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PROSPECTUS DECEMBER 16, 1997 FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-40693
FAMILY GOLF CENTERS, INC.
1,169,637 Shares of Common Stock
This Prospectus relates to the offering that may be made from time to
time of up to 1,169,637 shares (the "Shares") of common stock, par value $.01
per share (the "Common Stock"), of Family Golf Centers, Inc., a Delaware
corporation (the "Company"), by, or for the accounts of, the holders thereof
(the "Selling Security Holders"). See "Selling Security Holders." Of the
1,169,637 Shares being offered hereby, 300,000 are issuable upon the exercise
of certain warrants issued by the Company in connection with the Company's
public offering in December 1995 (the "Underwriters' Warrants") at $20.25 per
share and 55,537 are issuable upon the exercise of certain warrants issued in
connection with the Company's acquisition of Leisure Complexes, Inc. in July
1997 at $27.50 per share (the "Acquisition Warrants," and together with the
Underwriters' Warrants, the "Warrants").
The Common Stock is quoted on the Nasdaq National Market(R) (the
"Nasdaq National Market") under the symbol "FGCI." On December 2, 1997, the
last sale price of the Common Stock as reported by the Nasdaq National Market
was $28.5625 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 HEREIN FOR A DISCUSSION OF
CERTAIN MATTERS THAT SHOULD BE CONSIDERED BY POTENTIAL INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Shares may be sold from time to time by the Selling Security
Holders or their transferees. No underwriting arrangements have been entered
into by the Selling Security Holders as of the date hereof. The distribution of
the Shares by the Selling Security Holders may be effected in one or more
transactions that may take place in the over-the-counter market, including
ordinary broker's transactions, privately negotiated transactions, or through
sales to one or more dealers for resale of such Shares as principals, at
prevailing market prices at the time of sale, prices related to such prevailing
market prices, or negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commissions will be paid by the Selling Security
Holders in connection with sales of the Shares. To the extent required, the
number of Shares to be sold, the name of the Selling Security Holder, the
purchase price, the name of any agent or broker, and any applicable
commissions, discounts or otherwise constituting compensation to such agents or
brokers with respect to a particular offering will be set forth in a supplement
or supplements to this Prospectus (each, a "Prospectus Supplement").
See "Plan of Distribution."
The Company will receive proceeds upon the exercise of the Warrants,
but will not receive any proceeds from the sale of the Shares. By agreement
with the Selling Security Holders, the Company will pay all of the expenses
incident to the registration of the Shares under the Securities Act (other than
agent's commissions and discounts), estimated to be approximately $50,000.
The Selling Security Holders, and any broker-dealers or agents through
whom the Shares are sold, may be deemed "underwriters" within the meaning of
the Securities Act with respect to securities offered by them, and any profits
realized or commissions received by them may be deemed underwriting
compensation.
The date of this Prospectus is December 16, 1997
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street, N.W., Washington, D.C. 20549, a Registration
Statement (the "Registration Statement") under the Securities Act with respect
to the offering and sale from time to time of the Shares. This Prospectus does
not contain all the information set forth in the Registration Statement and the
exhibits thereto, as permitted by the rules and regulations of the Commission.
For further information, reference is made to the Registration Statement and to
the exhibits filed therewith. Statements contained in this Prospectus as to the
contents of any contract or other document which has been filed or incorporated
by reference as an exhibit to the Registration Statement are qualified in their
entirety by reference to such exhibits for a complete statement of their terms
and conditions. Additionally, the Company is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports, proxy statements, and other
information statements with the Commission. Copies of such materials may be
inspected without charge at the offices of the Commission, and copies of all or
any part thereof may be obtained from the Commission's public reference
facilities at 450 Fifth Street, N.W., Washington D.C. 20549 or at the regional
offices of the Commission located at 7 World Trade Center, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, upon
payment of the fees prescribed by the Commission. In addition, the Commission
maintains a Web Site that contains reports, proxy and information statements
and other information regarding the Company (http://www.sec.gov). The Common
Stock is quoted on the Nasdaq National Market under the symbol "FGCI." Reports
and other information concerning the Company may be inspected at the offices of
the National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporated herein by reference and made a part of this Prospectus
are the following: (1) the Company's Annual Report on Form 10-K, for the fiscal
year ended December 31, 1996; (2) the Company's Proxy Statement on Schedule 14A
filed with the Commission on April 30, 1997; (3) the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1997; (4) the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997; (5) the Company's
Current Report on Form 8-K, dated June 30, 1997; (6) the Company's Current
Report on Form 8-K dated July 25, 1997, as amended; (7) the Company's Current
Report on Form 8-K, dated October 6, 1997; (8) the Company's Current Report on
form 8-K dated October 16, 1997; (9) the Company's Current Report on Form 8-K
dated November 14, 1997; (10) the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997 and (11) the description of the Common
Stock which is registered under Section 12 of the Exchange Act, contained in
the Company's Registration Statement on Form 8-A dated November 8, 1994. All
documents subsequently filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14, or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering made hereby will be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the respective dates of filing of such documents. Any statement
contained in any document incorporated by reference shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus. All information appearing in this Prospectus is qualified in
its entirety by the information and financial statements (including notes
thereto) appearing in the documents incorporated herein by reference, except to
the extent set forth in the immediately preceding statement.
The Company will provide without charge to each person who receives a
Prospectus, upon written or oral request of such person, a copy of the
information that is incorporated by reference herein (not including exhibits to
the information that is incorporated by reference herein). Requests for such
information should be directed to: Family Golf Centers, Inc., 225 Broadhollow
Road, Melville, New York 11747; Attention: Chief Executive Officer. The
Company's telephone number is: (516) 694-1666.
