<PAGE>
- -------------------------------------------------------------------------------
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT
PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
CHECK THE APPROPRIATE BOX:
[ ] PRELIMINARY PROXY STATEMENT
[X] DEFINITIVE PROXY STATEMENT
[ ] DEFINITIVE ADDITIONAL MATERIALS
[ ] SOLICITING MATERIAL PURSUANT TO SECTION 240.14A-11(C) OR SECTION
240.14A-12
FAMILY GOLF CENTERS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FAMILY GOLF CENTERS, INC.
(NAME OF PERSON(S) FILING PROXY STATEMENT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[ ] $125 PER EXCHANGE ACT RULES 0-11(C)(1)(II), 14A-6(I)(1), OR 14A-6(I)(2)
[ ] $500 PER EACH PARTY TO THE CONTROVERSY PURSUANT TO EXCHANGE ACT RULE
14A-6(I)(3).
[ ] FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULES 14A-6(I)(4) AND 0-11.
(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES:
(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED
PURSUANT TO EXCHANGE ACT RULE 0-11:(1)
(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
(5) TOTAL FEE PAID:
[X] FEE PAID PREVIOUSLY WITH PRELIMINARY MATERIALS.
[ ] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE ACT
RULE 0-11(A)(2) AND IDENTIFY THE FILING FOR WHICH THE OFFSETTING FEE
WAS PAID PREVIOUSLY. IDENTIFY THE PREVIOUS FILING BY REGISTRATION
STATEMENT NUMBER, OR THE FORM OR SCHEDULE AND THE DATE OF ITS FILING.
(1) AMOUNT PREVIOUSLY PAID:
(2) FORM, SCHEDULE OR REGISTRATION STATEMENT NO.:
(3) FILING PARTY:
(4) DATE FILED:
- -------------------------------------------------------------------------------
<PAGE>
FAMILY GOLF CENTERS, INC.
225 BROADHOLLOW ROAD
MELVILLE, NEW YORK 11747
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Family Golf Centers, Inc.
The Annual Meeting of Stockholders of Family Golf Centers, Inc. (the
"Company") will be held at Flemington Family Golf Center, 99 Route 202 and 31
South, Flemington, New Jersey 08822 at 10:00 a.m., Eastern Daylight Savings
Time, on June 7, 1996, for the following purposes:
1. To consider and act upon a proposal to amend and restate the
Company's Certificate of Incorporation to increase the authorized capital
stock of the Company such that the aggregate number of shares which the
Company shall have the authority to issue shall be increased from
11,000,000 to 52,000,000, of which 2,000,000 shares shall be designated
"Preferred Stock" and 50,000,000 shares shall be designated "Common
Stock."
2. To elect the Board of Directors for the ensuing year.
3. To consider and act upon a proposal to adopt the Company's 1996
Stock Incentive Plan.
4. To ratify the appointment of Richard A. Eisner & Company, LLP as
the independent auditors and accountants for the Company for the year
ending December 31, 1996.
5. To transact such other business as may properly come before the
meeting.
All stockholders are invited to attend the meeting. Stockholders of record
at the close of business on May 10, 1996, the record date fixed by the Board
of Directors, are entitled to notice of and to vote at the meeting. A
complete list of stockholders entitled to notice of and vote at the meeting
will be open to examination by stockholders beginning ten days prior to the
meeting for any purpose germane to the meeting during normal business hours
at the office of the Secretary of the Company at 225 Broadhollow Road,
Melville, New York 11747.
Whether or not you intend to be present at the meeting, please sign and
date the enclosed proxy and return it in the enclosed envelope.
BY ORDER OF THE BOARD OF DIRECTORS
KRISHNAN P. THAMPI
Secretary
Melville, New York
May 24, 1996
<PAGE>
FAMILY GOLF CENTERS, INC.
