1,363) (1,120)
Other income (expense) 322 (1) (10) 2 27
---------- ---------- ---------- ---------- ---------
Income (loss) before income taxes (2,182) 1,599 (710) (1,361) (1,093)
Provision for income taxes 248 365 155 43 ---
---------- ---------- ---------- ---------- ---------
Net income (loss) $(2,430) $ 1,234 $ (865) $(1,404) $(1,093)
========== ========== ========== ========== =========
Earnings per share:
Net income (loss) $ (0.60) $ 0.41 $ (0.29) $ (0.47) $ (0.36)
========== ========== ========== ========== =========
Pro forma earnings per share(2):
Net income (loss) $ (0.57) $ 0.46 $ (0.03) $ (0.16) $ (0.36)
========== ========== ========== ========== =========
Weighted average common and common
equivalent shares outstanding 4,052 3,000 3,000 3,000 3,000
========== ========== ========== ========== =========
DECEMBER 31,
------------------------------------------------------------------
1996(3) 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------
BALANCE SHEET DATA (AT YEAR-END): (DOLLARS IN THOUSANDS)
Working capital (deficit) $20,593 $ 368 $ (462) $ 314 $ 386
Total assets 51,407 7,287 3,290 2,499 2,016
Long-term debt 5,557 44 113 --- ---
Shareholders' equity 38,254 1,030 256 1,110 1,439
</TABLE>
(1) Represents compensation deemed to have been received by certain executives
in connection with their purchase of shares in Golf Centers. See Note 13 to
the Consolidated Financial Statements included at Item 8 herein.
(2) See Note 9 to the Consolidated Financial Statements included at Item 8
herein.
(3) The significant increases in the respective balance sheet data amounts for
1996 is primarily attributable to the Company's initial public offering of
2.484 million shares of its Class A Common Stock on August 1, 1996.
14
<PAGE>
ITEM 7. 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 years ended December 31, 1996, 1995 and 1994.
This discussion and analysis should be read in conjunction with the Selected
Financial Data and the accompanying audited Consolidated Financial Statements of
the Company and the related Notes thereto which are included elsewhere in this
10-K.
OVERVIEW
The Company operates its business through three divisions: the Golf Division,
the Construction Division and the Marketing Division. The Golf Division owns,
operates and licenses the Company's golf practice and instruction facilities
under the JACK NICKLAUS GOLF CENTER, JACK NICKLAUS ACADEMY OF GOLF and GOLDEN
BEAR GOLF CENTER brand names, is involved in the marketing of golf course design
services on behalf of designers, primarily Nicklaus Design, and provides golf
course management and consulting services throughout the world. The Construction
Division provides technical construction services in connection with the
construction and renovation of golf courses. The Marketing Division is involved
primarily in the licensing of NICKLAUS, JACK NICKLAUS and GOLDEN Bear branded
products throughout the world, the operation of the NICKLAUS/FLICK GOLF SCHOOLS
and the generation of marketing fees related to Jack Nicklaus' personal
endorsements (which are reflected in the Company's Consolidated Statements of
Operations under the caption related party commissions).
The Company was formed on June 7, 1996 to enter into a reorganization agreement
which was consummated on August 1, 1996 upon the closing of an initial public
offering of the Company's Class A Common Stock. Parties to the plan of
reorganization included, among others, the Company's affiliates, Golf Centers,
Paragon and International, a privately owned company controlled by Jack
Nicklaus. Pursuant to the agreement, the Company acquired all of the outstanding
common stock of Golf Centers and Paragon in exchange for shares of its Class A
and Class B Common Stock. In addition, the Company acquired certain assets and
assumed certain liabilities of International in exchange for shares of the
Company's Class B Common Stock. The transaction was accounted for on an
historical cost basis in a manner similar to a pooling of interests as Golden
Bear, Golf Centers and Paragon had common stockholders and management.
Consistent with the Company's strategy to increase its ownership and operation
of golf practice and instruction facilities, the Company entered into purchase
and lease agreements during the year ended December 31, 1996, pursuant to which
it acquired 10 existing golf center facilities along with one such facility
under development. However, the substantial majority of these acquisitions were
consummated during the fourth quarter of 1996, including two that were acquired
on December 31, 1996. Prior to the reorganization of the Company on August 1,
1996, the Company owned and operated two golf practice and instruction
facilities. Subsequent to the reorganization, the Company acquired eight
additional existing golf centers and one under development through December 31,
1996. Certain of the golf centers that were acquired during the fourth quarter
of 1996, were in geographical regions that are typically out of season during
the fall and winter months. Accordingly, the majority of the golf centers
acquired during 1996 did not contribute significantly to the operating
performance of the Company for the year ended December 31, 1996. The Company
attempts to develop a business plans tailored to the specific markets and
renovation requirements of each golf center facility that is acquired. Although
the renovation and upgrade programs for these golf centers have commenced, the
majority of the recently acquired golf center facilities are not expected to
contribute significantly to the Company's operating performance in the near
term.
Subsequent to December 31, 1996, the Company acquired three additional existing
golf center facilities and is in the process of developing and implementing the
respective business plans for each of these facilities. While there is no
assurance that it will successfully do so, the Company is seeking to acquire or
develop a total of eight additional facilities by the end of 1997, bringing the
total to 22 facilities. However, such plans are subject to obtaining sufficient
financing, and the Company likewise is focusing its efforts on integrating the
operations of the golf centers acquired to-date and on implementing proper
internal controls and systems at such centers.
15
<PAGE>
While there is no assurance that the Company will achieve continued growth, the
Company believes that its growth will continue as it pursues its business plan
to acquire additional golf practice and instruction facilities and to expand its
construction and licensing operations.
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 Consolidated Statements of Operations. Pro forma operations reflect
adjustments to historical operating results for Federal and state income taxes
as if the predecessor entities comprising the current Company had been taxed as
C corporations rather than S corporations.
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1994 1995 1996
---- ---- ----
Revenues:
Golf Division 13.6% 8.0% 14.8%
Construction Division 40.1 66.6 61.0
Marketing Division 46.3 25.4 24.2
---- ---- ----
Total Revenues 100.0 100.0 100.0
Operating Costs and Expenses:
Golf Division 12.0 6.5 16.4
Construction Division 43.1 60.9 55.8
Marketing Division 26.7 15.4 14.5
Compensation recorded on sale
of shares to management 0.0 0.0 9.0
Corporate Overhead 21.8 10.8 10.4
Depreciation and Amortization 1.4 .8 1.4
---- ---- ----
Total Costs and Expenses 105.0 94.4 107.5
Operating Income (Loss) (5.0) 5.6 (7.5)
Other Income (Expense) (0.1) 0.0 1.0
---- ---- ----
Income (Loss) before Income Taxes (5.1) 5.6 (6.5)
Pro Forma Income Tax
Provision (Benefit) (4.4) 0.8 0.4
---- ---- ----
Pro Forma Net Income (Loss) (0.7)% 4.8% (6.9)%
==== ==== ====
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
Total revenues increased 16.4% to $33.5 million in 1996 from $28.8 million in
1995. The increase in total revenues was principally the result of an increase
in Golf Division revenues to $4.9 million in 1996 from $2.3 million in 1995,
attributable primarily to the recent acquisitions of 10 existing golf centers,
that contributed to revenues starting with their respective acquisition dates.
The Company's Construction Division revenues increased to $20.5 million in 1996
from $19.2 million in 1995. The Company limited the number of new construction
contracts that it undertook during 1996 in an effort to complete the
implementation of new systems and the integration of new staff to properly
position it for future growth. Marketing Division revenues increased to $8.1
million in 1996 from $7.3 million in 1995 due to increased revenues from
licensing and other operations, which were offset in part by a decrease in golf
instruction revenues of approximately $0.2 million. The decrease in golf
instruction revenues resulted primarily from reduced revenues attributable to a
significant corporate client during 1996.
16
<PAGE>
The Company incurred a net operating loss for 1996 due primarily to a one-time
charge of $3.0 million associated with the purchase of shares of Golf Centers by
certain executives (see Note 13 of the Consolidated Financial Statements).
Exclusive of the effect of the one-time expense, operating income would have
decreased approximately $1.1 million in 1996 as compared to 1995. Exclusive of
the effect of the one-time charge, operating income as a percentage of total
revenues decreased to 1.5% in 1996 from 5.6% in 1995. This $1.1 million decrease
was primarily a result of increased operating expenses and corporate overhead,
offset in part by an increase in the gross margin realized by the Construction
Division. The gross margin realized in the Construction Division increased due
primarily to a differing mix of projects in process during 1996. Operating
expenses as a percentage of total revenues were 35.8% and 25.5% for 1996 and
1995, respectively. The increase in operating expenses for 1996 resulted
primarily from operating the 10 newly acquired golf center facilities and
additional expenses incurred to support the expansion of the Company's
businesses. During 1996, the Company incurred additional costs attributable to
the implementation of new systems and the integration of its recently acquired
golf center facilities.
Corporate overhead, consisting primarily of corporate headquarters rent and
occupancy costs, as well as corporate management and employees, increased to
$3.5 million in 1996 from $3.1 million in 1995. Management anticipates that
corporate overhead will continue to increase due to planned systems upgrades and
additions of personnel, together with the increased costs associated with
operating the Company as a separate public company and the expansion of the
Company's businesses.
Other income of $0.3 million in 1996 was primarily attributable to interest
income on the unexpended proceeds from the Company's initial public offering
which have been invested in short-term commercial paper instruments and
repurchase agreements. Interest income for 1995 was not material to the
Company's results of operations.
Prior to the reorganization of the Company on August 1, 1996, Golf Centers and
Paragon were S Corporations for Federal and state income tax reporting purposes
and International Carveout was a division of International, which was likewise
an S Corporation. As S corporations prior to the reorganization, Golf Centers,
Paragon and International have historically only paid foreign income taxes and
have not paid United States Federal and state income taxes. The pro forma United
States income taxes were based on an approximate effective rate of 39% (See Note
9 of the Consolidated Financial Statements).
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
Total revenues increased 105.9% to $28.8 million in 1995 from $14.0 million in
1994. The $14.8 million increase in total revenues was principally the result of
an increase of Construction Division revenues to $19.2 million from $5.6
million. The increase in Construction revenues resulted from an increase in the
number of construction jobs both domestic and international. Golf Division
revenues also improved to $2.3 million in 1995 from $1.9 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
$7.3 million in 1995 from $6.5 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 $1.6 million in 1995
from a loss of $0.7 million in 1994. Operating income (after corporate overhead)
as a percentage of total revenues increased to 5.6% in 1995 from a loss of 5.0%
in 1994, primarily as a result of improved 1995 operating margins (before
corporate overhead) in the Construction Division of 8.6% as compared to (7.6)%
in 1994 and the achievement of operating efficiencies in overhead in 1995 as the
higher level of total revenues was spread over a relatively stable level of
corporate overhead. The improved operating margins (before corporate overhead)
in the Construction Division in 1995 resulted from increased gross profits of
the Division being spread over a relatively stable level of divisional operating
expenses. The Marketing Division's operating margins (before corporate overhead)
declined to 38.2% in 1995 from 41.6% 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.
17
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
On August 1, 1996 Golden Bear closed an initial public offering of 2,484,000
shares of its Class A Common Stock and received net proceeds (after deducting
underwriting discounts and offering costs) of approximately $35.2 million.
Approximately $1.6 million of the proceeds were utilized to repay indebtedness
incurred by the Company in connection with the acquisition of the Cool Springs
Golf Center which was owed to Jack Nicklaus. In addition, approximately $12.2
million of the proceeds have been used to fund the acquisition of certain other
golf centers along with an additional $2.5 million used for capital improvements
to the recently acquired golf center facilities through December 31, 1996. The
remaining proceeds, which have been invested in short-term commercial paper
instruments and repurchase agreements, will be used for working capital and
general corporate purposes including the acquisition and development of golf
practice and instruction facilities, additional advertising and expansion of the
Company's product development efforts, both domestically and internationally. At
December 31, 1996 and 1995, the Company had working capital of $20.6 million and
$0.4 million, respectively, and $16.5 million and $0.3 million, respectively in
cash and cash equivalents.
Net cash used in operations was $4.4 million for the year ended December 31,
1996 compared to net cash provided by operations of $0.5 million for the year
ended December 31, 1995. The decrease in net cash provided by (used in)
operations was primarily attributable to changes in the account balances
associated with accounts payable and costs and estimated earnings in excess of
billings on uncompleted construction contracts for the respective periods and
purchases of inventory during 1996 for several of the Company's newly acquired
golf centers, together with a decrease in net income (loss) for the year ended
December 31, 1996. Exclusive of the effect of a one-time, noncash charge of $3.0
million associated with the purchase of shares of Golf Centers by certain
executives (see Note 13 of the Consolidated Financial Statements), Net income
(loss) would have decreased approximately $0.7 million for the year ended
December 31, 1996 as compared to the year ended December 31, 1995.
Net cash used in investing activities was $18.1 million for the year ended
December 31, 1996 compared to $0.3 million for the year ended December 31, 1995.
The increase in cash used for investing activities resulted from the acquisition
and renovation of golf centers during 1996 as described above.
Net cash provided by (used in) financing activities was $38.7 million for the
year ended December 31, 1996 as compared to $(0.4) million for the year ended
December 31, 1995. The increase in cash provided by financing activities
primarily resulted from the proceeds received in the Company's initial public
offering.
Subject to obtaining sufficient financing, the Company intends to continue its
acquisition of golf practice and instruction facilities during 1997. The Company
plans to finance the acquisitions of facilities in 1997 with the remaining net
proceeds from the offering and mortgage financing secured by the facilities
acquired. The Company may also enter into various leasing arrangements for new
facilities which may not require a significant initial cash outlay or deferred
obligations may be issued to the sellers of such facilities as part of the
purchase price. In connection with the acquisition of certain golf center
facilities during 1996, the Company incurred indebtedness under both capital
lease obligations and notes payable to the sellers of such acquired golf centers
(see Note 6 of the Consolidated Financial Statements). Actual expenditures in
1997 will depend on, among other things, the availability of funds, the
availability of suitable facilities, the location and condition of the acquired
facilities (i.e. whether significant capital improvements are necessary),
whether the Company acquires or leases the related land, competitive
developments and strategic marketing decisions.
To provide for additional liquidity, the Company is seeking to obtain a $15-$20
million line of credit from a bank or other financial institution. Any such
credit facility would likely include customary representations and warranties
and covenants with respect to the conduct of the Company's business and require
the maintenance of various financial ratios, which could limit amounts available
to be borrowed under the facility. There can be no assurance that the Company
will obtain this credit facility or as to the amount or terms of any such
facility. In addition, the Company has outstanding indebtedness under a
revolving credit note that matures in May, 1997 (see Note 6 of the Consolidated
Financial Statements).
18
<PAGE>
The Company believes that the remaining proceeds from the initial public
offering, together with cash provided by operations will be sufficient to meet
its operating needs through the end of 1997. However, the acquisition of all of
the new golf centers that the Company is seeking to acquire during 1997 is
subject to obtaining additional financing. If the Company obtains the line of
credit financing described in the prior paragraph, the Company believes that it
would have sufficient funds to continue its planned acquisition and expansion
strategy through 1997. Beyond such 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 by
incurring 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 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. A substantial
portion of the revenues of the Company's overseas licensees are generated in
foreign currencies and accordingly, fluctuations in the values of these
currencies relative to the United States dollar could have a material adverse
effect on the Company's profitability. Royalty payments received by the Company
relating to foreign licensing arrangements are generally based on the exchange
rate at the time of payment. In addition, the Company's construction contracts
are also denominated in dollars and accordingly the effective cost to customers
for construction services performed overseas will increase or decrease as
foreign currencies fluctuate relative to the United States dollar, unless the
Company changes its United States dollar prices to reflect the fluctuations in
currency. The Company does not currently engage in hedging activities with
respect to such currency fluctuations, but may do so in the future.
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 such rates have had a
material effect on the Company's revenues or profitability.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This 10-K contains forward-looking statements made pursuant to the safe harbor
provisions of the Securities Litigation Reform Act of 1995. 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, including but not limited to, economic, competitive and other
factors affecting the Company's operations, markets, products and services,
expansion strategies and other factors discussed elsewhere in this report and
the documents filed by the Company with the Securities and Exchange Commission.
Actual results could differ materially from these forward-looking statements. In
light of these risks and uncertainties, there can be no assurance that the
forward-looking information contained in this 10-K will in fact prove accurate.
The Company does not undertake any obligation to revise these forward-looking
statements to reflect future events or circumstances.
19
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLDATED FINANCIAL STATEMENTS
PAGE
----
FINANCIAL STATEMENTS:
Report of Independent Certified Public Accountants.......................21
Consolidated Balance Sheets as of December 31, 1996 and 1995.............22
Consolidated Statements of Operations for the years
ended December 31, 1996, 1995 and 1994................................23
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1996, 1995 and 1994................................24
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994................................25
Notes to Consolidated Financial Statements...............................27
FINANCIAL STATEMENT SCHEDULE:
Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 1996, 1995 and 1994................................51
Consolidated Financial Statement Schedules not included have been omitted
because they are not applicable or the required information is presented in the
Consolidated Financial Statements or notes thereto.
20
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Golden Bear Golf, Inc.:
We have audited the accompanying consolidated balance sheets of Golden Bear
Golf, Inc. as of December 31, 1996 and 1995, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
and the schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and the schedule 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Golden Bear Golf,
Inc. as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
consolidated financial statements is presented for the purpose of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits 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,
February 21, 1997.
21
<PAGE>
<TABLE>
<CAPTION>
GOLDEN BEAR GOLF, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
--------------------------------
1996 1995
------------ ------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 16,477,420 $ 347,010
Accounts receivable, net of allowances of $540,806 in 1996
and $511,833 in 1995 5,352,224 4,728,461
Due from International 843,235 647,146
Costs and estimated earnings in excess of billings on uncompleted contracts 3,341,500 666,338
Inventory 1,953,857 30,236
Prepaid expenses and other current assets 221,800 162,251
------------ ------------
Total current assets 28,190,036 6,581,442
PROPERTY AND EQUIPMENT, net 18,347,927 582,586
INTANGIBLES AND OTHER ASSETS 4,868,919 123,166
------------ ------------
Total assets $ 51,406,882 $ 7,287,194
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,542,187 $ 3,594,236
Accrued liabilities and other 1,871,915 1,107,200
Billings in excess of costs and estimated earnings on uncompleted contracts 419,705 602,990
Deferred revenue 449,515 689,715
Current portion of notes payable and capital leases 1,313,383 219,225
------------ ------------
Total current liabilities 7,596,705 6,213,366
------------ ------------
NOTES PAYABLE AND CAPITAL LEASES, net of current portion 5,556,667 43,510
------------ ------------
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, 20,000,000 shares authorized,
no shares issued and outstanding --- ---
Common stock-
Class A, $.01 par value, 70,000,000 shares authorized, 2,744,812 and
240,000 shares issued and outstanding in 1996 and 1995, respectively 27,448 2,400
Class B, $.01 par value, 10,000,000 shares authorized, 2,760,000
shares issued and outstanding 27,600 27,600
Additional paid-in capital 40,850,358 840,000
Retained earnings (deficit) (2,651,896) 160,318
------------ ------------
Total shareholders' equity 38,253,510 1,030,318
------------ ------------
Total liabilities and shareholders' equity $ 51,406,882 $ 7,287,194
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
22
<PAGE>
<TABLE>
<CAPTION>
GOLDEN BEAR GOLF, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------
REVENUES: 1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Golf Division-
Golf centers and academy fees and royalties $ 3,653,056 $ 986,790 $ 744,549
Related party commissions 1,281,326 1,310,523 1,160,371
------------ ------------ ------------
Total golf division 4,934,382 2,297,313 1,904,920
------------ ------------ ------------
Construction Division 20,454,052 19,177,460 5,598,978
------------ ------------ ------------
Marketing Division-
Golf instruction revenues 3,339,184 3,535,444 2,965,482
Licensing and other revenues 2,704,108 2,235,135 2,172,739
Income from operations of JNAI 1,431,616 1,056,069 1,037,698
Related party management fees 643,587 480,000 300,000
------------ ------------ ------------
Total marketing division 8,118,495 7,306,648 6,475,919
------------ ------------ ------------
Total revenues 33,506,929 28,781,421 13,979,817
------------ ------------ ------------
OPERATING COSTS AND EXPENSES:
Construction and shaping costs 17,052,253 16,500,035 4,736,600
Operating expenses 11,994,477 7,326,740 6,693,399
Compensation recorded on sale of shares to management 3,000,000 -- --
Corporate overhead 3,479,181 3,121,257 3,051,444
Depreciation and amortization 485,362 233,041 198,710
------------ ------------ ------------
Total operating costs and expenses 36,011,273 27,181,073 14,680,153
------------ ------------ ------------
Income (loss) from operations (2,504,344) 1,600,348 (700,336)
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income 525,388 37,166 17,929
Interest expense (210,226) (25,255) (7,541)
Other 6,568 (12,954) (20,069)
------------ ------------ ------------
Total other income (expense) 321,730 (1,043) (9,681)
------------ ------------ ------------
Income (loss) before income taxes (2,182,614) 1,599,305 (710,017)
PROVISION FOR INCOME TAXES 247,919 365,430 155,618
------------ ------------ ------------
Net income (loss) $ (2,430,533) $ 1,233,875 $ (865,635)
============ ============ ============
EARNINGS PER SHARE:
Net income (loss) $ (0.60) $ 0.41 $ (0.29)
============ ============ ============
PRO FORMA EARNINGS PER SHARE (Note 9):
Net income (loss) $ (0.57) $ 0.46 $ (0.03)
============ ============ ============
Weighted average common and common
equivalent shares outstanding 4,051,887 3,000,000 3,000,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
23
<PAGE>
<TABLE>
<CAPTION>
GOLDEN BEAR GOLF, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
RETAINED
CLASS A CLASS B ADDITIONAL EARNINGS/
COMMON COMMON PAID-IN DIVISIONAL
STOCK STOCK CAPITAL EQUITY TOTAL
----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 $ 2,400 $ 27,600 $ 90,000 $ 990,045 $1,110,045
Capital 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 2,400 27,600 840,000 (614,384) 255,616
Divisional transfers to International --- --- --- (459,173) (459,173)
Net income --- --- --- 1,233,875 1,233,875
----------- ----------- ------------- ------------- -------------
BALANCE, December 31, 1995 2,400 27,600 840,000 160,318 1,030,318
Sale of shares to management --- --- 1,500,000 --- 1,500,000
Compensation recorded on sale
of shares to management --- --- 3,000,000 --- 3,000,000
Initial public offering, net 24,840 --- 35,177,574 --- 35,202,414
Exercise of stock options 208 --- 332,784 --- 332,992
Divisional transfers to International
prior to initial public offering --- --- --- (381,681) (381,681)
Net loss --- --- --- (2,430,533) (2,430,533)
----------- ----------- ------------- ------------- -------------
BALANCE, December 31, 1996 $ 27,448 $ 27,600 $40,850,358 $(2,651,896) $38,253,510
=========== =========== ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
24
<PAGE>
<TABLE>
<CAPTION>
GOLDEN BEAR GOLF, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Net income (loss) $ (2,430,533) $ 1,233,875 $ (865,635)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 485,362 233,041 198,710
Depreciation included in construction and shaping costs 111,239 90,230 52,536
Provision for uncollectibles 45,870 98,046 476,962
Compensation recorded on sale of shares to management 3,000,000 --- ---
Changes in assets and liabilities:
Accounts receivable (669,633) (3,271,756) (1,514,673)
Due from International (196,089) (617,057) (69,488)
Costs and estimated earnings in excess of billings
on uncompleted contracts (2,675,162) (472,161) (194,177)
Inventory (1,923,621) (30,236) ---
Prepaid expenses and other current assets (59,549) 79,074 (103,392)
Intangibles and other assets (399,507) 70,783 9,743
Accounts payable (52,049) 2,993,965 193,506
Accrued liabilities and other 764,715 536,410 321,508
Billings in excess of costs and estimated earnings
on uncompleted contracts (183,285) (226,802) 633,524
Deferred revenue (240,200) (168,304) 364,554
--------------- --------------- ---------------
Net cash provided by (used in) operating activities (4,422,442) 549,108 (496,322)
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of golf centers (15,036,093) --- ---
Capital expenditures, net (3,087,241) (269,744) (295,372)
--------------- --------------- ---------------
Net cash used in investing activities (18,123,334) (269,744) (295,372)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial public offering, net 35,202,414 --- ---
Proceeds from sale of shares to management 1,500,000 --- ---
Proceeds from capital contributions to Paragon --- --- 750,000
Proceeds from exercise of stock options 332,992 --- ---
Proceeds from note payable - shareholder 1,625,000 --- ---
Repayment of note payable - shareholder (1,625,000) --- ---
Proceeds from notes payable 1,800,000 --- 200,242
Payments on notes payable and capital leases (453,515) (62,975) (24,532)
Proceeds from revolving credit facility, net 675,976 150,000 ---
Divisional transfers to International (381,681) (459,173) (738,794)
--------------- --------------- ---------------
Net cash provided by (used in) financing activities 38,676,186 (372,148) 186,916
--------------- --------------- ---------------
Net increase (decrease) in cash and cash equivalents 16,130,410 (92,784) (604,778)
CASH AND CASH EQUIVALENTS, beginning of year 347,010 439,794 1,044,572
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS, end of year $ 16,477,420 $ 347,010 $ 439,794
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these statements.
25
<PAGE>
<TABLE>
<CAPTION>
GOLDEN BEAR GOLF, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF NON-CASH
OPERATING AND INVESTING ACTIVITIES:
Compensation recorded on sale of shares to management $ 3,000,000 $ --- $ ---
Golf center acquisitions accounted for as capital leases $ 2,465,757 $ --- $ ---
Notes payable issued in acquisition of golf centers $ 1,700,000 $ --- $ ---
Deferred profit participation obligation issued in
connection with acquisition of golf center $ 419,097 $ --- $ ---
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest $ 210,226 $ 24,962 $ 7,541
Cash paid for income taxes $ 201,835 $ 57,500 $ 155,618
</TABLE>
The accompanying notes are an integral part of these statements.
26
<PAGE>
GOLDEN BEAR GOLF, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
The accompanying Consolidated Financial Statements include the accounts of
Golden Bear Golf, Inc. and its subsidiaries ("Golden Bear" or the "Company").
All significant intercompany accounts and transactions have been eliminated.
Golden Bear was formed on June 7, 1996 to enter into an exchange agreement which
was consummated on August 1, 1996 upon the closing of an initial public offering
of Golden Bear's Class A Common Stock. Parties to the plan of reorganization
included, among others, Golden Bear's affiliates, Golden Bear Golf Centers, Inc.
("Golf Centers"), Paragon Golf Construction, Inc. ("Paragon") (collectively, the
"Constituent Companies") and Golden Bear International, Inc. ("International").
Pursuant to the exchange agreement, Golden Bear acquired all of the outstanding
common stock of the Constituent Companies in exchange for an aggregate of
1,668,000 shares of its Class A and Class B Common Stock. In addition, Golden
Bear acquired certain assets and assumed certain liabilities of International
("International Carve-out") in exchange for 1,332,000 shares of Class B Common
Stock. The transaction was accounted for on an historical cost basis in a manner
similar to a pooling of interests as Golden Bear and the Constituent Companies
had common stockholders and management. Therefore, the financial statements of
Golden Bear and the Constituent Companies for all periods prior to the
reorganization are presented in a combined format.
Certain amounts attributable to the operations of Jack Nicklaus Apparel
International ("JNAI"), which were included in the prior years' financial
statements on a consolidated basis, have been reclassified to conform to the
current year's presentation. See Note 8, Operations of JNAI.
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. In addition, Golf Centers also owns and
operates its own golf instruction and practice facilities at numerous locations
in several states.
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.
International Carve-out, which is now part of the Company, provides golf club
management services, operates golf academies, licenses the brand names of
Nicklaus, Jack Nicklaus and Golden Bear and in addition, develops and conducts
golf instruction. International Carve-out receives 30% of all revenues received
by Jack Nicklaus for personal endorsement services with various companies.
International Carve-out also receives a 10% management fee based on the golf
course design fees received by International. See Note 13, Related Party
Transactions.
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.
27
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
The financial statements of International Carve-out for all periods prior to the
reorganization, which are included in the accompanying Consolidated Financial
Statements, have been prepared from the books and records of International. As
such, the consolidated statements of operations include allocations of expenses
between International 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 International Carve-out using a proportional cost method of
allocation because specific identification of such expenses was not practicable.
Management believes that such allocations are representative of the respective
stand-alone expenses based on International Carve-out's operations, and are
further supported by agreements that were entered into in connection with the
reorganization of the Company. The divisional equity of International Carve-out
includes transfers to International, representing cash generated by
International Carve-out that was used in other operations of International.
In the opinion of management, the results of operations and cash flows of
International Carve-out are properly reflected in the accompanying Consolidated
Financial Statements.
CASH AND CASH EQUIVALENTS
Cash equivalents are comprised of highly liquid investment instruments with a
maturity of three months or less when purchased. Such investments, totaling
$13.9 million and $0 at December 31, 1996 and 1995, respectively, are comprised
primarily of interest bearing short-term commercial paper and repurchase
agreements.
ACCOUNTS RECEIVABLE AND REVENUE RECOGNITION
GOLF CENTERS
Revenues attributable to the operations of the Company's golf instruction and
practice facilities include practice range fees, miniature golf fees, batting
cage fees, lessons, food and beverage operations, and retail merchandise sales.
Such revenues are recognized concurrent with the time the services or products
are provided.
Revenues also include franchise fees and royalty fees received from franchisees.
Franchise fees relate to the establishment of the golf centers and royalty fees
relate to the providing 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 of $86,275 and $190,000 as of December 31, 1996 and 1995, respectively.
PARAGON
Paragon records profits on long-term construction and shaping contracts using
the percentage-of-completion method, measured by the percentage of costs
incurred to date as compared to estimated total cost for each contract. This
method is used as management considers expended contract costs to be the best
available measure of progress on these contracts. Provision for estimated losses
on uncompleted contracts are made in the period in which the Company determines
that such losses are probable.
Construction and shaping costs include all direct material and labor costs and
those indirect costs related to contract performance, such as indirect labor,
supplies, tools and repairs and depreciation costs. Operating expenses are
charged to expense as incurred.
Accounts receivable are principally from owners of golf courses under
construction. Paragon performs periodic reviews to determine the collectability
of its receivables and maintains allowances for potential credit losses.
28
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
Approximately 24% of the Company's total consolidated revenues for 1996 were
attributable to two unaffiliated customers of Paragon, comprised of SEG Hangzhou
Development Corporation ("SEG") and Aspen Glen Golf Company ("Aspen"). Accounts
receivable at December 31, 1996 include $599,531 due from SEG and $874,209 due
from Aspen. During 1995, revenues from Montreux Golf Club Limited, an
unaffiliated Paragon customer, represented approximately 16% of the Company's
total consolidated revenues. Accounts receivable at December 31, 1995 included
approximately $1.0 million due from this same customer.
INTERNATIONAL 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.
International Carve-out is also entitled to receive 30% of the revenues received
by International or Jack Nicklaus for personal endorsement services with various
companies, along with a management fee representing 10% of the golf course
design fees received by International. Related revenues are recognized as
International or Jack Nicklaus become 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.
INVENTORY
Inventory is comprised primarily of finished goods such as golfing apparel, golf
clubs and accessories that are held for retail sale in the pro shops of the
Company's golf center facilities. Such inventory is valued at the lower of cost
or market based on the first-in, first-out inventory method.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Construction in progress is
comprised of ongoing development costs associated with the planned upgrades and
additions to golf center facilities acquired by the Company that have yet to be
placed in service. Expenditures for major additions and improvements are
capitalized, while minor replacements, maintenance and repairs are charged to
expense as incurred. When property is retired or otherwise disposed of, the cost
and accumulated depreciation are removed from the accounts and any resulting
gain or loss is recognized currently.
The Company revises the estimated useful lives of property and equipment
acquired through its golf center acquisitions to conform with its policies
regarding property and equipment. Depreciation is provided over the estimated
useful lives of the assets involved using the straight-line and accelerated
methods. The estimated useful lives generally are: ten to thirty years for
buildings and improvements, three to seven years for leasehold improvements and
five to ten years for equipment, furniture and fixtures. The buildings and
improvements acquired in connection with the Company's acquisition of golf
centers are depreciated over periods that do not exceed the terms of the related
ground leases for the underlying real property, including options to extend the
respective terms.
INTANGIBLES AND OTHER ASSETS
Intangibles and other assets consist primarily of the cost of acquired golf
center facilities in excess of the fair value of the net tangible assets
acquired. The cost in excess of the fair value of net tangible assets is
amortized over periods ranging from ten to thirty years on a straight-line
basis. Such costs acquired in connection with the Company's acquisition of golf
centers are amortized over periods that do not exceed the terms of the related
ground leases for the underlying real property, including options to extend the
respective terms.
29
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
In 1995, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS No. 121
requires that long-lived assets, including certain identifiable intangibles, and
the goodwill related to those assets, be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of the asset in
question may not be recoverable. The Company continually evaluates whether
events and circumstances have occurred that may warrant revision of the
estimated useful life of intangible assets or whether the remaining balance of
intangible assets should be evaluated for possible impairment. The Company uses
an estimate of the related undiscounted cash flows over the remaining life of
the intangible assets in measuring their recoverability.
USE OF ESTIMATES
The preparation of consolidated 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 consolidated
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
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments," 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, inventory, prepaid expenses and other current
assets, accounts payable, accrued expenses and other, billings in excess of
costs and estimated earnings on uncompleted contracts, deferred revenue,
together with notes payable and capital leases are reflected in the accompanying
Consolidated Financial Statements at cost which approximates fair value.
PRO FORMA INCOME TAXES
Prior to the reorganization of the Company which was consummated on August 1,
1996 upon the closing of its initial public offering, Golf Centers and Paragon
were S Corporations for Federal and state income tax reporting purposes and
International Carve-out was a division of International, which was also an S
Corporation. As S corporations prior to the reorganization, Golf Centers,
Paragon and International have historically only paid foreign income taxes and
have not paid United States Federal and state income taxes. Because the Company
became a C corporation as of the date of the reorganization, a pro forma income
tax benefit (provision) has been included in the respective pro forma earnings
per share amounts presented in the Company's Consolidated Statements of
Operations for informational purposes as if the relevant entities were C
corporations during all of the years presented. The pro forma United States
income taxes were based on an approximate effective rate of 39%. See Note 9,
Income Taxes.
PRO FORMA EARNINGS PER SHARE
Pro forma net income (loss) per share is computed by dividing pro forma net
income (loss) by the weighted average common and dilutive common equivalent
shares outstanding for each year. Common stock equivalents include the dilutive
effect of all outstanding stock options using the treasury stock method. The
calculation used for 1996 is based upon 4,040,378 average common shares
outstanding plus 11,509 average dilutive stock options. The calculation used for
1995 and 1994 is based upon 3,000,000 average common shares outstanding.
30
<PAGE>
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:
DECEMBER 31,
-------------------------------------
1996 1995
---------------- ----------------
Costs incurred on uncompleted contracts $ 23,604,746 $ 16,614,195
Estimated earnings 2,446,337 2,116,225
---------------- ----------------
26,051,083 18,730,420
Less billings to date 23,129,288 18,667,072
---------------- ----------------
$ 2,921,795 $ 63,348
================ ================
The amounts associated with costs and estimated earnings on uncompleted
construction and shaping costs are included in the accompanying Consolidated
Balance Sheets under the following captions:
DECEMBER 31,
-------------------------------------
1996 1995
---------------- ----------------
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 3,341,500 $ 666,338
Billings in excess of costs and estimated
earnings on uncompleted contracts (419,705) (602,990)
---------------- ----------------
$ 2,921,795 $ 63,348
================ ================
Construction contract revenues and the cost of construction contract revenues
included in the accompanying Consolidated Statements of Operations consist of
the following:
<TABLE>
<CAPTION>
CONSTRUCTION CONTRACT REVENUES COST OF CONTRACT REVENUES
YEARS ENDED DECEMBER 31, YEARS ENDED DECEMBER 31,
-------------------------------------- --------------------------------------
1996 1995 1996 1995
----------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Completed contracts $ 13,182,139 $ 4,255,046 $ 11,655,967 $ 3,391,505
Uncompleted contracts 7,271,913 14,922,414 5,396,286 13,108,530
----------------- ----------------- ----------------- ----------------
$ 20,454,052 $ 19,177,460 $ 17,052,253 $ 16,500,035
================= ================= ================= ================
</TABLE>
31
<PAGE>
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
Land $ 1,918,000 $ ---
Buildings and leasehold improvements 12,293,099 333,337
Equipment, furniture and fixtures 3,443,209 1,684,103
---------------- ----------------
17,654,308 2,017,440
Construction in progress 2,329,931 ---
---------------- ----------------
19,984,239 2,017,440
Less accumulated depreciation and amortization (1,636,312) (1,434,854)
---------------- ----------------
$ 18,347,927 $ 582,586
================ ================
</TABLE>
4. INTANGIBLES AND OTHER ASSETS
Intangibles and other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
Costs in excess of tangible net assets acquired $ 4,126,000 $ ---
Investment in JNAI 328,604 83,493
Deposits on golf center acquisition 120,000 ---
Other 380,123 76,873
---------------- ----------------
4,954,727 160,366
Less accumulated amortization (85,808) (37,200)
---------------- ----------------
$ 4,868,919 $ 123,166
================ ================
</TABLE>
5. ACCRUED LIABILITIES AND OTHER
Accrued liabilities and other consist of the following:
DECEMBER 31,
-------------------------------------
1996 1995
---------------- ----------------
Payroll and related costs $ 312,369 $ 623,811
Foreign taxes 266,214 282,464
Other 1,293,332 200,925
---------------- ----------------
$ 1,871,915 $ 1,107,200
================ ================
32
<PAGE>
6. NOTES PAYABLE AND CAPITAL LEASES
Notes payable and capital leases consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
Note payable to financial institution, due in monthly
principal installments of $10,000 plus interest at
prime + 3/4%, with balloon payment due at maturity
in August, 2003(1) $ 1,760,000 $ ---
Notes payable to sellers of golf centers, with interest
ranging from 0% to prime + 1/2%, with maturities
through August, 2001(2) 1,367,008 ---
Capital lease obligations, with maturities through
April, 2025(3) 2,454,457 ---
Deferred profit participation obligation, payable
quarterly, discounted at an effective rate of 9%,
matures December, 2006(4) 419,097 ---
Revolving credit note with a bank, with interest
at 8-1/2% payable monthly, matures May, 1997(5) 825,976 150,000
Secured credit note, with principal and interest
at 9-1/2% payable monthly, matures July, 1997 43,512 112,735
---------------- ----------------
6,870,050 262,735
Less current portion (1,313,383) (219,225)
---------------- ----------------
$ 5,556,667 $ 43,510
================ ================
</TABLE>
(1) In September 1996, the Company borrowed $1.8 million evidenced by a note
payable to a financial institution, secured by certain real property and
equipment of its Cool Springs Golf Center. See Note 14, Acquisitions.
(2) Notes payable to sellers is comprised of certain notes associated with the
acquisition of golf centers. In September 1996, the Company issued
non-interest bearing notes payable of $600,000 in connection with the
purchase of East Coast Facilities, secured by certain property and
equipment. In connection with specific consulting agreements associated
with the acquisition, the Company issued certain principals of East Coast
Facilities options to purchase 37,500 shares of its Class A Common Stock
which fully vested in September 1996, and are exercisable at any time prior
to their expiration in August 1997. Any proceeds from the exercise of the
options must be used to repay an equal amount of principal under the
promissory notes. Any remaining outstanding principal balance on the notes
is due in September 1997. At December 31, 1996, the outstanding principal
on these notes was $267,008. See Note 10, Stock Options, and Note 14,
Acquisitions.
Also in September 1996, the Company issued a note payable for $750,000 in
connection with its acquisition of Highlander Facilities. The note is
secured by certain property and equipment of the golf center and bears
interest at 8% payable monthly, with the entire principal due in August
2001. See Note 14, Acquisitions.
In December 1996, the Company issued a note payable for $350,000 in
connection with the purchase of MacDivott's Golf Center. The note is
secured by certain property and equipment of the golf center and bears
interest at prime + 1/2% payable quarterly, with the entire principal
due in December 1999. See Note 14, Acquisitions.
33
<PAGE>
6. NOTES PAYABLE AND CAPITAL LEASES - (CONTINUED)
(3) In April 1996, the Company incurred a capital lease obligation of
approximately $1.2 million in connection with its acquisition of McDain
Golf Center. The capital lease obligation is for a term of 29 years. In
addition, the Company incurred another capital lease obligation of
approximately $1.2 million as part of the acquisition of Rollandia Golf
Park Plus in September 1996, the term of which is for 20 years. See Note
14, Acquisitions.
(4) As part of the purchase price for the acquisition of Pop's Golf Center in
December 1996, the Company issued a profit participation obligation payable
to one of the former shareholders of the golf center, requiring payment of
amounts equal to the greater of $64,000 per year or 4.5% of the project's
gross annual revenues for the duration of such periods as the Company owns
and operates the facility. For financial statement purposes, the net
present value of the minimum payments anticipated to be made under the
profit participation obligation of $419,097 has been recorded as a deferred
acquisition obligation. See Note 14, Acquisitions.
(5) In 1995, Paragon entered into a revolving credit note agreement with a bank
which provides for a 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 million through the May 1997 maturity date.
In addition to the foregoing indebtedness, the Company also had indebtedness
that originated and was repaid in full during 1996. In June 1996, Jack Nicklaus
advanced the Company $1.625 million and the Company issued a note payable to
Jack Nicklaus for such amount. The proceeds were used to fund the Cool Springs
Golf Center acquisition. See Note 14, Acquisitions. The note payable was repaid
in full in August 1996 from the proceeds of the initial public offering.
The revolving credit note contains certain restrictive covenants, including the
maintenance of minimum consolidated tangible net worth, as defined, and limits
on the total funded debt outstanding on the part of the Company. At December 31,
1996, the Company was out of compliance with respect to its maintenance of the
required minimum consolidated tangible net worth, for which it obtained a waiver
from the bank. At December 31, 1995, the Company was in compliance with the
covenants required by the note agreement.
The following table sets forth the future minimum lease payments under capital
lease obligations and the future minimum payments required under the deferred
profit participation obligation, together with the present value of the net
minimum lease payments and profit participation payments, as of December 31,
1996.
DEFERRED PROFIT
CAPITAL LEASE PARTICIPATION
Years ending December 31: OBLIGATIONS OBLIGATION
---------------- ------------------
1997 $ 249,483 $ 64,000
1998 259,316 64,000
1999 266,691 64,000
2000 266,691 64,000
2001 266,691 64,000
Thereafter 4,504,292 320,000
---------------- ------------------
Total minimum payments 5,813,164 640,000
Less amounts representing interest(1) (3,358,707) (220,903)
---------------- ------------------
Present value of minimum payments $ 2,454,457 $ 419,097
================ ==================
(1) Represents amounts necessary to reduce the net minimum payments to present
value calculated at the Company's estimated incremental borrowing rate at
the inception of the respective obligations.
34
<PAGE>
6. NOTES PAYABLE AND CAPITAL LEASES - (CONTINUED)
The aggregate maturities of notes payable, the revolving credit note and the
secured credit note were as follows, at December 31, 1996:
MATURITIES OF
Years ending December 31: INDEBTEDNESS
----------------
1997 $ 1,256,496
1998 120,000
1999 470,000
2000 120,000
2001 870,000
Thereafter 1,160,000
----------------
$ 3,996,496
================
7. 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.
Each share of Class A Common Stock entitles the holder to one vote on each
matter submitted to a vote of Golden Bear's shareholders and each share of Class
B Common Stock entitles the holder to ten votes on each such matter, including
the election of directors. Neither the Class A Common Stock nor the Class B
Common Stock have cumulative voting rights.
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 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
liquidation to satisfy the preferential rights of any holders of Preferred
Stock.
There are certain restrictions with respect to the transfer of Class B Common
Stock. All of the shares of Class B Common Stock are held by Nicklaus Family
Members, as defined. If a holder of Class B Common Stock transfers such shares,
whether by sale, assignment, gift, bequest, appointment or otherwise, to a
person other than a Nicklaus Family Member, such shares will be converted
automatically into shares of Class A Common Stock.
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 liquidation, after payment of the debts and other liabilities of
Golden Bear and after making provision for the holders of Preferred Stock, if
any, the remaining assets of 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.
Upon the merger or consolidation of Golden Bear, holders of Class A Common Stock
and Class B Common Stock each 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.
35
<PAGE>
8. OPERATIONS OF JNAI
The apparel licensing activities of the Company in the Far East are conducted
through JNAI and its various partnerships. The Company serves as a 50% general
partner and is generally entitled to receive 50% to 66-2/3% of the cash
distributions of the various partnerships' operations. The Company's investment
in JNAI is recorded on the equity method.
The following is a summary of the operating results of JNAI:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994
-------------- --------------- ---------------
<S> <C> <C> <C>
Licensing revenues $ 3,929,392 $ 3,820,125 $ 3,682,506
Operating expenses 818,877 1,095,232 1,063,229
Provision for income taxes 247,283 644,882 543,881
============== =============== ===============
Net income $ 2,863,232 $ 2,080,011 $ 2,075,396
============== =============== ===============
</TABLE>
9. INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". Accordingly, deferred income taxes have been
provided to show the effect of temporary differences between the tax basis of
assets and liabilities and their reported amounts in the financial statements.
The Company will file a consolidated Federal income tax return which will
include its operations commencing on, and subsequent to, the reorganization of
the Company on August 1, 1996. Prior to the reorganization, the respective
entities comprising the current Company were S Corporations for Federal income
tax reporting purposes, and therefore not subject to Federal income taxes.