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SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements included or incorporated by reference into this
Prospectus constitute "forwardlooking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. All such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company,
or industry results, to be materially different from any future results,
performance, or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following general economic
and business conditions: the Company's indebtedness; changes in business
strategy or development plans; competitive factors in the industry, including
additional competition from existing competitors or future entrants to the
industry; social and economic conditions; availability, terms and deployment of
capital; local, state and federal regulations; availability of qualified
personnel; and other factors referenced in this Prospectus and in the Company's
filings with the Commission.
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<PAGE>
THE COMPANY
The following summary is qualified in its entirety by reference to the
more detailed information and the financial statements and the related notes
appearing elsewhere in this Prospectus or incorporated herein by reference.
Each prospective investor is urged to read this Prospectus in its entirety.
Investment in the securities offered hereby involves a high degree of risk. See
"Risk Factors."
BUSINESS
The Company is a leading consolidator and operator of golf centers in
the United States. The Company's golf centers are designed to provide a wide
variety of practice opportunities, including facilities for driving, chipping,
putting, pitching and sand play. In addition, the Company's golf centers
typically offer full-line pro shops, golf lessons instructed by PGA-certified
golf professionals and other amenities such as miniature golf and snack bars to
encourage family participation. The Company has a proven track record of
successfully identifying, acquiring and integrating golf centers, having grown
from one golf facility in 1992 to 51 as of October 31, 1997. As a result, the
Company has increased revenues from $2.6 million in 1993 to $55.5 million for
the twelve months ended September 30, 1997, and increased earnings per share
from a loss of $0.23 in 1993 to a profit of $0.75 for the twelve months ended
September 30, 1997.
RECENT DEVELOPMENTS
In addition to pursuing its activities as a consolidator and operator
of golf centers, the Company has identified the ice rink industry as having a
number of industry and operational dynamics similar to those of the golf center
industry. The Company intends to apply the skills and resources it has used in
the golf center industry to capitalize on such similarities by selectively
constructing, or acquiring and enhancing, ice rinks over the next twelve
months. In addition, the Company expects to selectively augment certain of its
existing golf centers with sports and entertainment amenities including ice
rinks, video and virtual reality games, children's rides, batting cages and
other entertainment activities to create family sports supercenters (the
"Family Sports Supercenters"). The Company believes that the addition of these
facilities expands on the Company's concept of family-oriented sports
entertainment, improves utilization by adding additional sources of revenues,
attracts a more diversified base of customers, increases visitation and per
capita spending and has the added benefit of being counter-seasonal to the
Company's core golf business.
In July 1997, the Company acquired Leisure Complexes, Inc. ("LCI"),
the operator of a family sports and entertainment supercenter which includes a
golf center, an 18-hole executive golf course, an ice rink and additional
family amusements, such as video and virtual reality games, a Lasertag arena,
children's rides, batting cages, an I-werks Motion Master Theatre, a 48-lane
bowling center, restaurants and an 18,000 square foot conference center. LCI
also owns and operates seven stand-alone bowling centers. In addition, in
September 1997, the Company acquired an ice rink facility which includes a
National Hockey League regulation-size ice rink and an additional half rink.
On November 17, 1997 the Company consummated the sale of six of the
seven stand-alone bowling centers it acquired in connection with its
acquisition of LCI. Proceeds from the sale consist of $15.5 million in cash,
which the Company intends to use to repay existing indebtedness, in the amount
of $10,000,000, with the remaining balance to be used for working capital and
to pay deferred corporate income taxes arising from this transaction.
The Company's principal executive offices are located at 225
Broadhollow Road, Melville, New York 11747 and its telephone number is (516)
694-1666. The Company's World Wide Web address is http://www.familygolf.com.
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RISK FACTORS
Prospective investors should carefully consider the specific factors
set forth below, as well as the other information included in this Prospectus,
before deciding to invest in the Shares offered hereby.
LEVERAGE, DEBT SERVICE AND COVENANTS
As of October 31, 1997, the Company had approximately $131.5 million
aggregate principal amount of indebtedness outstanding. The Company's level of
indebtedness requires that a significant amount of its cash flow from
operations be applied to debt service, and there can be no assurance that the
Company's operations will generate sufficient cash flow to service this
indebtedness. Borrowings under the Company's $20.0 million credit facility (the
"Credit Facility"), of which no balance was outstanding as of October 31, 1997,
and approximately $27.0 million of term debt (the "Term Debt") incurred in
connection with the Company's acquisition of LCI, of which $26.8 million was
outstanding as of October 31, 1997, are at variable rates of interest, which
subjects the Company to fluctuations in interest rates.
The Credit Facility and the Term Debt include covenants that restrict
the operational and financial flexibility of the Company, including a limit on
the number of facilities that the Company may construct in any rolling twelve
month period and restrictions on indebtedness, liens, acquisitions and other
significant actions. Failure to comply with certain covenants would, among
other things, permit the Company's lenders to accelerate the maturity of the
obligations thereunder and could result in cross-defaults permitting the
acceleration of debt under other Company agreements. In addition, the Company
is required to maintain certain financial ratios.
EXPANSION STRATEGY AND NEW STRATEGY
The Company's ability to significantly increase revenues, operating
cash flow and net income over time depends in large part upon its success in
acquiring and improving or leasing or constructing additional facilities at
suitable locations upon satisfactory terms. There can be no assurance that
suitable facility acquisition or lease opportunities will be available or that
the Company will be able to consummate acquisition or leasing transactions on
satisfactory terms. The acquisition of facilities may become more expensive in
the future to the extent that demand and competition increase. The likelihood
of the success of the Company must be considered in light of the problems,
expenses, difficulties, complications and delays frequently encountered in
connection with the construction and opening of new facilities and improvements
to existing facilities, including delays in obtaining required permits.
