Golf Digest Online : Notice of the Extraordinary Shareholders Meeting(141 KB)

Note: This document has been translated from a part of the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. The Company assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from the translation.

(Stock Exchange Code 3319)

November 9, 2022

To Shareholders with Voting Rights:

Nobuya Ishizaka

President and CEO

Golf Digest Online Inc.

2-10-2Higashi-Gotanda,Shinagawa-ku, Tokyo

NOTICE OF

THE EXTRAORDINARY SHAREHOLDERS MEETING

Dear Shareholders:

We would like to express our appreciation for your continued support and patronage.

The Extraordinary Shareholders Meeting of Golf Digest Online Inc. (the "Company") will be held for the purposes as described below.

If you are unable to attend the meeting in person, you may exercise your voting rights by either of the methods below. Please review the Reference Documents for the Extraordinary Shareholders Meeting presented on subsequent pages, and exercise your voting rights by 5:30 p.m., Tuesday, November 22, 2022.

[Exercising your voting rights in writing]

Please indicate your approval or disapproval for each proposal on the enclosed Voting Rights Exercise Form, and return it so that it will be received before the above voting deadline.

[Exercising your voting rights through electronic means (via the internet, etc.)]

Please refer to the Voting Rights Exercise Guide on page 4, and enter your approval or disapproval for each proposal according to directions on the screen, by the abovementioned voting deadline.

If you exercise your voting rights both in writing and through electronic means, the voting rights exercised through electronic means will be effective.

If you exercise your voting rights more than once through electronic means, or repeatedly by means of a personal computer, smartphone, or mobile phone, the voting rights exercised most recently will be considered as the effective exercise of your voting rights.

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1. Date and Time:
2. Place:

Thursday, November 24, 2022 at 1:00 p.m. Japan time (Doors open at 12:30 p.m. Japan time)

TKP Shinagawa Conference Center, 9th floor, Keikyu Daini Building,

3-25-23 Takanawa, Minato-ku, Tokyo

3. Meeting Agenda: Proposals to be resolved:

Proposal 1: Partial Amendment of Articles of Incorporation

Proposal 2: Issuance of Class A Preferred Shares by way of Third-party Allotment

Reminder

When attending the meeting, please submit the enclosed Voting Rights Exercise Form at the reception desk.

Disclosure on the Internet

Should the Reference Documents for the Extraordinary Shareholders Meeting require revisions, the revised versions will be posted on the Company's website.

https://company.golfdigest.co.jp/ir/

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Reference Documents for the Extraordinary Shareholders Meeting

Proposal 1: Partial Amendment of Articles of Incorporation

Purpose of the Amendment

In order to enable the Class A Preferred Shares prescribed in Proposal 2 "Issuance of Class A Preferred Shares by way of Third-party Allotment" to be issued, the Company will create Class A Preferred Shares as a new class of shares and establish new provisions regarding Class A Preferred Shares in the Articles of Incorporation.

For details on the reasons for issuance of Class A Preferred Shares, please refer to Proposal 2 "Issuance of Class A Preferred Shares by way of Third-party Allotment".

The partial amendments to the Articles of Incorporation will be subject to the condition that Proposal 2 "Issuance of Class A Preferred Shares by way of Third-party Allotment" is approved as proposed at the Extraordinary Shareholders Meeting.

Proposal 2: Issuance of Class A Preferred Shares by way of Third-party Allotment

The Company asks the shareholders to approve the issuance of Class A Preferred Shares by way of third-party allotment (the "Capital Increase by Third-Party Allotment"), to Fivestar Mezzanine II Investment Limited Partnership (the "Scheduled Allottee") for the reasons prescribed in 1. through 3. below, and in accordance with the outlines prescribed in 4. below, pursuant to the provisions of Article 199 of the Companies Act.

The Capital Increase by Third Party Allotment is subject to the condition that Proposal 1 is approved as proposed and the partial amendments to the Articles of Incorporation related to Proposal 1 becoming effective. Further, under the investment agreement executed between the Company and the Scheduled Allottee dated September 22, 2022 (the "Investment Agreement"), the payment for the Class A Preferred Shares by the Scheduled Allottee is subject to conditions such as that Proposals 1 and 2 are approved as proposed at the Extraordinary Shareholders Meeting.