The following pro forma income taxes at the Company's estimated effective tax
rate of 39% have been reflected in the pro forma earnings per share data
presented in the accompanying Consolidated Statements of Operations to show the
effects on the Company's operations as if the relevant entities had been C
Corporations during all of the years presented. The pro forma taxes reflect
consideration of all permanent differences between book and tax income.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994
-------------- --------------- ---------------
<S> <C> <C> <C>
Historical income (loss) before income taxes $ (2,182,614) $ 1,599,305 $ (710,017)
Pro forma benefit (provision) for income taxes (120,588) (230,350) 608,674
-------------- --------------- ---------------
Pro forma net income (loss) $ (2,303,202) $ 1,368,955 $ (101,343)
============== =============== ===============
</TABLE>
The components of the provision for income taxes for the respective fiscal years
consist of the following:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994
-------------- --------------- ---------------
<S> <C> <C> <C>
Current:
State $ 64,474 $ --- $ ---
Foreign 183,445 365,430 155,618
Deferred:
Federal (515,282) --- ---
State (23,718) --- ---
Change in valuation allowance 539,000 --- ---
-------------- --------------- ---------------
Provision for income taxes $ 247,919 $ 365,430 $ 155,618
============== =============== ===============
</TABLE>
36
<PAGE>
9. INCOME TAXES - (CONTINUED)
A reconciliation of the statutory Federal income tax rate to the Company's
effective tax rate for the respective fiscal years is shown below:
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
------ ------ ------
Statutory Federal income tax rate (34.0)% --% --%
Non-deductible expenses 1.8 -- --
State income taxes 2.9 -- --
Foreign income taxes 8.5 22.8 21.9
Change in valuation allowance (9.1) -- --
Tax rate on pre- C
Corporation earnings 42.2 -- --
Other, net (0.9) -- --
---- ---- ----
Effective tax rate 11.4% 22.8% 21.9%
==== ==== ====
The net deferred income tax asset at December 31, 1996 is comprised of the
following:
Deferred income tax assets:
Allowance for doubtful accounts $ 211,000
Tax basis capitalized costs 52,000
Tax basis in property and equipment
in excess of book basis 68,000
Accruals not currently deductible 47,000
Net operating loss carryforwards 286,000
Foreign tax credit carryforwards 112,000
--------------
776,000
--------------
Deferred income tax liabilities:
Book basis in intangible assets over tax basis 7,000
Book basis of investment in JNAI
over tax basis 223,000
Deferred revenue 7,000
--------------
237,000
--------------
Net deferred income tax asset 539,000
Valuation allowance (539,000)
--------------
$ ---
==============
At December 31, 1996, the Company had available Federal net operating loss
carryforwards of approximately $733,000 which expire in the year 2011, along
with approximately $112,000 of foreign tax credit carryforwards which expire in
2001. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The Company has provided a valuation
allowance to offset the net deferred tax asset due to uncertainty surrounding
the future realization of certain of these deferred tax assets. The Company
adjusts the valuation allowance in the period management determines it is more
likely than not that deferred tax assets will or will not be realized.
37
<PAGE>
10. STOCK OPTIONS
A total of 675,000 shares of the Company's Class A Common Stock may be issued
under the Golden Bear 1996 Stock Option Plan ("Option Plan"), which was adopted
in July 1996. Concurrent with the Company's initial public offering on August 1,
1996, options to purchase 367,000 shares of its Class A Common Stock were
granted to certain officers and employees. Such options are exercisable at the
initial public offering price of $16 per share and become fully vested five
years from the grant date and expire 10 years from the date of grant. None of
the options granted at the time of the initial public offering were exercised or
canceled during the period ended December 31, 1996. Moreover, none of the
367,000 options outstanding at December 31, 1996 were exercisable on that date.
In addition to the options granted to certain officers and employees on August
1, 1996, the Company also agreed to grant Jack Nicklaus options to purchase
65,000 shares of Class A Common Stock each year for a period of four years,
commencing one year after the date of the initial public offering. The options
to be granted are pursuant to an employment agreement with Mr. Nicklaus and such
options are to be issued with an exercise price equal to the fair market value
of the Class A Common Stock on the date of grant.
The Option Plan also provides for options to be granted to each non-employee
director of Golden Bear on the first business day following the annual meeting
of shareholders of the Company. Each non-employee director shall be granted
options for the purchase of 1,000 shares of Class A Common Stock with an
exercise price equal to the fair market value of the Class A Common Stock on the
date of grant, which will expire 10 years from the date of grant.
In addition to the foregoing options issued or issuable to the Company's
employees, officers and board members, the Company granted options to certain
principals of East Coast in connection with the acquisition of an existing golf
practice and instruction facility in September 1996. Pursuant to certain
consulting agreements that were entered into at the time of the acquisition, the
Company issued options for the purchase of 37,500 shares of its Class A Common
Stock which fully vested at the date of grant and are exercisable at any time
prior to their expiration in August 1997. Any proceeds from the exercise of
these options, which are exercisable at the initial public offering price of $16
per share, must be used to repay an equal amount of principal under certain
promissory notes that were issued in connection with the acquisition. At
December 31, 1996, options to purchase 16,688 shares were outstanding under this
grant. See Note 6, Notes Payable and Capital Leases.
The Option Plan is administered by the compensation committee of the Company's
Board of Directors which is authorized to determine the provisions of future
grants, including selecting the recipients, exercise price, terms and vesting
schedules for such options.
The Company applies Accounting Principals Board Opinion No. 25, "Accounting for
Stock Issued to Employees" in accounting for stock-based compensation
arrangements whereby no compensation costs attributable to stock options is
deducted in determining net income (loss). Had compensation costs for the
Company's Option Plan been determined pursuant to SFAS No. 123, "Accounting for
Stock-Based Compensation", the Company's net loss and net loss per share would
have increased accordingly. Using the Black-Scholes option pricing model for all
options granted, the Company's pro forma net loss, pro forma net loss per share
and pro forma weighted average fair value of options granted, with related
assumptions, are as follows for the period since inception of the Option Plan
through December 31, 1996.
DECEMBER 31,
Period ended: 1996
----------------
Pro forma net loss $ (2,650,648)
Pro forma net loss per share (0.65)
Pro forma weighted average fair
value of options granted 11.80
Risk free interest rate 7.0%
Expected lives 10 years
Expected volatility 55.0%
38
<PAGE>
11. RETIREMENT SAVINGS PLAN
The Company participates in a retirement savings plan ("Savings Plan") sponsored
by International. The Savings Plan operates as a defined contribution plan and
is qualified under Section 401(k) of the Internal Revenue Code. The Savings Plan
covers all employees who have completed one year of service. The Company matches
the employees' contributions, up to a maximum of $1,500 per employee per Savings
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 Savings Plan. All employees who have
completed one year of service and are employed at year-end are eligible for this
contribution.
Company contributions to the Savings Plan were $121,942, $118,979 and $59,639
during the years ended December 31, 1996, 1995 and 1994, respectively.
12. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company generally leases the real property underlying its golf center
facilities under long-term lease arrangements. The lease terms typically provide
for minimum rentals to be paid each year along with certain additional
contingent rentals based on a percentage of sales. Although such lease
arrangements may include certain related buildings and improvements, the
substantial majority of the lease payments attributable to the operations of the
Company's golf centers are for the real property underlying the respective golf
centers. At December 31, 1996, the Company had such long-term operating lease
agreements associated with seven of its golf center facilities, with terms
expiring at various dates through April, 2017. Most of these leases contain one
or more renewal options, generally for five or ten-year periods. Rent expense
under such leases was $506,844 for the year ended December 31, 1996,
substantially all of which was comprised of minimum rentals. Because all of
these golf centers were acquired in 1996, there was no associated rent expense
for the years ended December 31, 1995 and 1994.
In addition to the operating leases associated with its golf centers, the
Company also subleases its corporate executive and administrative office
facilities and leases certain other office space, office equipment and vehicles.
See Note 13, Related Party Transactions. The rent expense incurred under these
leases was $1,248,151, $629,566 and $464,369 during the years ended December 31,
1996, 1995 and 1994, respectively.
Future minimum lease payments required under noncancelable operating lease
obligations at December 31, 1996, are as follows:
MINIMUM
LEASE
Years ending December 31: PAYMENTS
----------------
1997 $ 1,526,218
1998 1,533,494
1999 1,559,284
2000 1,037,541
2001 972,989
Thereafter 13,428,968
----------------
$ 20,058,494
================
39
<PAGE>
12. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
ARBITRATION CLAIMS
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 related amounts due, together with additional damages,
totaling approximately $350,000. 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. Although the customer
recently claims its damages are in excess of $1.2 million, the initial claim
submitted by the customer in arbitration was for $750,000. The ultimate outcome
of this matter is not determinable at this time; accordingly no provision for
loss regarding this matter has been established at December 31, 1996.
GUARANTEES
Several of Paragon's construction contracts guarantee that Paragon shall, at its
sole cost and expense, properly correct and remedy, to the satisfaction of the
golf course owner, any structural, aesthetic or functional defects which may
appear in the work within a designated period of time. Additionally, Paragon has
entered into construction agreements which specify that Paragon will be liable
for penalties incurred on all construction projects uncompleted within a
specified period of time. The Company's management does not expect the costs
associated with corrective action or penalties incurred pursuant to these
guarantees, if any, to have a material impact on its results of operations.
13. RELATED PARTY TRANSACTIONS
The amounts included in the accompanying Consolidated Balance Sheets under the
caption "Due from International" consist of the following:
DECEMBER 31,
-------------------------------------
1996 1995
---------------- ----------------
Golden Bear Golf, Inc. $ 807,231 $ ---
Paragon 22,329 637,210
International Carve-out 13,675 9,936
---------------- ----------------
$ 843,235 $ 647,146
================ ================
The $807,231 balance due Golden Bear Golf, Inc. at December 31, 1996 is
comprised primarily of International's allocable portion of certain costs
associated with maintaining shared office space in Singapore, together with
reimbursements for certain legal expenses and commissions on specific design
related revenues collected by Nicklaus Design, a division of International. The
balance also includes amounts owed by International in connection with the
reimbursement of certain allocated payroll and other costs which are paid by the
Company.
A majority of Paragon's construction, shaping and consulting contracts that were
outstanding as of December 31, 1995 related to golf courses designed by
International. Certain payments under such contracts were remitted directly to
International. As of December 31, 1995, the amount due from International
related to these arrangements was $637,210, substantially all of which was paid
during 1996.
Pursuant to an office sharing agreement, the Company subleases its corporate
office facilities from International. The sublease commenced concurrent with the
reorganization of the Company on August 1, 1996 and expires in January, 2000.
The sublease requires minimum annual payments of approximately $575,000, and the
rent expense incurred under such sublease for the year ended December 31, 1996
was $248,862.
40
<PAGE>
13. RELATED PARTY TRANSACTIONS - (CONTINUED)
International Carve-out revenues include 30% of the personal endorsement fees
received by Jack Nicklaus. Such revenues totaled $643,587, $480,000 and $300,000
for the years ended December 31, 1996, 1995 and 1994, respectively.
International Carve-out revenues also include 10% of the golf course design fees
received by International. Such amounts totaled approximately $1.3 million, $1.3
million and $1.2 million in the years ended December 31, 1996, 1995 and 1994,
respectively. In addition, the Company began managing a golf course facility
owned by International during 1996 for which it earned revenues of $75,000.
An analysis of "Due from International" is as follows:
Balance, December 31, 1994 $ 30,089
Management fees and commissions 1,790,523
Payments received (1,173,466)
----------------
Balance, December 31, 1995 647,146
Management fees and commissions 1,999,913
Reimbursement for shared employees 255,000
Reimbursement for Singapore office costs 277,818
Reimbursement of legal fees 209,000
Payments received (2,545,642)
----------------
Balance, December 31, 1996 $ 843,235
================
In June 1996, members of management and certain Nicklaus Family Members
purchased capital stock of Golf Centers for an aggregate price of $1.5 million.
The shares were sold to members of management for $600,000. For financial
statement reporting purposes, the fair value of the shares sold to management at
the date of issuance was deemed to be the estimated initial public offering
price of $15 per share which resulted in the recognition of compensation expense
in the amount of $3 million.
In April 1994, Paragon entered into a fixed price contract to construct a
certain golf course located in Middle Smithfield Township, Pennsylvania on which
the design work was to be performed by Nicklaus Design. Pursuant to the
agreements among Paragon, Nicklaus Design and the owner of the project, a
portion of the compensation payable by the owner was represented by certain
contingent compensation payable to Nicklaus Design based on a share of the golf
club membership sales that were to be generated upon completion of the project.
In September 1996, Paragon received a change order aggregating $750,000 for
certain additional services and contract extras to be provided in addition to
the original fixed price services previously agreed to. Such additional work was
requested in order to enhance the quality of the project so that the finished
product would meet the standards of Nicklaus Design and Jack Nicklaus as
designers of the golf course. Under the terms of the change order, $750,000 is
payable by the owner of the project to Paragon in a lump sum on or before
December 31, 1997. In connection with the foregoing agreement by the owner,
Nicklaus Design has agreed to grant the owner a $750,000 credit against the
total contingent compensation Nicklaus Design would otherwise be entitled to
receive from golf club membership sales.
41
<PAGE>
14. ACQUISITIONS
On April 15, 1996, the Company entered into a long-term lease agreement for
McDain Golf Center of Monroeville (an existing golf practice and instruction
facility located in the greater Pittsburgh, Pennsylvania area). The portion of
the long-term lease attributable to building and improvements has been accounted
for as a capital lease totaling approximately $1.2 million.
On June 17, 1996, the Company purchased Cool Springs Golf Center (an existing
golf practice and instruction facility located in Pittsburgh, Pennsylvania) for
approximately $2.9 million. The fair value of the net assets acquired
(substantially all land, property and equipment) was approximately $2.6 million,
resulting in the recording of goodwill in the amount of $300,000 which is being
amortized over a term of 30 years. The purchase price was funded in part, by a
$1.625 million shareholder loan which was repaid from the proceeds of the
Company's initial public offering. In September 1996, the Company refinanced
these facilities with a secured, long-term loan from a financial institution.
See Note 6, Notes Payable and Capital Leases.
On August 7, 1996, the Company purchased certain assets utilized in connection
with Tom's River Golf Center (an existing golf practice and instruction facility
located in Tom's River, New Jersey) for approximately $1.9 million, which was
paid in cash at the closing. The purchase price was funded from the proceeds of
the Company's initial public offering. Concurrent with the purchase of assets,
the Company entered into a long-term ground lease for the related real property
which provides for an initial term of 20 years that may be extended for two
additional five-year terms.
On September 9, 1996, the Company purchased certain assets utilized in
connection with Rollandia Golf Park Plus (an existing golf practice and
instruction facility located in the Dayton, Ohio area) and entered into a
long-term 20 year lease arrangement for certain buildings and improvements along
with the real property underlying the facilities. The portion of the long-term
lease attributable to buildings and improvements has been accounted for a
capital lease totaling approximately $1.2 million. The purchase price for the
assets was $1.1 million, which was paid in cash at the closing from the proceeds
of the Company's initial public offering.
On September 11, 1996, the Company purchased East Coast Facilities (comprised of
an existing Golden Bear Golf Center located in Columbus, Ohio and a Golden Bear
Golf Center in Fort Lauderdale, Florida which commenced operations in November,
1996) for approximately $5.9 million, of which $5.3 million was paid in cash at
the closing and $600,000 is evidenced by promissory notes. The $5.3 million paid
at closing was funded from the proceeds of the Company's initial public
offering. The fair value of the net assets acquired (substantially all property
and equipment) was approximately $4.2 million, resulting in the recording of
goodwill in the amount of $1.7 million which is being amortized over the 20 year
term of the related ground leases.
On September 13, 1996, the Company consummated the acquisition and lease of
certain assets utilized in connection with Highlander Facilities (comprised of
an existing Golden Bear Golf Center located in Carrollton, Texas and an existing
Golden Bear Golf Center located in Moreno Valley, California). The Company
purchased the facility located in Texas for $2.25 million, of which $1.5 million
was paid at closing and $750,000 is evidenced by a promissory note. The $1.5
million paid at closing was funded from the proceeds of the Company's initial
public offering. The fair value of the net assets acquired (substantially all
property and equipment) was approximately $1.4 million, resulting in the
recording of $816,000 of goodwill which is being amortized over the expected 25
year term (including renewal options) of the related ground lease. With respect
to the facility located in California, the Company entered into a ground lease
for the real property and an operating lease of the facility. Both the ground
lease and the operating lease are for a period of ten years, renewable for two
additional five year terms.
On November 20, 1996, the Company entered into an agreement to assume a
long-term lease for certain real property located in College Park, Maryland,
upon which the Company plans to build a golf center. The remaining term of the
lease expires on December 29, 2015. Rent due under the lease is based upon
certain minimum annual amounts plus a percentage of the project's sales. In
addition, under the terms of a related finder's agreement, the Company will be
obligated to pay a percentage (as defined) of the project's annual gross
revenues for the duration of such periods as the Company owns and operates the
facility.
42
<PAGE>
14. ACQUISITIONS - (CONTINUED)
On December 31, 1996, the Company purchased Pop's Golf Center (an existing golf
practice and instruction facility located in Lake Park, Florida) for
approximately $762,000 in cash and a profit participation obligation payable to
one of the former shareholders of the golf center, requiring payment of amounts
equal to the greater of $64,000 per year or 4.5% of the project's gross annual
revenues for the duration of such periods as the Company owns and operates the
facility. For financial statement purposes, the net present value of the minimum
payments anticipated to be made under the profit participation agreement of
$419,097 has been recorded as a deferred acquisition obligation. The cash
portion of the purchase price was paid at the closing from proceeds of the
Company's initial public offering. The fair value of net assets acquired
(substantially all property and equipment) was approximately $1.031 million,
which resulted in the recording of goodwill in the amount of $150,000 which is
being amortized over the 10 year term of the related ground lease.
On December 31, 1996, the Company consummated the acquisition of MacDivott's
Wood and Putter (an existing golf practice and instruction facility located in
Royal Oak, Michigan) in a stock purchase transaction and assumed the ground
lease for the underlying real property. The total purchase price of the common
shares was $1.45 million, of which $1.1 million was paid in cash at the closing
and the remainder is evidenced by a $350,000 promissory note. The cash portion
of the purchase price was funded from the proceeds of the Company's initial
public offering. The fair value of net assets acquired (substantially all
property and equipment) by the stock purchase was approximately $350,000, which
resulted in the recording of $1.1 million of goodwill which is being amortized
over the expected 27 year term (including renewal options) of the related ground
lease.
Apart from the acquisition of MacDivott's Wood and Putter which was represented
by a stock purchase transaction, all of the above acquisitions were acquired
pursuant to asset purchase agreements. In addition, all of the foregoing
acquisitions were accounted for under the purchase method of accounting.
Accordingly, the results of operations of these golf centers are included in the
accompanying Consolidated Statements of Operations for all periods starting with
their respective acquisition dates. Had these acquisitions occurred as of
January 1, 1995, the Company's summarized unaudited results of operations for
the respective years, would have been as follows.
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1996 1995
---------------- -----------------
Total revenues $ 38,298,929 $ 35,253,422
Income (loss) from operations $ (3,136,346) $ 400,343
Net loss $ (3,251,204) $ (343,049)
Net loss per share $ (0.80) $ (0.11)
15. SUBSEQUENT EVENTS
Subsequent to December 31, 1996, the Company acquired three other golf center
facilities in separate, unrelated transactions, as follows.
Effective January 1, 1997, the Company entered into a long-term lease agreement
for certain assets and the underlying real property utilized in connection with
Sunset Golf Center (an existing golf practice and instruction facility located
in Beaverton, Oregon). The lease term is for a period of 20 years and provides
for annual rentals equal to the greater of a minimum base rent or a percentage
rent calculated on gross revenues of the project. Pursuant to the long-term
lease agreement, the Company also paid $100,000 in cash representing an
additional fee payable to the former owners of the facility for entering into
the lease agreement, which was recorded as goodwill. Under the terms of the
lease agreement, the Company is required to invest at least $500,000 in
improvements to the property prior to the end of the second lease year.
43
<PAGE>
15. SUBSEQUENT EVENTS - (CONTINUED)
On January 31, 1997, the Company purchased Oasis Golf Center (an existing "dome"
type golf practice and instruction facility located in Plymouth, Michigan) for
$3.2 million of which $1.0 million was paid in cash at the closing and the
remainder is evidenced by a $1.0 million secured promissory note along with
certain other obligations to pay $1.2 million. The cash portion of the purchase
price was funded from the proceeds of the Company's initial public offering. The
fair value of net assets acquired (substantially all property and equipment) was
approximately $1.8 million, resulting in the recording of goodwill in the amount
of $1.4 million which will be amortized over the 20 year term of the related
ground lease for the underlying property.
In February, 1997, the Company purchased Caddy-Shack Golf Dome (an existing golf
practice and instruction facility located in Williamsville, New York) for
approximately $1.1 million of which $300,000 was paid in cash at the closing and
$800,000 is evidenced by certain secured promissory notes. The $300,000 paid at
the closing was funded from the proceeds of the Company's initial public
offering. The fair value of net assets acquired (substantially all property and
equipment) was approximately $500,000, resulting in the recording of goodwill in
the amount of $600,000 which will be amortized over the expected 20 year term
(including renewal options) of the related ground lease for the underlying
property.
16. SEGMENT REPORTING
The Company's revenue generating operations are conducted through three
divisions, comprised of the Golf Division, Construction Division and Marketing
Division. The Golf Division is comprised primarily of the operations of the
Company's golf practice and instruction facilities. The Construction Division
reflects the operating activities of Paragon, which is primarily engaged in the
construction and shaping of golf courses. The Marketing Division includes the
operating activities associated with the development of the licensed products
and marketing endorsement relationships. The operating results of the respective
segments are set forth below.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994
--------------- --------------- --------------
<S> <C> <C> <C>
Revenues:
Golf division $ 4,934,382 $ 2,297,313 $ 1,904,920
Construction division 20,454,052 19,177,460 5,598,978
Marketing division 8,118,495 7,306,648 6,475,919
--------------- --------------- --------------
$ 33,506,929 $ 28,781,421 $ 13,979,817
=============== =============== ==============
Operating income (loss):
Golf division $ (552,902) $ 425,903 $ 222,703
Construction division 1,745,273 1,659,516 (422,063)
Marketing division 3,267,828 2,869,227 2,749,178
Corporate(1) (6,479,181) (3,121,257) (3,051,444)
--------------- --------------- --------------
$ (2,018,982) $ 1,833,389 $ (501,626)
=============== =============== ==============
Depreciation and amortization:
Golf division $ 296,951 $ 41,690 $ 35,000
Construction division 23,357 25,007 17,702
Marketing division 57,042 77,000 55,000
Corporate 108,012 89,344 91,008
--------------- --------------- --------------
$ 485,362 $ 233,041 $ 198,710
=============== =============== ==============
</TABLE>
(1) The costs attributable to corporate overhead for the year ended December
31, 1996 of $6.5 million include $3.0 million representing the compensation
deemed to have been received by certain executives in connection with their
purchase of shares in Golf Centers. See Note 13, Related Party
Transactions.
44
<PAGE>
16. SEGMENT REPORTING - (CONTINUED)
Information with respect to identifiable assets and capital expenditures of the
respective segments is set forth below.
DECEMBER 31,
----------------------------------
1996 1995
--------------- ---------------
Identifiable assets:
Golf division $ 34,624,655 $ 405,959
Construction division 7,228,719 5,676,554
Marketing division 1,393,664 822,264
Corporate 8,159,844 382,417
--------------- ---------------
$ 51,406,882 $ 7,287,194
=============== ===============
Capital expenditures:
Golf division $ 2,459,245 $ ---
Construction division 203,514 178,469
Marketing division 44,819 ---
Corporate 379,663 91,275
--------------- ---------------
$ 3,087,241 $ 269,744
=============== ===============
17. INTERNATIONAL OPERATIONS
The Company derives a portion of its revenues from foreign sources, primarily
through certain operations of Paragon and the apparel licensing activities of
JNAI, an unconsolidated joint venture. The foreign operations of Paragon are
primarily attributable to projects located in the Asia Pacific region.
Substantially all of Paragon's construction contracts are denominated in U.S.
currency and accordingly, its historical results of operations have generally
not been subject to foreign currency fluctuations. Although JNAI conducts its
operations in the United States, substantially all of its revenues are received
from licensees located in the Asia Pacific region, primarily Japan and Korea.
All of the revenues of JNAI's licensees are generated in foreign currencies. The
licensees pay their license fees to JNAI in U.S. dollars based on the exchange
rate on the date of payment. Although foreign currency fluctuations have not
been significant historically, fluctuations in the values of these currencies
relative to the U.S. dollar could have a material adverse effect on the
Company's future profitability. Certain information with respect to the foreign
operations of Paragon and the Company's net investment in, and net equity in the
earnings of JNAI is set forth below.
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994
--------------- --------------- --------------
<S> <C> <C> <C>
Assets $ 1,605,598 $ 2,583,569 $ 918,262
=============== =============== ==============
Revenues $ 8,528,800 $ 6,821,478 $ 3,892,297
=============== =============== ==============
Contribution to operating income before
allocation of corporate overhead $ 1,852,314 $ 3,034,988 $ 2,079,201
=============== =============== ==============
</TABLE>
45
<PAGE>
18. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly financial information for the years ended December 31, 1996
and 1995 is presented below.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1996 1996 1996 1996
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Golf division $ 450,992 $ 984,723 $ 1,761,447 $ 1,737,220
Construction division 2,055,894 5,116,729 6,482,256 6,799,173
Marketing division 1,825,727 2,341,779 1,633,305 2,317,684
--------------- -------------- --------------- ---------------
4,332,613 8,443,231 9,877,008 10,854,077
--------------- -------------- --------------- ---------------
Operating costs and expenses:
Construction and shaping costs 1,505,531 4,481,026 5,311,901 5,753,795
Operating expenses 1,974,760 2,528,784 3,251,833 4,239,100
Compensation on sales of shares --- 3,000,000 --- ---
Corporate overhead 750,467 911,267 1,083,863 733,584
Depreciation and amortization 72,207 91,579 46,022 275,554
--------------- -------------- --------------- ---------------
4,302,965 11,012,656 9,693,619 11,002,033
--------------- -------------- --------------- ---------------
Income (loss) from operations 29,648 (2,569,425) 183,389 (147,956)
Other income (expense) 4,130 (30,294) 160,481 187,413
--------------- -------------- --------------- ---------------
Income (loss) before income taxes 33,778 (2,599,719) 343,870 39,457
Provision for income taxes 586 24,790 187,992 34,551
--------------- -------------- --------------- ---------------
Net income (loss) $ 33,192 $ (2,624,509) $ 155,878 $ 4,906
=============== ============== =============== ===============
Net income (loss) per share $ 0.01 $ (0.87) $ 0.03 $ ---
=============== ============== =============== ===============
QUARTER ENDED
-------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1995 1995 1995 1995
--------------- -------------- --------------- ---------------
Revenues:
Golf division $ 415,324 $ 654,611 $ 655,450 $ 571,928
Construction division 1,434,680 4,593,305 7,427,233 5,722,242
Marketing division 1,974,395 2,439,491 1,336,529 1,556,233
--------------- -------------- --------------- ---------------
3,824,399 7,687,407 9,419,212 7,850,403
--------------- -------------- --------------- ---------------
Operating costs and expenses:
Construction and shaping costs 1,257,320 3,814,085 6,483,370 4,945,260
Operating expenses 1,662,322 2,090,097 1,675,614 1,898,707
Corporate overhead 714,052 787,506 772,834 846,865
Depreciation and amortization 53,305 58,033 58,952 62,751
--------------- -------------- --------------- ---------------
3,686,999 6,749,721 8,990,770 7,753,583
--------------- -------------- --------------- ---------------
Income from operations 137,400 937,686 428,442 96,820
Other income (expense) (4,057) (3,564) (3,836) 10,414
--------------- -------------- --------------- ---------------
Income before income taxes 133,343 934,122 424,606 107,234
Provision for income taxes 71,790 118,617 152,136 22,887
--------------- -------------- --------------- ---------------
Net income $ 61,553 $ 815,505 $ 272,470 $ 84,347
=============== ============== =============== ===============
Net income per share $ 0.02 $ 0.27 $ 0.09 $ 0.28
=============== ============== =============== ===============
</TABLE>
46
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
47
<PAGE>
PART III
The information required in Items 10, 11, 12 and 13 is incorporated by reference
to the Company's definitive proxy statement for the 1997 Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission on or
before April 30, 1997.
48
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements of the Company are set forth in Part II,
Item 8 of this report.
(2) Financial Statement Schedule II, Valuation and Qualifying Accounts
for the years ended December 31, 1996, 1995 and 1994 is submitted
herein.
(3) Exhibits are set forth in the Index to Exhibits included elsewhere
herein.
(b) Reports on Form 8-K
On November 22, 1996, the Company filed an amendment to an earlier report
on Form 8-K dated September 9, 1996 including certain financial statements
of businesses acquired under Item 7(a) that were previously not included
in the Form 8-K dated September 9, 1996. The financial statements filed on
November 22, 1996 were comprised of the Financial Statements of Dallas
Highlander, Ltd. for the six months ended June 30, 1996 and the Combined
Financial Statements of East Coast Golf Centers, Inc., East Coast Golf
Centers of Columbus, Ltd. and East Coast Golf Centers of Fort Lauderdale,
Inc. for the six months ended June 30, 1996.
(c) Exhibits
See (a) (3) above.
(d) Financial Statement Schedules
See (a) (2) above.
49
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 28, 1997.
GOLDEN BEAR GOLF, INC.
By: /S/ RICHARD P. BELLINGER
Richard P. Bellinger
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on March 28, 1997.
SIGNATURE TITLE
--------- -----
/S/ JACK W. NICKLAUS Director and Chairman of the Board
Jack W. Nicklaus
/S/ RICHARD P. BELLINGER President, Chief Executive Officer and Director
Richard P. Bellinger (Principal Executive Officer)
/S/ JACK P. BATES Senior Vice President and Chief Financial Officer
Jack P. Bates (Principal Financial and Accounting Officer)
/S/ MARK F. HESEMANN Senior Vice President and Director
Mark F. Hesemann
/S/ THOMAS P. HISLOP Senior Vice President and Director
Thomas P. Hislop
/S/ ROGER E. BIRK Director
Roger E. Birk
/S/ RICHARD F. CHAPDELAINE Director
Richard F. Chapdelaine
/S/ JOHN F. MCGOVERN Director
John F. McGovern
50
<PAGE>
<TABLE>
<CAPTION>
GOLDEN BEAR GOLF, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS DEDUCTIONS
--------------- ---------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND AMOUNTS END
DESCRIPTION OF YEAR EXPENSES WRITTEN OFF OF YEAR
- ------------------------------------------ --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994:
Allowance for uncollectible accounts $ 96,037 $ 476,962 $ --- $ 572,999
--------------- --------------- --------------- ---------------
YEAR ENDED DECEMBER 31, 1995:
Allowance for uncollectible accounts $ 572,999 $ 98,046 $ 159,212 $ 511,833
--------------- --------------- --------------- ---------------
YEAR ENDED DECEMBER 31, 1996:
Allowance for uncollectible accounts $ 511,833 $ 45,870 $ 16,897 $ 540,806
Valuation allowance for deferred
tax assets --- 539,000 --- 539,000
--------------- --------------- --------------- ---------------
$ 511,833 $ 584,870 $ 16,897 $ 1,079,806
--------------- --------------- --------------- ---------------
</TABLE>
51
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
2 Agreement and Plan of Reorganization (incorporated by reference to
Exhibit 2.1 to the Registrant's Registration Statement on Form S-1,
Commission File No. 333-05581).
3.1 Articles of Incorporation of the Registrant (incorporated by reference
to Exhibit 3.1 to the Registrant's Registration Statement on Form S-1,
Commission File No. 333-05581).
3.2 Bylaws of the Registrant (incorporated by reference to Exhibit 3.3 to
the Registrant's Registration Statement on Form S-1, Commission File
No. 333-05581).
4 Form of Class A Common Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Registrant's Registration Statement on Form S-1,
Commission File No. 333-05581).
10.1 Form of Registration Rights Agreement (incorporated by reference to
Exhibit 10.1 to the Registrant's Registration Statement on Form S-1,
Commission File No. 333-05581).
10.2 The Golden Bear Golf, Inc. 1996 Stock Option Plan (incorporated by
reference to Exhibit 10.2 to the Registrant's Registration Statement
on Form S-1, Commission File No. 333-05581).
10.3 Employment Agreement, dated June 7, 1996, between Golden Bear Golf,
Inc. and Richard P. Bellinger.
10.4 Employment Agreement, dated June 7, 1996, between Golden Bear Golf,
Inc. and Mark F. Hesemann.
10.5 Employment Agreement, dated June 7, 1996, between Golden Bear Golf,
Inc. and Thomas P. Hislop.
10.6 Employment Agreement, dated June 7, 1996, between Golden Bear Golf,
Inc. and Jack P. Bates.
10.7 Form of Indemnification Agreement between Golden Bear Golf, Inc. and
each of its Directors and Executive Officers (incorporated by
reference to Exhibit 10.7 to the Registrant's Registration Statement
on Form S-1, Commission File No. 333-05581).
10.8 Amended and Restated Joint Venture Agreement, dated June 1, 1994 of
Jack Nicklaus Apparel International, a joint venture between Seaford
Clothing Company and Golden Bear International, Inc. (incorporated by
reference to Exhibit 10.8 to the Registrant's Registration Statement
on Form S-1, Commission File No. 333-05581).
10.9 Master Apparel Agreement, dated June 1, 1993, by and between Golden
Bear International, Inc., Hart Schaffner & Marx and Hartmarx
Corporation (incorporated by reference to Exhibit 10.9 to the
Registrant's Registration Statement on Form S-1, Commission File No.
333-05581).
10.10 Trademark License Agreement, dated June 7, 1996, between Golden Bear
International, Inc. and Golden Bear Golf, Inc.
10.11 Design Services Marketing Agreement, dated June 7, 1996, between
Nicklaus Design (a division of Golden Bear International, Inc.) and
Golden Bear Golf, Inc.
52
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
10.12 Personal Services Management Agreement, dated June 7, 1996, between
Golden Bear Golf, Inc., Golden Bear International, Inc. and Jack W.
Nicklaus.
10.13 Marketing Consulting and Cooperation Agreement, dated June 7, 1996,
between Golden Bear International, Inc., Golden Bear Golf, Inc. and
Nicklaus Golf Equipment Company, L.C.
10.14 Office Staff and Equipment Service Agreement, dated June 7, 1996,
between Golden Bear International, Inc. and Golden Bear Golf, Inc.
10.15 Sublease and Sharing Agreement, dated June 7, 1996, between Golden
Bear International, Inc. and Golden Bear Golf, Inc.
10.16 Agreement, dated July 31, 1996, between East Coast Golf Centers of
Columbus, Ltd. and Golden Bear Golf Centers, Inc. (incorporated by
reference to Exhibit 10.2 to the Registrant's Current Report on Form
8-K, dated September 9, 1996).
10.17 Agreement, dated July 31, 1996, between East Coast Golf Centers of
Fort Lauderdale, Inc. and Golden Bear Golf Centers, Inc. (incorporated
by reference to Exhibit 10.3 to the Registrant's Current Report on
Form 8-K, dated September 9, 1996).
10.18 Agreement, dated July 31, 1996, between East Coast Golf Centers, Inc.
and Golden Bear Golf Centers, Inc. (incorporated by reference to
Exhibit 10.4 to the Registrant's Current Report on Form 8-K, dated
September 9, 1996).
10.19 Agreement, dated January 27, 1997, between Golden Bear Golf Centers,
Inc., All in Fun Enterprises, Inc. and Brian Ashley (incorporated by
reference to Exhibit 10 to the Registrant's Current Report on Form
8-K, dated January 31, 1997).
10.20 Shareholders' Agreement, dated July 15, 1996, among Nicklaus Family
Members and Golden Bear Golf, Inc.
10.21 Shareholders' Agreement, dated July 15, 1996, among certain executives
of Golden Bear Golf, Inc., Jack W. Nicklaus and Golden Bear Golf, Inc.
21 Subsidiaries of the Registrant (incorporated by reference to Exhibit
21.1 to the Registrant's Registration Statement on Form S-1,
Commission File No. 333-05581).
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule (for SEC use only).
53
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), is dated as of ______, 1996,
between Golden Bear Golf, Inc., a Florida corporation (the "Company"), and
Richard P. Bellinger (the "Executive").
WHEREAS, the Company intends to undertake an initial public offering of
the Company's Class "A" Common Stock; and
WHEREAS, contingent upon the closing of the initial public offering,
the Company desires to employ the Executive in an executive capacity and the
Executive desires to accept such employment, all upon the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth in this Agreement, the Company and the Executive agree as
follows:
1. TERM OF EMPLOYMENT. The Company shall employ the Executive, and the
Executive accepts such employment, on the terms and subject to the conditions
set forth in this Agreement. The Executive shall be employed for an initial term
of five (5) years beginning as of the "Effective Date" (the "Initial Term"). The
Effective Date shall be the date of the Company's initial public offering of
Class A Common Stock. At the conclusion of the Initial Term, or any Renewal Term
(as defined below), the Executive's employment shall automatically be extended
for an additional term of two (2) years (the "Renewal Term"), unless at least
one hundred and eighty (180) days prior to expiration of the Initial Term or any
Renewal Term either the Executive or the Company gives notice to the other that
the Executive or the Company does not wish to extend the Executive's employment.
The Initial Term and any Renewal Term shall be referred to herein as the "Term".
2. SERVICES.
2.1 OFFICE AND DUTIES. During the Term, the Executive shall
serve as President and Chief Executive Officer of the Company and shall have
powers and authority commensurate with such positions and such other powers and
authority as may be assigned to him by the Company's Board of Directors or any
committee thereof from time to time.
2.2 BEST EFFORTS. During the Term, the Executive shall devote
a minimum of eighty percent (80%) of his time and energies during business hours
to the business of the Company and shall use his best efforts, skills and
abilities to promote the interests of the Company.
2.3 SERVICE FOR RELATED ENTITIES. The parties acknowledge that
during the Term of this Agreement the Executive intends to devote approximately
twenty percent (20%) of his business time and efforts on behalf of Golden Bear
International, Inc. and its affiliates. The Company acknowledges such activities
shall not violate any of the provisions of this Agreement, and the Company
waives any claims against the Executive arising from his performance of his
duties on behalf of such entities.
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3. COMPENSATION.
3.1 CASH COMPENSATION. During the Term, the Executive shall
receive an initial base salary at the annual rate of $450,000 ("Base Salary"),
payable in accordance with the Company's normal payroll practices. The Base
Salary shall be subject to increase from time to time as may be determined upon
a review of the Executive's performances to be undertaken by the Compensation
Committee of the Board of Directors at least once annually ("Compensation
Committee").
3.2 INCENTIVE AWARD PAYMENTS.
(a) For each fiscal year during the Term, the Executive shall
be entitled to receive a cash award (the "Bonus") based on the Company's Annual
Pre-Tax Income relative to its Annual Pre-Tax Income as projected in the
Business Plan ("Business Plan") approved by the Company's Board of Directors
with respect to such fiscal year. For each fiscal year, "Annual Pre-Tax Income"
shall be the "Income Before Provision for Income Taxes and Extraordinary Items"
as set forth in the Company's audited Consolidated Statement of Operations. The
Compensation Committee shall set in advance of each fiscal year the formula for
determining the Bonus for such fiscal year, after the Compensation Committee
consults with the Executive and the Board of Directors approves the Business
Plan. Upon the termination of the Executive's employment for any reason, the
Executive shall be entitled to receive any Bonus earned by the Executive with
respect to the preceding fiscal year (even if the payment of such Bonus has been
deferred into the current fiscal year).
(b) If the Executive's employment with the Company shall
terminate after the commencement of, but prior to the expiration of, any fiscal
year (except for termination for Cause, as defined in Section 5.3, then the
Bonus payable to the Executive for services rendered during such fiscal year
shall be equal to the Bonus for such fiscal year determined as described above,
multiplied by a fraction, the numerator of which shall be the number of days
during such fiscal year that the Executive was an employee of the Company, and
the denominator of which shall be 360.
3.3 SUPPLEMENTAL INCENTIVE AWARD PAYMENTS. Each year during
the Term, the Compensation Committee may, but shall be under no obligation to,
establish a supplemental incentive award pool, consisting of a percentage of the
salaries of the executive officers of the Company determined by the Compensation
Committee after consulting with management of the Company, which is to be paid
out to executives of the Company provided the Company's performance meets or
exceeds annual objectives predetermined by the Compensation Committee. It is
anticipated that if such a pool is established, the objectives would consist
primarily of the Company's meeting operating income targets, but also may
consist of the Company's meeting sales targets, increasing its revenue base
and/or other factors. The Executive's payment from such an incentive award pool
relative to other Company executives is to be weighted based upon the
Executive's position in the Company and contribution towards the Company's
performance relative to the annual objectives. In the event the Compensation
Committee determines that such objectives are met for a fiscal year and that it
is
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appropriate to establish such a pool, the Chairman of the Board shall be
entitled to allocate the incentive award pool among the Executive and other
executive officers of the Company, provided that all such awards must be
approved by the Compensation Committee, which may revise the awards at its
discretion.
3.4 STOCK OPTIONS. On the Effective Date, the Company shall
grant to the Executive options to purchase 96,000 shares of the Class A Common
Stock of the Company pursuant to the terms of the Stock Option Agreement
attached hereto as Exhibit A.
3.5 ADDITIONAL COMPENSATION. Nothing in this Agreement shall
be deemed to prohibit the Compensation Committee from granting the Executive
such increased compensation, incentive awards or other benefits as the
Compensation Committee from time to time may determine, provided that the
parties recognize and acknowledge that the Compensation Committee shall be under
no obligation to grant any such increase and shall have full discretion in
making any determination with respect thereto. The Compensation Committee shall
also determine what allowances to provide Executive, including without
limitation, auto allowance, allowance for membership in country clubs, and
allowance for increased and additional benefits, in addition to those benefits
for which Executive is eligible under Section 4.2, below; provided however, that
Executive shall receive benefits at least equal to those received by Executive
from Golden Bear International, Inc. prior to the Effective Date.
4. REIMBURSEMENT OF EXPENSES; BENEFITS.
4.1 REIMBURSEMENT OF EXPENSES. Upon submission of appropriate
documentation and in accordance with such guidelines as may be established from
time to time by the Company's Board of Directors, the Company shall reimburse
the Executive for all reasonable business expenses incurred by the Executive in
the performance of his duties under this Agreement.
4.2 EMPLOYEE BENEFIT PLANS AND PROGRAMS. During the Term, the
Executive shall also be entitled to participate in all group life insurance,
pension, medical insurance, hospitalization, disability and other similar
employee benefit plans and programs of the Company, subject to eligibility and
vesting requirements from time to time in effect, which at any time during the
Term may be offered by the Company to its executive officers generally, provided
that nothing in this Agreement shall require the Company at any time to create
or continue any such plan or program or to fix, amend or retain eligibility
requirements so as to include the Executive.
4.3 VACATIONS. The Executive shall be entitled to that amount
of paid vacation during each calendar year as is the Company's policy for
executive employees, taking into consideration the reasonable business needs of
the Company. The Executive may take vacation at such times as the Executive
elects, upon reasonable advance notice to the Company, provided that the
Executive takes no more than two consecutive weeks of vacation and provided
further that such vacation does not affect the operations and business needs of
the Company. The Executive shall be permitted to accrue vacation time in
accordance with the Company's vacation accrual policy for executive employees in
effect at the time the vacation is accrued.
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5. TERMINATION. The Executive's employment under this
Agreement may be terminated prior to the end of any Term by the Company or
the Executive without any breach of this Agreement under the following
circumstances:
5.1 DEATH. The Executive's employment under this Agreement
shall terminate upon the Executive's death.
5.2 DISABILITY. The Company may terminate the Executive's
employment if the Executive, due to physical or mental injury or illness, is
unable to perform the Executive's duties under this Agreement for an aggregate
of 135 days out of any 270 day period.
5.3 CAUSE. The Company may terminate the Executive's
employment under this Agreement for "Cause". "Cause" shall mean the following:
(a) action by the Executive involving willful misconduct, dishonesty or gross
neglect which has a materially adverse effect on the business or reputation of
the Company; (b) Employee's conviction of a crime punishable by death or
imprisonment of one year or more under the laws of the jurisdiction in which
convicted, or of a crime involving theft, misappropriation of funds, fraud or
deception, regardless of the punishment; or (c) the refusal or repeated failure
of the Executive to discharge his duties under Section 2 in all material
respects (other than any such refusal or failure resulting from the Executive's
incapacity due to physical or mental injury or illness) where such alleged
refusal or failure is not remedied within fifteen (15) days after the date of
the Executive's receipt of a written demand from the Company to remedy such
alleged refusal or failure, which demand shall specify the nature of such
refusal or failure.
5.4 GOOD REASON. The Executive may terminate his employment
under this Agreement for "Good Reason". "Good Reason" means: (a) any removal of
the Executive from the position of President and Chief Executive Officer of the
Company; (b) a failure by the Company to pay when due all compensation provided
for in this Agreement; or (c) a material failure by the Company to comply with
any of the other material provisions of this Agreement; provided in each case
that the Company has not remedied the breach underlying such Good Reason within
fifteen (15) days after notice thereof.
5.5 NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Company or by the Executive (other than termination pursuant
to Section 5.1 above) shall be communicated by written notice of termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon, and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination.
5.6 DATE OF TERMINATION. The "Date of Termination" shall mean:
(i) if the Executive's employment is terminated by his death, the date of death,
(ii) if the Executive's employment is terminated pursuant to Section 5.2 above,
30 days after Notice of Termination is given (provided that the Executive shall
not have returned to the performance of his duties on a full time basis during
such 30 day period), and (iii) if the Executive's employment is terminated for
any reason, the date on which a Notice of Termination is given.
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5.7 SUSPENSION OF EMPLOYMENT. In the event the Executive is
arrested for any crime of the nature specified in Section 5.3(b) hereof, the
Company may elect to suspend the Executive from his duties hereunder until such
charges have been dropped or adjudicated in a manner which results in other than
a guilty verdict, whichever is earlier. During the period of suspension, the
Executive shall not receive any compensation unless the Company determines that
the continuation of the Executive's compensation is appropriate. The election by
the Company to suspend the Executive under this Section 5.7 shall not limit the
right of the Company to otherwise terminate the Executive for Cause under
Section 5.3 (provided that the Executive's actions constitute Cause for purposes
of Section 5.3).
6. PAYMENTS TO EXECUTIVE DURING DISABILITY AND AFTER TERMINATION.
6.1 COMPENSATION DURING DISABILITY. During any period that the
Executive fails to perform his duties hereunder as a result of incapacity due to
physical or mental injury or illness, the Executive shall continue to receive
the Base Salary, incentive compensation and benefits to which he is entitled
under this Agreement until his employment is termination pursuant to Section 5.2
hereof; provided that payments so made to the Executive during such period shall
be reduced to the extent of any amounts paid to the Executive under any
disability benefit plan of the Company.
6.2 COMPENSATION UPON TERMINATION FOR DEATH OR DISABILITY. If
the Executive's employment is terminated by his death under Section 5.1 or
disability under Section 5.2, the Company shall pay to the Executive, his spouse
or his estate, as applicable: (i) the incentive compensation to which he is
entitled under this Agreement through the Date of Termination; (ii) the
Executive's Base Salary as in effect on the Date of Termination, for a period of
two years following the Date of Termination, and (iii) the cost of health
insurance benefits for the Executive and his family for a period of 18 months
following the Date of Termination.
6.3 PAYMENTS AFTER TERMINATION FOR CAUSE. If the Executive's
employment is terminated under Section 5.3 for Cause, the Executive shall
receive: (i) the incentive compensation to which he is entitled under this
Agreement through the Date of Termination; and (ii) his Base Salary through the
Date of Termination in accordance with the terms of this Agreement and
thereafter Executive shall not be entitled to receive any further compensation
or benefits whatsoever.