To successfully implement its expansion strategy, the Company must
integrate acquired or newly opened facilities into its existing operations,
which may necessitate the implementation of enhanced operational and financial
systems and may require additional employees and management, operational,
financial and other resources. As part of its strategy, the Company has
recently entered the ice rink and Family Sports Supercenter industries, in
which the Company has only limited experience and which involve all the risks
commonly associated with the establishment of new lines of business. As the
Company grows, there can be no assurance that additional facilities can be
readily assimilated into the Company's operating structure. The Company's
inability to efficiently integrate facilities or to successfully enter the ice
rink and Family Sports Supercenter industries could have a material adverse
effect on the Company's financial condition and results of operations. In
addition, a number of the facilities which the Company has acquired have, and
facilities it may acquire in the future may have, experienced losses. On a pro
forma basis, giving effect to the acquisitions consummated after January 1,
1996 as if they had occurred as of January 1, 1996, the Company had net income
of $2.4 million (as compared to net income of $5.2 million on a historical
basis) for the year ended December 31, 1996 and pro forma net income of $8.9
million (as compared to net income of $8.9 million on a historical basis) for
the nine months ended September 30, 1997. As a result of the timing of the
Company's acquisitions, the seasonality of the acquired businesses, the
expansion of the Company's business to include ice rinks and Family Sports
Supercenters and other factors, the Company's historical, pro forma and
trailing twelve month results of operations referred to herein are not
necessarily indicative of future results. There can be no assurance that
facilities recently acquired by the Company or those that the Company may
acquire in the future will operate profitably and will not adversely affect the
Company's results of operations.
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DEPENDENCE ON THE GOLF INDUSTRY
Although the Company has begun expanding its business outside the golf
industry, the Company is highly dependent on the golf industry, and the
public's interest in utilizing golf practice centers, for the generation of its
revenues and earnings. Activities such as golf have, in the past, been
susceptible to increases and decreases in popularity that have materially
affected the financial condition and results of operations of companies
dependent on such activities, and there can be no assurance that the golf
industry will not suffer a material decrease in popularity, which would result
in a material adverse effect on the Company's business and operations. In
addition, customer spending on activities such as golf is generally considered
to be discretionary spending, which may be significantly decreased as a result
of regional or national economic downturns.
VULNERABILITY TO WEATHER CONDITIONS AND SEASONAL RESULTS
Historically, the second and third quarters of the year have accounted
for a greater portion of the Company's revenues than have the first and fourth
quarters of the year. This is primarily due to an outdoor playing season
limited by weather. Although most of the Company's driving ranges are designed
to be all-weather facilities, portions of the Company's facilities, including
the miniature golf courses, are outdoors and vulnerable to weather conditions.
In addition, golfers are less inclined to practice when weather conditions
limit their ability to play golf on outdoor courses. The Company expects its
expansion into ice rink facilities and Family Sports Supercenters to partially
offset such seasonality. The timing of new center openings and acquisitions may
also cause the Company's results of operations to vary significantly from
quarter to quarter. Accordingly, period-to-period comparisons are not
necessarily meaningful and should not be relied on as indicative of future
results. In addition, variability in the Company's results of operations could
cause the price of the Common Stock and Notes (as defined) to fluctuate
following the release of interim results of operations or other information and
may have a material adverse effect on the price of the Common Stock and Notes.
COMPETITION
The golf center, ice rink and family entertainment industries are each
highly competitive and include competition from other golf centers, traditional
golf ranges, golf courses, other ice rinks and family entertainment outlets and
other recreational pursuits. The Company may face imitation and other forms of
competition and the Company cannot prevent or restrain others from utilizing a
similar operational strategy. Many of the Company's competitors and potential
competitors have considerably greater financial and other resources, experience
and customer recognition than does the Company. The Company operates seven of
its golf centers under the name "Golden Bear" pursuant to a non-exclusive
license agreement (the "License Agreement") with Golden Bear Golf Centers, Inc.
(the "Licensor"). Golden Bear Golf, Inc., an affiliate of the Licensor, is a
competitor of the Company. The Licensor is permitted to establish, or license
others to establish, "Golden Bear" golf centers that compete with the Company's
golf centers, including the Company's Golden Bear Golf Centers. There can be no
assurance that competition will not adversely affect the Company's business or
ability to acquire additional properties. In addition, the Company's pro shop
business faces competition from pro shops at golf courses and other golf
centers or ice rinks, as the case may be, specialty retailers devoted to golf
or skating equipment and apparel, sporting goods and department stores.
DEPENDENCE ON CERTAIN AGREEMENTS
The future success of the business and operations of the Company is
dependent, in part, upon certain key operating agreements, including its real
property leases, management agreements with respect to certain municipal
facilities and the License Agreement. The termination of any of these
agreements may have a material adverse effect on the Company.
After giving effect to renewal options none of the Company's leases,
as of October 31, 1997, is expected to expire until October 31, 2001. However,
the leases may be terminated prior to their scheduled expiration should the
Company default in its obligations thereunder. The termination of any of the
Company's leases could have an adverse effect on the Company. If any of the
Company's leases were to be terminated, there can be no assurance that the
Company would be able to enter into leases for comparable properties on
favorable terms, or at all.