225 BROADHOLLOW ROAD
MELVILLE, NEW YORK 11747
(516) 694-1666
----------------
PROXY STATEMENT
----------------
The accompanying proxy is solicited by the Board of Directors of Family
Golf Centers, Inc. (the "Company") for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held at 10:00 a.m., Eastern
Daylight Savings New York time, on June 7, 1996 at Flemington Family Golf
Center, 99 Route 202 and 31 South, Flemington, New Jersey and any adjournment
thereof.
VOTING SECURITIES; PROXIES
The Company will bear the cost of solicitation of proxies. In addition to
the solicitation of proxies by mail, certain officers and employees of the
Company, without extra remuneration, may also solicit proxies personally by
telefax and by telephone. In addition to mailing copies of this material to
stockholders, the Company may request persons, and reimburse them for their
expenses in connection therewith, who hold stock in their names or custody or
in the names of nominees for others to forward such material to those persons
for whom they hold stock of the Company and to request their authority for
execution of the proxies.
The holders of a majority of the outstanding shares of Common Stock, par
value $.01 per share (the "Common Stock"), present in person or represented
by proxy shall constitute a quorum at the Annual Meeting. The approval of a
plurality of the votes of the outstanding shares of Common Stock present in
person or represented by proxy at the Annual Meeting is required for election
of the nominees as directors. The affirmative vote of the holders of a
majority of the shares of Common Stock issued and outstanding is required for
any amendment of the Company's Certificate of Incorporation. In all matters
other than the election of directors and any amendment to the Company's
Certificate of Incorporation, the affirmative vote of the majority of the
outstanding shares of Common Stock present in person or represented by proxy
at the Annual Meeting is required for the adoption of such matters.
The form of proxy solicited by the Board of Directors affords stockholders
the ability to specify a choice among approval of, disapproval of, or
abstention with respect to each matter to be acted upon at the Annual
Meeting. Shares of Common Stock represented by the proxy will be voted,
except as to matters with respect to which authority to vote is specifically
withheld. Where the solicited stockholder indicates a choice on the form of
proxy with respect to any matter to be acted upon, the shares will be voted
as specified. Abstentions and broker non-votes will not have the effect of
votes in opposition to a director or "against" any other proposal to be
considered at the Annual Meeting.
All shares of Common Stock represented by properly executed proxies which
are returned and not revoked will be voted in accordance with the
instructions, if any, given therein. If no instructions are provided in a
proxy, the shares of Common Stock represented by such proxy will be voted FOR
the Board's nominees for director, FOR the approval of Proposals 1, 3 and 4
and in accordance with the proxy-holder's best judgment as to any other
matters raised at the Annual Meeting.
A stockholder who has given a proxy may revoke it at any time prior to its
exercise by giving written notice of such revocation to the Secretary of the
Company, executing and delivering to the Company a later dated proxy
reflecting contrary instructions or appearing at the Annual Meeting and
taking appropriate steps to vote in person.
<PAGE>
At the close of business on May 10, 1996, 8,598,025 shares of Common Stock
were outstanding and eligible for voting at the meeting. Each stockholder of
record is entitled to one vote for each share of Common Stock held on all
matters that come before the meeting. Only stockholders of record at the
close of business on May 10, 1996 are entitled to notice of, and to vote at,
the meeting.
NO DISSENTER'S RIGHTS
Under Delaware law, stockholders are not entitled to dissenter's rights of
appraisal with respect to Proposals 1, 3 and 4.
This proxy material is first being mailed to stockholders commencing on or
about May 24, 1996.
PROPOSAL 1
APPROVAL OF AMENDMENT
OF CERTIFICATE OF INCORPORATION TO
INCREASE THE AUTHORIZED SHARE CAPITAL
GENERAL
The Board of Directors has determined that it would be advisable to amend
Paragraph A of Article FOURTH of the Company's Certificate of Incorporation
to increase the authorized capital stock of the Company such that the
aggregate number of shares which the Company shall have the authority to
issue shall be increased from 11,000,000 to 52,000,000, of which 2,000,000
shares shall be designated "Preferred Stock" and 50,000,000 shares shall be
designated "Common Stock";
The Board of Directors has unanimously adopted and declared it advisable
and unanimously recommends to the Company's stockholders that Paragraph A of
Article FOURTH of the Company's Certificate of Incorporation be amended as
described. A copy of Paragraph A of Article FOURTH of the Company's
Certificate of Incorporation, as proposed to be amended by the resolution
adopted by the Board of Directors, is attached as Annex A.