6.4 PAYMENTS AFTER WRONGFUL TERMINATION.
(a) If: (i) the Company terminates the
Executive's employment other than because of the Executive's death, Disability,
or for Cause; or (ii) the Company elects to terminate the Executive's employment
as of the end of the Initial Term or any Renewal Term; or (iii) if the Executive
shall terminate the Executive's employment for Good Reason pursuant to Section
5.4 (any such termination being referred to as a "Wrongful Termination"), then
the Company shall pay to the Executive for a period equal to the greater of the
remainder of the current term or twenty-four (24) months: 1) the Base Salary, in
effect on the Date of Termination; and 2) an amount equal to the average annual
Bonus, if any, received by Executive prior to termination. In addition, Company
shall pay to Executive (i) the incentive compensation to which he is entitled
under this Agreement through the Date of Termination and (ii) the cost of
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health insurance benefits for the Executive and his family for a period of
18 months.
(b) Notwithstanding the terms of Section 6.5(a)
above, if a Wrongful Termination occurs within a period of one year after a
Change of Control (as defined below), the Executive shall be entitled within 30
days after such termination to a lump sum payment equal to the greater of
(i) the Base Salary and Bonuses, if any (in each case, determined as of the
Date of Termination), through the remainder of the current Term, or (ii) 24
months of the Base Salary, and Bonuses in an amount equal to the average annual
Bonus, if any, received by Executive prior to the Date of Termination. In
addition, Company shall pay to Executive the cost of health insurance benefits
for the Executive and his family for a period of 18 months.
A Change of Control will occur: (i) on the date of the
acquisition by any person, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities and Exchange Act of 1934, as amended),
excluding the Company, any of its subsidiaries or any holder of the Company's
Class B Common Stock, par value $.01 per share, of twenty-five percent (25%) or
more of the then outstanding voting securities entitled to vote generally in the
election of directors; (ii) on the date of any sale of the Company's or any of
its subsidiaries' assets which required approval of the Company's shareholders
under the Florida Business Corporation Act; or (iii) on the date of any
consolidation or merger to which the Company is a party or any stock exchange or
similar transaction as a result of which the holders of the Company's
outstanding voting securities immediately prior to such transaction do not
continue to own voting securities in the new or surviving entity entitling them
to elect its Board of Directors.
7. CONFIDENTIALITY; INTELLECTUAL PROPERTY; NONCOMPETITION.
7.1 CONFIDENTIALITY. The Executive shall not, during the Term
or any time after the Term, use or divulge to any person any Confidential
Information (as defined below) relating to the Company or any of its
subsidiaries which may have come to the Executive's knowledge at any time during
the Executive's term of employment with the Company or during the time that
Executive was employed by Company's predecessor in interest, Golden Bear
International, Inc. "Confidential Information" shall mean any information not
generally available to the public concerning the Company or any of its
subsidiaries, including, but not limited to, methods of operation, methods of
doing business, sales, files, forms, lists and names of and the needs and
requirements of customers and suppliers, the nature and content of any
contracts, and any inventions, techniques, methods, products, devices, trade
secrets, copyrights, patents, other rights to and in all knowledge, information
and materials proprietary to the Company (including business plans and financial
information), which relate to or are used in connection with any business or
activity carried on by the Company or any of its subsidiaries. At or prior to
the termination of the Executive's employment with the Company, the Executive
shall deliver to the Company (i) all property of the Company in the possession
or under the control of the Executive and (ii) all written or printed material
and all other property (including, but not limited to, computerized data) in the
possession or under the control of the Executive relating to Confidential
Information.
7.2 OWNERSHIP OF CERTAIN INTELLECTUAL PROPERTY. The Executive
hereby sells, transfers and assigns to the Company or to any person or entity
designated by the Company, the Executive's entire, right, title and interest in
and to all inventions,
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ideas, disclosures, intellectual property rights and improvements, whether
patented or unpatented, and copyrightable material made or conceived by the
Executive, solely or jointly, during the term of the Executive's employment,
which relate to methods, apparatus, designs, ideas, products, processes, items
or devices, sold, leased, used or under consideration or development by the
Company or which otherwise relate or pertain to the businesses, functions or
operations of the Company. The Executive shall communicate promptly and disclose
to the Company, in such form as the Executive may be requested to do so by the
Company's Board of Directors, all information, details and data pertaining to
these matters and shall execute and deliver to the Company such formal transfers
and assignments and such other papers and documents as may be requested of the
Executive to permit the Company or any person or entity designated by the
Company to file and prosecute the patent applications and as to copyrightable
material to obtain copyright thereof. The Executive irrevocably appoints the
Company's designee as the Executive's attorney-in-fact for the purpose of
carrying out the terms of this Section 7.2, and acknowledges that this
appointment is irrevocable and coupled with an interest.
7.3 NONCOMPETITION. During the Term and for a period of one
(1) year after the voluntary resignation of the Executive as an employee of the
Company or the termination by the Company of any such employment or engagement
for Cause pursuant to Section 5.3 or upon the expiration of the Term of this
Agreement, the Executive shall not engage or have an interest, anywhere in the
United States of America or any other geographic area where the Company or any
of its subsidiaries do business or in which its products are marketed, alone or
in association with others, as principal, officer, agent, employee, consultant,
independent contractor, director, partner or stockholder, or through the
investment of capital, lending of money or property, rendering of services or
otherwise, in any business competitive with the business engaged in by the
Company or any of its subsidiaries; provided, that the foregoing shall not be
construed to prohibit the Executive from owning, in the aggregate, less than 5%
of any class of securities listed on a national securities exchange or traded
publicly on the over-the-counter market. During the same period, the Executive
shall not, and shall not knowingly or intentionally permit, cause or authorize
any of his employees, agents or others under his control to, directly or
indirectly, on behalf of himself or any other Person, to recruit or otherwise
solicit or induce any person who is an employee of, or otherwise engaged by, the
Company, any subsidiary of the Company or any such successor to terminate his or
her employment or other relationship with the Company, any subsidiary of the
Company or such successor. The Executive shall not at any time, directly or
indirectly, use or purport to authorize any Person to use any name, mark, logo,
trade dress or other identifying words or images which are the same as or
confusingly similar to those used at any time by the Company or any subsidiary
of the Company in connection with any product or service, whether or not such
use would be in a business competitive with that of the Company or any
subsidiary of the Company.
7.4 REMEDIES. The restrictions set forth in this Section 7 are
considered by the parties to be reasonable for the purposes of protecting the
value of the business and goodwill of the Company. The Executive acknowledges
that the Company would be irreparably harmed and that monetary damages would not
provide an adequate remedy in the event of a breach of the provisions of this
Section 7.
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Accordingly, the Executive agrees that, in addition to any other remedies
available to the Company, the Company shall be entitled to injunctive and other
equitable relief, (without any bond or security being required to be posted) to
secure the enforcement of these provisions, and shall be entitled to receive
reimbursement from the Executive for all attorneys' fees and expenses incurred
by the Company in enforcing these provisions. If the Executive breaches the
covenant set forth in Section 7.3, the running of the noncompete period
described therein (but not his obligations) shall be tolled for so long as such
breach continues. It is the desire and intent of the parties that the provisions
of Section 7 be enforced to the fullest extent permissible under the laws and
public policies of each jurisdiction in which enforcement is sought. If any
provisions of Section 7 relating to the time period, scope of activities or
geographic area of restrictions are declared by a court of competent
jurisdiction to exceed the maximum permissible time period, scope of activities
or geographic area, the maximum time period, scope of activities or geographic
area, as the case may be, shall be reduced to the maximum which such court deems
enforceable. If any provisions of Section 7 other than those described in the
preceding sentence are adjudicated to be invalid or unenforceable, the invalid
or unenforceable provisions shall be deemed amended (with respect only to the
jurisdiction in which such adjudication is made) in such manner as to render
them enforceable and to effectuate as nearly as possible the original intentions
and agreement of the parties.
8. NOTICES. All notices or other communications which any party to this
Agreement may desire or be required to give under this Agreement shall be deemed
to have been given the first business day after being delivered to a nationally
recognized overnight courier for next business day delivery to the address of
such party set forth below or such other address as either party may from time
to time give notice to the other in the aforesaid manner:
If to the Company: Golden Bear Golf, Inc.
11780 U.S. Highway No. 1
North Palm Beach, Florida 33408
Attn: _________________________
If to the Executive: Richard P. Bellinger
__________________________________________
__________________________________________
Attn: __________________________
9. MISCELLANEOUS.
9.1 ENTIRE AGREEMENT. This Agreement and all agreements and
documents referred to in this Agreement are intended to and do constitute the
entire agreement between the parties and supersede all prior oral or written
agreements or understandings of the parties with regard to the subject matter of
this Agreement. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter of this Agreement, have been made by
either party which are not expressly set forth in this Agreement.
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9.2 NO ORAL MODIFICATIONS. No interpretation,
change, termination or waiver of any provision of this Agreement shall be
binding upon a party unless in writing and executed by the party or parties to
be bound thereby.
9.3 NO ASSIGNMENT. Neither this Agreement nor any
rights or obligations under this Agreement may be assigned or delegated by the
parties to this Agreement, except for any assignment by the Company occurring by
operation of law.
9.4 BINDING EFFECT. This Agreement shall be binding
upon the parties and their respective successors and shall inure to the benefit
of the parties and their respective successors.
9.5 GOVERNING LAW. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Florida without giving effect to any conflict of laws provision
thereof.
9.6 PREVAILING PARTIES. In the event of a dispute regarding
any of the terms of this Agreement, the party prevailing in such dispute shall
be paid its legal costs, including reasonable attorneys' fees, incurred in
connection with the enforcement or interpretation of this Agreement, in
litigation and in preparation for litigation, and at trial and in connection
with any appellate action.
9.7 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9.8 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which,
together, will constitute one and the same agreement. Any telecopied version of
a manually executed signature page delivered by one party to the other shall be
deemed a manually executed and delivered original.
9.9 NO WAIVER. Any waiver by either party of any
provision of this Agreement shall not be construed as a continuing waiver
thereof or a waiver of any other provision of this Agreement.
9.10 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
9.11 REMEDIES. Neither the termination of this Agreement, the
provision of a specific remedy, nor any other provision of this Agreement shall
be construed to prohibit any party from pursuing any remedy available at law or
in equity for the breach or violation of the provisions of this Agreement.
9.12 SURVIVAL. The terms of Sections 3, 6, 7, and 9 of this
Agreement shall survive the expiration or termination of this Agreement.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement on
the date set forth above.
GOLDEN BEAR GOLF, INC.:
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By: ________________________
Name: _____________________
Title: _______________________
EXECUTIVE:
By: _______________________
Name: Richard P. Bellinger
Title: President and Chief Executive
Officer
10
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), is dated as of ______, 1996,
between Golden Bear Golf, Inc., a Florida corporation (the "Company"), and Mark
F. Hesemann (the "Executive").
WHEREAS, the Company intends to undertake an initial public offering of
the Company's Class "A" Common Stock; and
WHEREAS, contingent upon the closing of the initial public offering,
the Company desires to employ the Executive in an executive capacity and the
Executive desires to accept such employment, all upon the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth in this Agreement, the Company and the Executive agree as
follows:
1. TERM OF EMPLOYMENT. The Company shall employ the Executive, and the
Executive accepts such employment, on the terms and subject to the conditions
set forth in this Agreement. The Executive shall be employed for an initial term
of four and one-half (4-1/2) years beginning as of the "Effective Date" (the
"Initial Term"). The Effective Date shall be the date of the Company's initial
public offering of Class A Common Stock. At the conclusion of the Initial Term,
or any Renewal Term (as defined below), the Executive's employment shall
automatically be extended for an additional term of two (2) years (the "Renewal
Term"), unless at least one hundred and eighty (180) days prior to expiration of
the Initial Term or any Renewal Term either the Executive or the Company gives
notice to the other that the Executive or the Company does not wish to extend
the Executive's employment. The Initial Term and any Renewal Term shall be
referred to herein as the "Term".
2. SERVICES.
2.1 OFFICE AND DUTIES. During the Term, the Executive shall
serve as Senior Vice President and Chief Operating Officer of the Golf Division
of the Company and shall have powers and authority commensurate with such
positions and such other powers and authority as may be assigned to him by the
Company's Board of Directors or any committee thereof from time to time.
2.2 BEST EFFORTS. During the Term, the Executive shall devote
a minimum of one hundred percent (100%) of his time and energies during business
hours to the business of the Company and shall use his best efforts, skills and
abilities to promote the interests of the Company.
3. COMPENSATION.
3.1 CASH COMPENSATION. During the Term, the Executive shall
receive an initial base salary at the annual rate of $210,000 ("Base Salary"),
payable in accordance with the Company's normal payroll practices. The Base
Salary shall be subject to increase from time to time as may be determined upon
a review of the
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Executive's performances to be undertaken by the Compensation
Committee of the Board of Directors at least once annually ("Compensation
Committee").
3.2 INCENTIVE AWARD PAYMENTS.
(a) For each fiscal year during the Term, the Executive shall
be entitled to receive a cash award (the "Bonus") based on the Company's Annual
Pre-Tax Income relative to its Annual Pre-Tax Income as projected in the
Business Plan ("Business Plan") approved by the Company's Board of Directors
with respect to such fiscal year. For each fiscal year, "Annual Pre-Tax Income"
shall be the "Income Before Provision for Income Taxes and Extraordinary Items"
as set forth in the Company's audited Consolidated Statement of Operations. The
Compensation Committee shall set in advance of each fiscal year the formula for
determining the Bonus for such fiscal year, after the Compensation Committee
consults with the Executive and the Board of Directors approves the Business
Plan. Upon the termination of the Executive's employment for any reason, the
Executive shall be entitled to receive any Bonus earned by the Executive with
respect to the preceding fiscal year (even if the payment of such Bonus has been
deferred into the current fiscal year).
(b) If the Executive's employment with the Company shall
terminate after the commencement of, but prior to the expiration of, any fiscal
year (except for termination for Cause, as defined in Section 5.3, then the
Bonus payable to the Executive for services rendered during such fiscal year
shall be equal to the Bonus for such fiscal year determined as described above,
multiplied by a fraction, the numerator of which shall be the number of days
during such fiscal year that the Executive was an employee of the Company, and
the denominator of which shall be 360.
3.3 SUPPLEMENTAL INCENTIVE AWARD PAYMENTS. Each year during
the Term, the Compensation Committee may, but shall be under no obligation to,
establish a supplemental incentive award pool, consisting of a percentage of the
salaries of the executive officers of the Company determined by the Compensation
Committee after consulting with management of the Company, which is to be paid
out to executives of the Company provided the Company's performance meets or
exceeds annual objectives predetermined by the Compensation Committee. It is
anticipated that if such a pool is established, the objectives would consist
primarily of the Company's meeting operating income targets, but also may
consist of the Company's meeting sales targets, increasing its revenue base
and/or other factors. The Executive's payment from such an incentive award pool
relative to other Company executives is to be weighted based upon the
Executive's position in the Company and contribution towards the Company's
performance relative to the annual objectives. In the event the Compensation
Committee determines that such objectives are met for a fiscal year and that it
is appropriate to establish such a pool, the Chairman of the Board shall be
entitled to allocate the incentive award pool among the Executive and other
executive officers of the Company, provided that all such awards must be
approved by the Compensation Committee, which may revise the awards at its
discretion.
3.4 STOCK OPTIONS. On the Effective Date, the Company shall
grant to the Executive options to purchase 32,000 shares of the Class A Common
Stock of the
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Company pursuant to the terms of the Stock Option Agreement attached hereto as
Exhibit A.
3.5 ADDITIONAL COMPENSATION. Nothing in this Agreement shall
be deemed to prohibit the Compensation Committee from granting the Executive
such increased compensation, incentive awards or other benefits as the
Compensation Committee from time to time may determine, provided that the
parties recognize and acknowledge that the Compensation Committee shall be under
no obligation to grant any such increase and shall have full discretion in
making any determination with respect thereto. The Compensation Committee shall
also determine what allowances to provide Executive, including without
limitation, auto allowance, allowance for membership in country clubs, and
allowance for increased and additional benefits, in addition to those benefits
for which Executive is eligible under Section 4.2, below; provided however, that
Executive shall receive benefits at least equal to those received by Executive
from Golden Bear International, Inc. prior to the Effective Date.
4. REIMBURSEMENT OF EXPENSES; BENEFITS.
4.1 REIMBURSEMENT OF EXPENSES. Upon submission of appropriate
documentation and in accordance with such guidelines as may be established from
time to time by the Company's Board of Directors, the Company shall reimburse
the Executive for all reasonable business expenses incurred by the Executive in
the performance of his duties under this Agreement.
4.2 EMPLOYEE BENEFIT PLANS AND PROGRAMS. During the Term, the
Executive shall also be entitled to participate in all group life insurance,
pension, medical insurance, hospitalization, disability and other similar
employee benefit plans and programs of the Company, subject to eligibility and
vesting requirements from time to time in effect, which at any time during the
Term may be offered by the Company to its executive officers generally, provided
that nothing in this Agreement shall require the Company at any time to create
or continue any such plan or program or to fix, amend or retain eligibility
requirements so as to include the Executive.
4.3 VACATIONS. The Executive shall be entitled to that amount
of paid vacation during each calendar year as is the Company's policy for
executive employees, taking into consideration the reasonable business needs of
the Company. The Executive may take vacation at such times as the Executive
elects, upon reasonable advance notice to the Company, provided that the
Executive takes no more than two consecutive weeks of vacation and provided
further that such vacation does not affect the operations and business needs of
the Company. The Executive shall be permitted to accrue vacation time in
accordance with the Company's vacation accrual policy for executive employees in
effect at the time the vacation is accrued.
5. TERMINATION. The Executive's employment under this
Agreement may be terminated prior to the end of any Term by the Company or the
Executive without any breach of this Agreement under the following
circumstances:
5.1 DEATH. The Executive's employment under this
Agreement shall terminate upon the Executive's death.
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5.2 DISABILITY. The Company may terminate the Executive's
employment if the Executive, due to physical or mental injury or illness, is
unable to perform the Executive's duties under this Agreement for an aggregate
of 135 days out of any 270 day period.
5.3 CAUSE. The Company may terminate the Executive's
employment under this Agreement for "Cause". "Cause" shall mean the following:
(a) action by the Executive involving willful misconduct, dishonesty or gross
neglect which has a materially adverse effect on the business or reputation of
the Company; (b) Employee's conviction of a crime punishable by death or
imprisonment of one year or more under the laws of the jurisdiction in which
convicted, or of a crime involving theft, misappropriation of funds, fraud or
deception, regardless of the punishment; or (c) the refusal or repeated failure
of the Executive to discharge his duties under Section 2 in all material
respects (other than any such refusal or failure resulting from the Executive's
incapacity due to physical or mental injury or illness) where such alleged
refusal or failure is not remedied within fifteen (15) days after the date of
the Executive's receipt of a written demand from the Company to remedy such
alleged refusal or failure, which demand shall specify the nature of such
refusal or failure.
5.4 GOOD REASON. The Executive may terminate his
employment under this Agreement for "Good Reason". "Good Reason" means: (a) any
removal of the Executive from the position of President and Chief Executive
Officer of the Company; (b) a failure by the Company to pay when due all
compensation provided for in this Agreement; or (c) a material failure by the
Company to comply with any of the other material provisions of this Agreement;
provided in each case that the Company has not remedied the breach underlying
such Good Reason within fifteen (15) days after notice thereof.
5.5 NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Company or by the Executive (other than termination pursuant
to Section 5.1 above) shall be communicated by written notice of termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon, and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination.
5.6 DATE OF TERMINATION. The "Date of Termination" shall mean:
(i) if the Executive's employment is terminated by his death, the date of death,
(ii) if the Executive's employment is terminated pursuant to Section 5.2 above,
30 days after Notice of Termination is given (provided that the Executive shall
not have returned to the performance of his duties on a full time basis during
such 30 day period), and (iii) if the Executive's employment is terminated for
any reason, the date on which a Notice of Termination is given.
5.7 SUSPENSION OF EMPLOYMENT. In the event the Executive is
arrested for any crime of the nature specified in Section 5.3(b) hereof, the
Company may elect to suspend the Executive from his duties hereunder until such
charges have
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been dropped or adjudicated in a manner which results in other than a guilty
verdict, whichever is earlier. During the period of suspension, the Executive
shall not receive any compensation unless the Company determines that the
continuation of the Executive's compensation is appropriate. The election by the
Company to suspend the Executive under this Section 5.7 shall not limit the
right of the Company to otherwise terminate the Executive for Cause under
Section 5.3 (provided that the Executive's actions constitute Cause for purposes
of Section 5.3).
6. PAYMENTS TO EXECUTIVE DURING DISABILITY AND AFTER TERMINATION.
6.1 COMPENSATION DURING DISABILITY. During any period that the
Executive fails to perform his duties hereunder as a result of incapacity due to
physical or mental injury or illness, the Executive shall continue to receive
the Base Salary, incentive compensation and benefits to which he is entitled
under this Agreement until his employment is termination pursuant to Section 5.2
hereof; provided that payments so made to the Executive during such period shall
be reduced to the extent of any amounts paid to the Executive under any
disability benefit plan of the Company.
6.2 COMPENSATION UPON TERMINATION FOR DEATH OR DISABILITY. If
the Executive's employment is terminated by his death under Section 5.1 or
disability under Section 5.2, the Company shall pay to the Executive, his spouse
or his estate, as applicable: (i) the incentive compensation to which he is
entitled under this Agreement through the Date of Termination; (ii) the
Executive's Base Salary as in effect on the Date of Termination, for a period of
two years following the Date of Termination, and (iii) the cost of health
insurance benefits for the Executive and his family for a period of 18 months
following the Date of Termination.
6.3 PAYMENTS AFTER TERMINATION FOR CAUSE. If the Executive's
employment is terminated under Section 5.3 for Cause, the Executive shall
receive: (i) the incentive compensation to which he is entitled under this
Agreement through the Date of Termination; and (ii) his Base Salary through the
Date of Termination in accordance with the terms of this Agreement and
thereafter Executive shall not be entitled to receive any further compensation
or benefits whatsoever.
6.4 PAYMENTS AFTER WRONGFUL TERMINATION.
(a) If: (i) the Company terminates the
Executive's employment other than because of the Executive's death, Disability,
or for Cause; or (ii) the Company elects to terminate the Executive's employment
as of the end of the Initial Term or any Renewal Term; or (iii) if the Executive
shall terminate the Executive's employment for Good Reason pursuant to Section
5.4 (any such termination being referred to as a "Wrongful Termination"), then
the Company shall pay to the Executive for a period equal to the greater of the
remainder of the current term or twenty-four (24) months: 1) the Base Salary, in
effect on the Date of Termination; and 2) an amount equal to the average annual
Bonus, if any, received by Executive prior to termination. In addition, Company
shall pay to Executive (i) the incentive compensation to which he is entitled
under this Agreement through the Date of Termination and (ii) the cost of health
insurance benefits for the Executive and his family for a period of 18 months.
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(b) Notwithstanding the terms of Section
6.5(a) above, if a Wrongful Termination occurs within a period of one year after
a Change of Control (as defined below), the Executive shall be entitled within
30 days after such termination to a lump sum payment equal to the greater of (i)
the Base Salary and Bonuses, if any (in each case, determined as of the Date of
Termination), through the remainder of the current Term, or (ii) 24 months of
the Base Salary, and Bonuses in an amount equal to the average annual Bonus, if
any, received by Executive prior to the Date of Termination. In addition,
Company shall pay to Executive the cost of health insurance benefits for the
Executive and his family for a period of 18 months.
A Change of Control will occur: (i) on the date of the
acquisition by any person, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities and Exchange Act of 1934, as amended),
excluding the Company, any of its subsidiaries or any holder of the Company's
Class B Common Stock, par value $.01 per share, of twenty-five percent (25%) or
more of the then outstanding voting securities entitled to vote generally in the
election of directors; (ii) on the date of any sale of the Company's or any of
its subsidiaries' assets which required approval of the Company's shareholders
under the Florida Business Corporation Act; or (iii) on the date of any
consolidation or merger to which the Company is a party or any stock exchange or
similar transaction as a result of which the holders of the Company's
outstanding voting securities immediately prior to such transaction do not
continue to own voting securities in the new or surviving entity entitling them
to elect its Board of Directors.
7. CONFIDENTIALITY; INTELLECTUAL PROPERTY; NONCOMPETITION.
7.1 CONFIDENTIALITY. The Executive shall not, during the Term
or any time after the Term, use or divulge to any person any Confidential
Information (as defined below) relating to the Company or any of its
subsidiaries which may have come to the Executive's knowledge at any time during
the Executive's term of employment with the Company or during the time that
Executive was employed by Company's predecessor in interest, Golden Bear
International, Inc. "Confidential Information" shall mean any information not
generally available to the public concerning the Company or any of its
subsidiaries, including, but not limited to, methods of operation, methods of
doing business, sales, files, forms, lists and names of and the needs and
requirements of customers and suppliers, the nature and content of any
contracts, and any inventions, techniques, methods, products, devices, trade
secrets, copyrights, patents, other rights to and in all knowledge, information
and materials proprietary to the Company (including business plans and financial
information), which relate to or are used in connection with any business or
activity carried on by the Company or any of its subsidiaries. At or prior to
the termination of the Executive's employment with the Company, the Executive
shall deliver to the Company (i) all property of the Company in the possession
or under the control of the Executive and (ii) all written or printed material
and all other property (including, but not limited to, computerized data) in the
possession or under the control of the Executive relating to Confidential
Information.
7.2 OWNERSHIP OF CERTAIN INTELLECTUAL PROPERTY. The Executive
hereby sells, transfers and assigns to the Company or to any person or entity
designated by the Company, the Executive's entire, right, title and interest in
and to all inventions,
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ideas, disclosures, intellectual property rights and improvements, whether
patented or unpatented, and copyrightable material made or conceived by the
Executive, solely or jointly, during the term of the Executive's employment,
which relate to methods, apparatus, designs, ideas, products, processes, items
or devices, sold, leased, used or under consideration or development by the
Company or which otherwise relate or pertain to the businesses, functions or
operations of the Company. The Executive shall communicate promptly and disclose
to the Company, in such form as the Executive may be requested to do so by the
Company's Board of Directors, all information, details and data pertaining to
these matters and shall execute and deliver to the Company such formal transfers
and assignments and such other papers and documents as may be requested of the
Executive to permit the Company or any person or entity designated by the
Company to file and prosecute the patent applications and as to copyrightable
material to obtain copyright thereof. The Executive irrevocably appoints the
Company's designee as the Executive's attorney-in-fact for the purpose of
carrying out the terms of this Section 7.2, and acknowledges that this
appointment is irrevocable and coupled with an interest.
7.3 NONCOMPETITION. During the Term and for a period of one
(1) year after the voluntary resignation of the Executive as an employee of the
Company or the termination by the Company of any such employment or engagement
for Cause pursuant to Section 5.3 or upon the expiration of the Term of this
Agreement, the Executive shall not engage or have an interest, anywhere in the
United States of America or any other geographic area where the Company or any
of its subsidiaries do business or in which its products are marketed, alone or
in association with others, as principal, officer, agent, employee, consultant,
independent contractor, director, partner or stockholder, or through the
investment of capital, lending of money or property, rendering of services or
otherwise, in any business competitive with the business engaged in by the
Company or any of its subsidiaries; provided, that the foregoing shall not be
construed to prohibit the Executive from owning, in the aggregate, less than 5%
of any class of securities listed on a national securities exchange or traded
publicly on the over-the-counter market. During the same period, the Executive
shall not, and shall not knowingly or intentionally permit, cause or authorize
any of his employees, agents or others under his control to, directly or
indirectly, on behalf of himself or any other Person, to recruit or otherwise
solicit or induce any person who is an employee of, or otherwise engaged by, the
Company, any subsidiary of the Company or any such successor to terminate his or
her employment or other relationship with the Company, any subsidiary of the
Company or such successor. The Executive shall not at any time, directly or
indirectly, use or purport to authorize any Person to use any name, mark, logo,
trade dress or other identifying words or images which are the same as or
confusingly similar to those used at any time by the Company or any subsidiary
of the Company in connection with any product or service, whether or not such
use would be in a business competitive with that of the Company or any
subsidiary of the Company.
7.4 REMEDIES. The restrictions set forth in this Section 7 are
considered by the parties to be reasonable for the purposes of protecting the
value of the business and goodwill of the Company. The Executive acknowledges
that the Company would be irreparably harmed and that monetary damages would not
provide
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an adequate remedy in the event of a breach of the provisions of this Section 7.
Accordingly, the Executive agrees that, in addition to any other remedies
available to the Company, the Company shall be entitled to injunctive and other
equitable relief, (without any bond or security being required to be posted) to
secure the enforcement of these provisions, and shall be entitled to receive
reimbursement from the Executive for all attorneys' fees and expenses incurred
by the Company in enforcing these provisions. If the Executive breaches the
covenant set forth in Section 7.3, the running of the noncompete period
described therein (but not his obligations) shall be tolled for so long as such
breach continues. It is the desire and intent of the parties that the provisions
of Section 7 be enforced to the fullest extent permissible under the laws and
public policies of each jurisdiction in which enforcement is sought. If any
provisions of Section 7 relating to the time period, scope of activities or
geographic area of restrictions are declared by a court of competent
jurisdiction to exceed the maximum permissible time period, scope of activities
or geographic area, the maximum time period, scope of activities or geographic
area, as the case may be, shall be reduced to the maximum which such court deems
enforceable. If any provisions of Section 7 other than those described in the
preceding sentence are adjudicated to be invalid or unenforceable, the invalid
or unenforceable provisions shall be deemed amended (with respect only to the
jurisdiction in which such adjudication is made) in such manner as to render
them enforceable and to effectuate as nearly as possible the original intentions
and agreement of the parties.
8. NOTICES. All notices or other communications which any party to this
Agreement may desire or be required to give under this Agreement shall be deemed
to have been given the first business day after being delivered to a nationally
recognized overnight courier for next business day delivery to the address of
such party set forth below or such other address as either party may from time
to time give notice to the other in the aforesaid manner:
If to the Company: Golden Bear Golf, Inc.
11780 U.S. Highway No. 1
North Palm Beach, Florida 33408
Attn: _________________________
If to the Executive: Mark F. Hesemann
______________________________________
______________________________________
Attn: __________________________
9. MISCELLANEOUS.
9.1 ENTIRE AGREEMENT. This Agreement and all agreements and
documents referred to in this Agreement are intended to and do constitute the
entire agreement between the parties and supersede all prior oral or written
agreements or understandings of the parties with regard to the subject matter of
this Agreement. No agreements or representations, oral or otherwise, express or
implied, with respect to
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the subject matter of this Agreement, have been made by either party which are
not expressly set forth in this Agreement.
9.2 NO ORAL MODIFICATIONS. No interpretation,
change, termination or waiver of any provision of this Agreement shall be
binding upon a party unless in writing and executed by the party or parties to
be bound thereby.
9.3 NO ASSIGNMENT. Neither this Agreement nor any
rights or obligations under this Agreement may be assigned or delegated by the
parties to this Agreement, except for any assignment by the Company occurring by
operation of law.
9.4 BINDING EFFECT. This Agreement shall be binding
upon the parties and their respective successors and shall inure to the benefit
of the parties and their respective successors.
9.5 GOVERNING LAW. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Florida without giving effect to any conflict of laws provision
thereof.
9.6 PREVAILING PARTIES. In the event of a dispute regarding
any of the terms of this Agreement, the party prevailing in such dispute shall
be paid its legal costs, including reasonable attorneys' fees, incurred in
connection with the enforcement or interpretation of this Agreement, in
litigation and in preparation for litigation, and at trial and in connection
with any appellate action.
9.7 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9.8 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which,
together, will constitute one and the same agreement. Any telecopied version of
a manually executed signature page delivered by one party to the other shall be
deemed a manually executed and delivered original.
9.9 NO WAIVER. Any waiver by either party of any
provision of this Agreement shall not be construed as a continuing waiver
thereof or a waiver of any other provision of this Agreement.
9.10 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
9.11 REMEDIES. Neither the termination of this Agreement, the
provision of a specific remedy, nor any other provision of this Agreement shall
be construed to prohibit any party from pursuing any remedy available at law or
in equity for the breach or violation of the provisions of this Agreement.
9.12 SURVIVAL. The terms of Sections 3, 6, 7, and 9 of this
Agreement shall survive the expiration or termination of this Agreement.
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IN WITNESS WHEREOF, the undersigned have entered into this Agreement on
the date set forth above.
GOLDEN BEAR GOLF, INC.:
By: _______________________
Name: ____________________
Title: _____________________
EXECUTIVE:
By: ________________________
Name: _____________________
Title: _______________________
10
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), is dated as of ______, 1996,
between Golden Bear Golf, Inc., a Florida corporation (the "Company"), and
Thomas P. Hislop (the "Executive").
WHEREAS, the Company intends to undertake an initial public offering of
the Company's Class "A" Common Stock; and
WHEREAS, contingent upon the closing of the initial public offering,
the Company desires to employ the Executive in an executive capacity and the
Executive desires to accept such employment, all upon the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth in this Agreement, the Company and the Executive agree as
follows:
1. TERM OF EMPLOYMENT. The Company shall employ the Executive, and the
Executive accepts such employment, on the terms and subject to the conditions
set forth in this Agreement. The Executive shall be employed for an initial term
of four (4) years beginning as of the "Effective Date" (the "Initial Term"). The
Effective Date shall be the date of the Company's initial public offering of
Class A Common Stock. At the conclusion of the Initial Term, or any Renewal Term
(as defined below), the Executive's employment shall automatically be extended
for an additional term of two (2) years (the "Renewal Term"), unless at least
one hundred and eighty (180) days prior to expiration of the Initial Term or any
Renewal Term either the Executive or the Company gives notice to the other that
the Executive or the Company does not wish to extend the Executive's employment.
The Initial Term and any Renewal Term shall be referred to herein as the "Term".
2. SERVICES.
2.1 OFFICE AND DUTIES. During the Term, the Executive shall
serve as Senior Vice President and Chief Operating Officer of the Marketing
Division of the Company and shall have powers and authority commensurate with
such positions and such other powers and authority as may be assigned to him by
the Company's Board of Directors or any committee thereof from time to time.
2.2 BEST EFFORTS. During the Term, the Executive shall devote
a minimum of one hundred percent (100%) of his time and energies during business
hours to the business of the Company and shall use his best efforts, skills and
abilities to promote the interests of the Company.
3. COMPENSATION.
3.1 CASH COMPENSATION. During the Term, the Executive shall
receive an initial base salary at the annual rate of $210,000 ("Base Salary"),
payable in accordance with the Company's normal payroll practices. The Base
Salary shall be subject to increase from time to time as may be determined upon
a review of the
<PAGE>
Executive's performances to be undertaken by the Compensation Committee of the
Board of Directors at least once annually ("Compensation Committee").
3.2 INCENTIVE AWARD PAYMENTS.
(a) For each fiscal year during the Term, the Executive shall
be entitled to receive a cash award (the "Bonus") based on the Company's Annual
Pre-Tax Income relative to its Annual Pre-Tax Income as projected in the
Business Plan ("Business Plan") approved by the Company's Board of Directors
with respect to such fiscal year. For each fiscal year, "Annual Pre-Tax Income"
shall be the "Income Before Provision for Income Taxes and Extraordinary Items"
as set forth in the Company's audited Consolidated Statement of Operations. The
Compensation Committee shall set in advance of each fiscal year the formula for
determining the Bonus for such fiscal year, after the Compensation Committee
consults with the Executive and the Board of Directors approves the Business
Plan. Upon the termination of the Executive's employment for any reason, the
Executive shall be entitled to receive any Bonus earned by the Executive with
respect to the preceding fiscal year (even if the payment of such Bonus has been
deferred into the current fiscal year).
(b) If the Executive's employment with the Company shall
terminate after the commencement of, but prior to the expiration of, any fiscal
year (except for termination for Cause, as defined in Section 5.3, then the
Bonus payable to the Executive for services rendered during such fiscal year
shall be equal to the Bonus for such fiscal year determined as described above,
multiplied by a fraction, the numerator of which shall be the number of days
during such fiscal year that the Executive was an employee of the Company, and
the denominator of which shall be 360.
3.3 SUPPLEMENTAL INCENTIVE AWARD PAYMENTS. Each year during
the Term, the Compensation Committee may, but shall be under no obligation to,
establish a supplemental incentive award pool, consisting of a percentage of the
salaries of the executive officers of the Company determined by the Compensation
Committee after consulting with management of the Company, which is to be paid
out to executives of the Company provided the Company's performance meets or
exceeds annual objectives predetermined by the Compensation Committee. It is
anticipated that if such a pool is established, the objectives would consist
primarily of the Company's meeting operating income targets, but also may
consist of the Company's meeting sales targets, increasing its revenue base
and/or other factors. The Executive's payment from such an incentive award pool
relative to other Company executives is to be weighted based upon the
Executive's position in the Company and contribution towards the Company's
performance relative to the annual objectives. In the event the Compensation
Committee determines that such objectives are met for a fiscal year and that it
is appropriate to establish such a pool, the Chairman of the Board shall be
entitled to allocate the incentive award pool among the Executive and other
executive officers of the Company, provided that all such awards must be
approved by the Compensation Committee, which may revise the awards at its
discretion.
3.4 STOCK OPTIONS. On the Effective Date, the Company shall
grant to the Executive options to purchase 32,000 shares of the Class A Common
Stock of the
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Company pursuant to the terms of the Stock Option Agreement attached hereto as
Exhibit A.
3.5 ADDITIONAL COMPENSATION. Nothing in this Agreement shall
be deemed to prohibit the Compensation Committee from granting the Executive
such increased compensation, incentive awards or other benefits as the
Compensation Committee from time to time may determine, provided that the
parties recognize and acknowledge that the Compensation Committee shall be under
no obligation to grant any such increase and shall have full discretion in
making any determination with respect thereto. The Compensation Committee shall
also determine what allowances to provide Executive, including without
limitation, auto allowance, allowance for membership in country clubs, and
allowance for increased and additional benefits, in addition to those benefits
for which Executive is eligible under Section 4.2, below; provided however, that
Executive shall receive benefits at least equal to those received by Executive
from Golden Bear International, Inc. prior to the Effective Date.
4. REIMBURSEMENT OF EXPENSES; BENEFITS.
4.1 REIMBURSEMENT OF EXPENSES. Upon submission of appropriate
documentation and in accordance with such guidelines as may be established from
time to time by the Company's Board of Directors, the Company shall reimburse
the Executive for all reasonable business expenses incurred by the Executive in
the performance of his duties under this Agreement.
4.2 EMPLOYEE BENEFIT PLANS AND PROGRAMS. During the Term, the
Executive shall also be entitled to participate in all group life insurance,
pension, medical insurance, hospitalization, disability and other similar
employee benefit plans and programs of the Company, subject to eligibility and
vesting requirements from time to time in effect, which at any time during the
Term may be offered by the Company to its executive officers generally, provided
that nothing in this Agreement shall require the Company at any time to create
or continue any such plan or program or to fix, amend or retain eligibility
requirements so as to include the Executive.
4.3 VACATIONS. The Executive shall be entitled to that amount
of paid vacation during each calendar year as is the Company's policy for
executive employees, taking into consideration the reasonable business needs of
the Company. The Executive may take vacation at such times as the Executive
elects, upon reasonable advance notice to the Company, provided that the
Executive takes no more than two consecutive weeks of vacation and provided
further that such vacation does not affect the operations and business needs of
the Company. The Executive shall be permitted to accrue vacation time in
accordance with the Company's vacation accrual policy for executive employees in
effect at the time the vacation is accrued.
5. TERMINATION. The Executive's employment under this
Agreement may be terminated prior to the end of any Term by the Company or the
Executive without any breach of this Agreement under the following
circumstances:
5.1 DEATH. The Executive's employment under this
Agreement shall terminate upon the Executive's death.
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5.2 DISABILITY. The Company may terminate the Executive's
employment if the Executive, due to physical or mental injury or illness, is
unable to perform the Executive's duties under this Agreement for an aggregate
of 135 days out of any 270 day period.
5.3 CAUSE. The Company may terminate the Executive's
employment under this Agreement for "Cause". "Cause" shall mean the following:
(a) action by the Executive involving willful misconduct, dishonesty or gross
neglect which has a materially adverse effect on the business or reputation of
the Company; (b) Employee's conviction of a crime punishable by death or
imprisonment of one year or more under the laws of the jurisdiction in which
convicted, or of a crime involving theft, misappropriation of funds, fraud or
deception, regardless of the punishment; or (c) the refusal or repeated failure
of the Executive to discharge his duties under Section 2 in all material
respects (other than any such refusal or failure resulting from the Executive's
incapacity due to physical or mental injury or illness) where such alleged
refusal or failure is not remedied within fifteen (15) days after the date of
the Executive's receipt of a written demand from the Company to remedy such
alleged refusal or failure, which demand shall specify the nature of such
refusal or failure.
5.4 GOOD REASON. The Executive may terminate his
employment under this Agreement for "Good Reason". "Good Reason" means: (a) any
removal of the Executive from the position of President and Chief Executive
Officer of the Company; (b) a failure by the Company to pay when due all
compensation provided for in this Agreement; or (c) a material failure by the
Company to comply with any of the other material provisions of this Agreement;
provided in each case that the Company has not remedied the breach underlying
such Good Reason within fifteen (15) days after notice thereof.
5.5 NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Company or by the Executive (other than termination pursuant
to Section 5.1 above) shall be communicated by written notice of termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon, and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination.
5.6 DATE OF TERMINATION. The "Date of Termination" shall mean:
(i) if the Executive's employment is terminated by his death, the date of death,
(ii) if the Executive's employment is terminated pursuant to Section 5.2 above,
30 days after Notice of Termination is given (provided that the Executive shall
not have returned to the performance of his duties on a full time basis during
such 30 day period), and (iii) if the Executive's employment is terminated for
any reason, the date on which a Notice of Termination is given.
5.7 SUSPENSION OF EMPLOYMENT. In the event the Executive is
arrested for any crime of the nature specified in Section 5.3(b) hereof, the
Company may elect to suspend the Executive from his duties hereunder until such
charges have been dropped or adjudicated in a manner which results in other than
a guilty verdict, whichever is earlier. During the period of suspension, the
Executive shall not receive
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any compensation unless the Company determines that the continuation of the
Executive's compensation is appropriate. The election by the Company to suspend
the Executive under this Section 5.7 shall not limit the right of the Company to
otherwise terminate the Executive for Cause under Section 5.3 (provided that the
Executive's actions constitute Cause for purposes of Section 5.3).
6. PAYMENTS TO EXECUTIVE DURING DISABILITY AND AFTER TERMINATION.
6.1 COMPENSATION DURING DISABILITY. During any period that the
Executive fails to perform his duties hereunder as a result of incapacity due to
physical or mental injury or illness, the Executive shall continue to receive
the Base Salary, incentive compensation and benefits to which he is entitled
under this Agreement until his employment is termination pursuant to Section 5.2
hereof; provided that payments so made to the Executive during such period shall
be reduced to the extent of any amounts paid to the Executive under any
disability benefit plan of the Company.
6.2 COMPENSATION UPON TERMINATION FOR DEATH OR DISABILITY. If
the Executive's employment is terminated by his death under Section 5.1 or
disability under Section 5.2, the Company shall pay to the Executive, his spouse
or his estate, as applicable: (i) the incentive compensation to which he is
entitled under this Agreement through the Date of Termination; (ii) the
Executive's Base Salary as in effect on the Date of Termination, for a period of
two years following the Date of Termination, and (iii) the cost of health
insurance benefits for the Executive and his family for a period of 18 months
following the Date of Termination.
6.3 PAYMENTS AFTER TERMINATION FOR CAUSE. If the Executive's
employment is terminated under Section 5.3 for Cause, the Executive shall
receive: (i) the incentive compensation to which he is entitled under this
Agreement through the Date of Termination; and (ii) his Base Salary through the
Date of Termination in accordance with the terms of this Agreement and
thereafter Executive shall not be entitled to receive any further compensation
or benefits whatsoever.
6.4 PAYMENTS AFTER WRONGFUL TERMINATION.
(a) If: (i) the Company terminates the
Executive's employment other than because of the Executive's death, Disability,
or for Cause; or (ii) the Company elects to terminate the Executive's employment
as of the end of the Initial Term or any Renewal Term; or (iii) if the Executive
shall terminate the Executive's employment for Good Reason pursuant to Section
5.4 (any such termination being referred to as a "Wrongful Termination"), then
the Company shall pay to the Executive for a period equal to the greater of the
remainder of the current term or twenty-four (24) months: 1) the Base Salary, in
effect on the Date of Termination; and 2) an amount equal to the average annual
Bonus, if any, received by Executive prior to termination. In addition, Company
shall pay to Executive (i) the incentive compensation to which he is entitled
under this Agreement through the Date of Termination and (ii) the cost of health
insurance benefits for the Executive and his family for a period of 18 months.
(b) Notwithstanding the terms of Section
6.5(a) above, if a Wrongful Termination occurs within a period of one year
after a Change of Control (as defined below), the Executive shall be entitled
within 30 days after such termination to a
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lump sum payment equal to the greater of (i) the Base Salary and Bonuses, if any
(in each case, determined as of the Date of Termination), through the remainder
of the current Term, or (ii) 24 months of the Base Salary, and Bonuses in an
amount equal to the average annual Bonus, if any, received by Executive prior to
the Date of Termination. In addition, Company shall pay to Executive the cost of
health insurance benefits for the Executive and his family for a period of 18
months.
A Change of Control will occur: (i) on the date of the
acquisition by any person, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities and Exchange Act of 1934, as amended),
excluding the Company, any of its subsidiaries or any holder of the Company's
Class B Common Stock, par value $.01 per share, of twenty-five percent (25%) or
more of the then outstanding voting securities entitled to vote generally in the
election of directors; (ii) on the date of any sale of the Company's or any of
its subsidiaries' assets which required approval of the Company's shareholders
under the Florida Business Corporation Act; or (iii) on the date of any
consolidation or merger to which the Company is a party or any stock exchange or
similar transaction as a result of which the holders of the Company's
outstanding voting securities immediately prior to such transaction do not
continue to own voting securities in the new or surviving entity entitling them
to elect its Board of Directors.
7. CONFIDENTIALITY; INTELLECTUAL PROPERTY; NONCOMPETITION.
7.1 CONFIDENTIALITY. The Executive shall not, during the Term
or any time after the Term, use or divulge to any person any Confidential
Information (as defined below) relating to the Company or any of its
subsidiaries which may have come to the Executive's knowledge at any time during
the Executive's term of employment with the Company or during the time that
Executive was employed by Company's predecessor in interest, Golden Bear
International, Inc. "Confidential Information" shall mean any information not
generally available to the public concerning the Company or any of its
subsidiaries, including, but not limited to, methods of operation, methods of
doing business, sales, files, forms, lists and names of and the needs and
requirements of customers and suppliers, the nature and content of any
contracts, and any inventions, techniques, methods, products, devices, trade
secrets, copyrights, patents, other rights to and in all knowledge, information
and materials proprietary to the Company (including business plans and financial
information), which relate to or are used in connection with any business or
activity carried on by the Company or any of its subsidiaries. At or prior to
the termination of the Executive's employment with the Company, the Executive
shall deliver to the Company (i) all property of the Company in the possession
or under the control of the Executive and (ii) all written or printed material
and all other property (including, but not limited to, computerized data) in the
possession or under the control of the Executive relating to Confidential
Information.