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The Company manages several facilities for municipalities pursuant to
concession licenses, three of which are terminable at will by the licensor. The
Company's concession license with the City of New York (the "City") for the
Douglaston, New York golf center, which was entered into in 1994 and which
expires on December 31, 2006, the concession license with the City for the
Randall's Island, New York golf center, which was entered into in 1992 and
which expires on March 1, 2007 and the concession license with the Metropolitan
Transportation Authority for the Bronx, New York golf center, currently under
construction, which was entered into in 1997 and which expires on December 31,
2009 (respectively, the "Douglaston License," "Randall's Island License" and
"Bronx License"), are terminable at will. Pursuant to the Douglaston License
and the Rardall's Island License, the Company has made approximately $2.3
million and $1.4 million, respectively, of capital improvements. Pursuant to
the Bronx License, the Company is obligated to make a minimum of $3.0 million
of capital improvements. If any of these concession licenses are terminated,
the licensor may retain, and is not obligated to pay the Company for the value
of, such capital improvements. Unless reimbursed, for accounting purposes the
Company would immediately have to write off the undepreciated value of these
capital improvements and the goodwill related to its purchase of the limited
partners' minority interest in the partnership which was party to the
Douglaston License, both of which are currently being depreciated and amortized
over the life of the relevant concession license. In addition, the Company's
management agreement with the City of El Segundo for the El Segundo golf
facility terminates on February 14, 1999. The Company intends to seek a renewal
of this agreement.
As of October 31, 1997, the Company operated seven of its 51 golf
centers under the name "Golden Bear" pursuant to the License Agreement,
expiring August 2002, with the Licensor. The License Agreement is terminable by
the Licensor prior to August 2002 under certain circumstances, including if the
current directors of the Company at any time constitute less than 50% of the
Company's directors. The Company agreed to cure, and believes it has cured, an
alleged default of the License Agreement (principally by making certain capital
improvements by November 1996). Failure by the Company to cure the alleged
default could result in the termination of the License Agreement. Termination
of the License Agreement could adversely affect the Company's Golden Bear Golf
Centers and, possibly, the Company. In addition, the value of the "Golden Bear"
name is dependent, in part, upon the continued popularity of Jack Nicklaus.
Accordingly, the occurrence of any event which diminishes the reputation of Mr.
Nicklaus and the related "Golden Bear" symbol could adversely affect the
Company's Golden Bear Golf Centers.
ADDITIONAL FINANCING REQUIREMENTS
The Company anticipates, based on its currently proposed expansion
plans and assumptions relating to its operations, that the net proceeds from
its sale of $115 million aggregate principal amount of 5 3/4% convertible
subordinated notes, due 2004 on October 16, 1997 and November 14, 1997 (the
"Notes"), together with availability under the Credit Facility and cash flow
from operations, will be sufficient to permit the Company to conduct its
operations and to carry on its contemplated expansion through at least the next
twelve months. The Company also anticipates that it will need to raise
additional capital in the future to continue its longer term expansion plans.
There can be no assurance that the Company will be able to obtain additional
financing on favorable terms or at all.
ENVIRONMENTAL REGULATION
Operations at the Company's facilities involve the use and limited
storage of various hazardous materials such as pesticides, herbicides, motor
oil, gasoline, heating oil and paint, as well as various chemicals used to
create, refrigerate and maintain the ice at its ice rinks. Under various
federal, state and local laws, ordinances and regulations, an owner or operator
of real property is generally liable for the costs of removal or remediation of
hazardous substances that are released on or in its property regardless of
whether the property owner or operator knew of, or was responsible for, the
release of hazardous materials. The Company has not been informed by any
governmental authority of any non-compliance or violation of any environmental
laws, ordinances or regulations and the Company believes that it is in
substantial compliance with all such laws, ordinances and regulations
applicable to its properties or operations. However, the Company is aware of
one notice of violation issued by the New York State Department of
Environmental Conservation against the owner of the land leased by the Company
in Elmsford, New York alleging that certain hazardous materials were placed on
the site. The owner has taken remedial action and the Company does not believe
it will be affected by the alleged violation. As of October 31, 1997, the
Company had not incurred material costs of
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remediation and the Company knows of no material environmental liability to
which it may become subject. Although the Company usually hires environmental
consultants to conduct environmental studies, including invasive procedures
such as soil sampling or ground water analysis on facilities it owns, operates
or intends to acquire, in some cases only limited invasive procedures are
conducted on such properties and in a limited number of instances no
environmental studies are conducted. Accordingly, there may be potential
environmental liabilities or conditions of which the Company is not aware.
DEPENDENCE UPON KEY EMPLOYEE; RECRUITMENT OF ADDITIONAL PERSONNEL
The Company is heavily dependent on the services of Dominic Chang, its
Chairman of the Board, Chief Executive Officer and President. The loss of the
services of Mr. Chang could materially adversely affect the Company. Mr. Chang
has entered into an employment agreement with the Company which terminates on
December 31, 1999. The Company owns, and is the sole beneficiary of, key person
life insurance in the amount of $1.5 million on the life of Mr. Chang. In
addition, it is an event of default under the Company's Credit Facility and
Term Debt if Mr. Chang is not the Chairman of the Board and Chief Executive
Officer of the Company and if he does not own at least 5% of the Company's
outstanding Common Stock. The Company will also be required to hire additional
personnel and professionals to staff the additional facilities it intends to
acquire, lease or construct. There can be no assurance that the Company will be
able to attract and retain qualified personnel.
CONTROL BY CURRENT STOCKHOLDER
As of October 31, 1997, Dominic Chang beneficially owned 2,519,334
shares of Common Stock, constituting approximately 19.6% of such outstanding
shares. Mr. Chang is, therefore, able to exercise significant influence with
respect to the election of the directors of the Company and all matters
submitted to a vote of the stockholders of the Company.