INCREASE IN NUMBER OF AUTHORIZED SHARES OF CAPITAL STOCK
The Board of Directors has approved, subject to stockholder approval at
the 1996 Annual Meeting of Stockholders, an increase in the number of
authorized shares of Common Stock from 10,000,000 to 50,000,000 and an
increase in the number of authorized shares of Preferred Stock from 1,000,000
to 2,000,000, which may be issued in one or more series and as to which the
Board of Directors is authorized to determine the voting powers,
designations, preferences, and rights and the qualifications, limitations,
and restrictions thereof, of each such series, including dividend rates,
conversion prices, redemption prices, liquidation preferences and voting and
other rights ("Authorized Stock Proposal"). The Company's Certificate of
Incorporation currently authorizes the issuance of 10,000,000 shares of
Common Stock and 1,000,000 shares of Preferred Stock. As of May 10, 1996, the
record date for the Annual Meeting, 8,598,025 shares of Common Stock were
outstanding (exclusive of 2,200 shares held by the Company as treasury
stock), 300,000 shares were reserved for issuance under the Company's 1994
Stock Option Plan, 500,000 shares will be reserved for issuance under the
1996 Stock Incentive Plan (if such plan is approved by stockholders at the
Annual Meeting -- see Proposal 3 below) and 461,780 shares are reserved for
issuance in relation to outstanding options and warrants. Accordingly, there
are only 137,995 authorized shares of Common Stock unissued and not reserved
for future issuance. No shares of Preferred Stock are currently outstanding.
The Board of Directors considers the proposed authorization of an
additional 40,000,000 shares of Common Stock and an additional 1,000,000
shares of Preferred Stock desirable because it would provide the Company with
the ability to take advantage of future opportunities for the issuance of
equity in connection with financings, possible future acquisitions, other
programs to facilitate expansion and growth and for other general corporate
purposes, including stock dividends, stock splits and employee benefit plans,
without the delay and expense incident to the holding of a special meeting of
stockholders to
2
<PAGE>
consider any specific issuance. Such additional shares could also be issued
in a public offering or privately placed in order to raise capital for
various purposes. Authorized but unissued shares may be issued at such time
or times, to such person or persons and for such consideration as the Board
of Directors determines to be in the best interests of the Company, without
further authorization from the stockholders except as may be required by the
rules of NASDAQ or any stock exchange on which the Common Stock is then
listed. The authorization of additional shares of Common Stock will not, by
itself, have any effect on the rights of holders of existing shares. Any new
shares of Common Stock, when issued, would have the same rights and
privileges as the shares of Common Stock presently outstanding, and would be
available for issuance at such time and on such terms as the Board of
Directors may consider appropriate. Depending on the circumstances, issuance
of additional shares of Common Stock could affect the existing holders of
shares by diluting the voting power of the outstanding shares. The
stockholders do not have pre-emptive rights to purchase additional shares of
Common Stock nor will they as a result of this proposal.
To the extent that any shares of Preferred Stock may be issued, such
Preferred Stock may (a) have priority over the Company's Common Stock with
respect to dividends and the assets of the Company upon liquidation; (b) have
significant voting power; (c) provide for representation of the holders of
the Preferred Stock on the Company's Board of Directors upon the occurrence
of certain events; and (d) require the approval of the Preferred Stock for
the taking of certain corporate actions, such as mergers. To the extent that
any shares of Preferred Stock (including preferred stock convertible into
Common Stock) may be issued on other than a pro rata basis to current
stockholders, the present ownership position of current stockholders may be
diluted. Such shares also could be used to dilute the stock ownership of
persons seeking to obtain control of the Company, and thereby defeat a
possible takeover attempt which (if stockholders were offered a premium over
the market value of their shares) might be viewed as being beneficial to
stockholders of the Company. Management of the Company is not aware of any
possible takeover attempts at this time. The proposed increase of the number
of authorized shares of Preferred Stock is not part of a plan by management
to adopt a series of "anti-takeover" amendments.