7.2 OWNERSHIP OF CERTAIN INTELLECTUAL PROPERTY. The Executive
hereby sells, transfers and assigns to the Company or to any person or entity
designated by the Company, the Executive's entire, right, title and interest in
and to all inventions, ideas, disclosures, intellectual property rights and
improvements, whether patented or unpatented, and copyrightable material made or
conceived by the Executive, solely or jointly, during the term of the
Executive's employment, which relate to methods,
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apparatus, designs, ideas, products, processes, items or devices, sold, leased,
used or under consideration or development by the Company or which otherwise
relate or pertain to the businesses, functions or operations of the Company. The
Executive shall communicate promptly and disclose to the Company, in such form
as the Executive may be requested to do so by the Company's Board of Directors,
all information, details and data pertaining to these matters and shall execute
and deliver to the Company such formal transfers and assignments and such other
papers and documents as may be requested of the Executive to permit the Company
or any person or entity designated by the Company to file and prosecute the
patent applications and as to copyrightable material to obtain copyright
thereof. The Executive irrevocably appoints the Company's designee as the
Executive's attorney-in-fact for the purpose of carrying out the terms of this
Section 7.2, and acknowledges that this appointment is irrevocable and coupled
with an interest.
7.3 NONCOMPETITION. During the Term and for a period of one
(1) year after the voluntary resignation of the Executive as an employee of the
Company or the termination by the Company of any such employment or engagement
for Cause pursuant to Section 5.3 or upon the expiration of the Term of this
Agreement, the Executive shall not engage or have an interest, anywhere in the
United States of America or any other geographic area where the Company or any
of its subsidiaries do business or in which its products are marketed, alone or
in association with others, as principal, officer, agent, employee, consultant,
independent contractor, director, partner or stockholder, or through the
investment of capital, lending of money or property, rendering of services or
otherwise, in any business competitive with the business engaged in by the
Company or any of its subsidiaries; provided, that the foregoing shall not be
construed to prohibit the Executive from owning, in the aggregate, less than 5%
of any class of securities listed on a national securities exchange or traded
publicly on the over-the-counter market. During the same period, the Executive
shall not, and shall not knowingly or intentionally permit, cause or authorize
any of his employees, agents or others under his control to, directly or
indirectly, on behalf of himself or any other Person, to recruit or otherwise
solicit or induce any person who is an employee of, or otherwise engaged by, the
Company, any subsidiary of the Company or any such successor to terminate his or
her employment or other relationship with the Company, any subsidiary of the
Company or such successor. The Executive shall not at any time, directly or
indirectly, use or purport to authorize any Person to use any name, mark, logo,
trade dress or other identifying words or images which are the same as or
confusingly similar to those used at any time by the Company or any subsidiary
of the Company in connection with any product or service, whether or not such
use would be in a business competitive with that of the Company or any
subsidiary of the Company.
7.4 REMEDIES. The restrictions set forth in this Section 7 are
considered by the parties to be reasonable for the purposes of protecting the
value of the business and goodwill of the Company. The Executive acknowledges
that the Company would be irreparably harmed and that monetary damages would not
provide an adequate remedy in the event of a breach of the provisions of this
Section 7. Accordingly, the Executive agrees that, in addition to any other
remedies available to the Company, the Company shall be entitled to injunctive
and other equitable relief,
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(without any bond or security being required to be posted) to secure the
enforcement of these provisions, and shall be entitled to receive reimbursement
from the Executive for all attorneys' fees and expenses incurred by the Company
in enforcing these provisions. If the Executive breaches the covenant set forth
in Section 7.3, the running of the noncompete period described therein (but not
his obligations) shall be tolled for so long as such breach continues. It is the
desire and intent of the parties that the provisions of Section 7 be enforced to
the fullest extent permissible under the laws and public policies of each
jurisdiction in which enforcement is sought. If any provisions of Section 7
relating to the time period, scope of activities or geographic area of
restrictions are declared by a court of competent jurisdiction to exceed the
maximum permissible time period, scope of activities or geographic area, the
maximum time period, scope of activities or geographic area, as the case may be,
shall be reduced to the maximum which such court deems enforceable. If any
provisions of Section 7 other than those described in the preceding sentence are
adjudicated to be invalid or unenforceable, the invalid or unenforceable
provisions shall be deemed amended (with respect only to the jurisdiction in
which such adjudication is made) in such manner as to render them enforceable
and to effectuate as nearly as possible the original intentions and agreement of
the parties.
8. NOTICES. All notices or other communications which any party to this
Agreement may desire or be required to give under this Agreement shall be deemed
to have been given the first business day after being delivered to a nationally
recognized overnight courier for next business day delivery to the address of
such party set forth below or such other address as either party may from time
to time give notice to the other in the aforesaid manner:
If to the Company: Golden Bear Golf, Inc.
11780 U.S. Highway No. 1
North Palm Beach, Florida 33408
Attn: _________________________
If to the Executive: Thomas P. Hislop
_______________________________________
_______________________________________
Attn: __________________________
9. MISCELLANEOUS.
9.1 ENTIRE AGREEMENT. This Agreement and all agreements and
documents referred to in this Agreement are intended to and do constitute the
entire agreement between the parties and supersede all prior oral or written
agreements or understandings of the parties with regard to the subject matter of
this Agreement. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter of this Agreement, have been made by
either party which are not expressly set forth in this Agreement.
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9.2 NO ORAL MODIFICATIONS. No interpretation,
change, termination or waiver of any provision of this Agreement shall be
binding upon a party unless in writing and executed by the party or parties to
be bound thereby.
9.3 NO ASSIGNMENT. Neither this Agreement nor any
rights or obligations under this Agreement may be assigned or delegated by the
parties to this Agreement, except for any assignment by the Company occurring by
operation of law.
9.4 BINDING EFFECT. This Agreement shall be binding
upon the parties and their respective successors and shall inure to the benefit
of the parties and their respective successors.
9.5 GOVERNING LAW. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Florida without giving effect to any conflict of laws provision
thereof.
9.6 PREVAILING PARTIES. In the event of a dispute regarding
any of the terms of this Agreement, the party prevailing in such dispute shall
be paid its legal costs, including reasonable attorneys' fees, incurred in
connection with the enforcement or interpretation of this Agreement, in
litigation and in preparation for litigation, and at trial and in connection
with any appellate action.
9.7 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9.8 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which,
together, will constitute one and the same agreement. Any telecopied version of
a manually executed signature page delivered by one party to the other shall be
deemed a manually executed and delivered original.
9.9 NO WAIVER. Any waiver by either party of any
provision of this Agreement shall not be construed as a continuing waiver
thereof or a waiver of any other provision of this Agreement.
9.10 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
9.11 REMEDIES. Neither the termination of this Agreement, the
provision of a specific remedy, nor any other provision of this Agreement shall
be construed to prohibit any party from pursuing any remedy available at law or
in equity for the breach or violation of the provisions of this Agreement.
9.12 SURVIVAL. The terms of Sections 3, 6, 7, and 9 of this
Agreement shall survive the expiration or termination of this Agreement.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement on
the date set forth above.
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GOLDEN BEAR GOLF, INC.:
By: ________________________
Name: _____________________
Title: _______________________
EXECUTIVE:
By: _________________________
Name: Thomas P.Hislop
Title: Senior Vice President and Chief
Operating Officer of the
Marketing Division
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EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), is dated as of ______, 1996,
between Golden Bear Golf, Inc., a Florida corporation (the "Company"), and Jack
P. Bates (the "Executive").
WHEREAS, the Company intends to undertake an initial public offering of
the Company's Class "A" Common Stock; and
WHEREAS, contingent upon the closing of the initial public offering,
the Company desires to employ the Executive in an executive capacity and the
Executive desires to accept such employment, all upon the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth in this Agreement, the Company and the Executive agree as
follows:
1. TERM OF EMPLOYMENT. The Company shall employ the Executive, and the
Executive accepts such employment, on the terms and subject to the conditions
set forth in this Agreement. The Executive shall be employed for an initial term
of three and one-half years (3-1/2) years beginning as of the "Effective Date"
(the "Initial Term"). The Effective Date shall be the date of the Company's
initial public offering of Class A Common Stock. At the conclusion of the
Initial Term, or any Renewal Term (as defined below), the Executive's employment
shall automatically be extended for an additional term of two (2) years (the
"Renewal Term"), unless at least one hundred and eighty (180) days prior to
expiration of the Initial Term or any Renewal Term either the Executive or the
Company gives notice to the other that the Executive or the Company does not
wish to extend the Executive's employment. The Initial Term and any Renewal Term
shall be referred to herein as the "Term".
2. SERVICES.
2.1 OFFICE AND DUTIES. During the Term, the Executive shall
serve as Senior Vice President and Chief Financial Officer of the Company and
shall have powers and authority commensurate with such positions and such other
powers and authority as may be assigned to him by the Company's Board of
Directors or any committee thereof from time to time.
2.2 BEST EFFORTS. During the Term, the Executive shall devote
a minimum of eighty percent (80%) of his time and energies during business hours
to the business of the Company and shall use his best efforts, skills and
abilities to promote the interests of the Company.
2.3 SERVICE FOR RELATED ENTITIES. The parties acknowledge that
during the Term of this Agreement the Executive intends to devote approximately
twenty percent (20%) of his business time and efforts on behalf of Golden Bear
International, Inc. and its affiliates. The Company acknowledges such activities
shall not violate any of the provisions of this Agreement, and the Company
waives any claims against the Executive arising from his performance of his
duties on behalf of such entities.
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3. COMPENSATION.
3.1 CASH COMPENSATION. During the Term, the Executive shall
receive an initial base salary at the annual rate of $160,000 ("Base Salary"),
payable in accordance with the Company's normal payroll practices. The Base
Salary shall be subject to increase from time to time as may be determined upon
a review of the Executive's performances to be undertaken by the Compensation
Committee of the Board of Directors at least once annually ("Compensation
Committee").
3.2 INCENTIVE AWARD PAYMENTS.
(a) For each fiscal year during the Term, the Executive shall
be entitled to receive a cash award (the "Bonus") based on the Company's Annual
Pre-Tax Income relative to its Annual Pre-Tax Income as projected in the
Business Plan ("Business Plan") approved by the Company's Board of Directors
with respect to such fiscal year. For each fiscal year, "Annual Pre-Tax Income"
shall be the "Income Before Provision for Income Taxes and Extraordinary Items"
as set forth in the Company's audited Consolidated Statement of Operations. The
Compensation Committee shall set in advance of each fiscal year the formula for
determining the Bonus for such fiscal year, after the Compensation Committee
consults with the Executive and the Board of Directors approves the Business
Plan. Upon the termination of the Executive's employment for any reason, the
Executive shall be entitled to receive any Bonus earned by the Executive with
respect to the preceding fiscal year (even if the payment of such Bonus has been
deferred into the current fiscal year).
(b) If the Executive's employment with the Company shall
terminate after the commencement of, but prior to the expiration of, any fiscal
year (except for termination for Cause, as defined in Section 5.3, then the
Bonus payable to the Executive for services rendered during such fiscal year
shall be equal to the Bonus for such fiscal year determined as described above,
multiplied by a fraction, the numerator of which shall be the number of days
during such fiscal year that the Executive was an employee of the Company, and
the denominator of which shall be 360.
3.3 SUPPLEMENTAL INCENTIVE AWARD PAYMENTS. Each year during
the Term, the Compensation Committee may, but shall be under no obligation to,
establish a supplemental incentive award pool, consisting of a percentage of the
salaries of the executive officers of the Company determined by the Compensation
Committee after consulting with management of the Company, which is to be paid
out to executives of the Company provided the Company's performance meets or
exceeds annual objectives predetermined by the Compensation Committee. It is
anticipated that if such a pool is established, the objectives would consist
primarily of the Company's meeting operating income targets, but also may
consist of the Company's meeting sales targets, increasing its revenue base
and/or other factors. The Executive's payment from such an incentive award pool
relative to other Company executives is to be weighted based upon the
Executive's position in the Company and contribution towards the Company's
performance relative to the annual objectives. In the event the Compensation
Committee determines that such objectives are met for a fiscal year and that it
is appropriate to establish such a pool, the Chairman of the Board shall be
entitled to allocate the incentive award pool among the Executive and other
executive officers of
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the Company, provided that all such awards must be approved by the Compensation
Committee, which may revise the awards at its discretion.
3.4 STOCK OPTIONS. On the Effective Date, the Company shall
grant to the Executive options to purchase 32,000 shares of the Class A Common
Stock of the Company pursuant to the terms of the Stock Option Agreement
attached hereto as Exhibit A.
3.5 ADDITIONAL COMPENSATION. Nothing in this Agreement shall
be deemed to prohibit the Compensation Committee from granting the Executive
such increased compensation, incentive awards or other benefits as the
Compensation Committee from time to time may determine, provided that the
parties recognize and acknowledge that the Compensation Committee shall be under
no obligation to grant any such increase and shall have full discretion in
making any determination with respect thereto. The Compensation Committee shall
also determine what allowances to provide Executive, including without
limitation, auto allowance, allowance for membership in country clubs, and
allowance for increased and additional benefits, in addition to those benefits
for which Executive is eligible under Section 4.2, below; provided however, that
Executive shall receive benefits at least equal to those received by Executive
from Golden Bear International, Inc. prior to the Effective Date.
4. REIMBURSEMENT OF EXPENSES; BENEFITS.
4.1 REIMBURSEMENT OF EXPENSES. Upon submission of appropriate
documentation and in accordance with such guidelines as may be established from
time to time by the Company's Board of Directors, the Company shall reimburse
the Executive for all reasonable business expenses incurred by the Executive in
the performance of his duties under this Agreement.
4.2 EMPLOYEE BENEFIT PLANS AND PROGRAMS. During the Term, the
Executive shall also be entitled to participate in all group life insurance,
pension, medical insurance, hospitalization, disability and other similar
employee benefit plans and programs of the Company, subject to eligibility and
vesting requirements from time to time in effect, which at any time during the
Term may be offered by the Company to its executive officers generally, provided
that nothing in this Agreement shall require the Company at any time to create
or continue any such plan or program or to fix, amend or retain eligibility
requirements so as to include the Executive.
4.3 VACATIONS. The Executive shall be entitled to that amount
of paid vacation during each calendar year as is the Company's policy for
executive employees, taking into consideration the reasonable business needs of
the Company. The Executive may take vacation at such times as the Executive
elects, upon reasonable advance notice to the Company, provided that the
Executive takes no more than two consecutive weeks of vacation and provided
further that such vacation does not affect the operations and business needs of
the Company. The Executive shall be permitted to accrue vacation time in
accordance with the Company's vacation accrual policy for executive employees in
effect at the time the vacation is accrued.
5. TERMINATION. The Executive's employment under this
Agreement may be terminated prior to the end of any Term by the Company or the
Executive without any breach of this Agreement under the following
circumstances:
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5.1 DEATH. The Executive's employment under this
Agreement shall terminate upon the Executive's death.
5.2 DISABILITY. The Company may terminate the Executive's
employment if the Executive, due to physical or mental injury or illness, is
unable to perform the Executive's duties under this Agreement for an aggregate
of 135 days out of any 270 day period.
5.3 CAUSE. The Company may terminate the Executive's
employment under this Agreement for "Cause". "Cause" shall mean the following:
(a) action by the Executive involving willful misconduct, dishonesty or gross
neglect which has a materially adverse effect on the business or reputation of
the Company; (b) Employee's conviction of a crime punishable by death or
imprisonment of one year or more under the laws of the jurisdiction in which
convicted, or of a crime involving theft, misappropriation of funds, fraud or
deception, regardless of the punishment; or (c) the refusal or repeated failure
of the Executive to discharge his duties under Section 2 in all material
respects (other than any such refusal or failure resulting from the Executive's
incapacity due to physical or mental injury or illness) where such alleged
refusal or failure is not remedied within fifteen (15) days after the date of
the Executive's receipt of a written demand from the Company to remedy such
alleged refusal or failure, which demand shall specify the nature of such
refusal or failure.
5.4 GOOD REASON. The Executive may terminate his
employment under this Agreement for "Good Reason". "Good Reason" means: (a) any
removal of the Executive from the position of President and Chief Executive
Officer of the Company; (b) a failure by the Company to pay when due all
compensation provided for in this Agreement; or (c) a material failure by the
Company to comply with any of the other material provisions of this Agreement;
provided in each case that the Company has not remedied the breach underlying
such Good Reason within fifteen (15) days after notice thereof.
5.5 NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Company or by the Executive (other than termination pursuant
to Section 5.1 above) shall be communicated by written notice of termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon, and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination.
5.6 DATE OF TERMINATION. The "Date of Termination" shall mean:
(i) if the Executive's employment is terminated by his death, the date of death,
(ii) if the Executive's employment is terminated pursuant to Section 5.2 above,
30 days after Notice of Termination is given (provided that the Executive shall
not have returned to the performance of his duties on a full time basis during
such 30 day period), and (iii) if the Executive's employment is terminated for
any reason, the date on which a Notice of Termination is given.
5.7 SUSPENSION OF EMPLOYMENT. In the event the Executive is
arrested for any crime of the nature specified in Section 5.3(b) hereof, the
Company may elect to suspend the Executive from his duties hereunder until such
charges have been dropped or adjudicated in a manner which results in other than
a guilty verdict,
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whichever is earlier. During the period of suspension, the Executive shall not
receive any compensation unless the Company determines that the continuation of
the Executive's compensation is appropriate. The election by the Company to
suspend the Executive under this Section 5.7 shall not limit the right of the
Company to otherwise terminate the Executive for Cause under Section 5.3
(provided that the Executive's actions constitute Cause for purposes of Section
5.3).
6. PAYMENTS TO EXECUTIVE DURING DISABILITY AND AFTER TERMINATION.
6.1 COMPENSATION DURING DISABILITY. During any period that the
Executive fails to perform his duties hereunder as a result of incapacity due to
physical or mental injury or illness, the Executive shall continue to receive
the Base Salary, incentive compensation and benefits to which he is entitled
under this Agreement until his employment is termination pursuant to Section 5.2
hereof; provided that payments so made to the Executive during such period shall
be reduced to the extent of any amounts paid to the Executive under any
disability benefit plan of the Company.
6.2 COMPENSATION UPON TERMINATION FOR DEATH OR DISABILITY. If
the Executive's employment is terminated by his death under Section 5.1 or
disability under Section 5.2, the Company shall pay to the Executive, his spouse
or his estate, as applicable: (i) the incentive compensation to which he is
entitled under this Agreement through the Date of Termination; (ii) the
Executive's Base Salary as in effect on the Date of Termination, for a period of
two years following the Date of Termination, and (iii) the cost of health
insurance benefits for the Executive and his family for a period of 18 months
following the Date of Termination.
6.3 PAYMENTS AFTER TERMINATION FOR CAUSE. If the Executive's
employment is terminated under Section 5.3 for Cause, the Executive shall
receive: (i) the incentive compensation to which he is entitled under this
Agreement through the Date of Termination; and (ii) his Base Salary through the
Date of Termination in accordance with the terms of this Agreement and
thereafter Executive shall not be entitled to receive any further compensation
or benefits whatsoever.
6.4 PAYMENTS AFTER WRONGFUL TERMINATION.
(a) If: (i) the Company terminates the
Executive's employment other than because of the Executive's death, Disability,
or for Cause; or (ii) the Company elects to terminate the Executive's employment
as of the end of the Initial Term or any Renewal Term; or (iii) if the Executive
shall terminate the Executive's employment for Good Reason pursuant to
Section 5.4 (any such termination being referred to as a "Wrongful
Termination"), then the Company shall pay to the Executive for a period equal
to the greater of the remainder of the current term or twenty-four (24) months:
1) the Base Salary, in effect on the Date of Termination; and 2) an amount
equal to the average annual Bonus, if any, received by Executive prior to
termination. In addition, Company shall pay to Executive (i) the incentive
compensation to which he is entitled under this Agreement through the Date of
Termination and (ii) the cost of health insurance benefits for the Executive
and his family for a period of 18 months.
(b) Notwithstanding the terms of Section 6.5(a)
above, if a Wrongful Termination occurs within a period of one year after
a Change of Control (as defined below), the Executive shall be entitled within
30 days after such termination to a lump sum payment equal to the greater of (i)
the Base Salary and Bonuses, if any (in
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each case, determined as of the Date of Termination), through the remainder of
the current Term, or (ii) 24 months of the Base Salary, and Bonuses in an amount
equal to the average annual Bonus, if any, received by Executive prior to the
Date of Termination. In addition, Company shall pay to Executive the cost of
health insurance benefits for the Executive and his family for a period of 18
months.
A Change of Control will occur: (i) on the date of the
acquisition by any person, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities and Exchange Act of 1934, as amended),
excluding the Company, any of its subsidiaries or any holder of the Company's
Class B Common Stock, par value $.01 per share, of twenty-five percent (25%) or
more of the then outstanding voting securities entitled to vote generally in the
election of directors; (ii) on the date of any sale of the Company's or any of
its subsidiaries' assets which required approval of the Company's shareholders
under the Florida Business Corporation Act; or (iii) on the date of any
consolidation or merger to which the Company is a party or any stock exchange or
similar transaction as a result of which the holders of the Company's
outstanding voting securities immediately prior to such transaction do not
continue to own voting securities in the new or surviving entity entitling them
to elect its Board of Directors.
7. CONFIDENTIALITY; INTELLECTUAL PROPERTY; NONCOMPETITION.
7.1 CONFIDENTIALITY. The Executive shall not, during the Term
or any time after the Term, use or divulge to any person any Confidential
Information (as defined below) relating to the Company or any of its
subsidiaries which may have come to the Executive's knowledge at any time during
the Executive's term of employment with the Company or during the time that
Executive was employed by Company's predecessor in interest, Golden Bear
International, Inc. "Confidential Information" shall mean any information not
generally available to the public concerning the Company or any of its
subsidiaries, including, but not limited to, methods of operation, methods of
doing business, sales, files, forms, lists and names of and the needs and
requirements of customers and suppliers, the nature and content of any
contracts, and any inventions, techniques, methods, products, devices, trade
secrets, copyrights, patents, other rights to and in all knowledge, information
and materials proprietary to the Company (including business plans and financial
information), which relate to or are used in connection with any business or
activity carried on by the Company or any of its subsidiaries. At or prior to
the termination of the Executive's employment with the Company, the Executive
shall deliver to the Company (i) all property of the Company in the possession
or under the control of the Executive and (ii) all written or printed material
and all other property (including, but not limited to, computerized data) in the
possession or under the control of the Executive relating to Confidential
Information.
7.2 OWNERSHIP OF CERTAIN INTELLECTUAL PROPERTY. The Executive
hereby sells, transfers and assigns to the Company or to any person or entity
designated by the Company, the Executive's entire, right, title and interest in
and to all inventions, ideas, disclosures, intellectual property rights and
improvements, whether patented or unpatented, and copyrightable material made or
conceived by the Executive, solely or jointly, during the term of the
Executive's employment, which relate to methods, apparatus, designs, ideas,
products, processes, items or devices, sold, leased, used or under consideration
or development by the Company or which otherwise relate or pertain to the
businesses, functions or operations of the Company. The Executive shall
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communicate promptly and disclose to the Company, in such form as the Executive
may be requested to do so by the Company's Board of Directors, all information,
details and data pertaining to these matters and shall execute and deliver to
the Company such formal transfers and assignments and such other papers and
documents as may be requested of the Executive to permit the Company or any
person or entity designated by the Company to file and prosecute the patent
applications and as to copyrightable material to obtain copyright thereof. The
Executive irrevocably appoints the Company's designee as the Executive's
attorney-in-fact for the purpose of carrying out the terms of this Section 7.2,
and acknowledges that this appointment is irrevocable and coupled with an
interest.
7.3 NONCOMPETITION. During the Term and for a period of one
(1) year after the voluntary resignation of the Executive as an employee of the
Company or the termination by the Company of any such employment or engagement
for Cause pursuant to Section 5.3 or upon the expiration of the Term of this
Agreement, the Executive shall not engage or have an interest, anywhere in the
United States of America or any other geographic area where the Company or any
of its subsidiaries do business or in which its products are marketed, alone or
in association with others, as principal, officer, agent, employee, consultant,
independent contractor, director, partner or stockholder, or through the
investment of capital, lending of money or property, rendering of services or
otherwise, in any business competitive with the business engaged in by the
Company or any of its subsidiaries; provided, that the foregoing shall not be
construed to prohibit the Executive from owning, in the aggregate, less than 5%
of any class of securities listed on a national securities exchange or traded
publicly on the over-the-counter market. During the same period, the Executive
shall not, and shall not knowingly or intentionally permit, cause or authorize
any of his employees, agents or others under his control to, directly or
indirectly, on behalf of himself or any other Person, to recruit or otherwise
solicit or induce any person who is an employee of, or otherwise engaged by, the
Company, any subsidiary of the Company or any such successor to terminate his or
her employment or other relationship with the Company, any subsidiary of the
Company or such successor. The Executive shall not at any time, directly or
indirectly, use or purport to authorize any Person to use any name, mark, logo,
trade dress or other identifying words or images which are the same as or
confusingly similar to those used at any time by the Company or any subsidiary
of the Company in connection with any product or service, whether or not such
use would be in a business competitive with that of the Company or any
subsidiary of the Company.
7.4 REMEDIES. The restrictions set forth in this Section 7 are
considered by the parties to be reasonable for the purposes of protecting the
value of the business and goodwill of the Company. The Executive acknowledges
that the Company would be irreparably harmed and that monetary damages would not
provide an adequate remedy in the event of a breach of the provisions of this
Section 7. Accordingly, the Executive agrees that, in addition to any other
remedies available to the Company, the Company shall be entitled to injunctive
and other equitable relief, (without any bond or security being required to be
posted) to secure the enforcement of these provisions, and shall be entitled to
receive reimbursement from the Executive for all attorneys' fees and expenses
incurred by the Company in enforcing these provisions. If the Executive breaches
the covenant set forth in Section 7.3, the running of the noncompete period
described therein (but not his obligations) shall be tolled for
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so long as such breach continues. It is the desire and intent of the parties
that the provisions of Section 7 be enforced to the fullest extent permissible
under the laws and public policies of each jurisdiction in which enforcement is
sought. If any provisions of Section 7 relating to the time period, scope of
activities or geographic area of restrictions are declared by a court of
competent jurisdiction to exceed the maximum permissible time period, scope of
activities or geographic area, the maximum time period, scope of activities or
geographic area, as the case may be, shall be reduced to the maximum which such
court deems enforceable. If any provisions of Section 7 other than those
described in the preceding sentence are adjudicated to be invalid or
unenforceable, the invalid or unenforceable provisions shall be deemed amended
(with respect only to the jurisdiction in which such adjudication is made) in
such manner as to render them enforceable and to effectuate as nearly as
possible the original intentions and agreement of the parties.
8. NOTICES. All notices or other communications which any party to this
Agreement may desire or be required to give under this Agreement shall be deemed
to have been given the first business day after being delivered to a nationally
recognized overnight courier for next business day delivery to the address of
such party set forth below or such other address as either party may from time
to time give notice to the other in the aforesaid manner:
If to the Company: Golden Bear Golf, Inc.
11780 U.S. Highway No. 1
North Palm Beach, Florida 33408
Attn: _________________________
If to the Executive: Jack P. Bates
__________________________________
__________________________________
Attn: __________________________
9. MISCELLANEOUS.
9.1 ENTIRE AGREEMENT. This Agreement and all agreements and
documents referred to in this Agreement are intended to and do constitute the
entire agreement between the parties and supersede all prior oral or written
agreements or understandings of the parties with regard to the subject matter of
this Agreement. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter of this Agreement, have been made by
either party which are not expressly set forth in this Agreement.
9.2 NO ORAL MODIFICATIONS. No interpretation,
change, termination or waiver of any provision of this Agreement shall be
binding upon a party unless in writing and executed by the party or parties to
be bound thereby.
9.3 NO ASSIGNMENT. Neither this Agreement nor any
rights or obligations under this Agreement may be assigned or delegated by the
parties to this Agreement, except for any assignment by the Company occurring by
operation of law.
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9.4 BINDING EFFECT. This Agreement shall be binding
upon the parties and their respective successors and shall inure to the benefit
of the parties and their respective successors.
9.5 GOVERNING LAW. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Florida without giving effect to any conflict of laws provision
thereof.
9.6 PREVAILING PARTIES. In the event of a dispute regarding
any of the terms of this Agreement, the party prevailing in such dispute shall
be paid its legal costs, including reasonable attorneys' fees, incurred in
connection with the enforcement or interpretation of this Agreement, in
litigation and in preparation for litigation, and at trial and in connection
with any appellate action.
9.7 SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9.8 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which,
together, will constitute one and the same agreement. Any telecopied version of
a manually executed signature page delivered by one party to the other shall be
deemed a manually executed and delivered original.
9.9 NO WAIVER. Any waiver by either party of any
provision of this Agreement shall not be construed as a continuing waiver
thereof or a waiver of any other provision of this Agreement.
9.10 HEADINGS. The headings in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
9.11 REMEDIES. Neither the termination of this Agreement, the
provision of a specific remedy, nor any other provision of this Agreement shall
be construed to prohibit any party from pursuing any remedy available at law or
in equity for the breach or violation of the provisions of this Agreement.
9.12 SURVIVAL. The terms of Sections 3, 6, 7, and 9 of this
Agreement shall survive the expiration or termination of this Agreement.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement on
the date set forth above.
GOLDEN BEAR GOLF, INC.:
By: _____________________
Name: __________________
Title: ___________________
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EXECUTIVE:
By: _____________________
Name: Jack P. Bates
Title: Senior Vice President and
Chief Financial Officer
10
EXHIBIT 10.10
TRADEMARK LICENSE AGREEMENT
THIS AGREEMENT, dated as of June 7, 1996, is made between Golden Bear
International, Inc. (hereinafter, "Licensor"), a Florida corporation with its
principal offices at 11780 U.S. Highway No. 1, North Palm Beach, Florida 33408,
and Golden Bear Golf, Inc. (hereinafter, "Licensee"), a Florida corporation,
with its principal offices at 11780 U.S. Highway No. 1, North Palm Beach,
Florida 33408.
RECITALS:
A. It is the intention of the parties that Licensee will take over
Licensor's interest in the ownership and operation of various businesses
currently operated by Licensor and operated by third parties under license from
Licensor as more particularly described in the attached Schedule A (the
"Transferred Businesses"), and that Licensor will license Licensee to conduct
and sub-license the Transferred Businesses under the marks and names presently
or hereafter owned or used by Licensor; and
B. It is the further intention of the parties that Licensee will have
the exclusive right, subject to the terms and conditions of this Agreement, to
develop future business opportunities utilizing the goodwill developed by
Licensor and the marks and names licensed under this Agreement, except for those
existing lines of business and business opportunities expressly reserved to
Licensor, as more particularly described in the attached Schedule A (the
"Retained Businesses").
UNDERTAKINGS:
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration being extant, the
parties agree as follows:
1. GRANT OF LICENSE.
A. Licensor hereby grants to Licensee the exclusive license to use the
GOLDEN BEAR trade name and trademark, as well as all of the other marks shown on
the attached Schedule B (hereinafter referred to individually and collectively
as "Licensed Marks") in connection with the manufacture, advertising, sale and
distribution of all of the goods and rendering of all of the services included
within the description of the Transferred Businesses in Schedule A, including
those goods and services set forth in the registrations and applications on
Schedule B, except as otherwise noted in such Schedule (hereinafter,
collectively, the "Licensed Goods"). The Licensed Goods shall include line
extensions, except as expressly reserved herein.
B. Licensor further grants to Licensee the right to use the
name, image, likeness, nickname, biographical data, and other
identifying characteristics of Jack W. Nicklaus (hereinafter
the "Nicklaus Image") in connection with the advertising,
promotion, or sale of the goods or the rendering of the
services covered by the Licensed Goods.
C. Licensor also grants to Licensee those limited rights in
Licensor's copyrighted works indicated on Schedule C
(hereinafter "Licensed Copyrights"). Licensor expressly
reserves all other copyright rights in the
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Licensed Copyrights not expressly granted by such Schedule,
including without limitation, the right to make derivative
works other than those derivative works authorized by such
Schedule.
D. The license granted herein does not include the right of
Licensee to use the personal services of Jack W. Nicklaus as a
model or spokesman, or to attribute specific statements,
claims or endorsements to Mr. Nicklaus as an individual. The
right to such personal services of Mr. Nicklaus as an
individual will be the subject of written agreements
separately negotiated between Licensee and Jack W. Nicklaus,
including an Employment Agreement between the parties which
will become effective as of the Effective Date (as defined
below).
E. In addition to the licenses granted herein, Licensor
acknowledges and agrees that Licensee shall have the exclusive
right to develop new business opportunities utilizing the
Licensed Marks, Licensed Copyrights and the Nicklaus Image in
connection with product and service lines outside of the
current scope of the Licensed Goods, and that the scope of the
licenses granted herein will be extended to include such
business opportunities subject to the further terms and
conditions of this Agreement, including P. 5, below.
Notwithstanding the foregoing, Licensee acknowledges that
Licensor has expressly reserved its exclusive right to utilize
and license the Retained Marks (as defined in sub-paragraph
4C, below), the Nicklaus Image, and the Licensed Copyrights in
connection with the Retained Businesses, and that Licensee
shall not be permitted, by virtue of the licenses granted
above or any extension of such licenses, to make or license
any use of the Licensed Marks, the Nicklaus Image or the
Licensed Copyrights which infringes upon or is in the same
field of use as any of the Retained Businesses, or would cause
substantial or irreparable damage to Licensor or any of
Licensor's material business relationships in connnection with
any of the Retained Businesses.
2. SCOPE. This License shall be exclusive and worldwide.
3. ROYALTIES. This License is paid in full and shall be royalty free.
4. QUALITY STANDARDS.
A. Licensee understands and acknowledges that Licensor has the
right to establish and to change the standards of quality of
the Licensed Goods identified by the Licensed Marks, subject
to the further terms of this Paragraph 4.
B. Licensor expressly adopts the standards of quality of the
Licensed Goods identified by the Licensed Marks as they
existed on the Effective Date (as defined below) of this
Agreement.
C. Licensor agrees that it will maintain quality standards for
the goods and services provided by Licensor and its licensees
in the Retained Businesses under those marks which are the
same as or substantially
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similar to the Licensed Marks (hereinafter, the "Retained
Marks") at a level consistent with or superior to the quality
standards in effect for such trademarks of Licensor on the
date of this Agreement, provided that Licensor may make
reasonable modifications to such standards to conform them
with quality standards for the Licensed Goods proposed by
Licensee and approved by Licensor under sub-paragraph E,
below. In order to permit Licensee to monitor Licensor's
adherence to the foregoing covenant, Licensor further agrees
that if it intends to enter into any new license with a third
party to use any of the Retained Mark in connection with
Licensor's Retained Businesses, Licensor shall submit the
proposed quality standards for the goods or services to be
offered under such license to the Licensee at least thirty
(30) days prior to the date such license with the third party
becomes a binding agreement of Licensor. If Licensee objects
to the proposed standards during such thirty (30) day period,
Licensor will not adopt such standards until the parties have
resolved such objections.
D. Licensor agrees that it will not change the standards of
quality for any of the Licensed Goods without giving Licensee
at least sixty (60) days written notice of the change and,
further, that any such changes will not be required to be made
by the Licensee until the Licensee has exhausted its inventory
of goods made in accordance with the Licensor's prior
standards. Licensee agrees to conform to such standards as
Licensor may establish from time to time, provided that the
new standards do not (i) materially increase the cost of
production or distribution of the Licensed Goods affected by
such changes over the existing standards, (ii) materially
depart from the quality standards established by Licensor for
the Retained Businesses, or (iii) materially depart from the
quality standards in effect as of the Effective Date.
E. Licensee may propose new standards for adoption by Licensor
for Additional Goods (as defined in P. 5, below), and it may
suggest changes in existing standards for the Licensed Goods
bearing the Licensed Marks. Such proposed standards shall be
submitted in writing for approval by Licensor, which approval
shall not be withheld or delayed if such proposed standards
are consistent with existing standards applicable to the
Licensed Goods and the Retained Businesses. If the Licensor
does not respond in writing to the Licensee regarding such new
or changed standards within thirty (30) days of its receipt of
the Licensee's written proposal, the Licensor's consent
thereto shall be conclusively presumed.
F. Licensee agrees to furnish to Licensor, at Licensor's
request, a reasonable number of samples of each of the
Licensed Goods identified by the Licensed Marks, without cost
to Licensor, not to exceed twenty (20) samples of any one
product in any one year period. Additional samples shall be
furnished to Licensor at its request and expense, based on
Licensee's wholesale price plus shipping. The limitation of
this paragraph
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shall not apply to samples of the Licensed Goods which are
necessary for Licensor to obtain or maintain the registration
of the Licensed Marks or for the enforcement of rights in such
marks.
G. Licensee shall not advertise, distribute, offer for sale,
render, or sell Licensed Goods identified by the Licensed
Marks which do not meet the quality standards established
hereby. However, Licensee shall have the right to dispose of
any Licensed Goods not made in accordance with the Licensor's
standards or which are no longer in style in accordance with
the then prevailing custom and practice of the trade for like
goods.
H. Licensee shall permit Licensor or its designees to inspect
Licensee's premises, facilities, and equipment, during normal
business hours for the purpose of insuring Licensor's control
over the quality of the Licensed Goods identified by the
Licensed Marks. Licensee, however, shall not be required to
permit any such inspection by Licensor where the inspection
would disclose one or more trade secrets of the Licensee.
I. So long as Jack W. Nicklaus is actively involved in the
management of Licensor, all final decisions by Licensor
regarding the standards of quality or the approval or
disapproval of Additional Goods shall be made personally by
Jack W. Nicklaus, unless Licensee waives such requirement.
5. EXPANSION OF EXISTING RIGHTS. The parties acknowledge that the Licensed Marks
and Nicklaus Image have enjoyed worldwide renown as a result of the fame of Jack
W. Nicklaus and the business, marketing and licensing activities conducted by
Licensor prior to the date of this Agreement. Subject to the terms of this
paragraph, Licensor hereby agrees to grant Licensee the right, on an exclusive
worldwide basis, to expand the current scope of the business conducted under the
licenses granted by this Agreement to any reasonable category of goods or
services that either party proposes to offer or license which is outside of the
scope of the Retained Businesses (the "Additional Goods"), and to provide for
any reasonable extension of the Licensed Goods and Licensed Marks under this
Agreement to cover such expansion.
A. Licensee may, but shall have no obligation whatsoever to,
undertake the development of a new product or service which is
within the Additional Goods. In the event that Licensee
desires for such product to be advertised, promoted, or sold
or such service to be rendered using any of the Licensed Marks
or the Nicklaus Image, Licensee will provide Licensor with
written notice of its intention to develop such Additional
Goods and a reasonable description of the product(s) or
service(s) involved, the Licensed Marks which Licensee
proposes to utilize, and Licensee's proposed quality standards
for such Additional Goods. Licensor shall have thirty (30)
days after its receipt of such notice to make written
objection to such proposal if Licensor reasonably believes
that the use of the Licensed Marks in connection with the
Additional Goods proposed in Licensee's notice: (i) will be in
the same field of use as any of
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the Retained Businesses, or would cause substantial damage to
any of Licensor's material business relationships in
connnection with the Retained Businesses, (ii) will associate
the goodwill of the Licensed Marks with a product or service
category or distribution network having a reputation which
would substantially harm the public image of Licensor or any
of its Retained Businesses, or (iii) would substantially harm
the personal reputation or image of Jack W. Nicklaus or
compromise his integrity as a public figure.
B. Unless Licensor makes a timely written objection to
Licensee's proposal to add Additional Goods to this Agreement,
the product(s) and/or service(s) described in Licensee's
notice shall be added to the Licensed Goods subject to this
Agreement, and Schedule B shall be deemed amended as set forth
in such notice without further action of the parties. In the
event that Licensor objects to Licensee's notice within the
required time period, the parties will make reasonable efforts
to address Licensor's objections and, to the extent
practicable under the circumstances, to reach agreement upon a
revised description for the Additional Goods which resolves
such objection, which description shall be incorporated in a
written amendment to Schedule B to this Agreement. If the
parties are unable to resolve Licensor's objections, the
Additional Goods described in Licensee's notice shall not be
licensed under this Agreement. In the event that Licensee in
good faith believes that Licensor has no reasonable basis for
any objection raised under sub-paragraph A, above, Licensee
shall have the right to seek relief as provided in Paragraph
17, below.
C. If Licensor undertakes to develop any new product or
service, or if it receives an offer from a third party to
license a new product or service, which is within the scope of
the Additional Goods, and for which the Licensor intends to
use or license the use of any marks which are the same as or
substantially similar to the Licensed Marks or any part of the
Nicklaus Image, Licensor shall first offer Licensee the right
to develop or sublicense such product(s) or service(s) under
exclusive royalty-free license as part of the Licensed Goods
in accordance with the terms of this Agreement. Such offer
shall be in writing and shall state Licensor's intention to
develop or license such Additional Goods, shall provide a
reasonable description of the product(s) or service(s)
involved and the trademarks which Licensor proposes to utilize
as Retained Marks in connection with such business, and shall
identify the names of any prospective third party licensees
and the material licensing terms offered by them to Licensor.
If such offer is made by Licensor in response to a third party
licensing offer, Licensor's offer shall include the option, in
Licensee's discretion, to pursue such licensing opportunity
with such third party without compensation to Licensor in the
event that Licensee accepts the opportunity relating to the
offered goods or services. In the event that Licensee accepts
the offer to develop or sublicense the Additional Goods
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identified in such offer, the product(s) and/or service(s)
described in Licensor's offer shall be added to the Licensed
Goods and the proposed marks shall be added to the Licensed
Marks subject to this Agreement, and Schedule B shall be
deemed amended as set forth in such offer without further
action of the parties.
D. In the event that Licensee fails to accept any offer made
by Licensor under sub-paragraph C., above, within a sixty (60)
days of its receipt thereof, Licensor may request that such
Additional Goods be added to the Retained Businesses
identified in this Agreement by further written notice
renewing the terms of its prior offer and stating Licensor's
intention to add such Additional Goods to the Retained
Businesses if such renewed offer is rejected and such addition
is approved in writing by Licensee. Licensee agrees to respond
in writing to any such request as soon as reasonably
practicable, provided however, that Licensee shall not be
required to accept Licensor's prior offer or to approve
Licensor's request to add the proposed Additional Goods to the
Retained Businesses if Licensee reasonably determines that (i)
such Additional Goods are not appropriate to the brand image
established by Licensee for the Licensed Goods, (ii) such
Additional Goods would compete with any of the Licensed Goods,
(iii) such Additional Goods would be an appropriate business
opportunity for Licensee to exploit at a future date, or (iv)
the proposed expansion of the Retained Businesses would cause
substantial damage to any of Licensee's material business
relationships.
E. If Licensee approves Licensor's request under sub-paragraph
D to add Additional Goods to the Retained Businesses reserved
by Licensor under this Agreement, the product(s) and/or
service(s) described in Licensor's request shall be added to
such Retained Businesses, and Schedule A shall be deemed
amended as set forth in such offer without further action of
the parties.
F. If Licensor decides to abandon its use of the Retained
Marks for any material part of the Retained Businesses
(considered on an individual product line or category of
service basis in any geographic jurisdiction where such
Retained Marks may be exploited by Licensee in a commercially
reasonable manner), rather than offering to assign, transfer
or otherwise convey its ownership interest in such trademarks
and/or the related assets of such business in a transaction
subject to sub-paragraph 13 B, below, Licensor shall provide
Licensee with reasonable prior written notice identifying the
products and/or services and jurisdictions affected by such
decision and the time after which Licensor reasonably
anticipates that such rights will be available for use by
Licensee. Licensee shall have the exclusive right during the
term of this Agreement to utilize such Retained Marks as
Licensed Marks for the purposes stated in such notice, and the
products and services identified in such notice may thereafter
be included in subsequent requests under this Paragraph to add
Additional
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Products to the schedule of Licensed Goods in the discretion
of Licensee. Licensor shall not be required under this
Agreement to continue its use of the Retained Marks in any
part of the Retained Businesses pending Licensee's exercise of
its option rights under this Agreement, nor will Licensor be
responsible for any diminution of its trademark rights in the
Licensed Marks caused by delay on the part of Licensee in
making an election under this sub-paragraph to utilize any
trademark rights which become available for Additional
Products.
6. NEW MARKS.
A. Licensee shall have the right to adopt and use in
connection with the Licensed Goods any mark which is similar
in sound or appearance to any of the Licensed Marks, without
the Licensor's prior written approval, provided that the mark
is used with goods or services which meet the Licensor's
standards for such goods or services. Such similar marks shall
be considered as part of the Licensed Marks.
B. Licensee shall have the right to request the adoption of
new marks by the Licensor as Licensed Marks for the Licensed
Goods which are not similar to the existing Licensed Marks,
and Licensee shall have the obligation to make such request if
Licensee intends to use the Nicklaus Image or any form or
variant of the Licensed Marks in connection with such new
marks or the advertisement or promotion of the goods and
services identified by such marks to the public. Any such
proposed new marks shall be submitted in writing to Licensor
for approval by Licensor, which approval shall not be
unreasonably withheld. If the Licensor does not respond in
writing to the Licensee regarding such new mark within twenty
(20) days of its receipt of Licensee's written proposal, the
Licensor's approval thereto shall be conclusively presumed.
Upon approval by Licensor, the new marks shall be considered
part of the Licensed Marks. In addition, Licensor shall be
free to utilize such marks or any reasonable variant thereof
approved by the parties as Retained Marks in connection with
the Retained Businesses to the extent that such use may be
appropriate.
C. In the event that Licensor desires to adopt any new marks
for the Retained Businesses which are not similar to the
existing Licensed Marks, and Licensor intends to use the
Nicklaus Image or any form or variant of the Licensed Marks in
connection therewith, Licensor shall provide Licensee with a
written description of such marks prior to their adoption.
Licensee shall have the right to object to Licensor's adoption
of such marks if, in the reasonable opinion of Licensee, the
proposed marks contain any scandalous or offensive matter, or
their association with the Nicklaus Image or Licensed Marks
could reasonably be expected to have a material adverse effect
upon the business of Licensee, the goodwill associated with
the Licensed Marks, or the market for the Licensed Goods. Iif
Licensee makes any such objections in writing to the Licensor
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regarding such new mark within twenty (20) days of its receipt
of Licensor's written description, the parties will be
required to mutually resolve such objections as a condition to
the adoption of such mark by Licensor. Upon adoption by
Licensor, the new marks shall be considered part of the
Retained Marks, unless otherwise mutually agreed by the
parties, and Licensee shall be free thereafter to utilize such
marks or any reasonable variant thereof approved by the
parties as Licensed Marks in connection with the Licensed
Goods to the extent that such use may be appropriate.