PREFERRED STOCK; POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER, BY-LAW AND
CONTRACTUAL PROVISIONS
The Company's Certificate of Incorporation authorizes the Board of
Directors to issue up to 2,000,000 shares of preferred stock, $0.10 par value
per share. The preferred stock may be issued in one or more series, the terms
of which may be determined at the time of issuance by the Board of Directors,
without further action by stockholders. Although no preferred stock is
currently outstanding and the Company currently has no plans for the issuance
of any preferred stock, there can be no assurance that the Company will not do
so in the future. The ability of the Board of Directors to issue preferred
stock could have the effect of delaying, deferring or preventing a change of
control of the Company or the removal of existing management and, as a result,
could prevent the stockholders of the Company from being paid a premium over
the market value for their shares of Common Stock. The Company's By-Laws
contain provisions requiring advance notice of stockholder proposals and
imposing certain procedural restrictions on stockholders wishing to call a
special meeting of stockholders. Under the Credit Facility and the Term Debt,
it is an event of default if Mr. Chang is not the Chairman of the Board, Chief
Executive Officer and beneficial owner of at least 5% of the outstanding Common
Stock of the Company. In addition, the Indenture with respect to the Notes
gives the holders of the Notes the right to have such Notes redeemed if there
is a Change of Control (as defined in the Indenture). The License Agreement may
be terminated by the Licensor if members of the Company's Board of Directors,
as of September 1995, do not constitute at least 50% of the Company's Board of
Directors. Accordingly, such provisions could discourage possible future
attempts to gain control of the Company (which attempts, if stockholders were
offered a premium over the market value of their Common Stock, might be viewed
as beneficial to stockholders).
VOLATILITY OF PRICE OF COMMON STOCK
The trading price of the Company's Common Stock could be subject to
fluctuations in response to variations in quarterly operating results, the gain
or loss of significant contracts, changes in management, future announcements
concerning the Company, general trends in the industry and other events or
factors.
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USE OF PROCEEDS
The net proceeds to the Company from the exercise of the Warrants are
estimated to be $7,602,267.50. The Company is unable to predict the time, if
ever, when the Warrants will be exercised. Accordingly, it is expected that the
net proceeds from the sale of the Shares underlying the Warrants will be used
by the Company for general corporate purposes. The Company will not receive any
proceeds from the sale of the Shares by the Selling Security Holders.
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SELLING SECURITY HOLDERS
The following table sets forth the ownership of the Common Stock by
the Selling Security Holders as of the date such information was provided to
the Company. Since the dates such information was provided to the Company, such
information may have changed. Any or all of the Shares listed below may be
offered for sale by the Selling Security Holders from time to time and
therefore no estimate can be given as to the number of Shares that will be held
by the Selling Security Holders upon termination of this offering (except that
in each case, such number will represent less than 1% of the Common Stock
outstanding, unless otherwise indicated ). The "Number of Shares of Common
Stock Owned before the Offering" listed below includes the "Number of Shares
Issuable upon Exercise of Warrants or Options" for each Selling Security
Holder. Except as otherwise indicated, the Selling Security Holders listed in
the table have sole voting and investment powers with respect to the Shares
indicated.
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF SHARES SHARES ISSUABLE NUMBER
OF COMMON STOCK UPON EXERCISE OF OF
OWNED BEFORE WARRANTS OR SHARES
NAME OF SELLING SECURITY HOLDER THE OFFERING (21) OPTIONS OFFERED
------------------------------- ------------------- ----------------- -----------
<S> <C> <C> <C>
Alan R. Schriber (4) 1,041 208 (7) 833
Allison Flege (4) 3,125 625 (7) 2,500
Andrew R. and Stephani Whittaker (2) 6,356 6,356 (5) 6,356
Andromeda Agency, Inc. Profit Sharing Plan FBO
Howard L. Tomb (Howard L. Tomb, Trustee) (4) 1,041 208 (7) 833
Arthur J. Calace, Jr. (4) (8) (20) 170,834 16,804 (6) 170,834
B. Joel Stoudenmire (4) 3,946 0 3,946
Carl Peyser (4) (9) 5,646 555 (6) 5,646
Carol Durkin (4) 21,132 2,078 (6) 21,132
Carver Golf Enterprises, Inc. (3) 109,200 0 109,200
Charles F. Schierar Trust U/A dated 6/6/83 1,041 208 (7) 833
Chris M. Mary Ellen Kanoff (2) 6,356 6,356 (5) 6,356
Christopher O'Connell (2) 6,444 6,444 (5) 6,444