Currently, the Company is not engaged in any negotiations concerning the
issuance of any shares of Common Stock or Preferred Stock, nor are there any
plans, commitments, agreements or understandings relating to the issuance of
any additional shares of Common Stock or Preferred Stock, except as described
under Proposal 3 below -- the "1996 Stock Incentive Plan" and except that the
Company recently filed a registration statement covering the proposed sale of
2,000,000 shares of Common Stock. The offering of such shares of Common Stock
will be made only by prospectus. The timing of any other actual issuance of
additional shares will depend upon market conditions, the specific purpose
for which the stock is to be issued and other similar factors.
POSSIBLE ANTI-TAKEOVER EFFECTS OF AUTHORIZED STOCK PROPOSAL
The primary purpose of the Authorized Stock Proposal is to provide the
Company with the flexibility to raise additional capital from the sale of
shares of Common Stock and Preferred Stock and to take advantage of possible
future opportunities for which the issuance of additional shares of Common
Stock or Preferred Stock may be deemed advisable without the delay and
expense incident to calling a special meeting of the Company's stockholders
in any case in which such a meeting would not otherwise be required.
The issuance of additional shares of Common Stock or Preferred Stock may
be deemed to have an anti-takeover effect since such shares may be used,
under certain circumstances, to create voting impediments to frustrate
persons seeking to effect a takeover or otherwise gain control of the
Company. The increase in authorized Common Stock or Preferred Stock may also
be viewed as having the effect of discouraging an attempt by another person
or entity, through the acquisition of a substantial number of shares of the
Common Stock, to acquire control of the Company, since the issuance of
additional shares may be used to dilute such person's ownership of shares of
the Company's voting stock. Moreover, "blank check" preferred stock may be
used for adoption of a stockholder rights plan or "poison pill." However, the
Company already has authorized sufficient "blank check" preferred stock to
implement such a rights plan.
3
<PAGE>
The Authorized Stock Proposal has not been proposed as an anti-takeover
measure nor is the Board of Directors aware of any offers to acquire control
of the Company. It should be noted that any action taken by the Company to
discourage an attempt to acquire control of the Company may result in
stockholders not being able to participate in any possible premiums which may
be obtained in the absence of anti-takeover provisions. Any transaction which
may be so discouraged or avoided could be a transaction that the Company's
stockholders might consider to be in their best interests. However, the Board
of Directors has a fiduciary duty to act in the best interests of the
Company's stockholders at all times.
The possible anti-takeover effects of this Proposal 1 should be considered
together with those discussed below, which relate to the provisions currently
in place in the Company's Certificate of Incorporation, By-Laws and contracts
to which the Company is a party.
POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS IN THE CERTIFICATE OF
INCORPORATION, THE BY-LAWS AND CONTRACTUAL AGREEMENTS OF THE COMPANY.
The possible anti-takeover effects of Proposal 1, which, if approved, will
amend the Company's Certificate of Incorporation, must be evaluated together
with certain defensive provisions currently in the Company's Certificate of
Incorporation and By-Laws, various contractual obligations of the Company and
relevant provisions of DCGL.
The Company's Certificate of Incorporation and By-Laws already contain
certain provisions that may make more difficult a change in control of the
Company not having the approval of the Board of Directors. The Certificate of
Incorporation currently authorizes the Board of Directors to issue up to one
million (1,000,000) shares of Preferred Stock without further action,
authorization or approval of the Company's stockholders (which amount would
be increased to 2,000,000 if this Proposal 1 is accepted). The Certificate of
Incorporation provides for "blank check" preferred stock which may be issued
in one or more series and as to which the Board of Directors is authorized to
determine the voting powers, designations, preferences, and rights and the
qualifications, limitations, and restrictions thereof, of each such series,
including dividend rates, conversion prices, redemption prices, liquidation
preferences and voting and other rights.