D. Licensee shall have the right to adopt, use and own any
mark in connection with the Licensed Goods free of the
limitations and restrictions of sub-paragraph A of this
paragraph if (i) the mark is not similar to any of the
Licensed Marks; and (ii) Licensee does not intend to use the
Nicklaus Image in connection therewith. In order to avoid
confusion as to the source of goods and services offered under
such marks as may be acquired or adopted under this
sub-paragraph, Licensee hereby covenants and warrants that it
will not use or license any mark adopted under this
sub-paragraph in any manner which will associate such mark
with the Nicklaus Image in advertising, marketing or
promotional activities during the term of this Agreement, nor
use or license any such mark in any business competitive with
any of the Retained Businesses until such earlier time, if
any, as Licensor has transferred or assigned its rights with
respect to the affected Retained Businesses to an unaffiliated
third party in a transaction subject to sub-paragraph 13 B.,
below.
E. Licensor shall have the right to adopt, use and own any
mark in connection with the Retained Businesses free of the
limitations and restrictions of sub-paragraph C of this
paragraph if (i) the mark is not similar to any of the
Licensed Marks; and (ii) Licensor does not intend to use the
Nicklaus Image in connection therewith. In order to avoid
confusion as to the source of goods and services offered under
such marks as may be acquired or adopted under this
sub-paragraph, Licensor hereby covenants and warrants that it
will not use or license any mark adopted under this
sub-paragraph in any manner which will associate such mark
with the Nicklaus Image in advertising, marketing or
promotional activities during the term of this Agreement.
F. The parties further acknowledge that each of them shall be
entitled to own, utilize and register any mark adopted by them
under P. P. 6D or 6E free and clear of the other restrictions
and limitations of this Agreement, provided however, that the
insurance and indemnification provisions of P. 11 shall apply
to any claim made against or loss sustained by a party as a
result of the other party's use or licensing of any such marks
during the term of this Agreement.
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7. LABELING AND ADVERTISING.
A. All advertising and labeling of Licensee for the Licensed
Goods identified by the Licensed Marks and/or Nicklaus Image
shall conform to good industry practice and shall comply with
all governmental laws and regulations.
B. Licensee shall submit copies of any new labeling or
advertising bearing the Licensed Marks and/or Nicklaus Image
to Licensor not less than thirty (30) days prior to its first
use by Licensee. If Licensor reasonably objects to any such
labeling or advertising within ten (10) days after its receipt
of such copies, the Licensee shall thereafter not use it until
it meets with Licensor's approval, which approval shall not be
unreasonably withheld or delayed.
C. Licensee shall use the Licensed Marks only in the manner
and format specified by Licensor. The parties acknowledge that
Licensor has established formats and standards for use of the
Licensed Marks and Retained Marks prior to the date of this
Agreement and agree that such formats and standards will form
the basis for Licensor's specifications under this
sub-paragraph with respect to the Licensed Marks. Licensee
shall have the right to propose for Licensor's review new
formats and standards for use of the Licensed Marks, which
standards shall form the basis for future specifications by
Licensor with respect to such Licensed Marks under this
sub-paragraph upon approval by Licensor. Licensor shall not
unreasonably withhold or delay its approval of any new formats
or standards proposed by Licensee hereunder, and Licensor
shall be deemed to have approved any such formats and
standards unless written objection is made to Licensee within
twenty (20) days of Licensor's receipt of a written proposal
from Licensee requesting such approval under this
sub-paragraph.
D. Licensee shall use such trademark notices - for example,
the encircled "R" symbol of registration - as Licensor may
reasonably require.
E. In order to maintain the goodwill of the Nicklaus Image and
protect the common interests of Licensor and Licensee in the
preservation of such goodwill, the parties agree to consult
with each other and the other licensees involved in the
marketing of the Licensed Goods and Retained Businesses
regarding appropriate uses of the Nicklaus Image to promote
their respective marketing activities. Neither Licensor nor
Licensee shall materially depart from or authorize any
material departure from the standards and practices
established prior to the date of this Agreement for
utilization of the Nicklaus Image in advertising and
promotional materials generated during the term hereof unless
such departure is mutually discussed and approved by the
parties prior to the dissemination of such materials, which
approval shall not be unreasonably withheld or delayed.
Licensor agrees to use its reasonable efforts to provide
copies and
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samples of advertising and labeling generated by Licensor and
its other licensees in connection with the Retained Businesses
to Licensee for review as soon as practicable after such
materials become available to Licensor in order to allow the
parties to discuss the effective utilization of the Retained
Marks and Nicklaus Image and to promote uniform brand
standards.
8. REPRESENTATIONS AND ACKNOWLEDGMENTS CONCERNING LICENSED MARKS.
A. Licensor represents, warrants and agrees that:
i. It is the owner of all right, title and
interest in and to the trademark and service mark
registrations and applications listed on Schedule B.
ii. It will maintain the registrations on
Schedule B for so long as the Licensee is using the
mark on any of the goods or the rendering of the
services set forth in such registration(s).
iii. It will, on request by Licensee, file
applications to register the Licensed Marks in any
country where the marks are not presently registered
for any goods and services within the scope of this
License.
iv. It will file applications at Licensee's
expense to register any new marks suggested by
Licensee and approved by Licensor pursuant to P. P.
6(A), and (B) in any classes and countries requested
by Licensee, and it may file such additional
applications, at Licensor's expense, in all other
classes and countries which it considers appropriate,
and seek reimbursement from Licensee for the
reasonable costs of filing any such registration in
the event such Licensed Mark is later utilized by
Licensee in any jurisdiction or product category
covered by such registrations.
v. It has agreements regarding the use of
the GOLDEN BEAR name, the Licensed Marks or related
trademarks, and the Nicklaus Image with the parties
shown on Schedule D, and this License is subject to
those agreements.
vi. It has pending administrative or court
actions involving the Licensed Marks as set forth on
Schedule E.
B. Licensee represents, warrants and agrees that:
i. Any and all use of the Licensed Marks
shown on the attached Schedule B, or any variants
thereof, as well as any new marks adopted by the
parties under P. 6(A), (B) and (C) and used by
Licensee pursuant to this Agreement shall inure to
the benefit of the Licensor as owner of the Licensed
Marks and Retained Marks.
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ii. During the term of this Agreement and
thereafter, Licensee agrees that nothing herein shall
give it any right, title or interest in or to the
Licensed Marks, except the right to use in accordance
with the terms of this Agreement. Nothing herein
shall preclude Licensee from acquiring a right, title
or interest in the Licensed Marks or in any other of
the marks reserved by Licensor pursuant to separate
agreements.
iii. During the term of this Agreement and
thereafter, Licensee agrees not to raise or cause to
be raised any objection on any ground whatsoever to
the validity of the Licensed Marks, the Licensor's
ownership thereof, or the Licensor's right to
register said marks as Licensed Marks for the
Licensed Goods or as Retained Marks for the Retained
Businesses, provided that such registrations are made
in conformity with the terms and conditions of this
Agreement.
iv. Except as provided in clause A.iv,
above, Licensee will reimburse Licensor for all
reasonable costs in connection with the filing and
maintenance of registration of the Licensed Marks for
the Licensed Goods, including the costs and
attorney's fees relating to the recording of the
Licensee and its sub-licensees as registered users,
as well as for all other costs related to the
protection of the Licensed Marks for the Licensed
Goods. Licensee agrees, on request by Licensor, to
advance government fees and out-of-pocket expenses,
including attorney's fees, in connection with the
filing and maintenance of registrations of the
Licensed Marks for the Licensed Goods and such other
registrations as may be filed at the request of
Licensee for protection of the interests of
Licensee's future rights with respect to Additional
Goods.
9. MAINTENANCE OF TRADEMARK RIGHTS; SPECIAL RIGHT OF TERMINATION.
A. The Licensor and Licensee agree that the non-use of the
Licensed Marks or of the Nicklaus Image by Licensee can have a
substantial adverse impact on the ownership rights of Licensor
in its Licensed Marks. Licensee agrees that the provisions of
this Paragraph shall apply in the event that Licensee does not
continue to make good faith, reasonable use of all of the
Licensed Marks in connection with the distribution and sale of
goods and rendering of services included within the Licensed
Goods, unless Licensor agrees in writing to waive its rights
under this sub-paragraph with respect to a particular mark,
geographical jurisdiction and/or product category. "Reasonable
Use" under this paragraph shall not require the sale of any
particular quantity or dollar value of Licensed Goods bearing
the Licensed Mark so long as Licensee or its authorized
sub-licensee(s) make BONA FIDE use of each Licensed Mark in
the ordinary course of trade in conformity with 15 U.S.C.
ss.1127, or such definition of
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trademark "use" as may be adopted in any successor statute or
regulation. The abandonment by Licensee of an obsolete variant
of a Licensed Mark in favor of a redesigned or updated
Licensed Mark adopted under this Agreement as provided in
Paragraph 6 to represent the same brand shall not subject
Licensee to the provisions of this Paragraph with respect to
such obsolete mark or give rise to any rights in Licensor to
an assignment of any rights with respect to such Licensed
Mark.
B. Licensor and Licensee agree and acknowledge that Licensee
may from time to time deem it necessary to change Licensee's
use of the Licensed Marks and the Nicklaus Image in order to
meet competitive conditions in the markets for the Licensed
Goods. In the event that Licensor believes, in good faith,
that such changes may create a substantial risk of abandonment
of any of the Licensed Marks for any class of Licensed Goods
in any jurisdiction, Licensee shall provide reasonable
assurances to Licensor of its intention to utilize the
affected Licensed Marks upon request unless Licensee elects to
abandon such trademarks under sub-paragraph C, below.
C. If Licensee elects to abandon its use of any of the
Licensed Marks or to abandon its activities with respect to
the sub-licensing and/or sales of the Licensed Goods entirely
in any jurisdiction within Licensor's existing business as of
the date of this Agreement or in any jurisdiction to which
Licensee extends the business hereafter, Licensee shall give
Licensor prior written notice of its intention to abandon such
use.
i. In the event Licensee gives written
notice of its intention to abandon pursuant to
sub-paragraph C., above, Licensee shall, upon written
request by Licensor, provide an assignment and
release of Licensee's further rights under this
Agreement with respect to its right to use such
individual Licensed Marks and the Nicklaus Image for
the affected classes of Licensed Goods in the
applicable jurisdiction; and Licensor thereafter
shall be free to use, license or sub-license such
rights in the applicable jurisdiction in order to
maintain its trademark rights as an addition to the
Retained Businesses authorized by this Agreement and
subject to the other terms applicable to such
Retained Businesses.
ii. The parties acknowledge that the
rights and obligations of the parties under this
sub-paragraph are intended to be severable, based
upon Licensee's intentions with respect to the use of
each Licensed Mark and the Nicklaus Image for each
class of Licensed Goods in each applicable
jurisdiction, and that the transfer by Licensee of
its rights with respect to any individual mark as a
trademark for any class of Licensed Goods in any
affected jurisdiction as a result of Licensor's
exercise of its rights under this sub-paragraph shall
not affect the rights of Licensee (i) to utilize
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such trademark in any other jurisdiction where it has not
elected to abandon its use of such trademark, (ii) to
utilize such trademark on any other classes of Licensed
Goods which may be offered by or under license from
Licensee in the affected jurisdiction, or (iii) to utilize
or adopt any other Licensed Mark or the Nicklaus Image in
the affected jurisdiction.
D. In the event that Licensee elects to abandon its use of all
or substantially all of the Licensed Marks in all or
substantially all of the countries included within the
Transferred Business conveyed to Licensee as of the date of
this Agreement and to which the Licensee hereafter extends
such business, other than territories where Licensee's rights
have been abandoned or surrendered to Licensor under
sub-paragraph C, above (hereafter the "Existing Territory"),
Licensor shall have the right to terminate this Agreement by
written notice to Licensee. Licensee may elect to abandon the
Licensed Marks by written notice to Licensor or by non-use of
all or substantially all of the Licensed Marks in all or
substantially all of the Existing Territory. The Licensee
shall have the right to withdraw any written election under
this sub-paragraph within thirty (30) days of its receipt of
Licensor's notice of termination. The Licensee shall also have
one hundred and eighty (180) days from the date of a notice of
termination from Licensor to cure any alleged abandonment
resulting from non-use by re-commencing use of the Licensed
Marks with respect to any commercially reasonable number of
the Licensed Goods in any commercially reasonable part of the
Existing Territory, provided that (I) LICENSEE SHALL PROMPTLY
ASSIGN AND RELEASE ITS RIGHTS AS PROVIDED UNDER CLAUSE II OF
SUB-PARAGRAPH C, ABOVE, IN ANY INDIVIDUAL LICENSED MARKS AND
LICENSED GOODS IN ANY JURISDICTIONS IN WHICH THE Licensee does
not intend to re-commence actual use, and (ii) Licensee shall
be required to promptly undertake and diligently continue
during such cure period those preliminary marketing activities
which are necessary or prudent to avoid a finding that such
any Licensed Marks have been abandoned or deemed abandoned
with respect to the Licensed Goods and territories which
Licensee seeks to retain under the laws and regulations of the
United States or any other applicable jurisdictions.
E. The failure of Licensor to request a release of trademark
rights from Licensee under this Agreement, or its failure to
elect to terminate this Agreement within the time provided by
this Agreement, shall not preclude Licensor from invoking the
provisions of sub-paragraph D of this paragraph at any
subsequent time, provided that it shall be required to give
Licensee ninety (90) days notice of its intention to invoke
such provisions, which notice shall be subject to the cure
rights provided in such sub-paragraph, during which notice
period Licensee shall be entitled to continue its rights under
the Agreement provided its use is in conformity with the
remaining terms of this Agreement.
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<PAGE>
F. If Licensor exercises its special right of termination
under sub-paragraph D this paragraph, this Agreement shall
terminate on the date stated in the notice of termination, and
the parties shall be released from any further obligations to
each other except for those which relate to acts occurring
prior to the date of termination.
G. The exercise of Licensor's special right of termination
under this paragraph shall not be subject to arbitration under
this Agreement.
10. TRADEMARK INFRINGEMENT/UNFAIR COMPETITION CLAIMS.
A. Each party agrees to notify the other party of any claim
made against it with respect to the use of the Licensed Marks
by such party or its licensees, and of any claims of rights
conflicting with Licensor's exclusive ownership of the
Licensed Marks and the Nicklaus Image.
B. The Licensor shall have the first option to bring or defend
any trademark and/or unfair competition action arising from
the Licensee's use of the Licensed Marks, provided that such
right shall not apply to the prosecution or defense of any
claim which relates primarily to the activities and rights of
Licensee under this Agreement, or otherwise does not
materially affect the interests of Licensor in the use of the
Retained Marks in the Retained Businesses. Licensee shall have
the first option to bring or defend any action not subject to
Licensor's first option upon written notice to Licensor, which
notice shall describe the basis for such action, parties
involved and trademark and related rights in issue. If either
party does not exercise its option to bring or defend such an
action within ten (10) calendar days of its receipt of the
other party's written request to do so, the party making such
request may bring or defend such action in its name and in the
name of the other party as its interest appears in such
action. As between the Licensor and Licensee, the party
bringing the action shall have the right to control the
conduct of the proceeding, but in no circumstance shall either
party enter into any settlement, license or compromise of any
controversy which would affect Licensor's rights as owner of
the Licensed Marks and/or Nicklaus Image or Licensee's
exclusive rights to utilize them under this Agreement without
the prior written approval of the other party, which shall not
be unreasonably withheld.
C. In any action brought by Licensee involving the Licensed
Marks, the Licensor shall have the option to participate. In
any action brought by Licensor which relates to the Licensed
Marks or rights to license them under this Agreement, the
Licensee shall have the option to participate. In any action
involving the Licensed Marks, the party controlling such
action shall keep the other party reasonably advised regarding
the status of such proceedings, and the Licensor and Licensee
shall each render its fullest cooperation and assistance to
the other.
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<PAGE>
D. In any action which arises as a result of or relates to the
marketing or sale of the Licensed Goods under the Licensed
Marks, the Licensee shall bear all reasonable costs of itself
and of the Licensor, including out-of-pocket costs and
expenses of witnesses employed by Licensor, Licensor's
counsel, as well as all costs and reasonable expenses of any
material or expert witness. If the Licensor brings or defends
such an action, it shall have the right to set off its
out-of-pocket expenses, including attorney's fees, against any
monetary award or settlement proceeds actually received, and
the balance of any such receipts shall be remitted to
Licensee. If the Licensee brings such action, it shall
promptly pay all costs and expenses of Licensor as required by
this sub-paragraph, and upon payment of such costs and
expenses, Licensor agrees that Licensee shall have the right
to plead, prove and receive such amounts as part of its
damage, fees or taxable costs award in such proceedings
without further obligation to Licensor.
E. In any action which arises as a result of Licensor's
marketing or sale of goods or services included within the
Retained Businesses under the Retained Marks, the Licensor
shall bear all costs of itself and the Licensee, including
costs and related out-of-pocket expenses of witnesses employed
by Licensee, Licensee's counsel, as well as all costs and
reasonable expenses of any material or expert witness. In any
such action, the Licensor shall have the right to receive and
retain any monetary award granted by the court.
11. PRODUCT LIABILITY, INDEMNITY & INSURANCE.
A. Nothing in this Agreement shall be construed as a guaranty
or warranty of any kind on the part of Licensor with respect
to the Licensed Goods bearing the Licensed Marks which are
manufactured or rendered for or by Licensee.
B. In no event shall Licensor be liable for any loss or damage
sustained by Licensee because of the manufacture, rendering,
sale or distribution of the Licensed Goods identified by the
Licensed Marks, except where the loss or damage is caused by
the negligence of the Licensor. In no event shall Licensee be
liable for any loss or damage sustained by Licensor because of
the manufacture, rendering, sale or distribution of goods or
services identified by the Retained Marks through the Retained
Businesses, except where the loss or damage is caused by the
negligence of the Licensee.
C. Licensee shall indemnify Licensor, its officers, directors,
agents, and employees harmless from, against and in respect of
any and all losses, liabilities, claims, causes of actions,
suits, damages and expenses (including attorney's fees), for
which any of them may become liable or which any of them may
incur, sustain or be compelled to pay in any action or claim
against the Licensor, its officers, directors, agents and/or
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<PAGE>
employees arising out of or with respect to any act or
omission that may be suffered or committed by Licensee or by
any individual, partnership, firm, corporation, or other
enterprise acting or purporting to act (whether or not so
authorized) for or on behalf of the Licensee, including
sub-licensees acting under color of this Agreement, unless
such claim, loss or damage is caused by the negligence of the
party seeking such indemnification.
D. Licensor shall indemnify Licensee, its officers, directors,
agents, and employees harmless from, against and in respect of
any and all losses, liabilities, claims, causes of actions,
suits, damages and expenses (including attorney's fees), for
which any of them may become liable or which any of them may
incur, sustain or be compelled to pay in any action or claim
against the Licensee, its officers, directors, agents and/or
employees arising out of or with respect to any act or
omission that may be suffered or committed by Licensor or by
any individual, partnership, firm, corporation, or other
enterprise acting or purporting to act (whether or not so
authorized) for or on behalf of the Licensor, including other
licensees involved in the Retained Businesses, unless such
claim, loss or damage is caused by the negligence of the party
seeking such indemnification.
E. During the term of this License, each party shall maintain
insurance in full force and effect covering general liability
(including contractual and products liabilities and completed
operations) and such other specific areas of liability as are
customarily insured against by parties domiciled in the United
States conducting business activities of the same general kind
and scope as those undertaken by Licensor and Licensee from
time to time, including appropriate umbrella coverage for
catastrophic events. The amounts of coverage to be provided by
each party (and deductibles or self insurance primary to such
coverage) shall be set in its reasonable discretion according
to customs in the businesses undertaken and general corporate
standards of prudent financial management, provided that
neither party shall materially reduce any insurance coverage
limits (or increase any deductibles or self insurance limits)
from the limits in force previous to such action without
providing reasonable written notice of such action to the
other party. Any policies of insurance effected hereunder
shall be placed with an insurance company of reasonable net
worth and reputation in the industry which is licensed in the
State of Florida, and any self insurance program effected by a
party in lieu of primary insurance coverage required hereunder
shall be designed and implemented in accordance with all
legal, regulatory and underwriting requirements applicable to
such programs and otherwise reasonably acceptable to the other
party.
F. Each party shall use reasonable efforts to name the other
party as an additional named insured party in any liability
policies effected by such
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party under sub-paragraph E., above, where such insurance can
be obtained without material increase in premium or the party
so named agrees to pay the additional premium attributable to
such designation. Each party agrees to provide such other
party with certificates showing the policies obtained under
this paragraph, with the coverages and names of all insured
parties designated, and to cause its insurance carriers to
give copies of any official notice to such other party in the
event of a cancellation, non-renewal or material reduction or
limitation of coverage under any such policy.
12. BANKRUPTCY OR INSOLVENCY PROCEEDINGS.
A. If either Licensor or Licensee shall file a petition for
relief under the United States Bankruptcy Code, 11 U.S.C.
ss.101 ET SEQ., or if an involuntary bankruptcy petition is
filed under 11 U.S.C. ss.303 which results in entry of an
order for relief as to either Licensor or Licensee, then the
rights of Licensor and Licensee with respect to rejection of
this Agreement under 11 U.S.C. ss.365(a) including, without
limitation, all rights to enforce the exclusivity provisions
of this Agreement, shall be governed by 11 U.S.C. ss.365(n) as
it presently exists or is hereafter amended.
B. If Licensor makes an assignment for the benefit of
creditors, discontinues its business, or if a receiver or
custodian is appointed to take control of Licensor's property
or business, Licensor shall be in material default under this
Agreement, and Licensee shall have all of the rights of a
licensee under 11 U.S.C. ss.365(n) as it presently exists or
is hereafter amended, including, without limitation, all
rights to enforce the exclusivity provisions of this
Agreement.
13. LICENSEE'S PURCHASE OPTION RIGHTS.
A. If Licensor decides to assign, transfer or otherwise convey
its legal title and ownership interest in the Licensed Marks,
or in any other trademark right, trademark registration, or
publicity right which is licensed exclusively to Licensee
under this Agreement, Licensor shall offer to transfer to
Licensee its legal title and/or ownership interest in all
trademark rights, trademark registrations, and publicity
rights which are licensed exclusively to Licensee under this
Agreement, together with the goodwill of the businesses
symbolized thereby, for a consideration of ten dollars
($10.00), plus reimbursement to Licensor for all costs and
expenses, including attorney's fees, directly related to the
transfer of such title and/or interest to Licensee. Licensee
acknowledges that such transfer will include the right to
utilize GOLDEN BEAR in Licensee's corporate name, but will not
include any right to own or register any part of the Retained
Marks or Nicklaus Image in connection with the Retained
Businesses or the right to prevent Licensor from utilizing its
corporate name in connection therewith. As a condition to the
conveyance of Licensor's rights under this sub-paragraph,
Licensee shall cooperate with
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Licensor in concluding and filing such documents and
instruments as may reasonably be required by Licensor's legal
counsel to assure the appropriate division of legal rights in
the Licensed Marks, the Retained Marks and Nicklaus Image
between the parties, including without limitation, such
additional trademark registrations and concurrent use
agreements as may be required to effect such division.
B. In the event Licensor desires to negotiate with any third
party to: (i) assign, convey or transfer its ownership
interest in, or to license substantially all of its beneficial
interest in the right to license and utilize, any part of the
Retained Marks or the Nicklaus Image as used in connection
with any of the Retained Businesses, or (ii) otherwise divest
itself of all or substantially all of the assets, equity
holdings, and/or business opportunities relating to any of the
Retained Businesses (the foregoing being collectively referred
to as the "Business Interests"), Licensor agrees to enter into
good faith negotiations for a period of sixty (60) days with
Licensee regarding the acquisition by Licensee of any of the
Business Interests which Licensor desires to transfer to third
parties. Unless the parties have concluded an agreement for
Licensee to acquire the Business Interests which Licensor
intends to transfer within such negotiation period, Licensor
shall be free to offer and sell the Business Interests
included in such negotiations to third parties subject only to
the further provisions of this paragraph. In the event
Licensor proposes to make such a transfer to a third party
upon terms and conditions less favorable to Licensor than the
last offer of Licensee made during the negotiation period,
Licensor shall give Licensee written notice of the terms of
the proposed transfer, and the Licensee shall have the right
to accept the proposed transfer on the same terms and
conditions offered to or by said third party by accepting such
offer within thirty (30) days of the date such notice is
given, with the closing to be within sixty (60) days of the
Licensee's written notice of the exercise of its option. For
purposes of this sub-paragraph, a proposed change of control
of Licensor shall be deemed a transfer subject to the first
negotiation rights set forth herein, except as provided in
sub-paragraph C, below.
C. The terms of this Paragraph 13 shall not apply to any
proposed transfer by Licensor to Mr. Nicklaus, members of his
immediate family or their personal representatives or lineal
descendants, or to any entity or trust established to hold the
Licensed Marks, Retained Marks and/or Nicklaus Image for the
benefit of such persons and their authorized licensees,
provided that such transferee assumes all of the obligations
of this Agreement with respect to any intangible rights so
assigned.
14. ASSIGNMENTS & SUB-LICENSES.
A. Except as otherwise provided in this Paragraph 14, this
Agreement may not be assigned, transferred or hypothecated by
Licensee, whether
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by operation of law or otherwise, without the prior written
consent of Licensor.
B. This Agreement may not be assigned, transferred or
hypothecated by Licensor, without the prior written consent of
Licensee.
C. Any attempted assignment, or transfer or hypothecation of
this Agreement by either party without the written consent of
the other, where such consent is required, shall be null and
void and of no effect, and shall constitute a material default
hereunder.
D. Licensee may grant to any person, firm, corporation or
other entity a sub-license of any of its rights under this
License, provided that the sub-license is expressly subject to
the terms and conditions of this License.
E. Notwithstanding the restrictions of this paragraph,
Licensee shall be entitled without the consent of Licensor to
transfer this Agreement, by assignment or by operation of law,
to any entity which simultaneously acquires all or
substantially all of the business developed by Licensee under
this Agreement, provided that such entity agrees in writing to
accept and be bound by all of the terms and conditions of this
Agreement, to the extent such undertaking is not made by
operation of law.
15. RELATIONSHIP OF PARTIES.
A. Nothing in this Agreement shall create a joint venture or
establish the relationship of principal and agent or any other
relationship of a similar nature between the parties hereto.
Nothing contained in this Agreement shall be construed as in
any way granting to or conferring upon Licensee a "franchise"
within the meaning of any law, statute, rule, regulation,
order, decision or public policy.
B. In all of its transactions with third parties, the
Licensee shall assume sole responsibility for its commitments,
obligations, or representations made in connection therewith,
and it shall not attempt to bind or commit Licensor in any
matter whatsoever.
C. The parties acknowledge that, due to the common public
association of the Licensed Marks and Nicklaus Image with all
of the products and services offered by the parties and their
respective licensees utilizing the Licensed Marks and Nicklaus
Image, it is in their mutual best interests to furnish
reasonable cooperation to each other in order to support
common marketing efforts and a unified brand image, and to
assist each other and their respective licensees in preventing
the unauthorized use of the Licensed Marks and the Nicklaus
Image. Without limiting the rights of the parties to manage
and conduct their respective businesses independently as
contemplated by this Paragraph 15, the parties have agreed to
undertake the following obligations during the term of this
Agreement in support of their mutual interests in maintenance
of the goodwill represented by the Licensed Marks and Nicklaus
Image:
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i. During the Term of this Agreement,
Licensor and Licensee will keep each other advised of
the identity of any subsequent licensees or venture
partners authorized by the parties to utilize the
Licensed Marks and/or Nicklaus Image and the nature
of the business undertaken by them, and will provide
each other with reasonable advance notice of events
affecting their respective promotional activities
with respect to the Licensed Goods and Retained
Businesses or affecting public awareness of the
Licensed Marks and the common brand image developed
by the parties and their respective licensees.
ii. Licensor and Licensee will use all
reasonable efforts throughout the term of this
Agreement to meet periodically with each other at
least once per calendar quarter and, where
appropriate, with representatives of their respective
licensees to discuss matters of mutual importance to
them and complementary strategies with respect to the
effective world wide exploitation of the Licensed
Marks. In the event that either party elects to call
a general meeting of its staff and licensees or
venture partners to discuss matters of common market
strategy or business development, such party will
provide the other party with reasonable advance
notice of such meeting, and if requested by such
other party, the party calling such general meeting
will use reasonable efforts to schedule a plenary
session at such meeting where both parties and their
respective licensees and venture partners can attend
to exchange information and discuss matters of common
interest to them as persons utilizing the Licensed
Marks and Nicklaus Image. Unless otherwise agreed,
the expenses of any such plenary session shall be
shared by the parties on a PRO RATA basis according
to the number of attendees from each party. The
parties agree to hold any non-public marketing, sales
or business information obtained through such
meetings and discussions in strictest confidence, and
to treat such information in the same manner as their
own most sensitive confidential business information.
The parties further agree to impose similar
confidentiality restrictions upon their licensees in
a written document signed prior to the attendance of
any such party at any meetings where either party
reasonably believes that confidential information
will be discussed, unless the parties are satisfied
that the confidentiality provisions of the existing
license agreement with such party is sufficient to
protect their mutual interests under this clause.
iii. Without limiting the generality of the
cooperation to be furnished under this sub-paragraph
during the term of this Agreement: (i) Licensor
hereby agrees to use its reasonable efforts to
promote the use of the Licensed Goods by all parties
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<PAGE>
affiliated with Licensor and parties having
substantial ongoing licensing or business
relationships with Licensor in connection with the
Retained Businesses, to the extent that Licensor has
knowledge of such related parties' requirements for
goods or services of the type included within the
Licensed Goods, and (ii) Licensee hereby agrees to
use its reasonable efforts to promote the use of the
goods and services provided by the Retained
Businesses by all parties affiliated with Licensee
and parties having substantial ongoing licensing or
business relationships with Licensee in connection
with the Licensed Goods, to the extent that Licensee
has knowledge of such related parties' requirements
for goods or services of the type provided by the
Retained Businesses. The parties agree to cooperate
with each other and their respective licensees in the
development of advertising tie-ins and
cross-promotional activities using the Licensed Goods
and Retained Businesses wherever appropriate to the
common marketing objectives of the parties, and the
parties will make reasonable efforts to use branded
goods or services featuring the Licensed Marks and/or
Nicklaus Image throughout the term of this Agreement
in any of their other advertising or promotional
activities where use of such goods or services is
required.
iv. The parties acknowledge that the ready
availability of branded goods and merchandise bearing
the Licensed Marks and Nicklaus Image is important to
their common goals in promoting goodwill for their
respective businesses and securing long term brand
loyalties by supplying the requirements of affiliated
parties and business associates for products and
services endorsed by and associated with Jack
Nicklaus. For that reason, the parties agree to
cooperate with each other on an ongoing basis to
provide reasonable access to goods and services
associated with the Licensed Marks and Nicklaus
Image, and to extend to each other and their
respective clients, licensees and venture partners to
the fullest extent practicable the benefits of any
supply arrangements negotiated by the parties with
respect to the Licensed Goods and any goods and
services distributed through the Retained Businesses
in support of the development and implementation of
advertising and promotional activities requiring the
use of such goods and services. It is understood that
neither party shall be required under this clause to
make any purchase, advance funds, or provide any
credit or financial accommodation to the other party
in connection with any such supply arrangement, it
being understood that the party requesting goods or
services shall in all events be required to meet the
customary price, quantity and payment terms of the
supplier of such goods and services as a condition to
purchasing any such goods and services and to accept
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<PAGE>
sole financial responsibility for any purchases made
under this clause.
v. The parties hereby agree to use all
reasonable efforts, as licensor and licensee, to
limit conflicts between themselves and their
respective licensees and licensed venture partners
with respect to uses of the Licensed Marks or the
Nicklaus Image, and subject to the provisions of
applicable law, to cooperate in the control of "grey
market" sales of Licensed Goods and any other goods
and services offered by the Retained Businesses.
16. TERM OF AGREEMENT; TERMINATION.
A. Subject to the provision for prior termination as
hereinafter set forth, this Agreement and the licenses granted
hereunder shall be effective commencing upon the "Effective
Date", which for purposes of this Agreement shall have the
same meaning and be deemed to occur simultaneously with the
Effective Date defined in Section 4 of that certain Agreement
and Plan of Reorganization between Licensor and Licensee of
even date herewith, and shall continue in full force and
effect until December 31, 2026. Thereafter, this Agreement
shall automatically be renewed for successive ten (10) year
terms, subject to the terms of Paragraph 17, below.
B. Licensee may terminate this Agreement at any time upon
ninety (90) days prior written notice to the Licensor.
17. BREACH OF THIS AGREEMENT; ARBITRATION.
A. In the event that either party does not initiate action to
correct a breach of this License within ninety (90) days after
receipt of written notice from the other party, the party
giving such notice shall, as a condition to pursuing a
termination of this Agreement based upon such breach, demand
within ninety (90) days following the expiration of said
initial ninety (90) day period that the disputed matter be
submitted to arbitration by a single arbitrator in North Palm
Beach, Florida, or at such other site as the parties may
agree, in accordance with the Commercial Rules of the American
Arbitration Association. The cost and expenses (including
reasonable attorney's fees) of arbitration shall be
apportioned in such amounts and against such party or parties
as the arbitrator may determine.
B. The arbitrator shall have the right to issue reasonable
preliminary and final orders directing the parties to take
such actions or to cease and desist from such actions as may
be deemed necessary to ameliorate the effects of the alleged
breach on the aggrieved party or cause such party to honor its
financial commitments under this Agreement, provided that no
such award shall include incidental or consequential damages
or compensation for any losses sustained other than direct
costs incurred as
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<PAGE>
a result of such breach. Any orders so issued may be enforced
by preliminary or permanent injunction in any court of
competent jurisdiction subject to general principles of equity
applicable to such proceedings. The arbitrator shall also be
authorized to award and apportion reasonable attorneys' fees
to the prevailing party or parties in such action, in addition
to taxable costs of the arbitration.
C. In the event that Licensor declares a default under this
Agreement and requests termination as a remedy in its demand
for arbitration, it shall be the duty of the arbitrator to
determine whether the Licensee has committed a material breach
of any of the material covenants, terms or conditions of this
Agreement. If the arbitrator finds that there has been a
breach of any one or more of the terms thereof which is
material to the overall relationship of the parties under this
Agreement, the Licensee shall be afforded forty-five (45) days
from the date of the arbitrator's decision, or within such
additional time as the arbitrator may permit on request and
for good cause by Licensee, to cure such breach or to take
such actions or make such payments as the arbitrator may
require to ameliorate the effects of a default as a condition
to avoiding termination if such breach is not subject to cure.
If such material breach is curable and is not so cured, or if
such breach is not curable and the arbitrator does not
determine that there is an action or payment which would
appropriately ameliorate such breach, the Licensor shall have
the right to terminate this License upon written notice given
to Licensee within sixty (60) days of the later of (i) the
date of such arbitrator's decision, or (ii) the expiration of
the time afforded by the arbitrator for the cure. The
arbitrator may award such additional relief as the arbitrator
deems just, exclusive of termination, and may grant Licensor
the conditional right to terminate in the event Licensee fails
to comply with any remedies ordered by the arbitrator to
ameliorate the effects of a default which is not subject to
cure. The arbitrator's decision shall be final and binding
upon the parties, and it shall be a condition precedent to any
court action arising from an alleged breach of this License.
18. CESSATION OF USE OF LICENSED MARKS. Upon termination or expiration of this
Agreement, Licensee shall not thereafter use the Licensed Marks, including the
trade name GOLDEN BEAR, but it shall have the right to exhaust its inventory of
supplies bearing said marks, provided that they meet the Licensor's quality
standards. Licensee shall delete GOLDEN BEAR from its corporate name as soon as
reasonably practical after such expiration or termination.
19. NOTICES. Except as otherwise provided in this Agreement, all notices
required or permitted to be given hereunder shall be sent to the other in
writing and shall be valid and sufficient only if sent by facsimile transmission
and confirmed by registered or certified mail or the equivalent, postage
prepaid, addressed as follows:
LICENSOR: LICENSEE:
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<PAGE>
President President
Golden Bear International, Inc. Golden Bear Golf, Inc.
11780 U.S. Highway No. 1 11780 U.S. Highway No. 1
North Palm Beach, FL 33408 North Palm Beach, FL 33408
Either party hereto may change its address by a notice given to the other party
in the manner set forth above.
20. ENTIRE AGREEMENT; AMENDMENTS. This Agreement represents the entire
understanding and agreement into which all prior negotiations and agreements are
merged between the parties hereto with respect to the subject matter hereof; and
it can be amended, supplemented or changed, or any provision hereof can be
waived, only by a written instrument making specific reference to this License
signed by the party against whom enforcement of any such amendment, supplement,
modification or waiver is sought.
21. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
22. PARAGRAPH HEADINGS. The paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
23. APPLICABLE LAW. This Agreement shall be governed by the law of the State of
Florida.
24. SEVERABILITY. If any time subsequent to the date hereof, any provision of
this Agreement shall be held by any court of competent jurisdiction to be
illegal, void or unenforceable, in whole or in part, such provision (to the
extent of such illegality or unenforceability) shall be of no force and effect,
but the illegality or unenforceability of such revision shall have no effect
upon and shall not impair the enforceability of any other provision of this
Agreement.
25. CONSTRUCTION. All terms and words used in this Agreement, regardless of the
number, format or gender in which they are used, shall be deemed and construed
to include any other number (singular or plural), or any format (hyphenated or
capitalized), or any other gender (masculine, feminine or neuter), and the term
"and" shall include "or" and vice versa, as the contents or sense of this
Agreement may require, the same as if the words had been fully and properly
written in the proper number, format, gender or expression.
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed by their duly authorized representatives as of the day and year
first above written.
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<PAGE>
GOLDEN BEAR INTERNATIONAL, INC. GOLDEN BEAR GOLF, INC.
By:_________________________ By:___________________________
Title:________________________ Title:__________________________
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EXHIBIT 10.11
DESIGN SERVICES MARKETING AGREEMENT
DESIGN SERVICES MARKETING AGREEMENT, made as of this 7th day of June,
1996, by and between NICKLAUS DESIGN, a division of Golden Bear International,
Inc. ("GBI"), a Florida corporation having its principal place of business at
11780 U.S. Highway One, Suite 400, North Palm Beach, Florida 33408 ("Designer"),
and GOLDEN BEAR GOLF, INC., a Florida corporation having its principal place of
business at 11780 U.S. Highway One, Suite 400, North Palm Beach, Florida 33408
("Golden Bear").
W I T N E S S E T H:
WHEREAS, Designer and its predecessors have established and currently
operate a golf course design and consulting business (the "Business") providing
the personal golf course design services of Jack W. Nicklaus ("JWN"), Jack W.
Nicklaus II ("JWN II"), Steven C. Nicklaus ("SCN"), Gary T. Nicklaus ("GTN")
(collectively, the "Nicklaus Family"), and those associated designers employed
by Designer or under contract to serve on its staff (the "Design Associates");
WHEREAS, prior to the date of this Agreement, the Business has been
marketed by Designer worldwide under certain tradenames and service marks owned
by Designer, including "Jack Nicklaus Design", "Jack Nicklaus Golf Services",
"Golden Bear Design Associates" and "Nicklaus Design";
WHEREAS, as part of a corporate reorganization, Golden Bear has
acquired certain assets, intangible rights and marketing staff formerly utilized
by GBI to assist Designer in the marketing of its Business, and Golden Bear has
undertaken sole responsibility for worldwide brand development and marketing
activities which are complementary to the effective marketing of Designer's
services and the maintenance of its standing and image as a premiere golf course
design company;
WHEREAS, Designer intends to carry on the Business as a professional
design and consulting business, and desires to contract out related sales and
marketing activities to Golden Bear in order to concentrate the efforts of
Designer's staff on the design and implementation of golf course work;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions set forth herein, the parties hereto agree as
follows:
1. APPOINTMENT. Designer hereby appoints Golden Bear as its worldwide
marketing representative and sales agent for the purpose of identifying and
negotiating contracts with developers, owners and/or operators of golf
facilities and potential golf facilities (the "Clients") for Designer's golf
course design and consulting services, including contracts for the design and
redesign of golf courses and parts thereof and for such related consulting
services as may be offered from time to time by Designer in conjunction with its
Business. Designer further retains Golden Bear to provide ongoing liaison and
consulting services and administrative assistance to Designer in connection with
contracts concluded by Designer with such clients, as more particularly
described in Exhibit "A" annexed hereto (the "Contract Support Services").
Without limiting the
<PAGE>
foregoing, it is intended by the parties that Golden Bear will market Designer's
standard Golf Course Agreements (as the same may be modified from time to time,
the "Design Agreements") for projects which: (i) require the personal services
of JWN and/or other members of the Nicklaus Family as principal designer(s),
under design agreements which permit the utilization by Clients of the personal
endorsement of the principal designer(s), and (ii) require the personal services
of the Design Associates as the principal designer(s), under design agreements
which permit the utilization by Clients of the Nicklaus Design designation or
other identification of Designer as the source of the design work. The parties
understand that Design Agreements to be marketed under this Agreement will
normally require the Client to develop a full 18 hole championship quality golf
course, although Designer may undertake the original design of other larger or
smaller golf facilities involving multiples of 9 holes and the redesign of golf
holes as circumstances require. By this Agreement, Golden Bear will be
authorized to solicit design work from individuals, corporations and other
entities on a world-wide basis, directly or through affiliates or cooperating
sales representatives, provided that Golden Bear will not be authorized to
commit Designer to any work unless and until the terms of a formal Design
Agreement or other written contract for design work have been reviewed and
approved by Designer, which approval will not be unreasonably withheld provided
that Designer's customary terms and conditions for providing its design and
consulting services are met.
2. EXCLUSIVITY. The parties agree that Golden Bear will be Designer's
exclusive representative during the term of this Agreement, and that Designer
will be required to pay compensation to Golden Bear with respect to all Design
Agreements and other contracts for design and related consulting services
(collectively, with the Design Agreements, the "Client Contracts") concluded
during the term of this Agreement, except as otherwise provided in this
Agreement or otherwise mutually agreed by the parties in writing.
Notwithstanding the foregoing, the parties acknowledge and agree that Designer
shall be free to deal directly with respect to the marketing and negotiation of
contracts, agreements and undertakings to provide any of the following design
services (the "Protected Work"): (i) any design or design consulting services
provided for any entity controlled by, or under common control with, GBI or
Golden Bear, (ii) any design services provided as a courtesy or at Designer's
cost to modify, upgrade or redesign any existing golf course which was designed
or previously redesigned by Designer or its predecessor entities as part of the
Business, (iii) any daily fee golf facility developed by GBI, licensed by GBI to
operate utilizing GBI's trademarks on a royalty basis, or in which GBI, JWN or
other members of the immediate family of JWN acquire a controlling equity
interest (a "Daily Fee Golf Project"), or (iv) any golf facility developed as
part of, or as an amenity serving, a residential community developed by GBI,
licensed by GBI to operate utilizing GBI's trademarks on a royalty basis, or in
which GBI, JWN or other members of the immediate family of JWN acquire a
controlling equity interest (a "Residential Community Project"). Golden Bear
shall not be required to represent Designer exclusively, and Designer agrees
that Golden Bear may participate as a marketing representative, consultant and
liaison in connection with the promotion, sale, negotiation, contracting
<PAGE>
or performance of golf course design work on behalf of other golf course
designers during the term of this Agreement, subject to the further covenants
and conditions of this Section. Golden Bear agrees at all times during the term
of this Agreement to use its best efforts to promote the services of Designer
throughout the world, and to actively encourage all prospective Clients to
utilize the services of Designer, unless (i) Designer has expressly rejected a
Client introduced by Golden Bear under Section 4, below, or (ii) a Client has
contacted Golden Bear for the express purpose of obtaining the services of
another golf course designer. As a condition to Designer's waiver of potential
conflicts of interest which may arise out of Golden Bear's representation of
other golf course designers, Golden Bear acknowledges and agrees that it will
not utilize any confidential information entrusted to Golden Bear by Designer in
connection with this Agreement, its representation activities under this
Agreement, its corporate affiliations with Designer or the Nicklaus Family, or
its licensing relationships with Designer to further the interests of any
competing golf course designer or to imply the endorsement of Designer or the
Nicklaus Family for the services of such a designer, unless such activities have
been expressly approved by Designer in writing.
3. PARTICIPATION IN PROTECTED WORK. Golden Bear shall have the right to
participate as Designer's representative in connection with the negotiation and
management of the Client Contracts developed for any Daily Fee Golf Project or
Residential Community Project which is undertaken by Designer and its affiliates
with an Approved Client introduced by Golden Bear under Section 4, below, and to
earn compensation with respect to such activities as set forth in Section 5,
below. In the event that Designer or its affiliates require Golden Bear to be
substantially involved in the development, negotiation and/or administration of
the Client Contracts relating to a Daily Fee Golf Project or a Residential
Community Project involving a Client generated by Designer or its affiliates
directly or from another source, Golden Bear shall be entitled to receive
reasonable compensation for the services actually required by Designer and its
affiliates from Golden Bear in connection with such project, which services and
compensation shall be determined by mutual agreement of the parties on a
case-by-case basis at the time such services are requested, provided that
Representative shall in any event be entitled to receive an amount sufficient to
cover any out-of-pocket expenses incurred by Representative in connection with
its participation in any Protected Work contracted with its assistance. Designer
shall keep Golden Bear's marketing staff reasonably informed of any Protected
Work negotiated and contracted with parties other than Approved Clients through
the sole efforts of Designer and/or its affiliates during the term of this
Agreement, and shall promptly advise Golden Bear of any exclusive dealing or
territorial restrictions accepted by Designer in conjunction with any such
Protected Work in order to avoid marketing conflicts with prospective Clients
affected by such arrangements.
4. QUALIFICATION OF PROSPECTS. In order to protect the credibility of
the parties in their dealings with prospective Clients, the parties agree that
Designer will have the right to review and approve potential Clients identified
in writing by Golden Bear prior any active solicitation of Design Work from such
persons and that Golden Bear will limit its specific sales and negotiation
activities under this Agreement to those potential
<PAGE>
Clients approved by Designer (the "Approved Clients") except as otherwise
expressly requested by Designer under Section 3, above. The parties have annexed
an initial list of Approved Clients to this Agreement as Schedule "1", which
list reflects all current prospects of Designer (other than for Protected Work),
and Designer hereby assigns to Golden Bear the right to pursue the sale and
negotiation of Client Contracts with such Approved Clients pursuant to the terms
of this Agreement. The parties further agree that future prospects identified in
writing by Golden Bear will be added to the list of Approved Clients upon
approval by Designer, which approval will not be unreasonably withheld or
delayed, and that any Client which Designer refers to Golden Bear or which
contacts Designer directly or through other parties shall automatically be
deemed an Approved Client for all purposes other than the contracting of
Protected Work. Designer agrees to provide Golden Bear and the Approved Clients
with reasonable access to Designer's key personnel and facilities in connection
with the marketing of design work to such persons under this Agreement, and
Designer agrees to furnish reasonable cooperation to Golden Bear in connection
with the promotion, marketing and negotiation of Client Contracts, subject only
to Designer's discretion as to the acceptance of particular projects offered by
Clients.
5. COMPENSATION. As compensation for the services to be rendered by
Golden Bear under this Agreement, Designer shall pay Golden Bear a commission at
the rate of ten percent (10%) of the Gross Fees (as defined below) actually
received or deemed received by Designer or its affiliates from all Work in
Process (as defined in Section 13, below) and from any Client Contract hereafter
concluded by Designer with an Approved Client during the term of this Agreement.