Christopher Allick and Alice P. Allick 6,356 6,356 (5) 6,356
Claude Lemieux 4,167 0 4,167
Curtis Burge, Trustee of Pension & Profit Plan;
Trust dated 4/24/85 (4) 401K 1,041 208 (7) 833
Daniel O. Conwill, IV (2) 6,356 6,356 (5) 6,356
David Wechsler (4) (10) 7,084 5,417 (7)(11) 1,667
David Handler (2) 8,000 8,000 (5) 8,000
David P. and Wendie E. St. Jean (2) 3,177 3,177 (5) 3,177
David L. Rose (2) 5,730 5,730 (5) 5,730
Dominick and Mary E. DeBari (4) 10,003 984 (6) 10,003
Dr. Vincent W. Shiel, Trustee U/A of Trustee dated
1/18/89 (4) 3,334 834 (7) 3,334
Dudley S. Taft (4) 2,084 417 (7) 1,667
Edward J. Malek (4) (26) 14,200 0 13,756
Estate of Roslyn Shervan (4) 10,003 984 (6) 10,003
Ronald G. Orloff Trustee for the Marc Steven Orloff
Irrevocable Living Trust (4) 5,001 492 (6) 5,001
FHM, Inc. (4) 416 83 (7) 333
Frederick J. Caspar (4) 1,041 208 (7) 833
Gary Munafo (4) 2,084 417 (7) 1,667
Michael Jonathan Chill (2) 8,765 (12) 6,765 (5) 6,765
Richard K. Abbe (2) 23,106 (13) 18,706 (5) 18,706
Jeffrey M. Berman (2) 18,705 18,705 (5) 18,705
Leo Abbe (2) 18,706 18,706 (5) 18,706
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF SHARES SHARES ISSUABLE NUMBER
OF COMMON STOCK UPON EXERCISE OF OF
OWNED BEFORE WARRANTS OR SHARES
NAME OF SELLING SECURITY HOLDER THE OFFERING (21) OPTIONS OFFERED
------------------------------- ------------------- ----------------- ------------
<S> <C> <C> <C>
James M. Gould (4) 416 83 (7) 333
Janet Rudnick (4) 10,003 984 (6) 8,133
Jay Haas (4) 3,947 0 3,947
Jean Schiear Meier Trust U/A dated 6/7/72 (4) 1,041 208 (7) 833
Jeff Rosenberg (4) 1,041 208 (7) 833
Jefferies & Company, Inc. (1) 61,707 61,707 (5) 61,707
Jeffrey C. Key (2) 4,000 4,000 (5) 4,000
Jeffrey Kent Weinhoff (2) 32,491 32,491 (5) 32,491
Jeffrey and Denise Feldman (4) 5,001 492 (6) 5,001
John D. Lafoy (4) 5,920 0 5,920
John C. Vance (4) 3,125 625 (7) 2,500
Jonah Kupietzky (4) 10,003 984 (6) 10,003
Joseph M. and Doris Fitzgerald (4) 70,271 6,912 (6) 57,136
Joseph F. Chiappetta (2) 6,800 6,800 (5) 6,800
Karen Calace (4) (14) 10,056 987 (6) 10,056
Kenneth W. Gurley (4) 14,570 4,950 (23) 9,620
Leonard Hefter (2) 6,800 6,800 (5) 6,800
Linda Calace (4) (15) (22) 159,380 15,677 (6) 129,589
Louis V. Bellucci (2) 6,800 6,800 (5) 6,800
M. Brent Stevens (2) 3,177 3,177 (5) 3,177
Marrianne Klekamp(4) 1,041 208 (7) 833
Mark Calace (4) (16) 11,076 1,091 (6) 11,076
Marvin Rosenberg (4) 4,002 1,501 (7) 2,501
Monness, Crespi, Hardt & Co., Inc (1) 15,000 15,000 (5) 15,000
Paul Ochs 4,800 0 4,800
Peter E. and Judy V. Ruel (2) 6,800 6,800 (5) 6,800
Philip M. Bell (4) 2,084 417 (7) 1,667
Rabiner Partners (4) 1,041 208 (7) 833
Raymond Travaglione(4) (25) 56,800 0 56,800
Richard and Constance Pines (4) 10,003 984 (6) 10,003
Robert T. Colgan (2) 6,800 6,800 (5) 6,800
Ruth L. Conway (4) 6,252 1,251 (7) 5,001
Salem Realty, Inc. (4) 2,084 417 (7) 1,667
Sam Pate (4) 9,620 0 9,620
Samuel W. Tuten & Vicky R. Tuten (4) 1,041 208 (7) 833
Sharon Wahlke (4) 1,041 208 (7) 833
Stacy Hart (4) 87,583 0 12,583
Stefani Nelson (2) 6,800 6,800 (5) 6,800
Steve Contardi (4) 833 0 833
Steve H. Owings (4) 3,974 0 3,947
Susan W. Holmes 1951 Trust (4) 2,084 417 (7) 1,667
U.S. Golf and Entertainment, Inc. (2) 75,000 0 75,000
William Parks (4) (17) 19,440 1,912 (6) 19,440
William G. Reitzig (4) (18) 66,775 33,617 (6) (19) 36,775
Hampshire Securities Corporation (1) 9,405 9,405 (5) 9,405
John H. Starr (2) 7,761 7,761 (5) 7,761
Leslie Abbey 941 941 (5) 941
Jonathan Abbey 940 940 (5) 940
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF SHARES SHARES ISSUABLE NUMBER
OF COMMON STOCK UPON EXERCISE OF OF
OWNED BEFORE WARRANTS OR SHARES
NAME OF SELLING SECURITY HOLDER THE OFFERING (21) OPTIONS OFFERED
------------------------------- ------------------- ----------------- ------------
<S> <C> <C> <C>
Realprop Capital Corp. 3,527 3,527 (5) 3,527
William E. Aaron (2) 1,258 1,258 (5) 1,258
Michael R. Stein (2) 1,258 1,258 (5) 1,258
Ceasar Fraschilla 2,216 2,216 (5) 2,216
Morton D. Kurzrok (2) 335 335 (5) 335
F. Garofalo Electric Co., Inc. Profit Sharing Plan 1,176 1,176 (5) 1,176
Trade Wind Fund I, L.P. 2,351 2,351 (5) 2,351
</TABLE>
(1) An investment bank which has participated in underwritten public offerings
of the Company's securities.
(2) An employee of an investment bank which has participated in underwritten
public offerings of the Company's securities.
(3) A company, the assets of which have been acquired by the Company.
(4) A stockholder of a company, the assets of which have been acquired by the
Company.
(5) Shares issuable upon the exercise of the Underwriters' Warrants.
(6) Shares issuable upon the exercise of the Acquisition Warrants.
(7) Shares issuable upon the exercise of options granted in connection with
the acquisition of a golf center in Cincinnati, Ohio.
(8) Does not include shares beneficially owned by Arthur Calace's wife, Linda
Calace.
(9) Director of Management Information Services for Family Golf Centers, Inc.