The Company's Amended and Restated By-Laws (the "By-Laws") (1) provide
procedures for the giving of advance notice of nominations of directors and
proposals of business by a stockholder; (2) deny the power to stockholders to
consent in writing, without a meeting, to the taking of any action; (3)
provide procedures for the calling, by a stockholder, of a special meeting of
the stockholders; and (4) require the affirmative vote of 80% of the Board of
Directors ("Directors' Super Majority Vote") to amend the By-Law provisions
referred to in these items (1),(2) and (3) above. In addition the Director's
Super Majority Vote provision itself requires a Directors' Super Majority
Vote to be removed from the By-Laws.
These By-Law provisions reduce the vulnerability of the Company's
management to potentially disruptive proxy contests immediately before or at
the stockholders' meeting and ensure that there is sufficient time for
management to provide a counter proposal to stockholders. As a result,
stockholders have the opportunity to consider and assess the benefits and
disadvantages of the stockholder proposal contained in such stockholder's
proxy statement, since management is also able to provide the Company's other
stockholders with a competing proxy statement. These By-Law provisions are
not designed to deter stockholder proposals and director nominations but to
regulate them in a manner conducive to protecting the Company's ability
evaluate the proposals and consider alternatives to any such proposals.
Although the Board is not aware of any attempt to gain control of the
Company or representation on the Board through accumulation of shares or
otherwise, the Board believes that efforts by a purchaser of a significant
number of shares of the Company's Common Stock to acquire control of the
Company could adversely affect the Board's ability to protect the interests
of the Company and its other stockholders by negotiating with such a
purchaser, evaluating such purchaser's plans for the Company or considering
alternatives to such purchaser's proposals.
Takeovers or changes in management of the Company which are proposed and
effected without prior consultation and negotiation with the Company's Board
of Directors are not necessarily detrimental to the interests of
stockholders, and, to the extent the proposed amendments in Proposal 1
discourage a
4
<PAGE>
prospective purchaser from acquiring a significant interest in the Company's
Common Stock with a view toward acquiring control, the amendments could
deprive stockholders of an opportunity to sell their shares at a premium over
the prevailing market price.
In addition, the Company is subject to the provisions of Section 203 of
the Delaware General Corporation law ("Section 203"). Under Section 203,
certain "business combinations" between a Delaware corporation whose stock
generally is publicly traded or held of record by more than 2,000
stockholders and an "interested stockholder" are prohibited for a three-year
period following the date that such stockholder became an interested
stockholder, unless (i) the corporation has elected in its original
certificate of incorporation not to be governed by Section 203, (ii) the
business combination was approved by the Board of Directors of the
corporation before the other party to the business combination became an
interested stockholder, (iii) upon consummation of the action that made it an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the commencement of the
transaction (excluding voting stock owned by directors who are also officers
or held in employee benefit plans in which the employees do not have a
confidential right to tender or vote stock held by the plan) or (iv) the
business combination was approved by the Board of Directors of the
corporation and ratified by two-thirds of the voting stock which the
interested stockholder did not own. The three-year prohibition also does not
apply to certain business combinations proposed by an interested stockholder
following the announcement or notification of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of the majority of the corporation's
directors. The term "business combination" is defined generally to include
mergers or consolidations between a Delaware corporation and an "interested
stockholder," actions with an "interested stockholder" involving the assets
or stock of the corporation or its majority-owned subsidiaries and
transactions which increase an interested stockholder's percentage ownership
of stock. The term "interested stockholder" is defined generally as a
stockholder who, together with affiliates and associates, owns (or, within
three years prior, did own) 15% or more of a Delaware corporation's voting
stock. Section 203 could prohibit or delay a merger, takeover or other change
in control of the Company and therefore could discourage attempts to acquire
the Company.