1. Purpose of and reasons for offering

1. Background to and purpose of offering
   Uniquely offering lessons and golf club fittings customized to suit each individual based on three levels of data-swing data, ball and golf club data, and user profile data-derived from world-leading technology, GolfTEC Enterprises, LLC (whose head office is located in Colorado, USA; "US GOLFTEC"), a consolidated subsidiary of the Company, has over 230 locations in six countries including the US as well as Canada and the Southeast Asian region and provides over 1.5 million lessons annually by over 900 accredited coaches.
   The US golf market has seen new technology and the COVID-19 situation impact golfing habits and the way people enjoy golf, and there has been an increase in ways to enjoy golf outside the golf course as well as golf becoming a closer part of players' lives.
   Under such environment, US GOLFTEC, based on the basic policy of the Company's medium-term management policy "LEAD THE WAY" announced in February 2021, has adopted a growth strategy focused on expanding locations and is engaging in its business operations to achieve such strategy. With its sights on further growth and expansion, US GOLFTEC has adopted its concept "GOLFTEC ANYWHERE," aimed at offering more golfers world-classknow-how to improve their performance for all scenes and locations based on its conventional one-on-one lessons.
   Since the Company's acquisition of 60.0% of US GOLFTEC's equity interest and turning US GOLFTEC into a subsidiary of the Company in July 2018, and up to today, the Company and GTE Step1 HoldCo LLC, a joint venture partner of US GOLFTEC, have steadily expanded the business while establishing a favorable partnership. As a result, US GOLFTEC, which was in a state of insolvency when it became a subsidiary of the Company, is expected to resolve its insolvency during the 2022 fiscal year. At this time, in order to accelerate the long-term expansion of profits by realizing the "GOLFTEC ANYWHERE" concept, the Company has decided to increase GDO Sports, Inc.'s equity interests in US GOLFTEC (the "Additional Equity Interest Acquisition").
   While the Additional Equity Interest Acquisition is an essential transaction in order for the Company to achieve its medium-term management policy and by extension enhance its long-term corporate value, the amount of total net assets of the Company in the consolidated balance sheet ("Consolidated Net Assets") will be reduced by the Additional Equity Interest Acquisition, and therefore the Company believes that implementing the Additional Equity Interest Acquisition after procuring funds by a method that enables the Company to augment its Consolidated Net Assets and attain improved financial health is an important issue to be addressed.
   In examining such issue, the Company examined a range of methods premised on conditions such as that it be able to augment its Consolidated Net Assets and attain improved financial health even while giving consideration to the impacts of dilution on existing shareholders of the Company and that there be a high degree of certainty of being able to procure funds at the time of execution of the definitive agreement for the Additional Equity Interest Acquisition, and as a result of such examinations the Company determined, from the perspective of protecting the interests of existing shareholders, the perspective of its financial health after the Additional Equity Interest Acquisition, and the perspective of certainty of

being able to procure funds, that a capital increase by third-party allotment of so-called "redeemable preferred shares"-which are not able to be converted into common shares-is the optimal method for part of the funds procurement for the Additional Equity Interest Acquisition.

As part of such process, from early 2022 onward the Company has had contact with multiple investor candidates and engaged in discussions regarding the possibility of their subscribing for redeemable preferred shares. In April 2022, the Company requested approximately 10 Japanese financial institutions to submit indication letters and at the end of May 2022 received proposed terms from multiple institutions, and from among these the Company selected as a subscriber candidate for the Capital Increase by Third-Party Allotment and pursued discussions on detailed terms with Fivestar Mezzanine II Investment Limited Partnership which presented the best overall terms including financial terms, possesses a deep understanding of the Company business, and has abundant experience in mezzanine finance (finance using subordinated funds) in Japan including preferred shares. As a result of such discussions, the two parties reached agreement on the issuance of redeemable preferred shares on terms satisfactory to the Company from the perspective of protecting the interests of existing shareholders, the perspective of its financial health after the Additional Equity Interest Acquisition, and the perspective of certainty of being able to procure funds, and therefore the Company decided to conduct a capital increase by third-party allotment to Fivestar Mezzanine II Investment Limited Partnership and use this to procure part of the funds for the Additional Equity Interest Acquisition.

1. Reasons for selecting Capital Increase by Third-Party Allotment to procure funds
   The Company examined a range of methods premised on conditions such as that it be able to augment its Consolidated Net Assets and attain improved financial health and that there be expected a high degree of certainty of being able to procure funds at the time of execution of the definitive agreement for the Additional Equity Interest Acquisition.
   In the course of such process, the Company also examined methods aimed at general investors such as a public offering or a shareholder allotment but decided that none of these could be regarded as the optimal fund procurement method from the perspective of protecting the interests of existing shareholders and certainty of being able to procure funds.
   In the Capital Increase by Third-Party Allotment, the Company has, taking into account the impacts of dilution on existing shareholders of the Company, decided to procure funds by issuing Class A Preferred Shares that are not convertible into common shares. The Company ultimately reached the decision that the Capital Increase by Third-Party Allotment is the best choice for the Company at the present time because it will augment the Consolidated Net Assets and contribute to the financial health of the Company without causing any dilution of shares of the Company and also provides a high degree of certainty of being able to procure funds.
2. Reasons for selecting Scheduled Allottee
   As stated in (1) above, the Company selected Fivestar Mezzanine II Investment Limited Partnership as the Scheduled Allottee after determining that it was the most suitable counterparty as subscriber for a third-party allotment because it presented the best financial terms from among the Japanese financial institutions from which the Company received indication letters, it possesses a deep understanding of the Company business, and it has abundant experience in mezzanine finance (finance using subordinated funds) in Japan including preferred shares.
   The Investment Agreement between the Company and the Scheduled Allottee includes the following terms and conditions.
3. 1. Prior consent matters
      Under the Investment Agreement, the prior written consent of the Class A Preferred Shareholder or Class A Preferred Shareholders whose aggregate paid-in amount for the Class A Preferred Shares is equal to 50.1% or more in cases where the Company seeks to undertake certain actions listed in the Investment Agreement. The actions requiring prior written consent include actions of a type that