For purposes of this Section, the "Gross Fees" shall include: (i) all fees
received by Designer, net of foreign tax withholding and discounts taken, from
an Approved Client for Designer's professional services, plus (ii) the amount of
any foreign income taxes withheld by an Approved Client from such fees, if such
withholding is actually paid and received by the taxing authorities and credited
for the benefit of Designer under applicable tax treaties. The parties agree
that Gross Fees shall not include any other taxes imposed upon the receipts or
income generated from the payments made to Designer by an Approved Client or any
payments made to Designer in addition to agreed fees for expenses advanced or
allocated to a project by Designer which an Approved Client is required to
reimburse under the Client Contract. In the event that a Client Contract or
other related agreement with an Approved Client negotiated by Golden Bear
provides for the payment to Designer of a participation in the revenues or
profits earned from the sale of club memberships, real estate or other rights or
services offered by such Client or its affiliates in connection with a golf
course project, which payment is in addition to Designer's customary fees for
its design services, any additional compensation actually received by Designer
from such participation shall be included in Gross Fees as, if and when
received. Within fifteen (15) days of the end of each calendar month during the
term of this Agreement, Designer will furnish Golden Bear with an accounting for
all Gross Fees received during such month, including its actual cash receipts
and any additions thereto or exclusions therefrom, and shall pay all commissions
due with respect to such Gross Fees at the time such statement is rendered.
Designer shall keep and maintain such books of account as shall be necessary to
record all billings to
<PAGE>
and collections from Approved Clients and for the accurate computation of Golden
Bear's compensation with respect thereto pursuant to the terms of this Section,
which books of account shall be open for inspection and copying upon prior
reasonable notice and during reasonable business hours by Golden Bear and its
representatives for at least twenty-four (24) months after the end of the
calendar year to which such books apply. Golden Bear shall have the right to
audit such books and records upon reasonable prior notice to Designer, which
audit shall be performed by certified public accountants to be designated by
Golden Bear at Golden Bear's sole cost and expense. In the event that Golden
Bear negotiates a Client Contract which requires Designer to accept a discounted
cash payment for its services in return for an equity interest in a golf course
project, a payment in kind, or any form of participation interest in the
revenues or earnings of a project, whether such payment is provided under the
Client Contracts, Golden Bear shall (i) receive its agreed percentage of any
participation interest or payment in kind, where such participation interest may
be taken in the name of Representative or such payment in kind divided between
the parties, or otherwise (ii) receive its agreed commissions based upon Gross
Fees received by Designer from the actual payment structure negotiated with the
Approved Client, in which case Golden Bear's guaranteed compensation will be
limited to its commissions on the actual cash payments (if any) received and any
future revenues received by Designer from such arrangements or consideration
will be reported and included in Gross Fees subject to the payments required
hereunder if, as and when actually received, provided however, that Designer's
obligation to make such payment to Golden Bear shall be continued and remain in
effect until the agreed fees are paid in full to Golden Bear notwithstanding any
prior termination of this Agreement. For purposes of determining the Gross Fees
received by Designer with respect to a payment in kind from an Approved Client,
Designer shall report the actual net resale value or net barter credit received
as and when received by Designer from any goods or services accepted by Designer
as barter, and Designer shall report the net fair market value (as reported by
Designer for income tax purposes) of any goods or services accepted by Designer
for its own use at the time such goods or services are actually received.
Notwithstanding the foregoing, the parties shall have the right to negotiate a
fixed fee from such Client Contract based upon Designer's then standard fee
schedules and terms of payment for an all cash deal, in which case such fees
shall be paid in lieu of any commission payments which would otherwise be due
under this Section, and Designer shall not be required to account to Golden Bear
for any gains or profits realized or entitled to receive any rebate of the
agreed fees based on losses sustained as a result of Designer's acceptance of
non-cash consideration for its services.
6. TERM. The term of this Agreement shall commence on the "Effective
Date", which for purposes of this Agreement shall have the same meaning and be
deemed to occur simultaneously with the Effective Date defined in Section 4 of
that certain Agreement and Plan of Reorganization between GBI and Golden Bear of
even date herewith, and shall expire on December 31, 2006, unless renewed or
terminated as provided in this Section.
<PAGE>
(a) Either party may terminate this Agreement in the event of a
material breach by the other party on ninety (90) days written notice specifying
the breach, unless the other party has cured the breach to the reasonable
satisfaction of the notifying party within such notice period. Golden Bear shall
have a special right to terminate this Agreement, without cause, at the end of
any calendar year, commencing with the end of calendar year 2000, by giving
written notice to Designer of its intent to terminate not later than July 1 of
the year in which such termination is to be effective. As a condition to such
termination, Golden Bear shall make reasonable efforts to continue its marketing
activities and to arrange for an orderly transition of all sales and marketing
responsibilities with respect to prospects and Approved Clients to Designer or
its designated successor representative(s) prior to the effective date of such
termination, provided that in no event will Golden Bear be required to provide
any further services to GBI or its successor representative(s) after the
effective date of such termination.
(b) This Agreement shall terminate automatically in the event that
either party suffers or commits any of the following acts of default, unless
such default is waived in writing by the non-defaulting party upon such
assurances of cure and future performance as such non-defaulting party may
reasonably request: (1) institutes voluntary proceedings under any bankruptcy or
insolvency law or other law for the benefit of creditors or the relief of
debtors, becomes the subject of involuntary bankruptcy proceedings instituted by
other parties, and such proceedings are not dismissed within sixty (60) days of
the commencement thereof, or is adjudicated bankrupt or insolvent in any legal
proceedings, (2) makes a general composition, assignment for the benefit of its
creditors, or other common-law or statutory arrangement for compromise of its
indebtedness to general creditors, (3) is voluntarily or involuntarily
dissolved, becomes the subject of any seizure or receivership affecting its
ability to perform this Agreement, or ceases its business or materially curtails
any part of the business activities contemplated by this Agreement, or (4)
voluntarily transfers all or a substantial part of the employees, or conveys all
or a substantial part of the assets or intangible rights necessary to perform
this Agreement, without a permitted assignment of this Agreement to the
transferee. Any termination under this subsection shall be without prejudice to
any other right or remedy which the non-defaulting party may have as a result of
such event or events, and shall not release the defaulting party from any damage
claims arising under this Agreement as a result of such default unless otherwise
agreed in writing.
(c) The expiration or earlier termination of this Agreement shall not
affect Golden Bear's right to receive commissions under Section 5, above, with
respect to any Client Contract concluded by Designer (i) prior to the effective
date of such termination, or (ii) within a period of six (6) months after the
effective date of such termination, if such contract is with any Approved Client
actively solicited by Golden Bear during the term of this Agreement.
(d) Upon the expiration of the initial term of this Agreement, Golden
Bear shall have the option to renew this Agreement for successive three (3) year
terms subject to its satisfactory performance of its responsibilities to
Designer under this
<PAGE>
Agreement through the effective date of such renewal. Any such option shall be
exercised by Golden Bear in a written notice given to Designer not later than
July 1 of the calendar year in which the initial term or then current renewal
term expires. A renewal shall be effective automatically if due notice is given
unless Designer makes a written objection to such renewal on or before its
effective date, which objection shall state in reasonable detail the reasons for
Designer's dissatisfaction with Golden Bear's performance and the actions
reasonably necessary for Golden Bear to remedy the recited problems. The
delivery of a written objection to renewal by Designer shall, if necessary,
extend the term of this Agreement for a minimum period of ninety (90) days from
the date of such notice, if such period is longer than the remaining stated term
then in force, which extension is made for the purpose of allowing the parties
to resolve the matters raised in such notice to their mutual satisfaction.
7. MARKETING SUPPORT. Designer agrees to provide Golden Bear, without
charge, with reasonable quantities of promotional material and other information
regarding Designer, its principals and the Business for the purpose of Golden
Bear's promotion of the Business and solicitation of Clients. Golden Bear and
Designer will work together to coordinate the production and dissemination of
such promotional material and the development of appropriate updated material
from time to time, which material may be developed "in house" by the parties or
by outside contractors as determined by Designer with the advice of Golden Bear.
Designer will have the final approval of all materials produced by any parties
for the purpose of promoting the Business, and will be responsible for payment
of all printing costs and third party creative fees and set up charges incurred
in development of such materials. In addition to the foregoing materials,
Designer will provide access for Golden Bear's sales staff to its professional
staff for the purpose of providing current information regarding the Business
and answering questions regarding design issues raised by Approved Clients
during the solicitation and negotiation process. In the event that Designer
requires Golden Bear to participate in any trade shows, or to undertake any
extraordinary expenses in connection with business entertainment or promotional
activities other than normal business travel and entertainment or activities
undertaken for the benefit of other businesses maintained by Golden Bear, Golden
Bear shall be entitled to require Designer to pay or reimburse the costs of such
activities as a condition to its participation under this Agreement.
8. CONTRACTING PROCEDURES. Throughout the term of this Agreement,
Designer shall provide Golden Bear with current price lists for standard Design
Agreements, together with schedules of all standard discounts and optional
services if separately priced. Designer shall also provide Golden Bear with its
standard forms of Design Agreement to be used in the solicitation of new golf
course design projects from Approved Clients, which forms may be provided on
computer disk or electronic format as requested by Golden Bear in order to
facilitate its communication and production of documents to prospective Clients.
Golden Bear shall not quote any other pricing or terms for a Design Agreement to
an Approved Client without the prior consent of Designer, and Golden Bear shall
not accept any counteroffer as to pricing or terms made by an Approved Client
unless communicated to and approved by Designer.
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Designer reserves the right to refer any negotiations involving terms of a
Client Contract affecting the scope of work or legal responsibility of Designer
to its legal counsel, and Golden Bear's representatives will cooperate with such
counsel as necessary to resolve any such issues to the satisfaction of Designer.
Designer may provide Golden Bear with additional approved forms of Client
Contracts for other design and consulting work from time to time in its
discretion, or Designer may direct Golden Bear to solicit contracts for such
work from Approved Clients for review and approval by Designer. Golden Bear
acknowledges that no agency has been created by this Agreement, and that Client
Contracts negotiated and procured by Golden Bear or its representatives shall
not be binding upon Designer or legally effective as a contract unless and until
accepted in writing by a designated officer of Designer at its principal place
of business in Florida.
9. EXPENSES. As an independent marketing representative, Golden Bear
shall be responsible for all expenses incurred by Golden Bear in the conduct of
its business, including, without limitation, payroll and commission expenses
with respect to its personnel, income and other taxes payable with respect to
commissions earned from Designer, and general overhead and administrative
expenses, except for those out-of-pocket expenses which Designer has agreed to
pay or reimburse under Sections 3 or 7, above. Designer will be responsible for
payment of any expenses incurred by Designer and its staff to support the
marketing and negotiation efforts of Golden Bear under this Agreement, and to
perform all work contracted with Approved Clients.
10. INDEMNIFICATION. Designer hereby agrees to indemnify and hold
Golden Bear harmless from and against any claims, losses or liabilities in the
event that Golden Bear is included as a party in any claim or governmental
proceeding arising out of or relating to (i) the failure of Designer or any
Approved Client to fully perform any Client Contract accepted by Designer, (ii)
the business activities and operations of Designerand the operation of the
Business, including without limitation, any alleged negligence, breach of
contract or product liability lawsuit against Designer, or (iii) the failure of
Designer to comply with any law or regulation applicable to the Business in any
jurisdiction where such Business is conducted by Designer. Golden Bear hereby
agrees to indemnify and hold Designer harmless from and against any claims,
losses or liabilities arising out of or relating to (i) any gross negligence or
willful misconduct by its employees or representatives in the performance of
this Agreement, or (ii) contracts or commitments for golf course design services
made by Golden Bear without the required authorization or approval of Designer.
Such indemnification shall include the indemnified party's expenses and
reasonable attorneys' fees incurred in the defense or settlement of a claim or
proceeding.
11. ASSIGNMENT; SUBCONTRACTING. Golden Bear shall not assign or
sublicense any of its rights or delegate any of its duties hereunder to any
third party, other than a wholly owned subsidiary of Golden Bear, without the
prior written consent of Designer, and any purported assignment or sublicensing
by Golden Bear without such consent shall be of no force or effect.
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(a) It is understood and agreed that Golden Bear may, in the normal
course of its business, subcontract with brokers, finders and other parties
having contact with Clients for the purpose of obtaining introductions and sales
assistance in the solicitation and negotiation of Design Agreements for Designer
with such Clients. Such activities shall not be deemed a prohibited assignment
of this Agreement, provided, however, that Golden Bear shall give prior written
notice to Designer of the identity, business address, and scope of the duties of
any broker, finder or representative authorized to solicit Clients and the
Approved Clients to be assigned to such person. Unless Designer makes a
reasonable objection to such a person within fifteen (15) days of such notice,
Golden Bear shall be authorized to enter into a subcontract with such person
consistent with the matters stated in such notice. Golden Bear shall be
responsible for payment of all fees and commission splits required by any
subcontractors retained by Golden Bear under this subsection from the
compensation payable by Designer under Section 5, above, unless the Designer
agrees in writing to pay such compensation at the time such subcontractor's
services are retained. Any direct payments made by Designer with respect to
Client Contracts generated with the participation of subcontractors retained by
Golden Bear under this subsection shall be deducted from the Gross Fees reported
by Designer from such Client Contracts for purposes of computing Golden Bear's
right to payment under Section 5 of this Agreement, unless otherwise expressly
agreed in the writing which evidences Designer's obligation to make such
payments.
(b) Golden Bear acknowledges that any marketing arrangement between
Golden Bear and another marketing or sales representative shall be deemed an
assignment by Golden Bear subject to the requirements of this Section 11 if such
arrangement provides the representative with exclusivity regarding classes of
Clients or defined geographic territories, or delegates all or substantially all
of Golden Bear's obligations to market, sell and negotiate with Approved Clients
within such classes or territories, regardless of the form of such transaction.
No such arrangement shall be developed without the prior consent of Designer,
and Designer shall have the right to approve any agreements between Golden Bear
and the representative documenting such arrangement in order to assure that its
rights under this Agreement are protected.
(c) The parties acknowledge that Designer entered into those marketing
and sales arrangements described in Schedule "2" annexed hereto prior to the
Effective Date with the independent contractors identified in such Schedule, and
Representative agrees that the continuation of such arrangements after the
Effective Date will not be deemed a breach of this Agreement. From and after the
Effective Date, such persons will become approved subcontractors of Golden Bear,
and Golden Bear will assume primary responsibility for managing such
arrangements and coordinating the activities of such subcontractors with Golden
Bear's exclusive marketing and sales activities under this Agreement. Designer
shall remain solely responsible for payment of the fees and commissions of such
persons from and after the Effective Date, and Golden Bear shall not be required
to divide its agreed commissions under this Agreement to compensate such persons
with respect to their participation in Work in Process or future Client
Contracts; provided however, that the parties have agreed that Designer
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shall be entitled to deduct any fees and commissions paid under this subsection
from the Gross Fees reported from such Work in Process and Client Contracts for
purposes of computing Golden Bear's right to payment under Section 5 of this
Agreement.
(d) Notwithstanding the approval by Designer of an assignment under
this Section 11, no assignment by Golden Bear of its rights hereunder or
delegation of its duties shall relieve Golden Bear of any of its obligations
hereunder, and any permitted assignee of Golden Bear shall be subject to the
restrictions imposed on Golden Bear under this Section 11 with respect to any
further assignment of its rights or delegation of duties under this Agreement.
(e) Golden Bear shall have the right to subcontract design services to
Designer through Golden Bear's Paragon Golf Construction, Inc. subsidiary or any
successor entity wholly owned and controlled by Golden Bear ("Paragon"), where
such arrangement is requested by an Approved Client or deemed prudent by Golden
Bear in order to provide comprehensive design and construction services for a
golf course project. Golden Bear shall advise Designer of its intention to
subcontract design services for an Approved Client as soon as practicable, and
Golden Bear shall have the right to approve the proposed arrangements, which
approval shall not be unreasonably withheld or delayed. Upon approval by
Designer of a subcontracting arrangement with Paragon, the parties shall
thereafter negotiate in good faith the terms of the design subcontract and
master design/build agreements required to effect such arrangement, which shall
contain in substance those provisions regarding scope of work and liability of
the Designer which are then contained in Designer's standard form of Design
Agreement. The parties acknowledge that any subcontract between Paragon and
Designer will be considered Protected Work for purposes of this Agreement, and
that Paragon will be allowed a discount of ten percent (10%) off from Designer's
normal pricing schedule in lieu of payment by Designer of any compensation or
expenses to Golden Bear with respect to such design services under Section 5 of
this Agreement. The parties agree that such discount is intended to reflect the
full value to Designer of Golden Bear's marketing and sales efforts in the
conclusion of a master design/build contract for the benefit of Paragon.
12. OTHER BUSINESS OPPORTUNITIES. Designer acknowledges that Golden
Bear has been authorized by GBI to explore, develop and promote other business
and licensing opportunities involving Designer's principal, JWN, and related
intangible rights associated with JWN, and that business opportunities outside
of the scope of this Agreement may be presented to or developed by Golden Bear
as an result of its efforts and involvement in the promotion and solicitation of
Client Contracts for Designer's services. In the event that such opportunities
consist of endorsement or personal appearance activities involving personal
services of JWN, other than his endorsement activities as the principal of
Designer under the standard form of Design Agreement, the parties agree that the
commission rates payable and procedures applicable to personal endorsements and
appearances under that certain Personal Services Management Agreement between
GBI and Golden Bear will apply to the negotiation, consummation and management
of such activities. In the event that such opportunities involve the development
of Daily Fee Projects or Residential Community Projects, the provisions of
<PAGE>
Section 3 of this Agreement shall govern the rights and obligations of the
parties with respect thereto, unless otherwise agreed in writing in a particular
case. In the event that such opportunities involve any other matter included
within the "Retained Businesses" of GBI (as more particularly described in
Schedule "A" of that certain Trademark License Agreement of even date herewith
between Golden Bear and GBI), Golden Bear agrees to refer such opportunities to
GBI free and clear of any claims for compensation under this Agreement, provided
that Golden Bear shall have a right of first negotiation to furnish any goods or
services available from Golden Bear or its subsidiaries which are reasonably
required in connection with the development and operation of such Retained
Businesses. All other business opportunities generated by Golden Bear in
connection with the performance of its duties under this Agreement shall be for
the sole and exclusive account of Golden Bear, and may be pursued in its sole
discretion without obligation to Designer under this Agreement
13. RESPONSIBILITY FOR WORK IN PROCESS. In addition to its assumption
of responsibility for Designer's worldwide marketing representation under this
Agreement, Golden Bear has agreed to provide Designer with all further Contract
Support Services required by Designer in connection with those contracts and
agreements between Designer and its existing Clients for design services
identified in Schedule "3" annexed hereto (the "Work in Process"), in exchange
for receiving the agreed commissions under Section 5 above with respect to all
Gross Fees collected by Designer from such Work in Process from and after the
Effective Date. It is the intention of the parties that Golden Bear assume all
contracted responsibilities under this Agreement with respect to all Client
Contracts of Designer, except for those contracts where Designer's work has been
completed and all fees have been collected prior to the Effective Date of this
Agreement, and that all such Client Contracts have been reflected in either
Schedule "1" or Schedule "3". The parties agree that all contracts and
arrangements identified in Schedule "3" shall be deemed to be Client Contracts
for all purposes under this Agreement, and that the contracting parties
thereunder shall be deemed Approved Clients under this Agreement where the
context so requires. In the event that Designer concludes a Client Contract with
any of the Approved Clients identified in Schedule "1" prior to the Effective
Date, such event shall not affect the ongoing rights and obligations of the
parties under this Agreement with respect to such Client, it being understood
that such Client Contract shall be automatically treated as Work in Process
subject to the terms hereof from and after the date a final binding agreement is
concluded.
14. MISCELLANEOUS.
(a) CHOICE OF LAW; ARBITRATION. This agreement shall be construed and
enforced in accordance with the internal laws of the State of Florida without
regard to conflicts of laws rules which might otherwise be applied. The parties
agree, except as otherwise expressly set forth herein, that all disputes
involving the construction or enforcement of this Agreement shall be resolved by
binding arbitration before a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association ("AAA") and the
Federal and Florida Arbitration Acts. The parties agree that the location of any
such arbitration shall be at a site selected by the arbitrator in Palm Beach
County, Florida, unless otherwise agreed at the time the dispute is
<PAGE>
submitted to the AAA. In accordance with the Federal and Florida Arbitration
Acts, any party may apply to any court of competent jurisdiction to compel
arbitration in accordance with this subsection or to enforce any award rendered
by the arbitrator in a proceeding conducted hereunder in accordance with its
terms. Unless otherwise agreed in writing by the parties, legal action to compel
any arbitration involving the construction or enforcement of this Agreement may
be brought by either party in that State or Federal Court having subject matter
jurisdiction over the cause which is located in Palm Beach County, Florida, and
each of the parties to this Agreement hereby agrees to submit to the personal
jurisdiction of such Courts regardless of the domicile of such party at the time
such action is filed. In any arbitration under this subsection, the arbitrator
shall have the authority to award to the prevailing party attorneys' fees and
expenses in accordance with the provisions of subsection (e) of this Section.
(b) NOTICES. Any notice to be given under this Agreement shall be made
in writing and shall be sent to the address of the intended recipient as set
forth at the beginning of this Agreement or the facsimile number set forth on
the signature page, or to such other address or facsimile number as may be
designated in a written notice meeting the requirements of this subsection.
Notices under this subsection will be effective: (i) if mailed by certified
mail, return receipt requested, three (3) days after the date the notice is
deposited, postage paid with the United States Postal Service, as shown by its
receipt for certified mail; (ii) if sent via courier service or express
delivery, upon the date of actual delivery as endorsed by the carrier or person
accepting such delivery for the recipient of such notice, or (iii) if sent via
facsimile to the telephone numbers given by the recipients of such notice, on
the date of transmission as shown by the confirmation forms printed by the
sending machine showing the recipients' station identification and verification
of error free communication, provided that confirmation copies of the notice are
sent to the recipient via certified mail or courier as provided above not later
than the day following the date of such confirmed facsimile transmission.
(c) ENTIRE AGREEMENT; AMENDMENT. This Agreement and the annexed
schedules constitute the entire agreement of the parties with respect to the
subject matter hereof. This Agreement may not be amended or modified, or any
right or obligation of a party hereunder waived or released, except in a written
document signed by the party to be charged with such amendment, modification,
waiver or release.
(d) COUNTERPARTS. This agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(e) EXPENSES; ATTORNEYS' FEES. Except as otherwise expressly provided
in this Agreement, each party shall be responsible for payment of its own
expenses (including, without limitation, the fees and expenses of their agents,
representatives, counsel and accountants) incidental to the preparation and
carrying out of this Agreement. In the event any a party is required to retain
the services of an attorney to enforce the rights of such party under this
Agreement, or to require a construction of this Agreement or declaration or
determination of the rights of any party hereunder, the
<PAGE>
prevailing party or parties in any subsequent litigation involving such matter
shall be entitled to receive an award of all attorneys' fees incurred by them in
connection with such matter, including any fees incurred for review,
negotiation, settlement, preparation of pleadings, trial or appeal.
(f) SECTION HEADINGS. The section headings are inserted for
convenience of reference only, and shall not affect the interpretation or
construction of any of the express terms of this Agreement.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals as of the date first set forth above.
GOLDEN BEAR INTERNATIONAL, INC. GOLDEN BEAR, INC.
By: _______________________________ By: ___________________________
Name: Name:
Title: Title:
Its Authorized Signatory Its Authorized Signatory
EXHIBIT 10.12
PERSONAL SERVICES MANAGEMENT AGREEMENT
THIS AGREEMENT, dated as of June 7, 1996, sets forth the agreements and
understandings between GOLDEN BEAR GOLF, INC., a Florida corporation having its
principal place of business at 11780 U.S. Highway #1, Suite 400, North Palm
Beach, Florida 33408 ("Representative"), GOLDEN BEAR INTERNATIONAL, INC., a
Florida corporation having its principal place of business at 11780 U.S. Highway
#1, Suite 400, North Palm Beach, Florida 33408 ("GBI"), and JACK W. NICKLAUS
("Nicklaus"), an individual having a business address at 11780 U.S. Highway #1,
Suite 400, North Palm Beach, Florida 33408, as follows:
1. EXCLUSIVE MANAGEMENT RELATIONSHIP; TERM. By signing this Agreement,
GBI and Nicklaus hereby retain Representative as the exclusive manager and
representative of Nicklaus in connection with the development, management and
marketing of certain personal endorsement services which may be provided by
Nicklaus as a celebrity for third parties not affiliated with GBI or
Representative (the "Clients"), as more particularly described in this
Agreement. GBI and Nicklaus confirm to Representative that neither of them is
presently subject to any other management agreements, commitments or
understandings which would conflict with this Agreement, and that they will not
enter into any conflicting management relationships involving the endorsement
services of Nicklaus during the term of this Agreement (as defined in Paragraph
9, below). Representative may represent, manage or otherwise provide marketing
services similar to those contemplated by this Agreement to, any other
professional golfer during the term of this Agreement without the prior written
consent of GBI, provided however, that Representative will not utilize its
representation activities under this Agreement or any confidential information
entrusted to Representative by GBI or Nicklaus in connection therewith, or
otherwise take unfair advantage of its corporate affiliations with GBI or
Nicklaus or its licensing relationships with GBI: (i) to further the interests
of any other professional golfer in obtaining personal services contracts where
such contract opportunities would otherwise be reasonably available to Nicklaus,
or (ii) to imply the endorsement of GBI or Nicklaus for the personal services of
such a golfer, unless such activities have been expressly approved by GBI in
writing.
2. MANAGEMENT SERVICES OF GBI. The parties acknowledge that GBI will
continue to manage Nicklaus' career as a professional golfer, and will be solely
responsible for scheduling PGA Tour and Senior Tour events and other golf
tournaments on behalf of Nicklaus, for promoting his personal services as a
golfer in golf exhibitions, events and outings, and for coordinating his
scheduled activities as a professional golfer with his other business
commitments, including his services as a golf course designer to GBI's Nicklaus
Design division. GBI will also have the exclusive right as between the parties,
subject to the terms and conditions of its agreements with Nicklaus and his
affiliated parties, to provide the personal services of Nicklaus as a speaker,
author, commentator or performer in connection with personal appearances where
such services are promoted directly to the public, or to patrons of or
contributors to an event, rather than being utilized to endorse or promote the
products and services of a third party. GBI will advise Representative promptly
of all personal service
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commitments and other business and travel commitments undertaken by Nicklaus
individually and on behalf of GBI, and the parties will use their best efforts
to resolve any scheduling conflicts which arise as a result of Nicklaus' various
professional and personal activities. In the event the parties are unable to
resolve a conflict, Nicklaus shall make the final determination as to his
schedule after consultation with GBI and Representative.
3. PERSONAL APPEARANCES AND OTHER ENDORSEMENT SERVICES.
Representative will serve as the exclusive world-wide representative of Nicklaus
in connection with the marketing and solicitation of non-golf related personal
appearances and other personal service opportunities where Nicklaus' services
are utilized by third parties as a commercial spokesman or celebrity endorser of
businesses, products and services which are not marketed under any trademarks
owned or licensed by GBI (collectively, the "Personal Services"), including
without limitation, promotional or motivational speaking engagements with
Clients, attendance at promotional and public relations events, appearing as a
model or performer in media advertising, providing support for direct marketing
activities to consumers or businesses, and lending his personal endorsement to
products or services used or recommended by him, whether such endorsement is
made directly by Nicklaus or by attribution to Nicklaus of specific statements
approved by him. It is the intention of the parties that the Personal Services
will consist of and be limited to those activities where the personal services
of Nicklaus are retained by a Client in order to lend his prestige as a
professional golfer, businessman, golf course designer, or public figure to a
business, product or non-golf event developed or marketed by such Client, but
will exclude those marketing activities conducted personally by Nicklaus in
support of trademark and endorsement licensing activities of Representative
under license from GBI and in support of GBI in the conduct of its Retained
Businesses (as defined below). Representative shall be responsible for reviewing
all requests from prospective Clients for Personal Services received by
Representative, GBI and Nicklaus, and for recommending Personal Service
opportunities for final review and acceptance by GBI and Nicklaus in their
discretion. In reviewing such requests, Representative shall give due
consideration to the reasonable directions of GBI and Nicklaus and to Nicklaus'
availability as determined by GBI. For purposes of this Agreement, all talent
and use fees, honoraria and other compensation paid by Clients contracting for
Nicklaus' Personal Services shall be included in the calculation of Net
Revenues, provided however, that the value of any goods or services provided by
Clients to Nicklaus or members of his immediate family which they are required
to personally use or use for promotional purposes in support of his endorsement
shall be excluded from the calculation of Net Revenues.
4. DUTIES OF REPRESENTATIVE. Unless otherwise directed by GBI,
Representative will actively work to promote Nicklaus' personal services, to
identify potential Clients, and to locate and develop Personal Services suitable
for Nicklaus' participation, according to such guidelines as may reasonably be
provided by GBI from time to time. Representative will also assist GBI in the
negotiation with Clients of those Personal Service deals which GBI authorizes
Representative to pursue on Nicklaus'
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behalf, provided that GBI and Nicklaus shall have a right of final approval over
any binding contract negotiated with a Client under this Agreement (each, a
"Service Contract"). Upon execution and delivery of a Service Contract,
Representative shall be responsible for providing all management services
required for GBI to fulfill such contract except as otherwise expressly agreed
by GBI or Nicklaus personally, including, without limitation: (i) coordination
of Client service requirements with Nicklaus' schedule, and generally acting as
a liaison between Nicklaus and the Clients retaining his personal services, (ii)
where required by the terms of any Service Contract, reviewing the details of
any events or promotional activities and the scripts, storyboards and/or copy of
any media advertising with Nicklaus to secure his approval thereof, and
assisting Nicklaus in communicating to the Clients any comments or revisions
requested by Nicklaus in order to secure such approval, (iii) making all travel,
set-up and practice/rehearsal arrangements required in connection with any
services to be rendered to Clients by Nicklaus, (iv) coordinating personal
supplies of endorsed products with the Clients and any third party providers
involved in customizing such products to Nicklaus' personal specifications where
appropriate, and (v) providing follow-up services to assure Client satisfaction
with services performed by Nicklaus under the Service Contracts. The parties
acknowledge that GBI and JWN are presently parties to those contracts and
arrangements with Clients described in Schedule "1" annexed hereto (the
"Existing Contracts") which provide for the provision by JWN of personal
services of the kind covered by this Agreement. Commencing on the Effective Date
(as defined below), the parties agree that GBI shall delegate and Representative
shall assume all of GBI's ongoing responsibilities for management of the
Existing Contracts under the terms of this Paragraph, and that such Existing
Contracts shall be treated thereafter as Service Contracts subject to the terms
of this Agreement except as otherwise provided herein.
5. COMPENSATION AND EXPENSES. As a fee for the services provided
under this Agreement, GBI and Nicklaus agree that Representative shall be
entitled to receive a percentage of the Net Revenues received, in any form, by
GBI, Nicklaus and/or any other parties designated by Nicklaus as compensation
for Nicklaus' services under any Service Contract which is signed or
substantially negotiated during the term of this Agreement and from any
extension, renewal or renegotiation of such Service Contract which is finalized
during such term. Such percentage shall be determined by mutual agreement of the
parties on a case by case basis prior to the time each Service Contract is
signed, provided that the parties agree that the minimum fee payable to
Representative from each Service Contract in any event shall be twenty percent
(20%) of Net Revenues. GBI and Nicklaus further agree that Representative shall
be paid thirty percent (30%) of the Net Revenues received, in any form, by GBI
and/or any other parties designated by Nicklaus as compensation for Nicklaus'
services under the Existing Contracts and from any extension, renewal or
renegotiation of any Existing Contract which is finalized during the term of
this Agreement, provided that, for purposes of calculating the compensation due
to Representative under this Paragraph, Net Revenues shall not include any
revenues earned by GBI or Nicklaus under the Existing Contracts prior to the
Effective Date. For purposes of calculating
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Representative's fees hereunder, Net Revenues will include all cash payments
made by Clients to GBI and/or parties designated by Nicklaus and the fair market
value of any property or barter credits provided by the Clients in lieu of cash
compensation. Where a Service Contract provides for payment or reimbursement of
expenses in addition to the agreed compensation, expense advances and
reimbursements made to Nicklaus or any other party assisting him in the
performance of his services will not be included in Net Revenues. Withholding
taxes paid by the Clients and received by the taxing authorities for the account
of GBI or a designated payee and credited for their benefit under applicable tax
laws and treaties shall be included in Net Revenues, provided that any other
withholding or transaction taxes imposed upon the receipts or income generated
from the payments due under a Service Contract shall be excluded from Net
Revenues. In addition to its agreed fees, Representative shall be entitled to
payment or reimbursement by GBI or the designated payee (if there has been an
assignment of rights or payments as contemplated by Section 6, below) of its
out-of-pocket expenses, including travel, express and communication charges
incurred by Representative's personnel in connection with the marketing,
negotiation, consummation and management of Service Contracts under this
Agreement, to the extent such expenses are not directly paid or reimbursed by
the Client. Representative will use its best efforts to manage such expenses
within such budgetary requirements as may be established by GBI and Nicklaus for
marketing of new endorsement services and to obtain the commitment of Clients to
reimburse ongoing expenses of Representative under any Service Contract
negotiated by Representative. Unless otherwise approved for payment by a Client,
or authorized for reimbursement by GBI and Nicklaus in an annual marketing
budget, Representative will secure the prior approval from GBI or Nicklaus of
all single expense items in excess of one thousand dollars ($1,000) and any
recurring expense items expected to exceed twelve thousand five hundred dollars
($12,500) in the aggregate in any twelve (12) month period.
6. SUBSTITUTION OF CONTRACTING PARTIES. It is understood that
Nicklaus has, by executing this Agreement, reserved the right in his discretion
to enter into any Service Contract in his own name or in the name of any other
entity designated by him to provide his personal services to Clients where he
determines that GBI is not the appropriate party to provide the required
services, and that GBI and Nicklaus have further reserved the right to assign
any payments due to them under a Service Contract to such parties as may be
designated by them. GBI and Nicklaus acknowledge that Representative's rights
and obligations under this Agreement, including without limitation, its right to
receive compensation as agreed under Section 5 from GBI or the party designated
by Nicklaus to enter into or perform such Service Contract, shall not be
affected by an assignment of any Service Contract or payment right to a party
other than GBI, either prior to or after execution of such Service Contract, and
that the party assigning such payment right shall be responsible for payment to
Representative of any agreed fees to the extent such fees are not paid by the
designated payee under such Service Contract.
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7. PAYMENT DIRECTIONS AND COLLECTION RIGHTS. At Representative's
request, GBI and Nicklaus agrees to direct the payment to Representative of all
compensation and expense reimbursements from Service Contracts negotiated by
Representative under Paragraph 3, above, and GBI and Nicklaus authorize
Representative to deduct its fees and reimbursable expenses under Paragraph 5
and remit the balance as directed by them as soon as practicable after
Representative's receipt of funds. Representative is further authorized by this
Agreement to endorse and deposit in its bank accounts any checks received for
such purposes, whether payable to Representative or to another designated payee
alone or jointly, and to pay the net share over to the parties entitled to
receive such funds by check or other transfer from Representative's accounts. In
the event that Representative does not directly collect funds due from Client
under any Service Contract, GBI and Nicklaus agree that: (i) payment in full to
Representative of its percentage fees under Paragraph 5 will be due not later
than thirty (30) days after receipt of funds by the designated payees, and (ii)
their right to assign payments will be limited to the net amount due to them
after payment of Representative's fees and any expense reimbursements from
Clients which are due to Representative under this Agreement.
8. THIRD PARTY PROFESSIONAL SERVICES. Representative will coordinate
its activities under this Agreement with legal, tax and/or accounting work
performed on GBI's and Nicklaus' behalf by their professional advisors. It is
understood and agreed that Representative's personnel are not licensed to
provide, and will not provide, independent public accounting or legal services
on behalf of GBI in connection with the negotiation and drafting of Service
Contract and the structuring of related transactions for liability and tax
purposes. GBI and Nicklaus shall be responsible for retaining all professional
advisors as necessary to protect their interests under any Service Contracts and
for payment of the fees and expenses of such persons from their net receipts
under this Agreement unless otherwise agreed at the time such services are
provided. The parties acknowledge and agree that GBI and Nicklaus shall be free
to retain the services of professionals who provide similar services for
Representative in connection with marketing transactions handled by
Representative for its own account, and that the representation of GBI and
Nicklaus by such persons in connection with the Service Contracts to be
negotiated and performed under this Agreement does not create any conflict with
the interests of Representative under this Agreement as GBI's exclusive
marketing representative.
9. TERM; RENEWAL. The term of this Agreement will begin on the
"Effective Date", which for purposes of this Agreement shall have the same
meaning and be deemed to occur simultaneously with the Effective Date defined in
Section 4 of that certain Agreement and Plan of Reorganization between GBI and
Representative of even date herewith, and will end on December 31, 2006, unless
otherwise terminated or renewed as provided below.
(a) Either party may terminate this Agreement in the event of a
material breach by the other party on ninety (90) days written notice specifying
the breach, unless the other party has cured the breach to the reasonable
satisfaction of the
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notifying party within such notice period. Representative shall have a special
right to terminate this Agreement, without cause, at the end of any calendar
year, commencing with the end of calendar year 1997, by giving written notice to
GBI of its intent to terminate not later than July 1 of the year in which such
termination is to be effective. As a condition to such termination,
Representative shall make reasonable efforts to continue its marketing
activities and to arrange for an orderly transition of all marketing and
management responsibilities with respect to prospective Clients and Service
Contracts to GBI or its designated successor representative(s) prior to the
effective date of such termination.
(b) This Agreement shall terminate automatically in the event that
either party suffers or commits any of the following acts of default, unless
such default is waived in writing by the non-defaulting party upon such
assurances of cure and future performance as such non-defaulting party may
reasonably request: (1) institutes voluntary proceedings under any bankruptcy or
insolvency law or other law for the benefit of creditors or the relief of
debtors, becomes the subject of involuntary bankruptcy proceedings instituted by
other parties, and such proceedings are not dismissed within sixty (60) days of
the commencement thereof, or is adjudicated bankrupt or insolvent in any legal
proceedings, (2) makes a general composition, assignment for the benefit of its
creditors, or other common-law or statutory arrangement for compromise of its
indebtedness to general creditors, (3) is voluntarily or involuntarily
dissolved, becomes the subject of any seizure or receivership affecting its
ability to perform this Agreement, or ceases its business or materially curtails
any part of the business activities contemplated by this Agreement, or (4)
voluntarily transfers all or a substantial part of the employees, or conveys all
or a substantial part of the assets or intangible rights necessary to perform
this Agreement, without a permitted assignment of this Agreement to the
transferee. Any termination under this subparagraph shall be without prejudice
to any other right or remedy which the non-defaulting party may have as a result
of such event or events, and shall not release the defaulting party from any
damage claims arising under this Agreement as a result of such default unless
otherwise agreed in writing.
(c) The expiration or earlier termination of this Agreement shall not
affect Representative's right to receive fees under Paragraph 5, above, with
respect to any Service Contract concluded by GBI (i) prior to the effective date
of such termination, or (ii) within a period of six (6) months after the
effective date of such termination, if such contract is with any Client actively
solicited by Representative during the term of this Agreement. Representative's
rights to payment with respect to such Service Contracts shall continue at the
agreed rate until the expiration or earlier termination of the contract term in
force on the effective date of the termination of this Agreement or on the date
of execution of such Service Contract, whichever last occurs, and shall not
apply to any renewal or extension of such Service Contract other than by
exercise by a Client of an option to renew on terms contained in such Service
Contract or otherwise negotiated by Representative on behalf of GBI prior to the
expiration of this Agreement. GBI and Nicklaus shall be free to renegotiate any
Service Contract subject to this Agreement
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prior to the termination of Representative's rights hereunder, provided that
Representative's rights to payment shall continue only as to the original
compensation levels and stated term of such Service Contract, and shall not
apply to any additional compensation or term extensions obtained by GBI or
Nicklaus in such renegotiation.
(d) Upon the expiration of the initial term of this Agreement,
Representative shall have the option to renew this Agreement for successive
three (3) year terms subject to its satisfactory performance of its
responsibilities to GBI under this Agreement through the effective date of such
renewal. Any such option shall be exercised by Representative in a written
notice given to GBI not later than July 1 of the calendar year in which the
initial term or then current renewal term expires. A renewal shall be effective
automatically if due notice is given unless GBI makes a written objection to
such renewal on or before its effective date, which objection shall state in
reasonable detail the reasons for GBI's dissatisfaction with Representative's
performance and the actions reasonably necessary for Representative to remedy
the recited problems. The delivery of a written objection to renewal by GBI
shall, if necessary, extend the term of this Agreement for a minimum period of
ninety (90) days from the date of such notice, if such period is longer than the
remaining stated term then in force, which extension is made for the purpose of
allowing the parties to resolve the matters raised in such notice to their
mutual satisfaction.
10. ASSIGNMENT; SUBCONTRACTING. Representative shall not assign any
of its rights or delegate any of its duties hereunder to any third party, other
than a wholly owned subsidiary of Representative, without the prior written
consent of Nicklaus as the principal of GBI, and any purported assignment or
sublicensing by Representative without such consent shall be of no force or
effect.
(a) It is understood and agreed that Representative may, in the normal
course of its business, subcontract with brokers, finders and other parties
having contact with Clients for the purpose of obtaining introductions and sales
assistance in the solicitation and negotiation of Service Contracts with such
Clients. Such activities shall not be deemed a prohibited assignment of this
Agreement, provided, however, that Representative shall give prior written
notice to GBI of the identity, business address, and scope of the duties of any
broker, finder or representative authorized to solicit Clients and the Clients
to be assigned to such person. Unless GBI makes a reasonable objection to such a
person within fifteen (15) days of such notice, Representative shall be
authorized to enter into a subcontract with such person consistent with the
matters stated in such notice.
(b) Notwithstanding the ability of Representative to deal with brokers
or finders as authorized under subparagraph (a), above, Representative
acknowledges that any representation arrangement between Representative and
another marketing or sales representative shall be deemed an assignment by
Representative subject to the requirements of this Paragraph 10 if such
arrangement provides the representative with exclusivity regarding classes of
Clients or defined geographic territories, or delegates all or substantially all
of Representative's obligations to market, sell and negotiate with
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Clients or provide management services within such classes or territories,
regardless of the form of such transaction. No such arrangement shall be
developed without the prior consent of GBI, and GBI shall have the right to
approve any agreements between Representative and the representative documenting
such arrangement in order to assure that its rights under this Agreement are
protected.
(c) Notwithstanding the approval by GBI of an assignment under this
Paragraph 10, no assignment by Representative of its rights hereunder or
delegation of its duties shall relieve Representative of any of its obligations
hereunder, and any permitted assignee of Representative shall be subject to the
restrictions imposed on Representative under this Paragraph 11 with respect to
any further assignment of its rights or delegation of duties under this
Agreement.
11. OTHER BUSINESS OPPORTUNITIES. GBI acknowledges that
Representative has been authorized by GBI to explore, develop and promote other
business and licensing opportunities involving GBI and related intangible rights
associated with Nicklaus, and that business opportunities may be presented to or
developed by Representative as an result of its efforts and involvement in the
promotion and solicitation of Service Contracts for Nicklaus' services. In the
event that such opportunities consist of design services offered by GBI's
Nicklaus Design division or Nicklaus' personal services and his endorsement as a
designer of golf courses of a finished golf course, a daily fee golf project, or
a residential real estate project, the parties agree that the commission rates
payable and procedures applicable to design and related consulting agreements
under that certain Design Services Marketing Agreement between GBI and
Representative will apply to the negotiation, consummation and management of
such activities. In the event that such opportunities involve any matter
included within the those Retained Businesses of GBI (as more particularly
described in Schedule "A" of that certain Trademark License Agreement of even
date herewith between Golden Bear and GBI), Representative agrees to refer such
opportunities to GBI free and clear of any claims for compensation under this
Agreement, provided that Representative shall have a right of first negotiation
to furnish any goods or services available from Representative, its corporate
affiliates, or its licensees which are reasonably required in connection with
the development and operation of such Retained Business. All other business
opportunities generated by Representative in connection with the performance of
its duties under this Agreement shall be for the sole and exclusive account of
Representative, and may be pursued in its sole discretion without obligation to
GBI under this Agreement subject only to those restrictions which may apply
under another written agreement between the parties.
12. MISCELLANEOUS.
(a) CHOICE OF LAW; ARBITRATION. This agreement shall be construed and
enforced in accordance with the internal laws of the State of Florida without
regard to conflicts of laws rules which might otherwise be applied. The parties
agree, except as otherwise expressly set forth herein, that all disputes
involving the construction or enforcement of this Agreement shall be resolved by
binding arbitration before a single
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arbitrator pursuant to the Commercial Arbitration Rules of the American
Arbitration Association ("AAA") and the Federal and Florida Arbitration Acts.
The parties agree that the location of any such arbitration shall be at a site
selected by the arbitrator in Palm Beach County, Florida, unless otherwise
agreed at the time the dispute is submitted to the AAA. In accordance with the
Federal and Florida Arbitration Acts, any party may apply to any court of
competent jurisdiction to compel arbitration in accordance with this
subparagraph or to enforce any award rendered by the arbitrator in a proceeding
conducted hereunder in accordance with its terms. Unless otherwise agreed in
writing by the parties, legal action to compel any arbitration involving the
construction or enforcement of this Agreement may be brought by either party in
that State or Federal Court having subject matter jurisdiction over the cause
which is located in Palm Beach County, Florida, and each of the parties to this
Agreement hereby agrees to submit to the personal jurisdiction of such Courts
regardless of the domicile of such party at the time such action is filed. In
any arbitration under this subsection, the arbitrator shall have the authority
to award to the prevailing party attorneys' fees and expenses in accordance with
the provisions of subparagraph (e) of this Section.
(b) NOTICES. Any notice to be given under this Agreement shall be made
in writing and shall be sent to the address of the intended recipient as set
forth at the beginning of this Agreement or the facsimile number set forth on
the signature page, or to such other address or facsimile number as may be
designated in a written notice meeting the requirements of this subsection.
Notices under this subparagraph will be effective: (i) if mailed by certified
mail, return receipt requested, three (3) days after the date the notice is
deposited, postage paid with the United States Postal Service, as shown by its
receipt for certified mail; (ii) if sent via courier service or express
delivery, upon the date of actual delivery as endorsed by the carrier or person
accepting such delivery for the recipient of such notice, or (iii) if sent via
facsimile to the telephone numbers given by the recipients of such notice, on
the date of transmission as shown by the confirmation forms printed by the
sending machine showing the recipients' station identification and verification
of error free communication, provided that confirmation copies of the notice are
sent to the recipient via certified mail or courier as provided above not later
than the day following the date of such confirmed facsimile transmission.