(10) Regional Manager for Southeastern District of Family Golf Centers, Inc.
(11) Includes 5,000 options granted under an employee stock option plan
(12) Includes 2,000 shares of unrestricted Common Stock purchased in the open
market.
(13) Includes 4,400 shares of unrestricted Common Stock purchased in the open
market.
(15) Does not include shares beneficially owned by Karen Calace's husband, Mark
Calace.
(16) Does not include shares beneficially owned by Linda Calace's husband,
Arthur Calace.
(17) Does not include shares beneficially owned by Mark Calace's wife, Karen
Calace.
(18) Director of Operations of Lake Grove Family Golf Centers, Inc.
(19) President of Lake Grove Family Golf Centers, Inc.
(20) Includes 30,000 options granted under an employee stock option plan
(21) Selling Security Holder's beneficial ownership of Common Stock is 1.3% of
the Common Stock outstanding.
(22) Includes the following numbers of Shares held in escrow for the
following Selling Security Holders: Arthur J. Calace, Jr. -15,128;
Carl Peyser - 500; Carol Durkin - 1,871; Dominick and Mary E. DeBari -
886; Edward J. Malek - 444; Estate of Roslyn Shervan - 886; Ronald G.
Orloff Irrevocable Living Trust - 443; Janet Rudnick - 886; Jeffrey
and Denise Feldman - 443; Jonah Kupietzky - 886; Joseph M. and Doris
Fitzgerald - 6,223; Karen Calace - 886; Linda Calace - 14,114; Mark
Calace - 985; Raymond Travaglione - 1,776; Richard and Constance Pines
- 886; William Parks - 3,289; William G. Reitzig - 3,256.
(23) Selling Security Holder's beneficial ownership of Common Stock is 1.3% of
the Common Stock outstanding.
(24) Options issued under an employee stock option plan.
(25) Includes 1,776 shares to be released from escrow.
(26) Includes 444 shares to be released from escrow.
DESCRIPTION OF CAPITAL STOCK
A description of the Company's capital stock is contained in the
Company's registration statement on Form 8-A, which is incorporated by
reference herein. See "Incorporation of Certain Documents by Reference."
PLAN OF DISTRIBUTION
The Shares offered by this Prospectus may be sold from time to time by
the Selling Security Holders or by transferees thereof. No underwriting
arrangements have been entered into by the Selling Security Holders. The
distribution of the Shares by the Selling Security Holders may be effected in
one or more transactions that may take place in the over-the-counter market,
including ordinary broker's transactions, privately negotiated transactions, or
through sales to one or more dealers for resale of such shares as principals,
at prevailing market prices at the time of sale, prices related to prevailing
market prices, or negotiated prices. Discounts and usual and customary or
specifically negotiated brokerage fees or commissions may be paid by a Selling
Security Holder in connection with sales of the Shares. To the extent required,
the number of Shares to be sold, the name of the Selling Security Holder, the
purchase price, the name
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<PAGE>
of any agent or broker, and any applicable commissions, discounts or other
compensation to such agents or brokers with respect to a particular offering
will be set forth in a Prospectus Supplement.
In order to comply with certain state securities laws, if applicable,
the Shares will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In certain states, the Shares may not be sold
unless such Shares have been registered or qualified for sale in such state or
an exemption from registration or qualification is available and is complied
with.
In connection with distributions of the Shares or otherwise, the
Selling Security Holders may enter into hedging transactions with
broker-dealers. In connection with such transactions, broker-dealers may engage
in short sales of the Shares in the course of hedging the positions they assume
with Selling Security Holders. The Selling Security Holders may also sell
Shares short and redeliver the Shares to close out such short positions. The
Selling Security Holders may also enter into option or other transactions with
broker-dealers which require the delivery to the broker-dealer of the Shares
registered hereunder, which the broker-dealer may resell or otherwise transfer
pursuant to this Prospectus. The Selling Security Holders may also loan or
pledge the Shares to a broker-dealer and the broker-dealer may sell the Shares
so loaned, or upon a default, the broker-dealer may effect sales of the pledged
Shares pursuant to this Prospectus.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Shares may not simultaneously engage in
market-making activities with respect to such Shares for a period of one or
five business days prior to the commencement of such distribution. In addition
to, and without limiting, the foregoing, each of the Selling Security Holders
and any other person participating in a distribution will be subject to the
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Regulation M, which provisions may
limit the timing of purchases and sales of any of the Shares by the Selling
Security Holders or any such other person. All of the foregoing may affect the
marketability of the Shares.
Pursuant to the Warrants and certain registration rights agreements,
the Company will pay all the fees and expenses incident to the registration of
the Shares (other than discounts and commissions, if any, and the Selling
Security Holders' counsel fees and expenses, if any).
In addition, the Company has agreed to indemnify the Selling Security
Holders against certain liabilities, including liabilities under the Securities
Act. In addition, each Selling Security Holder has agreed to indemnify the
Company against certain liabilities, including liabilities under the Securities
Act. Such agreements also provide for rights of contribution if such
indemnification is not available.
The Selling Security Holders, and any broker-dealers or agents through
whom the Shares are sold, may be deemed "underwriters" within the meaning of
the Securities Act with respect to securities offered by them, and any profits
realized or commissions received by them may be deemed underwriting
compensation.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by Delaware law. Delaware law
provides that directors of a company will not be personally liable for monetary
damages for breach of their fiduciary duties as directors, except for liability
for (i) any breach of their duty of loyalty to the company or its stockholders,
(ii) acts or omissions not in good faith or involving intentional misconduct or
a knowing violation of law, (iii) unlawful payment of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law or (iv) any transaction from which the director derived
an improper personal benefit.