(c) ENTIRE AGREEMENT; AMENDMENT. This Agreement and the annexed
schedules constitute the entire agreement of the parties with respect to the
subject matter hereof. This Agreement may not be amended or modified, or any
right or obligation of a party hereunder waived or released, except in a written
document signed by the party to be charged with such amendment, modification,
waiver or release.
(d) COUNTERPARTS. This agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(e) EXPENSES; ATTORNEYS' FEES. Except as otherwise expressly provided
in this Agreement, each party shall be responsible for payment of its own
expenses
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(including, without limitation, the fees and expenses of their agents,
representatives, counsel and accountants) incidental to the preparation and
carrying out of this Agreement. In the event any party is required to retain the
services of an attorney to enforce the rights of such party under this
Agreement, or to require a construction of this Agreement or declaration or
determination of the rights of any party hereunder, the prevailing party or
parties in any subsequent litigation involving such matter shall be entitled to
receive an award of all attorneys' fees incurred by them in connection with such
matter, including any fees incurred for review, negotiation, settlement,
preparation of pleadings, trial or appeal.
(f) PARAGRAPH HEADINGS. The paragraph headings are inserted
for convenience of reference only, and shall not affect the interpretation or
construction of any of the express terms of this Agreement.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals as of the date first set forth above.
GOLDEN BEAR INTERNATIONAL, INC. GOLDEN BEAR GOLF, INC.
By: _______________________________ By:___________________________
Name: Name:
Title: Title:
Its Authorized Signatory Its Authorized Signatory
Facsimile Number: (561) 626-4104 Facsimile Number: (561) 626-4104
Jack W. Nicklaus
Facsimile Number: (561) 626-4104
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SCHEDULE "1"
Identification of Existing Contracts
1. Trademark License Agreement between GBI and Dunlop Slazenger
Corporation, dated as of September 1, 1994.
2. Endorsement Agreement between GBI and Gulfstream Aerospace
Corporation dated as of September 1, 1994,
3. Personal Services and Promotional Agreement between GBI and
Young & Rubicam Detroit on behalf of its client, the
Lincoln-Mercury Division of the Ford Motor Company, dated
April 13, 1993, commencing June 1, 1993.
4. Endorsement Agreement between GBI and Rolex Watches dated
March 16, 1995.
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EXHIBIT 10.13
MARKETING CONSULTING AND COOPERATION AGREEMENT
MARKETING CONSULTING AND COOPERATION AGREEMENT, made as of this 7th day
of June, 1996, by and between GOLDEN BEAR INTERNATIONAL, INC. , a Florida
corporation having its principal place of business at 11780 U.S. Highway One,
Suite 400, North Palm Beach, Florida 33408 ("GBI"), GOLDEN BEAR GOLF, INC., a
Florida corporation having its principal place of business at 11780 U.S. Highway
One, Suite 400, North Palm Beach, Florida 33408 ("Golden Bear"), and Nicklaus
Golf EQUIPMENT COMPANY, L.C., a Florida limited liability company having its
principal place of business at 7850 Byron Drive, West Palm Beach, Florida 33404
("Nicklaus Golf").
W I T N E S S E T H:
WHEREAS, Nicklaus Golf was established on September 17, 1992, by GBI
and N48 Corporation ("N48") as its only members for the purpose of establishing
a golf equipment manufacturing and distribution business (the "Equipment
Business") utilizing the name and expertise of GBI's principal, Jack Nicklaus
("JWN"), on a worldwide basis, except as otherwise excluded by the terms of then
existing agreements between GBI and third parties;
WHEREAS, upon inception of Nicklaus Golf, GBI and Nicklaus Golf entered
into that certain Trademark License, Consulting and Technical Services Agreement
(the "NGEC License"), which authorized Nicklaus Golf to utilize certain
trademarks, tradenames and publicity rights relating to JWN and GBI (the "Golf
Endorsement") in connection with the identification, marketing, advertising,
promotion and sale of golf equipment and required GBI to furnish certain ongoing
consulting and marketing services in connection with the development of the
Nicklaus(TM) brand and use of other intangible rights developed by GBI and its
predecessors in interest;
WHEREAS, as part of a corporate reorganization, Golden Bear has
acquired certain businesses and assets (the "Transferred Businesses") and
marketing staff formerly utilized by GBI to consult with Nicklaus Golf in
connection with the marketing of the Equipment Business, and pursuant to a
Trademark License Agreement of even date herewith (the "GB License"), Golden
Bear is exercising exclusive license rights and has undertaken worldwide brand
development and marketing responsibilities with respect to the Transferred
Businesses, which activities are complementary to GBI's golf equipment licensing
activities under the NGEC License;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions set forth herein, the parties hereto agree as
follows:
1. RETENTION OF GOLDEN BEAR AS CONSULTANT. By executing this
Agreement, GBI hereby agrees to retain Golden Bear, and Golden Bear hereby
agrees to provide its services, as a marketing consultant to GBI in connection
with GBI's participation in the Equipment Business, which services shall include
providing GBI with advice regarding the imapact of marketing considerations on
the operation and management of Nicklaus Golf and furnishing reasonable
cooperation, information and advice to Nicklaus Golf as a licensee of GBI in
support of the marketing of its golf equipment
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products on a worldwide basis. By executing this Agreement, Nicklaus Golf
acknowledges and accepts the delegation of duties set forth below, subject to
the terms and conditions of this Agreement. The parties acknowledge and agree
that such delegation of duties and acceptance thereof by Nicklaus Golf shall not
affect the ultimate responsibilities of GBI for its performance to N48 as a
member of Nicklaus Golf under the Promoters' and Operating Agreement of Nicklaus
Golf and to Nicklaus Golf as licensor under the NGEC License. The parties
further agree that Golden Bear shall not, by virtue of this Agreement or
otherwise, acquire any legal or beneficial ownership interest in or claim
against Nicklaus Golf or the trademarks licensed under NGEC License, or succeed
to any right or obligation of GBI under the Promoters' and Operating Agreement
of Nicklaus Golf, including, without limitation, any right or obligation to
participate in the management, control or direction of the Equipment Business.
2. CONSULTING SERVICES OF GOLDEN BEAR. From and after the
Effective Date (as defined below), Golden Bear shall provide the following
marketing consulting services to GBI in support of the Equipment Business:
(a) Golden Bear shall render to GBI marketing related advisory and
consulting services as reasonably requested by GBI with respect to all marketing
aspects of the Equipment Business and Nicklaus Golf's product lines, and will
provide such information, advice and analysis with respect to the relationships
between the Transferred Businesses and the Equipment Business as GBI's marketing
staff have historically provided to its Executive Committee and its designated
management representatives in Nicklaus Golf prior to the Effective Date.
(b) Golden Bear shall also consult with GBI as requested regarding
those marketing considerations involved in the development and implementation of
ongoing marketing, advertising, promotion and merchandizing programs for the
Equipment Business, and will assist GBI in determining and implementing
appropriate methods and formats for using the Golf Endorsement as part of a
global brand strategy and marketing program involving GBI and its various
licensees.
(c) Golden Bear shall assist GBI in the review and evaluation of
marketing, advertising, promotion and merchandizing programs developed or
implemented by Nicklaus Golf staff for the Equipment Business, including review
and evaluation of the concepts of programs proposed by Nicklaus Golf and review
and evaluation of the implementation and effectiveness of programs implemented
by Nicklaus Golf.
The consulting services required under this Section shall be rendered to JWN as
the principal of GBI and to such additional employees and authorized
representatives of GBI as GBI may designate in writing generally or with respect
to particular matters. Golden Bear acknowledges that Nicklaus Golf is an
intended beneficiary of the consulting services being rendered by Golden Bear to
GBI as a member of Nicklaus Golf and that GBI shall be authorized to provide
Nicklaus Golf staff and management with all information, advice and other ideas
generated by Golden Bear as a consultant under this Agreement without additional
charge or restriction. If requested by GBI, Golden Bear further agrees to make
its staff available at its principal offices during
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reasonable times to discuss matters arising under this Agreement with Nicklaus
Golf staff.
3. REVIEW AND APPROVAL OF MARKETING MATERIALS. Golden Bear
acknowledges that, under the NGEC License, Nicklaus Golf has the exclusive right
to produce and use advertising and promotional materials which incorporate the
personal services of JWN and the Golf Endorsement to market golf equipment
utilizing the trademarks licensed by GBI which meets GBI's quality standards,
and to promote the business interests of Nicklaus Golf generally, including
Nicklaus Golf's public image and licensed business activities, subject to the
rights of GBI to approve such advertising and promotional materials under
Paragraph 8 of the NGEC License. The parties understand and acknowledge that, as
a result of Golden Bear's succession as licensee under the GB License to the
Transferred Businesses formerly conducted by GBI under trademarks and
endorsement rights related to the Golf Endorsement, the active participation of
Golden Bear as GBI's marketing consultant in the review of advertising and
promotional materials will promote their mutual interests in the maintenance of
a uniform brand image for all products offered or licensed by GBI. In order to
protect the mutual interests of the parties in such participation, GBI shall
promptly furnish the following to Golden Bear staff: (i) copies of all proposed
advertising and promotional materials, concepts and other information provided
to GBI under Paragraph 8 of the NGEC License, and (ii) any other marketing
materials, concepts or information relating to the Golf Endorsement submitted by
Nicklaus Golf staff to GBI for its review, comment or approval. Golden Bear
staff shall review any materials furnished to them under this Section within a
reasonable time based upon the circumstances and will communicate any comments
upon or objections to such materials to JWN and/or those other persons
designated by GBI to review such materials and communicate its response to
Nicklaus Golf. In any event, Golden Bear will use its best efforts to respond to
GBI prior to the expiration of any time limitations imposed upon objections from
GBI under the terms of Paragraph 8 of the NGEC License or the terms of any other
agreements between GBI and Nicklaus Golf governing GBI's response to any other
submission. GBI agrees to act in good faith to address with Nicklaus Golf any
matters raised by Golden Bear staff which may affect the goodwill of GBI's
trademarks or endorsement rights, and to communicate the results of its
discussions with Nicklaus Golf to Golden Bear's staff.
4. COORDINATION WITH OTHER EQUIPMENT LICENSEES. Golden Bear agrees
that, in addition to its marketing consulting responsibilities with respect to
Nicklaus Golf, Golden Bear shall provide such consulting services as GBI may
reasonably request in order for GBI to coordinate the marketing activities of
the Equipment Business with the activities of MacGregor Golf (Japan), Ltd.
("MGJ"), as the exclusive golf equipment licensee of GBI in Japan and South
Korea. In addition to providing such marketing advice to GBI, Golden Bear will
perform all of the services for GBI required under Sections 2 and 3 of this
Agreement to the extent such services may be applicable to the relationship
between GBI and MGJ. Golden Bear shall also assist GBI in evaluating the
activities of Nicklaus Golf and MGJ as GBI's licensees in the golf equipment
field and in providing consulting assistance as may reasonably be requested by
GBI in connection with MGJ's adaptation of global brand strategies to the
domestic Japanese market for golf equipment.
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5. COMPENSATION AND EXPENSES. In consideration of the services to be
provided and obligations to be undertaken by Golden Bear on behalf of GBI under
this Agreement, GBI agrees to pay Golden Bear a consulting fee in the amount of
one hundred thousand dollars ($100,000) per year, which fee will be payable
equal monthly installments due in advance on the Effective Date and on the same
day of each consecutive month during the term of this Agreement thereafter. In
consideration of such consulting fee, GBI shall receive up to three hundred
(300) hours per calendar year of marketing executive staff services (excluding
clerical and office staff time of Golden Bear support staff) from Golden Bear as
needed to perform this Agreement. In the event that GBI desires to obtain
marketing staff support in excess of such amount in any calendar year, GBI and
Golden Bear shall negotiate in good faith a mutually acceptable houly or per
diem rate for such services based upon the market rates for similar professional
marketing consulting services in the Southeastern region of the United States.
In addition to such consulting fee, GBI shall pay or reimburse Golden Bear for
reasonable out-of-pocket expenses incurred by Golden Bear in connection with the
services rendered under this Agreement, including, without limitation, travel
and lodging expenses incurred in connection with services rendered at places
other than the principal offices of GBI or Nicklaus Golf, provided that Golden
Bear will cooperate with GBI to obtain the prior approval and direct payment or
reimbursement of such expenses by Nicklaus Golf where applicable under
subparagraph 4(e) of the NGEC License. Any such reimbursement shall be made as
soon as practicable after submission by Golden Bear of vouchers or reports of
such expenditures in such reasonable detail as GBI may require. It is understood
that travel and entertainment expenses incurred by Golden Bear in order to
manage and promote the Transferred Businesses or other profit making activities
licensed by GBI shall be for the sole and exclusive account of Golden Bear, and
that the conduct by Golden Bear personnel of incidental marketing support
functions under this Agreement during such activities shall not entitle Golden
Bear to seek reimbursement of or contribution to such expenses from GBI unless
GBI has expressly agreed in writing to pay a stated amount or allocated share of
such expenses prior to the date such services are rendered. The parties
acknowledge that the services of Golden Bear are provided for the sole benefit
of GBI as a member of and licensor to Nicklaus Golf, and that Golden Bear shall
not claim or assert any right to payment against Nicklaus Golf under this
Agreement, including any right to direct payment of expenses payable or
reimbursible to GBI under subparagraph 4(e) of the NGEC License, unless Nicklaus
Golf has agreed in writing to pay such expenses directly at the request of GBI.
6. TERM. The term of this Agreement shall commence on the "Effective
Date", which for purposes of this Agreement shall have the same meaning and be
deemed to occur simultaneously with the Effective Date defined in Section 4 of
that certain Agreement and Plan of Reorganization between GBI and Golden Bear of
even date herewith, and shall expire on December 31, 2006, unless renewed or
terminated as provided in this Section.
(a) Either of GBI or Golden Bear may terminate this Agreement in the
event of a material breach by the other party on ninety (90) days written notice
specifying the breach, unless the other party has cured the breach to the
reasonable satisfaction of
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the notifying party within such notice period. Golden Bear shall have a special
right to terminate this Agreement without cause, at the end of any calendar
year, commencing with the end of calendar year 1997, by giving written notice to
GBI of its intent to terminate not later than July 1 of the year in which such
termination is to be effective. As a condition to any such termination, Golden
Bear shall make reasonable efforts to continue its marketing support activities
and to arrange for an orderly transition of all responsibilities under this
Agreement to GBI or its designated successor consultant(s) prior to the
effective date of such termination, provided that in no event will Golden Bear
be required to provide any further services to GBI or its successor
consultant(s) after the effective date of such termination.
(b) This Agreement shall terminate automatically in the event of: (i) a
termination of either the NGEC License or the GB License, which termination
shall be effective on the effective date of the termination of either such
license unless waived in writing by mutual agreement of the parties, (ii) in the
event of the withdrawal of GBI as a member of NGEC, or any reorganization of
NGEC which materially affects GBI's participation in the management of NGEC,
unless GBI and Golden Bear mutually agree to continue the performance of this
Agreement after such event, or (ii) in the event the marketing support
obligations of GBI to NGEC which form the subject matter of this Agreement are
terminated. This Agreement shall also terminate automatically in the event that
any party suffers or commits any of the following acts of default, unless such
default is waived in writing by the non-defaulting parties upon such assurances
of cure and future performance as such non-defaulting parties may reasonably
request: (1) institutes voluntary proceedings under any bankruptcy or insolvency
law or other law for the benefit of creditors or the relief of debtors, becomes
the subject of involuntary bankruptcy proceedings instituted by other parties,
and such proceedings are not dismissed within sixty (60) days of the
commencement thereof, or is adjudicated bankrupt or insolvent in any legal
proceedings, (2) makes a general composition, assignment for the benefit of its
creditors, or other common-law or statutory arrangement for compromise of its
indebtedness to general creditors, (3) is voluntarily or involuntarily
dissolved, becomes the subject of any seizure or receivership affecting its
ability to perform this Agreement, or ceases its business or materially curtails
any part of the business activities contemplated by this Agreement, or (4)
voluntarily transfers all or a substantial part of the employees, or conveys all
or a substantial part of the assets or intangible rights necessary to perform
this Agreement, without a permitted assignment of this Agreement to the
transferee. Any termination under this subsection shall be without prejudice to
any other right or remedy which the non-defaulting party may have as a result of
such event or events, and shall not release the defaulting party from any damage
claims arising under this Agreement as a result of such default unless otherwise
agreed in writing.
(c) Upon the expiration of the initial term of this Agreement, Golden
Bear shall have the option to renew this Agreement for successive three (3) year
terms subject to its satisfactory performance of its responsibilities to GBI
under this Agreement through the effective date of such renewal. Any such option
shall be exercised by Golden Bear in a written notice given to GBI not later
than July 1 of the calendar year in which the initial term or then current
renewal term expires. A renewal
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shall be effective automatically if due notice is given unless GBI makes a
written objection to such renewal on or before its effective date, which
objection shall state in reasonable detail the reasons for GBI's dissatisfaction
with Golden Bear's performance and the actions reasonably necessary for Golden
Bear to remedy the recited problems. The delivery of a written objection to
renewal by GBI shall, if necessary, extend the term of this Agreement for a
minimum period of ninety (90) days from the date of such notice, if such period
is longer than the remaining stated term then in force, which extension is made
for the purpose of allowing the parties to resolve the matters raised in such
notice to their mutual satisfaction.
(d) Copies of any termination notices or other communications sent by
GBI or Golden Bear under this Section shall be promptly delivered to Nicklaus
Golf, and GBI and Golden Bear acknowledge and understand that neither the
existence of a dispute between them nor the termination of this Agreement by
action of either of them shall affect GBI's obligations to provide marketing
support to Nicklaus Golf as required by the NGEC License.
7. INDEMNIFICATION. GBI hereby agrees to indemnify and hold Golden
Bear harmless from and against any claims, losses or liabilities in the event
that Golden Bear is included as a party in any claim or governmental proceeding
arising out of (i) the failure of Nicklaus Golf or GBI to fully perform any
commitments made to third parties in connection with the marketing activities
subject to this Agreement, (ii) the business activities and operations of
Nicklaus Golf, including without limitation, products liability claims from
purchasers of Nicklaus Golf's licensed products, or (iii) the failure of
Nicklaus Golf to comply with any law or regulation applicable to its business in
any jurisdiction where such business is conducted by Nicklaus Golf or its
sublicensees. Golden Bear hereby agrees to indemnify and hold GBI harmless from
and against any claims, losses or liabilities arising out of (i) any gross
negligence or misconduct by its employees or representatives in the performance
of this Agreement, or (ii) contracts or commitments for marketing and
promotional activities made by Golden Bear without the required authorization or
approval of Nicklaus Golf or GBI. Such indemnification shall include the
indemnified party's expenses and reasonable attorneys' fees incurred in the
defense or settlement of a claim or proceeding.
8. ASSIGNMENT; SUBCONTRACTING. Golden Bear shall not assign any of its
rights or delegate any of its duties hereunder to any third party, other than a
wholly owned subsidiary of Golden Bear, without the prior written consent of
GBI, and any purported assignment or subcontracting by Golden Bear without such
consent shall be of no force or effect. Prior to giving its consent to any
proposed assignment or subcontract, GBI shall review the terms of such proposal
with Nicklaus Golf, and GBI shall have the right to withhold its consent to any
proposed arrangement if Nicklaus Golf makes any reasonable objection thereto
unless such objection is resolved by Golden Bear prior to the time such consent
is required.
9. CONFIDENTIALITY. Golden Bear hereby agrees to maintain the
confidentiality of all non-public information regarding the Equipment Business,
regardless of the source of such information, including without limitation,
information relating to the following matters: (i) the relationships of Nicklaus
Golf with particular customers and
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<PAGE>
suppliers, including the identity and position of individual contacts,
capabilities, and pricing structures, (ii) manufacturing and marketing
information regarding the Nicklaus Golf's products and potential product lines,
including existing, pending and potential product offerings, market studies,
sales results and projections, and financial matters relating to the production
and distribution of products, and (iii) research and development projects and
new product, sales or marketing concepts developed by or for Nicklaus Golf.
Golden Bear agrees that, without the prior express written consent of GBI and
Nicklaus Golf, Golden Bear will not release, publish, communicate or otherwise
disclose any of such information to any party (other than GBI and Nicklaus Golf
management and staff), or make any use of such information for any purpose other
than performing Golden Bear's consulting and marketing support services under
this Agreement. Nicklaus Golf and GBI hereby agree to maintain the
confidentiality of all non-public information regarding the Transferred
Businesses and any other businesses developed by Golden Bear under the GB
License, regardless of the source of such information, including without
limitation, information relating to the following matters: (i) the relationships
of Golden Bear and its licensees with particular customers and suppliers,
including the identity and position of individual contacts, capabilities, and
pricing structures, (ii) manufacturing and marketing information regarding the
products and services and potential product and service lines to be offered
under the GB License, including existing, pending and potential offerings,
market studies, sales results and projections, and financial matters relating to
the licensing, production and distribution of products and services, and (iii)
research and development projects and new product, service, sales or marketing
concepts developed by or for Golden Bear. GBI and Nicklaus Golf agree that,
without the prior express written consent of Golden Bear, Nicklaus Golf and GBI
will not release, publish, communicate or otherwise disclose any of such
information to any party (other than GBI and Golden Bear management and staff),
or make any use of such information for any purpose other than determining and
implementing marketing strategies for the Equipment Business under this
Agreement. In the event that any party believes that it is required in response
to any form of legal process or under applicable securities laws or regulations
to make a public disclosure of any information subject to this Section, such
party shall provide the other parties with prompt written notice of the matters
which such party believes that it is required to disclose and the reasons why
such disclosures are required by law or regulation, and the parties shall
cooperate with each other as reasonably necessary to permit such party to
discharge its legal obligations.
10. OWNERSHIP OF INTANGIBLE RIGHTS. Golden Bear agrees not to assert
any intellectual property rights adverse to GBI or Nicklaus Golf in any
information or concepts for marketing golf equipment which come into existence
as a result of this Agreement, and that GBI and Nicklaus Golf shall be entitled
to exploit any work or creation developed by Golden Bear in connection with the
marketing of golf equipment as a consultant to GBI in the performance of Golden
Bear's services hereunder without payment of any compensation in any form other
than the fees payable under Section 5, above. In that regard, GBI or Nicklaus
Golf will be entitled own and exercise as provided under the GB License and NGEC
License all copyrights, trademarks and servicemarks, by assignment or otherwise,
which are developed for and/or promoted by
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<PAGE>
the parties with respect to Golf Equipment under this Agreement, and Golden Bear
expressly agrees to make no use of any such rights other than uses in
fulfillment of Golden Bear's obligations under this Agreement or other uses
permitted by the GB License and in connection with Golden Bear's business. The
parties acknowledge that GBI's use of, and its further authorization of Nicklaus
Golf to use, creative ideas and marketing concepts furnished to GBI by Golden
Bear under this Agreement shall not give GBI exclusive intellectual property
rights in such ideas or concepts, and that GBI shall not seek to limit or
prevent the use of such ideas or concepts by Golden Bear in the development of
other similar marketing and promotional projects within the scope of the GB
License and in connection with Golden Bear's business for parties other than
Nicklaus Golf or GBI. Notwithstanding the retention of any intellectual property
rights in such ideas and concepts by Golden Bear as against third parties,
Golden Bear agrees that such ideas and concepts shall remain available for use
by GBI and Nicklaus Golf after termination of this Agreement, without royalty or
other additional compensation to Golden Bear, for use in the continuation of
then existing programs or independent development of similar marketing programs
by or for GBI or Nicklaus Golf.
11. MISCELLANEOUS.
(a) CHOICE OF LAW; ARBITRATION. This agreement shall be construed and
enforced in accordance with the internal laws of the State of Florida without
regard to conflicts of laws rules which might otherwise be applied. The parties
agree, except as otherwise expressly set forth herein, that all disputes
involving the construction or enforcement of this Agreement shall be resolved by
binding arbitration before a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association ("AAA") and the
Federal and Florida Arbitration Acts. The parties agree that the location of any
such arbitration shall be at a site selected by the arbitrator in Palm Beach
County, Florida, unless otherwise agreed at the time the dispute is submitted to
the AAA. In accordance with the Federal and Florida Arbitration Acts, any party
may apply to any court of competent jurisdiction to compel arbitration in
accordance with this subsection or to enforce any award rendered by the
arbitrator in a proceeding conducted hereunder in accordance with its terms.
Unless otherwise agreed in writing by the parties, legal action to compel any
arbitration involving the construction or enforcement of this Agreement may be
brought by either party in that State or Federal Court having subject matter
jurisdiction over the cause which is located in Palm Beach County, Florida, and
each of the parties to this Agreement hereby agrees to submit to the personal
jurisdiction of such Courts regardless of the domicile of such party at the time
such action is filed. In any arbitration under this subsection, the arbitrator
shall have the authority to award to the prevailing party attorneys' fees and
expenses in accordance with the provisions of subsection (e) of this Section.
(b) RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARIES. GBI and
Nicklaus Golf acknowledge that the status of Golden Bear under this Agreement
shall be as an independent subcontractor to GBI, and that Golden Bear shall
exercise its independent judgment and discretion in the performance of all work
assigned under this Agreement. Except for Nicklaus Golf's rights to utilize the
work product and intellectual property delivered by Golden Bear to GBI under
this Agreement as expressly set forth above, no
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<PAGE>
party shall be deemed a third party beneficiary of this Agreement, and Golden
Bear and Nicklaus Golf acknowledge and agree that neither of them shall have any
independent right of action against the other as a result of their status as
parties to this Agreement or any acts undertaken by either of them in connection
with the performance of this Agreement.
(c) NOTICES. Any notice to be given under this Agreement shall be made
in writing and shall be sent to the address of the intended recipient as set
forth at the beginning of this Agreement or the facsimile number set forth on
the signature page, or to such other address or facsimile number as may be
designated in a written notice meeting the requirements of this subsection.
Notices under this subsection will be effective: (i) if mailed by certified
mail, return receipt requested, three (3) days after the date the notice is
deposited, postage paid with the United States Postal Service, as shown by its
receipt for certified mail; (ii) if sent via courier service or express
delivery, upon the date of actual delivery as endorsed by the carrier or person
accepting such delivery for the recipient of such notice, or (iii) if sent via
facsimile to the telephone numbers given by the recipients of such notice, on
the date of transmission as shown by the confirmation forms printed by the
sending machine showing the recipients' station identification and verification
of error free communication, provided that confirmation copies of the notice are
sent to the recipient via certified mail or courier as provided above not later
than the day following the date of such confirmed facsimile transmission.
(d) ENTIRE AGREEMENT; AMENDMENT. This Agreement and the annexed
schedules constitute the entire agreement of the parties with respect to the
subject matter hereof. This Agreement may not be amended or modified, or any
right or obligation of a party hereunder waived or released, except in a written
document signed by the party to be charged with such amendment, modification,
waiver or release.
(e) COUNTERPARTS. This agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(f) EXPENSES; ATTORNEYS' FEES. Except as otherwise expressly provided
in this Agreement, each party shall be responsible for payment of its own
expenses (including, without limitation, the fees and expenses of their agents,
representatives, counsel and accountants) incidental to the preparation and
carrying out of this Agreement. In the event any a party is required to retain
the services of an attorney to enforce the rights of such party under this
Agreement, or to require a construction of this Agreement or declaration or
determination of the rights of any party hereunder, the prevailing party or
parties in any subsequent litigation involving such matter shall be entitled to
receive an award of all attorneys' fees incurred by them in connection with such
matter, including any fees incurred for review, negotiation, settlement,
preparation of pleadings, trial or appeal.
(f) SECTION HEADINGS. The section headings are inserted
for convenience of reference only, and shall not affect the interpretation or
construction of any of the express terms of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals as of the date first set forth above.
GOLDEN BEAR INTERNATIONAL, INC. GOLDEN BEAR GOLF, INC.
By: _______________________________ By: ___________________________
Name: Name:
Title: Title:
Its Authorized Signatory Its Authorized Signatory
NICKLAUS GOLF EQUIPMENT COMPANY, L.C.
By:
Name:
Title:
Its Authorized Signatory
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EXHIBIT 10.14
OFFICE STAFF AND EQUIPMENT SERVICE AGREEMENT
THIS AGREEMENT, dated as of _______________, 1996, is entered into by
and between GOLDEN BEAR INTERNATIONAL, INC. ("GBI"), a Florida corporation,
having its principal place of business at 11780 U.S. Highway One, North Palm
Beach, Florida 33408, and GOLDEN BEAR GOLF, INC. ("Golden Bear"), a Florida
corporation having its principal place of business at 11780 U.S. Highway One,
North Palm Beach, Florida 33408, and sets forth the agreements and
understandings of the parties as follows:
SECTION 1: SUBJECT MATTER OF AGREEMENT
1.1 USE OF OFFICE SPACE. Prior to the date of this Agreement, the
businesses operated by the parties to this Agreement were operated by GBI as a
single entity out of the headquarters of GBI located on the third, fourth and
fifth floors of that office building known as Three Golden Bear Plaza, at the
street address set forth above (the "Premises"). By separate Sublease Agreement
of even date herewith, GBI has agreed to grant to Golden Bear the right to use a
portion of the Premises for Golden Bear's main corporate headquarters, including
certain space allocated for the sole and exclusive use of Golden Bear (the "GB
Space") and other common tenant areas to be shared by the parties as more
particularly described in the Sublease Agreement (the "Common Areas"). In order
to better facilitate the use of the Premises by the parties under the Sublease
Agreement, and to provide for the sharing of office and business services and
equipment formerly provided by GBI which would be inconvenient or wasteful for
the parties to duplicate, GBI and GB have agreed to enter into the arrangements
described below in connection with their respective business operations at the
Premises.
1.2 USE OF COMMON AREAS AND FACILITIES. In conjunction with the
Sublease Agreement, GBI has authorized Golden Bear to make non-exclusive use of
the Common Areas, subject to the requirement that the parties mutually cooperate
in the scheduling and use of the Common Areas in order to satisfy both parties'
business objectives and needs. GBI agrees that the following Common Areas shall
be open at all reasonable times to use by the staff, business invitees, and
guests of both parties, and that GBI shall not interfere with ingress and egress
to the common areas by Golden Bear and such persons: main reception area (during
normal business hours), entry ways and hallways, kitchens and break rooms, and
rest rooms. The remaining Common Areas, consisting of those conference and
meeting rooms identified in Exhibit "A" annexed hereto, shall be available to
the parties by prior reservation with the parties designated in such Exhibit, or
on a "space available" basis if no prior conflicting reservation has been made.
GBI reserves the right to limit use of meeting rooms to parties above a certain
number or to utilize other reasonable criteria mutually adopted by the parties
where necessary in order to relieve congestion or limit scheduling conflicts
between the parties.
1.3 JOINT OWNERSHIP OF PHONE EQUIPMENT. In order to minimize the
expense of separate telephone systems, the parties have agreed that they will
jointly own the
<PAGE>
telephone system for the Premises and the necessary components thereof,
including (i) the the PBX switching unitmain switchboard, voice mail system, and
interior wiring connections in the Premises, and (ii) the office telephone
instruments, such as desk and wall phones, handsets and phone jacks. Each party
will establish its own long distance phone service and be responsible for
payment of all charges and expense in establishing and using long distance phone
service.
1.4 JOINT OWNERSHIP OF OTHER EQUIPMENT. In addition to the phone
system, the parties have agreed that they will jointly own certain office and
business equipment as more particularly described in Exhibit "B" annexed hereto,
including without limitation, central facsimile machines, photocopying machines,
and computer network. Reasonable security precautions will be developed and
mutually approved by the parties to assure that access to confidential business
data of each party is restricted to personnel directly employed by such party
and to such other parties as may be authorized by such party to have access to
such data. On or before the effective date of this Agreement, the parties will
conduct a physical inventory of all equipment to be shared by the parties and
will identify those items to be jointly owned , in which case Exhibit "B" will
be amended to reflect any additions or deletions to the equipment to be jointly
owned.
1.5 USE OF GOLDEN BEAR EMPLOYEES. In recognition of the fact that
certain headquarters staff employees formerly employed by GBI are still
necessary for the normal conduct of both parties' business operations, and to
obviate the need for GBI to incur the expense of hiring personnel who would
duplicate and conflict with the job performance of personnel permanently
transferred to Golden Bear's staff, Golden Bear shall provide to Golden Bear the
services of those employees whose job descriptions are set forth in Exhibit "C"
annexed hereto, who have been initially identified by the parties who can
effectively serve the needs of both organizations and facilitate the joint use
of the Common Areas. GBI acknowledges that it has retained in its employ all
other staff required by GBI in order to continue its business in the normal
course, that GBI will retain such additional professional and management
consulting services as it may require in connection with such business, and that
Golden Bear shall have no responsibility to provide GBI with the services of any
individual or entity except as set forth in Exhibit "C" or in another written
agreement between the parties. In the event that circumstances after the
effective date of this Agreement obviate the need to share the services of any
identified service require the parties to share use of other service personnel
employed by Golden Bear in order to continue their operations in the normal
course, Exhibit "C" will be amendment by a written document signed by both
parties to confirm such change.
SECTION 2: FEES AND EXPENSES
2.1 EMPLOYEE EXPENSE. As compensation to Golden Bear for the use of
those staff members identified in Exhibit "C", GBI shall pay to Golden Bear an
initial monthly fee of Twenty-Eight Thousand Seven Hundred Fifty Dollars
($28,750.00) (the "Management Fee"), which represents fifty percent (50%) of the
current costs to Golden Bear of employing the identified staff. The Management
Fee will be paid in advance,
<PAGE>
on or before the first day of the month, and shall be nonrefundable. The parties
will review their staffing requirements under this Agreement annually during the
last thirty (30) days of Golden Bear's fiscal year and at any other time when
Exhibit "C" is amended to determine the projected staffing costs and
requirements for the coming year, at which time the Management Fee shall be
adjusted to reflect material cost increases and changes in staffing
requirements.
2.2 TELEPHONE EXPENSE. In the event any portion of the telephone system
requires repair or replacement, the parties will share equally in such cost and
any additional components purchased will be owned jointly. In addition, Golden
Bear shall pay GBI an initial monthly fee of Two Hundred Dollars ($200.00) (the
"Phone Rental"), which represents Golden Bear's pro rata share of GBI's current
costs of providing local telephone service.In addition to the Phone Rental,
Golden Bear shall be responsible for payment of any equipment costs or service
charges incurred by GBI in order to provide additional phone services to Golden
Bear (or to make changes in the phone service as currently provided to the
Premises for the benefit of Golden Bear). The Phone Rental will be paid in
advance, on or before the first day of the month, and shall be nonrefundable.
The parties will review their telephone service requirements under this
Agreement annually during the last thirty (30) days of GBI's maintenance
contract year and at any other time when changes are made in phone service to
determine the projected recurring costs of such changes, at which time the Phone
Rental shall be adjusted to reflect material cost increases and changes in
service requirements.
2.3 EQUIPMENT EXPENSE AND RIGHTS UPON SALE. If any of the items
identified on Exhibit "B" or any additional equipment jointly acquired, requires
repair or replacement, the parties will share equally in the cost of such repair
or replacement and any additional equipment purchased will be owned jointly.
Upon the sale or disposition of any Equipment, the parties will divide equally
the proceeds from any such sale of disposition. In the event of a proposed sale
or disposition, either party shall have the right to purchase such equipment at
the then current book value of such equipment on the books of the party wishing
to purchase the equipment. In purchasing any new equipment to be jointly owned,
the parties will execute such instruments and documents as necessary to reflect
joint ownership.
2.4 OTHER OFFICE EXPENSES. Each party shall be solely responsible for
the costs of acquisition, installation, supplies and maintenance for all
equipment dedicated solely for its use, and for payment of all staff not subject
to sharing under this Agreement. Except as otherwise provided in this Agreement
or in the Sublease Agreement, GBI shall be responsible for payment of the costs
of providing the Premises to the parties, including all rental and pass-through
charges imposed by the landlord. In the event of any material change in the
business of the parties which causes a material increase or decrease in its
utilization of the Premises, the parties shall have the right to renegotiate
this Agreement and the Sublease Agreement to more accurately reflect the usage
of the Premises to be made by the parties and apportion the costs to be shared
by the parties based upon such usage.
<PAGE>
SECTION 3 - TERM AND TERMINATION
3.1 TERM OF THE AGREEMENT. The term of this Agreement shall commence on
the date hereof and shall terminate upon the expiration or earlier termination
of the Sublease Agreement, unless sooner terminated as provided in this Section
3.
3.2 TERMINATION OF AGREEMENT. Either party may terminate this Agreement
upon ninety (90) days written notice to the other of a material breach of this
Agreement, and the failure of the breaching party to cure such default. This
Agreement shall terminate in the event proceedings are instituted by either
party under any bankruptcy or insolvency law or other law for the benefit of
creditors or the relief of debtors; or involuntary bankruptcy proceedings are
commenced against either party and such proceedings result in the entry of an
order adjudicating such party as bankrupt or such proceedings are not dismissed
within one hundred eighty (180) days after the commencement thereof; or either
party shall make an assignment for the benefit of its creditors; or either party
shall be adjudicated bankrupt or insolvent, unless the other party agrees
otherwise.
3.3 DUTIES UPON TERMINATION OR EXPIRATION. Upon the termination or
expiration of this Agreement, each party shall cease making use of any shared
staff or equipment, and shall make all necessary arrangements to provide
replacement staff or equipment for its own account. All shared equipment shall
be left in place (or delivered as directed by the party owning such equipment)
in working condition, reasonable wear and tear excepted, and shall not be
removed or damaged by the party losing the right to use such equipment under
this Agreement.
SECTION 4 - RELATIONSHIP OF PARTIES
4.1 INDEPENDENT CONTRACTORS. Nothing herein is intended nor shall be
deemed to create a joint venture, partnership, or agency relationship among GBI
and Golden Bear, or to impose any liability or responsibility on either party
for the debts, losses or liabilities of the other. Neither party shall have the
power to commit the other to any matter, cause or thing whatsoever without the
prior express written consent of the party to be charged. It is understood that
each party is to perform its obligations and exercise its rights hereunder as an
independent contractor with discretion and control as to the manner and timing
of its performance.
4.2 INDEMNIFICATION; INSURANCE. Each party agrees to indemnify the
other, its directors, officers or agents, for and hold them harmless from and
against any and all obligations, losses, costs, expenses, damages, liabilities
or claims, including attorneys' fees, arising out of claims asserted by third
parties which are related in any way to the other party's business or
operations, except as otherwise provided in a written agreement between the
parties regarding specific business relationships undertaken by them. In the
event a party is joined as a defendant in any legal action instituted against
the other as a result of any matter requiring indemnity hereunder, the
indemnitor shall undertake to defend the indemnitee against any such asserted
liability and shall pay all reasonable costs or defense related thereto,
including, but not limited to, the cost and expense of independent counsel, if
any, retained by the indemnitee, and shall indemnify
<PAGE>
and hold such parties harmless in the event of a settlement or adverse judgment
against either of them. Each party shall obtain general liability and property
and casualty insurance necessary to adequately fulfill each parties obligation
hereunder, including obligations of indemnity.
SECTION 5 - GENERAL PROVISIONS
5.1 ASSIGNMENT. Neither party may assign any of its rights under
this Agreement without the consent of the other party.
5.2 NON WAIVER. The failure of a party to demand strict performance of
or compliance with this Agreement or any provisions thereof at any time or under
any set of circumstances shall not be deemed a waiver by such party of its right
to demand such performance and compliance at any other time or under any other
circumstances. This Agreement may not be changed, modified, or terminated
orally, but only by a written instrument of change, modification, or termination
executed by the party against whom enforcement of any change, modification, or
termination is sought.
5.3 SEVERABILITY. If any term or provision of this Agreement or the
application thereof to any particular person or circumstances shall to any
extent be invalid or unenforceable then such invalidity or unenforceability
shall not impair the remainder of this Agreement or the application of such term
or provisions to persons or circumstances other than those as to which it is
held invalid or unenforceable and each other term and provision of this
Agreement, not affected thereby, shall be valid and enforceable to the fullest
extent permitted by law.
5.4 GOVERNING LAW. All questions pertaining to the validity,
construction, execution and performance of this Agreement shall be construed in
accordance with and governed by the internal laws of the State of Florida
without regard to principles of conflicts of law which might otherwise be
applied.
5.5 NOTICES. All notices given or made under or pursuant to this
Agreement shall be in writing and delivered or sent to the address shown in the
first page hereof or to such other address or facsimile number as the recipient
may have notified the sender and shall be deemed to be duly given or made: (a)
if by letter, three (3) days after posting, and in proving the same it shall be
sufficient to show that the envelope containing the same was duly addressed,
stamped, and posted by certified mail; or (b) If by hand, when delivered to the
attention of the Chief Executive Officer of the recipient at the Premises.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
as of the date first set forth above.
<PAGE>
GOLDEN BEAR INTERNATIONAL, INC. GOLDEN BEAR GOLF, INC.
By:__________________________ BY:
Name. Name:
Title: Title:
<PAGE>
EXHIBIT "A"
COMMON AREAS
<PAGE>
EXHIBIT "B"
JOINTLY OWNED OFFICE AND BUSINESS EQUIPMENT
<PAGE>
EXHIBIT "C"
EMPLOYEE JOB DESCRIPTIONS
EXHIBIT 10.15
SUBLEASE AND SHARING AGREEMENT
THIS AGREEMENT, dated as of _______________, 1996, between
GOLDEN BEAR INTERNATIONAL, INC., a Florida corporation (the "Sublessor"), and
GOLDEN BEAR GOLF, INC., a Florida corporation (the "Sublessee"), recites and
provides: RECITALS:
A. By "Lease Agreement" as amended (the "Lease Agreement"),
between GOLDEN BEAR PLAZA ASSOCIATES as lessor (the "Lessor"), and the
Sublessor, as lessee, the Lessor leased to the Sublessor certain office space
(the "Premises") in the building (the "Building") located in the City of Palm
Beach Gardens, Florida, with a street address of Three Golden Bear Plaza, 11780
U.S. Highway One, North Palm Beach, Florida 33408.
B. The Sublessor has agreed to lease to the Sublessee and
the Sublessee has agreed to lease from the Sublessor that portion of the
Premises (the "Subleased Premises") described on composite Exhibit "A" hereto on
the terms and conditions hereinafter set forth.
SUBLEASE AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual
covenants contained herein, the Sublessor and the Sublessee hereby agree as
follows:
1. DESCRIPTION OF SUBLEASED PREMISES. The Sublessor hereby
demises and subleases to the Sublessee and the Sublessee hereby rents and
subleases from the Sublessor, on the terms and conditions hereinafter set forth,
the
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<PAGE>
Subleased Premises containing approximately 14,962 square feet and designated on
Exhibit "A".
2. TERM.
(a) The term of this Sublease Agreement shall
commence on the date hereof, and shall end at the same date as the Lease
Termination date, unless sooner terminated or extended on the terms and
conditions set forth herein.
(b) Sublessee shall have no right to extend this
Sublease unless Sublessor and Sublessee have entered into a written agreement
therefor prior to expiration of the term hereof.
3. RENT. During the term of this Sublease Agreement
the Sublessee covenants and agrees to pay to the Sublessor the amounts set forth
on Exhibit "B" hereto; such amounts to be payable to Sublessor on the first day
of each month for the succeeding month. All such Rent is based on a straight
pass through of rental charges to Sublessor under the Lease. The first rental
payment due shall be on the execution hereof and shall be pro-rated if the term
hereof does not commence on the first day of a calendar month. Sublessee shall
also pay all Florida sales tax due on all rental payments hereunder.
4. INCORPORATION OF LEASE AGREEMENT. The Lease Agreement is
incorporated herein by this reference thereto with the same force and effect as
if it were fully set forth herein and, except as otherwise herein specifically
provided, nothing herein shall in any way be interpreted or construed as to
result in an amendment or modification of the Lease Agreement. A true, correct,
and complete copy of the Lease Agreement is set forth on Exhibit "C" hereto. For
purposes hereof, the Lease Agreement includes the "FHS Sublease" attached here
as Exhibit C-1. The parties
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<PAGE>
under the FHS Sublease Agreement intend to amend the Lease to include the
subleased premises under the FHS Sublease.
5. COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE LEASE AGREEMENT.
All rights, powers, and privileges granted to the Sublessee under this Sublease
Agreement are subject to the provisions of the Lease Agreement. The Sublessee
covenants and agrees to comply with all of the provisions of the Lease Agreement
and to perform all of the obligations of the Sublessor under the Lease Agreement
pertaining to the Subleased Premises, except that the Sublessor shall pay rent
to the Lessor according to the terms and conditions of the Lease Agreement and
the Sublessee shall pay rent to the Sublessor in such amounts and on such dates
as provided in this Sublease Agreement.
6. SUBLESSEE'S COVENANTS.
(a) The Sublessee covenants and agrees that it will occupy the
Subleased Premises in accordance with the Lease Agreement and it will not suffer
to be done nor omit to do any act which may result in a violation of or default
under any of the terms and conditions of the Lease Agreement or render the
Sublessor liable for any charge or expense thereunder (except for any matters
approved by Sublessor in advance, which approval shall not be unreasonably
whithheld if Sublesee has made appropriate security arrangements satisfactory to
Sublessor).
(b) The Sublessee further covenants and agrees to indemnify the
Sublessor against and hold it harmless from any loss, liability, damage or
expense (including attorney's fees) arising out of, by reason of, or resulting
from (i) the Sublessee's failure to perform or observe any of the terms and
conditions of this Sublease Agreement or the Lease Agreement or (ii) the
Sublessee's use or occupancy of the Subleased Premises; excepting, however,
claims, actions, damages, liability and expense arising
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<PAGE>
out of the willful or negligent act or failure of Sublessor, its agents,
servants, employees, or contractors.
(c) At the commencement hereof, and throughout the term hereof, the
Sublesee shall maintain appropriate liability and casualty insurance in the
amounts set forth in the Lease Agreement and deliver appropriate evidence
thereof to Sublessor upon request.
7. ADDITIONAL RENT. Notwithstanding any other provisions in
this Sublease Agreement to the contrary, the Sublessee shall pay as additional
rent to the Sublessor, upon demand, (i) any and all sums which the Sublessor may
be required to pay to the Lessor arising out of, by reason of, or resulting from
the Sublessee's failure to perform or observe one or more of the terms and
conditions of this Sublease Agreement and (ii) those amounts set forth in
Sections 3, 14 and 15 hereof and (iii) those amounts set forth in the portion of
this Agreement entitled "Sharing Agreement."
8. ACCEPTANCE. Sublessee agrees to accept the
Subleased Premises in an "as is" condition and the Sublessee acknowledges that
no representations with respect to the condition thereof or any other matters
have been made to it by the Sublessor, or its representatives.
9. ALTERATIONS.
(a) Sublessee shall make no alterations or additions to the
Subleased Premises without the prior written consent of the Sublessor.
(b) All matters with respect to any such alterations or
additions and the construction thereof shall be approved by Sublessor, and, if
applicable, the Lessor. Any approved alterations or additions shall be
constructed at the sole cost and expense of the Sublessee. Sublessee shall allow
no mechanics liens to be filed in connection therewith and shall indemnify and
hold Sublessor harmless from any loss, cost, damage
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<PAGE>
or expense whatsoever in connection therewith. All such improvements shall be
constructed in a good and workmanlike manner and in compliance with all
applicable laws and building standards.
(c) All alterations, additions, and improvements shall
become the property of the Sublessor upon the completion thereof.
10. RIGHT TO ENFORCE. The Sublessee agrees that the
Sublessor shall not be required to perform any of the covenants and obligations
of the Lessor under the Lease Agreement, or to expend any money for the
preservation or repair of the Subleased Premises, and, insofar as any of the
covenants or obligations of the Sublessor hereunder are required to be performed
under the Lease Agreement by the Lessor, the Sublessee shall rely on and look
solely to the Lessor under the Lease Agreement for the performance thereof. If
the Lessor shall default in the performance of any of its obligations under the
Lease Agreement, and if within a reasonable period after the receipt of written
notice from the Sublessee, the Sublessor fails to enforce such rights, then the
Sublessee shall have the right, in the name of the Sublessee or, if necessary,
in the name of the Sublessor, to enforce any such rights. Such enforcement shall
be at the sole expense of the Sublessee and the Sublessee shall indemnify the
Sublessor against all costs and expenses, including, but not limited to,
reasonable counsel fees, which may be incurred by the Sublessor in connection
with any claim, action, or proceeding undertaken by the Sublessee.
11. DEFAULT. In the event that the Sublessee defaults in the
payment of any monetary amount due hereunder and such default continues for a
period of three (3) days after receipt of written notice or in the event the
Sublessee fails to comply with any other term or condition of this Agreement or
of the Lease Agreement, and such default continues for a period of ten (10) days
after receipt of written notice thereof,
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<PAGE>
then in either event the Sublessor shall have the right to: (a) declare this
Sublease Agreement terminated and receive as damages all rentals which would
have become due hereunder less the proceeds from reletting the Subleased
Premises, if any, plus reasonable expenses in connection therewith; and (b)
pursue all other remedies available to it at law or in equity.
12. RIGHT OF ENTRY. Sublessor shall have the right to enter
the Subleased Premises during reasonable business hours to examine the same, or
to make such repairs or alterations as they deem necessary, or to exhibit the
Subleased Premises to prospective purchasers or lessees.
13. NOTICES. All notices from the Sublessee to the
Sublessor required or permitted by any provision of this Sublease Agreement
shall be in writing and delivered by hand or sent by registered or certified
mail and addressed as follows:
Golden Bear International, Inc.
11780 U.S. Highway One
Suite 400
North Palm Beach, Florida 33408
Attention: Jack W. Nicklaus, Chairman
All notices from the Sublessor to the Sublessee required
or permitted by any provision of this Sublease Agreement shall be in writing and
delivered by hand or sent by registered or certified mail and addressed as
follows:
Golden Bear Golf, Inc.
Three Golden Bear Plaza
11780 U.S. Highway One
Suite
North Palm Beach, FL 33408
Attention: The President
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<PAGE>
The effective date of the notice shall be the date of
delivery if by hand or the second business day after the date on which the
notice is mailed. Either party may, at any time, or from time to time, designate
in writing a substitute address set forth above, and thereafter notices shall be
directed to such substitute address.
14. PARKING. As long as this Agreement is in effect,
Sublessee shall have the right to utilize six (6) underground parking spaces
designated by Sublessor. Additional rent for these spaces shall be payable as
set forth in Exhibit "B" hereto.
15. UTILITIES. Sublessor shall pay directly all utilities
(e.g. electricity, telephone) for the Subleased Premises, if separately metered.
If not, all such charges shall constitute additional rent and shall be
calculated based on "Tenant's Percentage" of 46.96%. Sublessee shall pay all
charges for air-conditioning utilized in accordance with the provisions of the
Lease Agreement, in addition to normal business hours. In addition, Sublessee
shall pay all other expenses for the Subleased Premises, including real estate
taxes and other common area maintenance charges as required by the Lease
Agreement, which sums shall be based on Tenant's Percentage and shall be due and
payable monthly with the rent hereunder.
16. TERMINATION. Upon the termination hereof, the
Sublessee shall deliver the Subleased Premises to the Sublessor in broom clean
condition and shall remove all of its personal property thereform. In addition,
at the request of Sublessor, Sublessee shall restore the Subleased Premises to
the condition existing prior to any alterations or additions.
SHARING AGREEMENT
1. USE OF FACILITIES. Sublessor shall allow Sublessee to use
those common areas and facilities located in the Premises as more particularly
identified in
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<PAGE>
Exhibit "A" hereto (the "Common Areas"), which consist of reception areas,
conference rooms, break rooms, and storage areas.
2. CHARGES. The cost of all of such facilities shall
be based on the allocations set forth in Exhibit "A". Base charges for the
Common Areas are set forth on Exhibit "B". Additional charges shall be due and
payable, as applicable, on a "cost basis". "Cost basis" shall mean ordinary and
reasonable pro-rata charges based on Sublessor's costs and shall be pro rated
based on the ratio between the area of the Subleased Premises and the entire
area of the Premises.
MISCELLANEOUS
1. ASSIGNMENT AND SUBLETTING. The covenants, conditions, and
agreements contained in this Agreement shall bind and inure to the benefit of
the Sublessor and the Sublessee and their respective heirs, devises, personal
representatives, successors, and assigns, subject to the provisions of the Lease
Agreement; provided, however, that the Sublessee shall not sublet or assign this
Sublease, nor any interest therein, without the prior written consent of the
Sublessor and Lessor, which consent may be withheld in accordance with the
provisions of the Lease Agreement. Notwithstanding any authorized subletting or
assignment, the Sublessee shall remain liable to the Sublessor in accordance
with the terms, covenants, and conditions of this Agreement. Consent by the
Sublessor and the Lessor to any assignment or subletting shall not constitute a
waiver of the necessity for such consent to any subsequent assignment or
subletting.
2. AMENDMENT AND MODIFICATION. This Agreement shall not be
amended or modified and no waiver of any provision hereof shall be effective
unless set
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<PAGE>
forth in written instrument executed by the Sublessor and the Sublessee with the
same formalities as herein.
3. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the Sublessor and the Sublessee relative to the subject matter
hereof and supersedes all prior and contemporaneous negotiations,
understandings, and agreements, written or oral, between the parties.
4. LITIGATION. In any litigation in connection herewith: (a)
the prevailing party shall be entitled to court costs and reasonable attorneys'
fees and (b) both parties waive the right to trial by jury.
5. BROKERAGE. Sublessor and Sublessee each warrant and
represent to the other that, each such party has not dealt with any broker in
connection with this transaction. In the event of any claim(s) by any other
person or firm for a finder's fee, professional fee or brokerage commission,
Sublessor and Sublessee hereby agree to indemnify and hold the other parties
harmless from any and all losses, damages, costs and expenses, including, but
not limited to, attorneys' fees and related disbursements through trial and on
appeal, incurred in connection with such claim(s) if the warranties stated above
are proven to be false.
WITNESS the following signatures and seals:
WITNESSES: GOLDEN BEAR INTERNATIONAL, INC.
______________________ By:________________________(SEAL)
Name: Name:
Title:
______________________
Name:
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<PAGE>
GOLDEN BEAR GOLF, INC.
By:_________________________(SEAL)
Name:
Title:
____________________
Name:
____________________
Name:
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<PAGE>
SCHEDULE OF EXHIBITS
Exhibit "A" Designation of Subleased Premises
(approximately 14,962 square feet)
Exhibit "B" Rent
Exhibit "C" Lease Agreement
Exhibit "C-1" FHS Sublease
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<PAGE>
EXHIBIT "B"
BASE RENT
Annual Base Rent $_____ /year (until)
$________/month plus
sales tax; subject to
adjustment as set forth in the
Lease
Real estate taxes, insurance $______/year
and c.a.m. $________/month, plus
sales tax; subject to
adjustment as set forth in
the Lease
Underground Parking Spaces
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EXHIBIT 10.20
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT, dated as of the 15th day of July, 1996,
between and among JACK W. NICKLAUS ("JWN"); GOLDEN BEAR INTERNATIONAL, INC., a
Florida corporation ("GBI"); Richard P. Bellinger and Barbara B. Nicklaus, as
Trustees of the THE JACK W. NICKLAUS II TRUST u/a dated as of the 23rd day of
September, 1982, as amended and restated; THE STEVEN C. NICKLAUS TRUST u/a dated
as of the 20th day of June, 1984, as amended and restated; THE NANCY J. NICKLAUS
TRUST u/a dated as of the 5th day of May, 1986, as amended and restated; THE
GARY T. NICKLAUS TRUST u/a dated as of the 15th day of January, 1990 as amended
and restated: and THE MICHAEL S. NICKLAUS TRUST u/a dated as of the 28th day of
November, 1990 (each a "Shareholder" and collectively the "Shareholders"); and
GOLDEN BEAR GOLF, INC. a Florida corporation (the "Company").
WITNESSETH:
WHEREAS, the Shareholders are currently the owners and holders of Class
"A" voting and Class "B" non-voting common stock of Golden Bear Golf Centers,
Inc. ("GBGC"), and are parties to that certain Shareholders' Agreement of GBGC
dated as of December 7, 1992, as amended by Amendment dated June 6, 1996 (the
"Old Shareholders Agreement") which contains certain restrictions upon
transferability and authorizes JWN to exercise all voting rights appurtenant to
such common stock of GBGC;
WHEREAS, the Shareholders are also currently the owners and holders of
Class "B" non-voting common stock of Paragon Golf Construction, Inc.
("Paragon"), and are parties to that certain Shareholders' Agreement of Paragon
dated as of December 11, 1992;
WHEREAS, the Shareholders have agreed, pursuant to an Agreement and
Plan of Reorganization dated June 6, 1996, to exchange the shares of GBGC common
stock and Paragon common stock owned and held by them for shares of the Class
"B" voting common stock of the Company (the "Shares");
WHEREAS, under the GBGC Shareholders Agreement, the Shareholders have
agreed with JWN that, as a condition to JWN's approval of any corporate
reorganization, they would enter into a restrictive agreement providing for
continuation of the voting arrangements under the GBGC Shareholders Agreement
and for continuing restrictions upon the transfer of any shares received or
receivable in exchange for the common stock of GBGC held under the GBGC
Shareholders Agreement;
WHEREAS, as a further condition to the proposed reorganization, the
parties have agreed to maintain their relative position as set forth in the
Paragon Shareholders Agreement, and to enter into a restrictive agreement
maintaining the non-voting
<PAGE>
position of the Shareholders under the Paragon Shareholders Agreement and
providing continuing restrictions upon the transfer of any shares received or
receivable in exchange for the common stock of Paragon held under the Paragon
Shareholders Agreement;
WHEREAS, in contemplation of the effectuation of the public offering
contemplated by the Agreement and Plan of Reorganization, the Shareholders, JWN
and GBI, as the other holders of Class "B" common stock of the Company, and the
Company have entered into this Agreement with respect to the rights of the
Shareholders to vote and transfer the Shares, such Agreement to be effective as
provided below and to continue thereafter as set forth herein;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
herein, and intending to be legally bound, the parties agree as follows:
1. EFFECTIVE DATE. This Agreement shall become effective only upon the
issuance by the Company of the Shares to the Shareholders pursuant to the
Agreement and Plan of Reorganization, and such effectiveness shall be a
simultaneous condition to the delivery of such Shares to the Shareholders. If
the Reorganization is not consummated and the Agreement and Plan of
Reorganization is terminated as provided therein, then this Agreement shall be
null and void and of no further force and effect.
2. RESTRICTION ON TRANSFER. Except as otherwise provided in this
Agreement, no Shareholder shall assign, encumber, pledge, transfer, or otherwise
dispose of any of the Shares to any person without first receiving the written
consent of the other Shareholder(s) during the applicable holding period under
Rule 144 promulgated by the Securities and Exchange Commission, or any
subsequent securities regulation which expressly supersedes such Rule. The
restriction on transfer set forth in this Section 1, shall not apply to: (i) the
delivery of the Shares by a Shareholder to JWN as substitute collateral security
for a loan from JWN to such Shareholder evidenced by a Promissory Note and
Security Agreement dated as of June 6, 1996 (the "Loan(s)"), or (ii) any
assignment, conveyance or disposition of Shares to JWN or GBI or another party
qualified to hold Class "B" common stock of the Company, provided that such
transfer is made in full compliance with the further terms and restrictions of
this Agreement and all applicable securities regulations.
3. OPTION RIGHTS UPON PROPOSED TRANSFER OF SHARES. Unless otherwise
agreed by the parties to this Agreement, no Shareholder shall assign, encumber,
pledge, transfer, or otherwise dispose of any of his Shares to any person, or
tender any of his Shares to the Company for conversion into shares of Class "A"
common stock, without first offering to sell such Shares to the other holders of
the Class "B" common stock in accordance with the provisions of this Section.
Notwithstanding the foregoing, the option rights set forth in this Section 2,
shall not apply to any assignment, encumbrance, pledge, transfer or other
disposition of the Shares to any
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trust established for the benefit of JWN, his wife Barbara B. Nicklaus ("BBN"),
or the beneficiary of a transferor Shareholder trust or his lineal descendants,
provided that: (i) such trust is duly established and qualified with the Company
as a holder or potential holder of the Class "B" common stock of the Company,
and (ii) the trustees of such trust shall acknowledge and agree to be bound by
this Agreement as a holder or potential holder of such Shares prior to the time
record ownership or a security interest in such Shares is conveyed to such
person.
(a) Any Shareholder desiring to enter into a transaction subject to
this Section (a "Transferor") shall give written notice of such intention (the
"Notice") to the other Shareholders, GBI and JWN, which Notice shall set forth
the name and address of the prospective purchaser or lienor, the number of
Shares involved in the proposed transaction, and the terms of such proposed
transaction. Any Notice given under this subsection shall constitute an offer to
sell all of the Shares identified in such Notice (the "Option Shares") to the
recipients of such Notice at the Market Price determined in accordance with
subsection (d), below, which offer may be accepted at the successive options of
such recipients as set forth below.
(b) The other Shareholders shall have the first option, which option
shall be exercised within thirty (30) days after their receipt of the Notice, to
purchase all of Option Shares from the Transferor. Such option rights shall be
divided between the Shareholders on a PRO RATA basis in proportion to the number
of Shares held by each of them. If any Shareholder fails or declines to exercise
its first option to purchase such Shareholder's part of the Option Shares within
the time provided above, the others of them shall have the right, by written
notice to the Transferror given within fifteen (15) days of the termination of
such period, to either: (i) rescind their exercise of the option to purchase
Option Shares, or (ii) exercise an option to purchase their PRO RATA portion of
the remainder of such Option Shares.
(c) In the event the other Shareholders fail to exercise sufficient
options to purchase all of the Option Shares on the terms and conditions set
forth in subsection (b), above, GBI shall have the second option to purchase any
of the Option Shares not subject to a binding purchase commitment under
subsection (b), which option must be exercised by written notice given by GBI to
the Transferror not later than fifteen (15) days after the expiration of the
first option granted under such subsection, including the fifteen (15) day
period provided for acquiring Option Shares not committed during the initial
thirty (30) day option period if any such options are exercised by the
Shareholders. In the event that GBI fails to exercise its option to purchase all
of the remaining Option Shares during such fifteen (15) day period, JWN shall
have the third option to purchase any of such Option Shares which are not
subject to a binding commitment to purchase by GBI and/or the other
Shareholders, which option shall be exercised by written notice given by JWN to
the Transferror not later than fifteen (15) days after the expiration of the
second option granted to GBI under this subsection.
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<PAGE>
(d) In the event that the other Shareholders, GBI and JWN fail or
decline to exercise their option rights under subsections (a) and (b) above,
with respect to all of the Option Shares, the Transferror may thereafter
transfer any Option Shares not subject to a binding exercise of such options to
such persons and upon such terms and conditions as are identified in the Notice,
at which time it is acknowledged that such Shares shall be converted to Class
"A" common stock of the Company in accordance with the requirements of its
Articles of Incorporation and Bylaws, and upon such conversion, shall be deemed
released from the requirements and restrictions of this Agreement. Unless a
permitted transfer under this Section is completed within one hundred twenty
(120) days of the date of the Notice, the Option Shares shall become subject
once again to the provisions of this Section, and the Transferror shall be bound
to renew its offer to the other Shareholders, GBI and JWN as required by this
Section in order to complete any subsequent sale or transfer of such Option
Shares.
(e) It is understood that no market presently exists or is expected to
exist for the Class "B" common stock of the Company, due to the restrictions
imposed upon qualified holders of such stock and the fact that it has not been
registered by the Company for sale to the general public. For that reason, the
"Market Price" of the Shares for purposes of this Agreement shall be deemed to
be a per share price equal to: (i) the average closing price of the Company's
Class "A" common stock on NASDAQ or any other recognized securities market on
which such stock is actively traded for the ten (10) day period immediately
following the date of the Transferror's Notice offering such Shares, if the
Company's Class "A" common stock is actively traded on a market during such
period, (ii) the average between the most recent bid and offer price quoted
prior to the date of such Notice for the Company's Class "A" common stock on a
Qualifying Electronic Quotation System recognized by the Securities and Exchange
Commission, if such quotations are made within the ten (10) days preceding such
date, or (iii) if no such trading activities or market quotations are available,
an amount equal to the net book value of such Shares as of the Company's most
recent quarterly financial statements preceding the date of such Notice.
4. PURCHASE OPTION UPON DISQUALIFICATION. Upon the "Disqualification"
of any Shareholder, which shall be defined as the declaration or adjudication of
bankruptcy of a Shareholder, the legal termination of the trust under which such
Shareholder holds the Shares, or the occurrence of any other event which, unless
promptly remedied by the Shareholder, would permit the Company to terminate the
special voting rights accorded to the Shares and convert the Shares into Class
"A" common stock, the other Shareholders, GBI and JWN shall have the option to
purchase all Shares then held by such Shareholder and/or its legal
representatives or distributees as the case may be (the "Disqualified Shares")
at the Market Price, which options shall be exercised as provided in this
Section 4.
(a) The other Shareholders shall have the first option to purchase
all of the Disqualified Shares from the holders thereof, which option shall be
exercised by written notice given to such holders within the last to expire of:
(i) thirty (30) days after receipt
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<PAGE>
by the Shareholders, GBI, and JWN of written notice of the disqualifying event
and the identities and interests of the holders of the Disqualified Shares and
any legal representatives appointed for them, or (ii) sixty (60) days after the
date of the disqualifying event. Such option rights shall be divided between the
Shareholders on a PRO RATA basis in proportion to the number of Shares held by
each of them. If any Shareholder fails or declines to exercise its first option
to purchase such Shareholder's part of the Disqualified Shares within the time
provided above, the others of them shall have the right, by written notice to
the holders of such shares given within fifteen (15) days of the termination of
such period, to either: (i) rescind their exercise of the option to purchase
Disqualified Shares, or (ii) exercise an option to purchase their PRO RATA
portion of the remainder of such Disqualified Shares.
(c) In the event the other Shareholders fail to exercise sufficient
options to purchase all of the Disqualified Shares on the terms and conditions
set forth in subsection (a), above, GBI shall have the second option to purchase
any of the Disqualified Shares not subject to a binding purchase commitment
under subsection (a), which option must be exercised by written notice given by
GBI to the holders of such shares or the legal representatives not later than
fifteen (15) days after the expiration of the first option granted under such
subsection, including the fifteen (15) day period provided for acquiring
Disqualified Shares not committed during the initial thirty (30) day option
period if any such options are exercised by the Shareholders. In the event that
GBI fails to exercise its option to purchase all of the remaining Disqualified
Shares during such fifteen (15) day period, JWN shall have the third option to
purchase any of such Disqualified Shares which are not subject to a binding
commitment to purchase by GBI and/or the other Shareholders, which option shall
be exercised by written notice given by JWN to the holders of such shares or
their legal representatives not later than fifteen (15) days after the
expiration of the second option granted to GBI under this subsection.
(c) Notwithstanding any of the foregoing, any Shares held by a
Shareholder, which at the time of its Disqualification are subject to a binding
commitment of purchase or sale pursuant to another Section of this Agreement,
shall be purchased pursuant thereto. Any other Shares held by a Shareholder at
the time of its Disqualification, whether or not the subject of any offer not
accepted at the time of such Disqualification, shall be deemed Disqualified
Shares and disposed of in accordance with the provisions of this Section.
5. CLOSINGS. The closing of any purchase or sale of Shares contemplated
by this Agreement shall take place at the office of the Corporation's legal
counsel at the time selected by the Secretary of the Company, subject to the
terms of this Agreement. At such closing, the purchase price shall be paid in
cash by the purchasers of Shares in exchange for the tender and conveyance of
the Shares by the sellers of Shares, unless other terms of payment and delivery
are mutually agreed in writing by the purchasers and sellers of the Shares. Any
purchase and sale permitted under this Agreement shall be subject to the rights
of JWN under any Loan secured by a pledge of the Shares
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<PAGE>
subject to such transfer, and his consent to such transfer as a secured party
may be conditioned upon payment in full of the outstanding balance of any such
Loan, the assumption of such Loan by the purchasers of such Shares, or the
receipt by him of such assurances of performance and discharge of the
obligations of the selling Shareholder under such Loan as JWN may reasonably
require. In the event that JWN exercises an option to purchase any Shares under
this Agreement, the Shareholders agree that JWN shall be entitled to offset the
balance of such indebtedness, including outstanding principal and interest
accrued through the closing date, against the purchase price due from him for
such Shares. If the purchase price due from JWN exceeds the balance of such
Loan, JWN shall be required only to pay the net amount due for the Shares
purchased by him after application of such offset. If such purchase price is
less than the balance of such Loan, the Shareholder shall receive credit against
the Loan to the full amount of the purchase price. At closing, the sellers of
Shares shall provide the purchasers and the Company with such documents and
instruments as are necessary to convey all right, title and interest in the
Shares to the purchasers, free and clear of any liens or encumbrances other than
the pledge securing the Loan to such Shareholder, if such Loan remains
outstanding. The parties agree that the cash paid by the purchasers of Shares
under this Section other than JWN shall first be applied to fully pay and
discharge the balance of any Loan which remains outstanding, with the balance
after satisfaction of such Loan and release of the Shares therefrom to be paid
over to the sellers of such Shares as their interests may appear. By executing
this Agreement, JWN, the Shareholders and their successors in interest with
respect to the Loans hereby agree that counsel for the Company shall be entitled
to receive such documents and instruments in escrow as may be required to close
a conveyance of Shares subject to the pledge created by a Loan, in which event
the parties purchasing such Shares under this Agreement shall deposit the
purchase price in escrow for disbursement as provided in this Section, at which
point the Shares will be conveyed free and clear of the lien of such pledge and
the original Promissory Note and Security Agreement reflecting such Loan to the
Shareholder shall be returned marked paid in full.
6. GRANT OF VOTING RIGHTS TO JWN; SUCCESSION. The Shareholders owning
and holding any shares of Class "B" voting common stock hereby assign to JWN all
of their right to vote the Shares on any and all corporate matters on which the
Shareholders are entitled to vote, including without limitation, the election of
directors, the sale of all or substantially all of the assets of the Company, or
any merger or consolidation with another company. In the event of the death or
incompetence of JWN, the Shareholders agree that GBI shall succeed to all of the
voting rights assigned to JWN hereunder, and that the Board of Directors of GBI
shall be entitled to exercise such voting rights thereafter during the term of
this Agreement unless otherwise agreed by the Shareholders. The Shareholders,
upon demand by the party holding voting rights in the Class "B" common stock
hereunder, shall deliver appointment forms irrevocably appointing such party as
a proxy to vote at all meetings and upon all matters subject to vote by the
Shareholders, such proxy being coupled with an interest as set forth in Florida
Statute 607.0722(5)(e). The Shareholders acknowledge that their
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<PAGE>
relinquishment of all of their right to vote the Shares is a material inducement
to their admission as shareholders of the Company and their obligations
hereunder may be specifically enforced by JWN and GBI.
7. ENDORSEMENT OF CERTIFICATES. All of the Shares shall bear
the following endorsement:
"This certificate is transferable only upon compliance with the
provisions of an agreement dated as of July 15, 1996 among the holder
and others, a copy of which is on file in the office of the Secretary
of the issuer."
All certificates for Shares hereafter issued to the Shareholders shall bear the
same endorsement.
8. APPLICABILITY TO OTHER STOCK HELD BY SHAREHOLDERS. It is understood
and agreed that the provisions of this Agreement shall be deemed to apply to the
Shares held by the Shareholders, and to any other securities hereafter received
or receivable by the Shareholders during the term of this Agreement with respect
to the Shares, including, without limitation, any securities received as a
result of a share dividend or other distribution of securities or as a result of
any recapitalization, reorganization or exchange transaction involving such
Shares. This Agreement shall not apply to any shares of the Company's Class A
common stock acquired by the Shareholders after the date of this Agreement, or
any other securities hereafter received or receivable by the Shareholders with
respect to such shares of the Company, including, without limitation, any shares
acquired as a result of the purchase of such shares on the open market.
9. SPECIFIC PERFORMANCE. The Shareholders agree that they would be
irreparably damaged if the terms of this Agreement were not capable of being
specifically enforced. For this reason the Shareholders agree that the terms of
this Agreement shall be specifically enforceable. The Shareholders further agree
that any sale or disposition, including an involuntary transfer or a transfer by
operation of law, that does not strictly comply with the terms and conditions of
this Agreement may be specifically restrained.
10. FURTHER ASSURANCES. The Shareholders agree that upon
the issuance of the Shares by the Company, each Shareholder shall do all things,
and execute and deliver all papers, instruments and documents and perform any
further acts necessary to carry out the provisions of this Agreement.
11. MISCELLANEOUS.
(a) NOTICES. Any and all notices, designations, consents, offers,
acceptances, or any other communications provided for herein shall be given in
writing by certified mail or recognized commercial courier service, which shall
be addressed to
-7-
<PAGE>
the Company at its principal offices and to JWN and the Shareholders at the
addresses given by them on the signature page of this Agreement, or to such
other address as may be designated by a party in a written notice meeting the
requirements of this Section. Any notice given under this Section shall be
deemed effective three (3) days following the date of its deposit with the
United States Postal Service, if sent by mail, or on the date of its confirmed
receipt at the address of the recipient if sent by courier service.
(b) SEVERABILITY. If any provision of this Agreement is held to be
unenforceable or invalid by any court of competent jurisdiction, the validity
and enforceability of the remaining provisions shall not be affected thereby.
(c) CONSTRUCTION. Whenever used herein, the singular number shall
include the plural, and the plural number shall include the singular, and use of
any gender shall include all genders. The paragraph headings in this Agreement
are for convenience of reference only and shall not be used as an aid in the
construction of any provision. This Agreement shall be deemed to have been
prepared by each of the parties and there shall be no canon of construction
applied hereto for or against any party by reason of the preparation hereof.
(d) GOVERNING LAW. This Agreement has been executed in and shall be
governed by and construed in accordance with the internal laws of the state of
Florida, notwithstanding conflicts of laws rules which might otherwise be
applied.
(e) SUCCESSORS AND ASSIGNS. Subject to the restrictions against
transfer or assignment as herein contained, the provisions of this Agreement
shall inure to the benefit of and shall be binding on the assigns, successors in
interest, personal representatives, estates, heirs, and legatees of each of the
parties. Each Shareholder agrees that he will not attempt or purport to grant
any beneficial interest in his Shares, or hypothecate or otherwise create or
permit to exist any lien, claim, or encumbrance upon any of the Shares at any
time subject to this Agreement, other than the encumbrances created by this
Agreement or an encumbrance permitted hereby.
(f) ENTIRE AGREEMENT; WAIVER AND AMENDMENT. This Agreement contains the
entire understanding between the parties concerning the subject matter contained
herein. There are no representations, agreements, arrangements, or
understandings, oral or written, between or among the parties relating to the
subject matter of this Agreement that are not fully expressed herein. This
Agreement cannot be changed or modified except in a written document signed by
all of the parties which recites the intention of the parties to amend this
Agreement and sets forth the specific changes and modifications to be made
thereby. No waiver of any right granted or release of any obligation imposed by
this Agreement shall be effective unless made in a writing signed by the party
sought to be charged therewith.
-8-
<PAGE>
(g) COUNTERPARTS. This Agreement may be executed in one or more
identical counterparts, and in making proof of this Agreement it shall not be
necessary to produce or account for more than one fully executed counterpart
hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
Attest: GOLDEN BEAR GOLF, INC.
________________________________ By:
Secretary Richard P. Bellinger
President
GOLDEN BEAR INTERNATIONAL, INC.
By:_____________________________
Jack P. Bates Jack W. Nicklaus
SHAREHOLDERS:
THE JACK W. NICKLAUS II TRUST u/a
dated September 23, 1982
By:
Richard P. Bellinger, as Trustee
and not Individually
THE STEVEN NICKLAUS TRUST u/a
dated as of June 20, 1984
By:
Barbara B. Nicklaus, as Trustee
and not Individually
By:
Richard P. Bellinger, as Trustee
and not Individually
-9-
<PAGE>
THE NANCY J. NICKLAUS TRUST u/a
dated as of May 5, 1986
By:
Barbara B. Nicklaus, as Trustee
and not Individually
By:
Richard P. Bellinger, as Trustee
and not Individually
THE GARY T. NICKLAUS TRUST u/a
dated as of January 15, 1990
By:
Barbara B. Nicklaus, As Trustee
and not Individually
By:
Richard P. Bellinger, As Trustee
and not Individually
THE MICHAEL S. NICKLAUS TRUST
u/a dated as of November 28, 1990
By:
Barbara B. Nicklaus, as Trustee
and not Individually
By:
Richard P. Bellinger, as Trustee
and not Individually
-10-
EXHIBIT 10.21
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT, dated as of the 15th day of July, 1996,
between and among Jack W. Nicklaus ("JWN"), and Jack P. Bates, Thomas P. Hislop,
Mark Hesemann, and Richard P. Bellinger (each a "Shareholder" and collectively
the "Shareholders"), and GOLDEN BEAR GOLF, INC. a Florida corporation (the
"Company").
WITNESSETH:
WHEREAS, the Shareholders are currently the owners and holders of Class
"A" voting common stock of Golden Bear Golf Centers, Inc. ("GBGC"), and are
parties to that certain Shareholders' Agreement of GBGC dated as of December 7,
1992, as amended by Amendment dated June 6, 1996 (the "Old Shareholders'
Agreement") which contains certain restrictions upon transferability and
authorizes JWN to exercise all voting rights appurtenant to such common stock of
GBGC;
WHEREAS, the Shareholders have agreed, pursuant to an Agreement and
Plan of Reorganization dated June 6, 1996, to exchange the shares of GBGC Class
"A" common stock owned and held by them for shares of the Class "A" voting
common stock of the Company (the "Shares");
WHEREAS, under the Old Shareholders' Agreement, the Shareholders have
agreed with JWN that, as a condition to JWN's approval of any corporate
reorganization, they would enter into a restrictive agreement providing for
continuation of the voting arrangements under the Old Shareholders' Agreement
and for continuing restrictions upon the transfer of any shares received or
receivable in exchange for the Class "A" common stock of GBGC held under the Old
Shareholders' Agreement;
WHEREAS, in contemplation of the effectuation of the public offering
contemplated by the Agreement and Plan of Reorganization, the Shareholders, JWN
and the Company have entered into this Agreement with respect to the rights of
the Shareholders to vote and transfer the Shares, such Agreement to be effective
as provided below and to continue thereafter as set forth herein;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
herein, and intending to be legally bound, the parties agree as follows:
1. EFFECTIVE DATE. This Agreement shall become effective only upon the
issuance by the Company of the Shares to the Shareholders pursuant to the
Agreement and Plan of Reorganization, and such effectiveness shall be a
simultaneous condition to the delivery of such Shares to the Shareholders. If
the Reorganization is not consummated and the Agreement and Plan of
Reorganization is terminated as provided therein, then this Agreement shall be
null and void and of no further force and effect.
<PAGE>
2. RESTRICTION ON TRANSFER. Except as otherwise provided in this
Agreement, no Shareholder shall assign, encumber, pledge, transfer, or otherwise
dispose of any of the Shares to any person without first receiving the written
consent of the other Shareholder(s) for the greater of two (2) years or the
applicable holding period under Rule 144 promulgated by the Securities and
Exchange Commission, or any subsequent securities regulation which expressly
supersedes such Rule. The restriction on transfer set forth in this Section 2,
shall not apply to: (i) the delivery of the Shares by a Shareholder to JWN as
substitute collateral security for a loan from JWN to such Shareholder evidenced
by a Promissory Note and Security Agreement dated as of June 6, 1996 (the
"Loan(s)"), or (ii) any assignment, conveyance or disposition of Shares to JWN
or a party designated by JWN to hold or receive a security interest in such
Shares, provided that such transfer is made in full compliance with all
applicable securities regulations.
3. RIGHT OF FIRST REFUSAL TO JWN. Following the expiration of the
period set forth in Section 2, above, no Shareholder shall assign, encumber,
pledge, transfer, or otherwise dispose of any of his Shares to any person
without first making an offer to sell such Shares to JWN in accordance with the
provisions of this Section, unless such right of first refusal is waived in a
written document signed by JWN. Notwithstanding the foregoing, the option rights
set forth in this Section 3 shall not apply to any assignment, encumbrance,
pledge, transfer or other disposition of the Shares to any of the holders of the
Class "B" common stock of the Company, provided that such person shall
acknowledge and agree to be bound by this Agreement as a holder or potential
holder of such Shares prior to the time record ownership or a security interest
in such Shares is conveyed to such person.
(a) Any Shareholder desiring to enter into a transaction subject to
this Section (a "Transferor") shall give written notice of such intention (the
"Notice") to JWN, which Notice shall set forth the name and address of the
prospective purchaser or lienor, the number of Shares involved in the proposed
transaction, and the terms of such proposed transaction. Any Notice given under
this subsection shall constitute an offer to sell to JWN all of the Shares
identified in such Notice, at the option of JWN as set forth in subsection (b),
below.
(b) JWN shall have the option, which option shall be exercised within
ten (10) days after his receipt of the Notice, to purchase all, but not less
than all, of the Shares identified in the Notice from the Transferor at a
purchase price determined in accordance with subsection (c), below. Any notice
of exercise given by JWN shall specify a date for the closing of the purchase of
Shares that shall not be more than fifteen(15) days after the date such notice
is given by JWN. Unless JWN exercises his option to purchase by giving written
notice of his acceptance of the offer to sell the Shares to the Transferor
within the required ten (10) day period, the Transferor shall be free to
consummate the transaction identified in the Notice. If the Transferor fails to
consummate the proposed transaction within thirty (30) days following the
expiration of
-2-
<PAGE>
such period, the Shares shall again become subject to all the restrictions of
this Agreement.
(c) If the proposed transaction is a private sale to a third party at a
negotiated price, the purchase price payable by JWN for the Shares to be
acquired from the Transferor and the terms of payment of such price shall be, at
the option of JWN: (i) the purchase price (net of broker's commissions) and
terms negotiated by the Transferor for such Shares as set forth in the Notice,
or (ii) the "Market Price" of the Shares, which except as otherwise provided
below shall be a per Share price equal to the average closing price of the
Company's Class "A" common stock on NASDAQ or any other recognized securities
market on which such stock is actively traded for the ten (10) day period
immediately preceding JWN's exercise of his election to purchase the Shares,
which Market Price shall be payable in cash at closing. The purchase price
payable by JWN for the Shares to be acquired from the Transferor in connection
with any proposed transaction subject to this Section other than a negotiated
sale shall be the Market Price, and shall be payable in cash at closing. If the
Company's Class "A" common stock is no longer actively traded on NASDAQ or any
other recognized securities market, then the Market Price shall be an amount per
Share equal to the average between the most recent bid and offer price quoted
for the Class "A" common stock on a Qualifying Electronic Quotation System
recognized by the Securities and Exchange Commission, or if no such quotations
are available, an amount equal to the fair market value of such Shares as of the
Company's most recent quarterly financial statements preceding the date of JWN's
acceptance of the offer as determined by a valuation to be prepared by an
independent appraiser agreed upon by the parties.
4. PURCHASE OPTION UPON INCAPACITY. Upon the "Incapacity" of any
Shareholder, which shall be defined as the death, declaration or adjudication of
personal bankruptcy, or legal declaration of incompetency of any Shareholder,
JWN shall have the option to purchase all Shares then held by such Shareholder,
and/or his legal representatives, heirs or distributees as the case may be (the
"Incapacity Shares"), as set forth in this Section 4.
(a) Upon the Incapacity of any Shareholder, JWN shall have the first
option to purchase all of the Incapacity Shares from the holders thereof at the
Market Price, payable in cash at closing unless otherwise mutually agreed, which
option shall be exercised by written notice given within the last to expire of:
(i) thirty (30) days after JWN's receipt of written notice of appointment or
qualification of the legal representative(s) of the deceased, bankrupt, or
incapacitated Shareholder, or (ii) sixty (60) days after the date such
incapacity is legally declared. Such option shall be exercised by written notice
to such legal representatives, which notice shall constitute a legally binding
agreement on the part of JWN to purchase all of the Incapacity Shares at the
Market Price.
(b) If JWN fails or declines to exercise such option rights with
respect to any of the Incapacity Shares, such action shall be deemed an election
to allow the holders
-3-
<PAGE>
of such Incapacity Shares to be substituted for the Shareholder subject to
Incapacity under this Shareholders' Agreement, and the holders of such
Incapacity Shares shall thereafter hold such Shares subject to all of the rights
and obligations of the original Shareholder under this Agreement, including
without limitation, the restrictions upon further transfer of such Shares set
forth in Sections 2 and 3, above. In the event any party is so substituted, the
Company may require such party to furnish written evidence of his intention to
be bound by this Agreement as a condition to receiving any rights or benefits
with respect to the Shares.
(c) Notwithstanding any of the foregoing, any Shares held by a
Shareholder, which at the time of his Incapacity are subject to a binding
commitment of purchase or sale pursuant to another Section of this Agreement,
shall be purchased pursuant thereto. Any other Shares held by a Shareholder at
the time of his Incapacity, whether or not the subject of any offer not accepted
at the time of such Incapacity, shall be deemed Incapacity Shares and disposed
of in accordance with the provisions of this Section.
5. CLOSINGS. The closing of any purchase or sale of Shares contemplated
by this Agreement shall take place at the office of the Corporation's legal
counsel at the time selected by JWN, subject to the terms of this Agreement.
Except as otherwise provided in clause (i) of subsection 3(c), above, the
purchase price shall be paid in cash by JWN at closing in exchange for the
tender and conveyance of the Shares. In the event that JWN has exercised his
option under such clause to accept the terms of sale by a Transferor as set
forth in the Notice given under Section 3, above, JWN shall make such payment at
closing as may be called for under the payment terms set forth in such Notice
and deliver such other consideration to the Transferor in exchange for such
Shares as may reasonably be required in order to meet such terms. At closing,
the balance of any Loan which remains outstanding, including unpaid principal
and interest accrued through the closing date, shall be offset against the
purchase price due from JWN, and JWN shall be required only to pay the net
amount due to the Shareholder after application of such offset or the
Shareholder shall receive credit against the Loan to the full amount of the
purchase price, as the case may be. The Shareholder shall tender a legal
conveyance of his Shares to JWN at closing by endorsement of his certificate(s)
for such Shares or by separate stock power, and shall provide JWN and the
Company with such other documents and instruments as are necessary to convey all
right, title and interest in the Shares to JWN, free and clear of any liens or
encumbrances other than the pledge securing the Loan to such Shareholder, if
such Loan remains outstanding. Unless the Loan has been previously discharged,
JWN in turn will provide the Shareholder with a receipt for payment against the
Loan in the amount of the purchase price credited as a result of the foregoing
offset, together with any instruments or documents necessary to document the
satisfaction and discharge of the remaining obligations of the Shareholder with
respect to the pledge of the Shares. If the purchase price offset due from JWN
is sufficient to fully pay and discharge the Loan, JWN will return the original
Non-Negotiable Promissory Note and Security
-4-
<PAGE>
Agreement reflecting such Loan to the Shareholder at closing marked paid in
full, and otherwise the Loan shall continue as an unsecured debt until the
balance becomes due and payable in accordance with the terms of the Promissory
Note.
6. GRANT OF VOTING RIGHTS TO JWN. The Shareholders owning and holding
any shares of Class "A" voting common stock hereby assign to JWN all of their
right to vote the Shares on any and all corporate matters on which the
Shareholders are entitled to vote, including without limitation, the election of
directors, the sale of all or substantially all of the assets of the Company,
and any merger or consolidation with another company. The Shareholders, upon
demand by JWN, shall deliver appointment forms to JWN, irrevocably appointing
him as a proxy to vote at all meetings and upon all matters subject to vote by
the Shareholders, such proxy being coupled with an interest as set forth in
Florida Statute 607.0722(5)(e). The Shareholders acknowledge that their
relinquishment of all of their right to vote the Shares is a material inducement
to their admission as shareholders of the Company and their obligations
hereunder may be specifically enforced by JWN.
7. ENDORSEMENT OF CERTIFICATES. All of the Shares shall bear
the following endorsement:
"This certificate is transferable only upon compliance with the
provisions of an agreement dated June 6, 1996 among the holder and
others, a copy of which is on file in the office of the Secretary of
the issuer."
All certificates for Shares hereafter issued to the Shareholders shall bear the
same endorsement.
8. APPLICABILITY TO OTHER STOCK HELD BY SHAREHOLDERS. It is understood
and agreed that the provisions of this Agreement shall be deemed to apply to the
Shares held by the Shareholders, and to any other securities hereafter received
or receivable by the Shareholders during the term of this Agreement with respect
to the Shares, including, without limitation, any securities received as a
result of a share dividend or other distribution of securities or as a result of
any recapitalization, reorganization or exchange transaction involving such
Shares. This Agreement shall not apply to any other shares of the Company's
Class "A" common stock acquired by the Shareholders after the date of this
Agreement, or any other securities hereafter received or receivable by the
Shareholders with respect to such shares of the Company, including, without
limitation, any shares acquired as a result of the exercise by a Shareholder of
any options or warrants granted by the Company to such Shareholder or as a
result of the purchase of such shares on the open market.
9. SPECIFIC PERFORMANCE. The Shareholders agree that they would be
irreparably damaged if the terms of this Agreement were not capable of being
specifically enforced. For this reason the Shareholders agree that the terms of
this Agreement shall be specifically enforceable. The Shareholders further agree
that any
-5-
<PAGE>
sale or disposition, including an involuntary transfer or a transfer by
operation of law, that does not strictly comply with the terms and conditions of
this Agreement may be specifically restrained.
10. FURTHER ASSURANCES. The Shareholders agree that upon
the issuance of the Shares by the Company, each Shareholder shall do all things,
and execute and deliver all papers, instruments and documents and perform any
further acts necessary to carry out the provisions of this Agreement.
11. MISCELLANEOUS.
(a) NOTICES. Any and all notices, designations, consents, offers,
acceptances, or any other communications provided for herein shall be given in
writing by certified mail or recognized commercial courier service, which shall
be addressed to the Company at its principal offices and to JWN and the
Shareholders at the addresses given by them on the signature page of this
Agreement, or to such other address as may be designated by a party in a written
notice meeting the requirements of this Section. Any notice given under this
Section shall be deemed effective three (3) days following the date of its
deposit with the United States Postal Service, if sent by mail, or on the date
of its confirmed receipt at the address of the recipient if sent by courier
service.
(b) SEVERABILITY. If any provision of this Agreement is held to be
unenforceable or invalid by any court of competent jurisdiction, the validity
and enforceability of the remaining provisions shall not be affected thereby.
(c) CONSTRUCTION. Whenever used herein, the singular number shall
include the plural, and the plural number shall include the singular, and use of
any gender shall include all genders. The Section headings in this Agreement are
for convenience of reference only and shall not be used as an aid in the
construction of any provision. This Agreement shall be deemed to have been
prepared by each of the parties and there shall be no canon of construction
applied hereto for or against any party by reason of the preparation hereof.
(d) GOVERNING LAW. This Agreement has been executed in and
shall be governed by and construed in accordance with the internal laws of the
State of Florida, notwithstanding conflicts of laws rules which might otherwise
be applied.
(e) SUCCESSORS AND ASSIGNS. Subject to the restrictions against
transfer or assignment as herein contained, the provisions of this Agreement
shall inure to the benefit of and shall be binding on the assigns, successors in
interest, personal representatives, estates, heirs, and legatees of each of the
parties. Each Shareholder agrees that he will not attempt or purport to grant
any beneficial interest in his Shares, or hypothecate or otherwise create or
permit to exist any lien, claim, or encumbrance
-6-
<PAGE>
upon any of the Shares at any time subject to this Agreement, other than the
encumbrances created by this Agreement or an encumbrance permitted hereby.
(f) ENTIRE AGREEMENT; WAIVER AND AMENDMENT. This Agreement contains the
entire understanding between the parties concerning the subject matter contained
herein. There are no representations, agreements, arrangements, or
understandings, oral or written, between or among the parties relating to the
subject matter of this Agreement that are not fully expressed herein. This
Agreement cannot be changed or modified except in a written document signed by
all of the parties which recites the intention of the parties to amend this
Agreement and sets forth the specific changes and modifications to be made
thereby. No waiver of any right granted or release of any obligation imposed by
this Agreement shall be effective unless made in a writing signed by the party
sought to be charged therewith.
(g) COUNTERPARTS. This Agreement may be executed in one or more
identical counterparts, and in making proof of this Agreement it shall not be
necessary to produce or account for more than one fully executed counterpart
hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
Attest: GOLDEN BEAR GOLF, INC.
___________________________ BY:
Secretary Richard P. Bellinger
President
SHAREHOLDERS:
Jack W. Nicklaus
Richard P. Bellinger
Mark F. Hesemann
Thomas P. Hislop
-7-
<PAGE>
Jack P. Bates
-8-
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K, into the Company's
previously filed registration statement on Form S-8 (File No. 333-05581).
ARTHUR ANDERSEN LLP
West Palm Beach, Florida,
March 31, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GOLDEN BEAR
GOLF, INC.'S FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 16,477,420
<SECURITIES> 0
<RECEIVABLES> 5,893,030
<ALLOWANCES> 540,806
<INVENTORY> 1,953,857
<CURRENT-ASSETS> 28,190,036
<PP&E> 19,984,239
<DEPRECIATION> 1,636,312
<TOTAL-ASSETS> 51,406,882
<CURRENT-LIABILITIES> 7,596,705
<BONDS> 5,556,667
0
0
<COMMON> 55,048
<OTHER-SE> 38,198,462
<TOTAL-LIABILITY-AND-EQUITY> 51,406,882
<SALES> 20,454,052
<TOTAL-REVENUES> 33,506,929
<CGS> 17,052,253
<TOTAL-COSTS> 29,046,730
<OTHER-EXPENSES> 6,964,543
<LOSS-PROVISION> 45,870
<INTEREST-EXPENSE> 210,226
<INCOME-PRETAX> (2,182,614)
<INCOME-TAX> 247,919
<INCOME-CONTINUING> (2,430,533)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,430,533)
<EPS-PRIMARY> (0.60)
<EPS-DILUTED> (0.60)
</TABLE>