The Company's Certificate of Incorporation provides that the Company
shall indemnify its officers, directors, employees and other agents to the
fullest extent permitted by Delaware law.
The Company maintains a policy of insurance under which the directors
and officers of the Company are insured, subject to the limits of the policy,
against certain losses arising from claims made against such directors and
-13-
<PAGE>
officers by reason of any acts or omissions covered under such policy in their
respective capacities as directors or officers, including liabilities under the
Securities Act. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
LEGAL MATTERS
The validity of the Shares has been passed upon for the Company by
Squadron, Ellenoff, Plesent & Sheinfeld, LLP, 551 Fifth Avenue, New York, New
York 10176. Kenneth R. Koch, Esq. a partner of Squadron, Ellenoff, Plesent &
Sheinfeld, LLP, holds options to purchase shares of the Company's Common Stock.
EXPERTS
The consolidated financial statements of the Company as at December
31, 1996 and December 31, 1995 and for each of the years in the three year
period ended December 31, 1996, incorporated herein by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996 have been so incorporated in reliance on the report of Richard A. Eisner &
Company, LLP, independent auditors, given upon the authority of said firm as
experts in accounting and auditing. The audited financial statements of
Carolina Capital Ventures, Ltd. as of December 31, 1996, incorporated herein by
reference to the Company's Current Report on Form 8-K dated July 25, 1997, as
amended, have been so incorporated in reliance on the report of Goldberg &
Davis, CPA's, independent auditors, given upon the authority of said firm as
experts in accounting and auditing. The audited financial statements of Divot
City, L.P. as of December 31, 1996, incorporated herein by reference to the
Company's Current Report on Form 8-K dated July 25, 1997, as amended, have been
so incorporated in reliance on the report of Ireland San Filippo, LLP,
independent auditors, given upon the authority of said firm as experts in
accounting and auditing. The audited financial statements of Darlington Driving
Range as of December 31, 1996, incorporated herein by reference to the
Company's Current Report on Form 8-K dated July 25, 1997, as amended, have been
so incorporated in reliance on the report of Weil & Company LLP, independent
auditors, given upon the authority of said firm as experts in accounting and
auditing. The audited financial statements of Randall's Island Practice Center
as of December 31, 1996, incorporated herein by reference to the Company's
Current Report on Form 8-K dated July 25, 1997, as amended, have been so
incorporated in reliance on the report of Weil & Company LLP, independent
auditors, given upon the authority of said firm as experts in accounting and
auditing. The audited financial statements of Green Oaks Golf Practice Center,
Inc. as of December 31, 1996, incorporated herein by reference to the Company's
Current Report on Form 8-K dated July 25, 1997, as amended, have been so
incorporated in reliance on the report of Gerard McEvoy, CPA, independent
auditors, given upon the authority of said firm as experts in accounting and
auditing. The audited financial statements of San Bruno Practice Center as of
December 31, 1996, incorporated herein by reference to the Company's Current
Report on Form 8-K dated July 25, 1997, as amended, have been so incorporated
in reliance on the report of Weil & Company LLP, independent auditors, given
upon the authority of said firm as experts in accounting and auditing. The
audited financial statements of Pinley Enterprises Ltd. as of December 31,
1996, incorporated herein by reference to the Company's Current Report on Form
8-K dated July 25, 1997, as amended, have been so incorporated in reliance on
the report of Hirschhorn, Fry & Associates, independent auditors, given upon
the authority of said firm as experts in accounting and auditing. The audited
financial statements of Southampton Family Golf Center, Inc. as of December 31,
1996, incorporated herein by reference to the Company's Current Report on Form
8-K dated July 25, 1997, as amended, have been so incorporated in reliance on
the report of Hirschhorn, Fry & Associates, independent auditors, given upon
the authority of said firm as experts in accounting and auditing. The audited
financial statements of Palm Royale Country Club Operations as of December 31,
1996, incorporated herein by reference to the Company's Current Report on Form
8-K dated July 25, 1997, as amended, have been so incorporated in reliance on
the report of Maryanov Madsen Gordon & Campbell, independent auditors, given
upon the authority of said firm as experts in accounting and auditing. The
audited financial statements of Leisure Complexes, Inc. as of December 31,
1996, incorporated herein by reference to the Company's Current Report on Form
8-K dated July 25, 1997, as amended, have been so incorporated in reliance on
the report of Feldman, Gutterman, Meinberg and Company, CPA's, independent
auditors, given upon the authority of said firm as experts in accounting and
auditing.
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<PAGE>
===============================================================
No dealer, salesman, or any other person has been authorized
to give any information or to make any representation not
contained in this Prospectus in connection with the offering
made hereby, and, if given or made, such information or
representation must not be relied upon as having been
authorized by the Company. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy,
any of the securities offered hereby in any jurisdiction to any
person to whom it is unlawful to make such an offer or
solicitation in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any
circumstances create any implication that there has been no
change in the affairs of the Company since the date hereof or
that the information contained herein is correct as of any time
subsequent to the dates as of which such information is
furnished.
--------------------
TABLE OF CONTENTS
Page
Available Information.........................................2
Incorporation of Certain Documents by Reference...............2
Special Note Regarding Forward Looking Statements.............3
The Company...................................................4
Risk Factors..................................................5
Use of Proceeds...............................................9
Selling Security Holders.....................................10
Description of Capital Stock.................................12
Plan of Distribution.........................................12
Limitation of Liability and Indemnification of Directors
and Officers............................................13
Legal Matters................................................14
Experts......................................................14
===============================================================
===============================================================
1,169,637 SHARES
_________________
FAMILY GOLF
CENTERS, INC.
COMMON STOCK
_________________
PROSPECTUS
_________________
DECEMBER 16, 1997
====================================================