The license agreement, under which the Company as licensee is entitled to
use the trademark "Golden Bear" in the operation of seven of its golf
facilities, is terminable by the licensor if the current directors of the
Company at any time constitute less than 50% of the Company's directors. In
addition, the vesting of outstanding stock options issued to employees,
directors and consultants of the Company may be accelerated by a "change in
control" of the Company. Options for an aggregate of 322,425 shares of Common
Stock would have their vesting accelerated if such a change of control
occurred. These provisions could be considered to have anti-takeover effects
because any such changes of control would terminate the "Golden Bear" license
and the vesting acceleration would entitle option holders to purchase Common
Stock, potentially diluting the voting power of outstanding shares.
STOCKHOLDER VOTE REQUIRED
An affirmative vote of the holders of a majority of the shares of Common
Stock issued and outstanding and entitled to vote at the Annual Meeting is
required to adopt Proposal 1. Accordingly, abstentions and broker non-votes
could have a significant effect on the outcome of this proposal. Proxies
solicited by the Board will be voted in favor of the adoption of Proposal 1
to amend Paragraph A of Article FOURTH of the Certificate of Incorporation
unless otherwise indicated thereon.
THE BOARD OF DIRECTORS Recommends a Vote for the Approval of the Amendment to
Paragraph A of Article Fourth of the Company's Certificate of Incorporation,
Which is Designated as Proposal 1 on the enclosed Proxy Card.
PROPOSAL 2
ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION
The number of directors of the Company is set by a resolution adopted by a
majority of the entire Board of Directors. The number of directors is
currently fixed at five. The number of directors to be
5
<PAGE>
elected at the Annual Meeting to constitute the Board of Directors has also
been fixed at five. The Board of Directors currently consists of the five
directors listed below. Each of these five has agreed to stand for
re-election at the Annual Meeting to hold office for a period of one year
until the next annual meeting, and in any event until a successor has been
elected and qualified. It is intended that the accompanying proxy will be
voted in favor of the following persons to serve as directors, unless the
stockholder indicates to the contrary on the proxy.
The persons named in the accompanying proxy intend to vote for the
election as director of the nominees listed herein. Each nominee has
consented to serve if elected. The Board of Directors has no reason to
believe that any nominee will not serve if elected, but if any of them should
become unavailable to serve as a director, and if the Board of Directors
designates a substitute nominee or nominees, the persons named as proxies
will vote for the substitute nominee or nominees designated by the Board of
Directors.
The following table sets forth certain information with respect to each
person who is currently a director or executive officer of the Company and
the individuals nominated and recommended to be elected by the Board of
Directors of the Company and is based on the records of the Company and
information furnished to it by such persons. Reference is made to "Security
Ownership of Certain Beneficial Owners and Management" for information
pertaining to stock ownership by each director and executive officer of the
Company and the nominees.
NOMINEES FOR ELECTION AS A DIRECTOR
<TABLE>
<CAPTION>
NAME OF DIRECTOR AGE POSITION
- ------------------ ----- ----------------------------------------------------------
<S> <C> <C>
Dominic Chang 46 Chairman of the Board, President, Chief Executive Officer
James Ganley 60 Director
Jimmy C.M. Hsu 46 Director
Krishnan P. Thampi 47 Chief Financial Officer, Chief Operating Officer,
Executive Vice President, Secretary, Treasurer and
Director
Yupin Wang 63 Director
</TABLE>
Dominic Chang has been the Chairman of the Board, President and Chief
Executive Officer of the Company and its predecessors since 1991. From 1989
to 1992, Mr. Chang was a Senior Vice President and Sector Executive for
Corporate Real Estate and General Services for The Bank of New York. He was
responsible for the acquisition, management and disposition of The Bank of
New York's properties worldwide, facilities design and construction, security
and centralized administrative services. Mr. Chang previously had over 15
years banking experience with Bankers Trust and Irving Trust Company. He has
a Masters Degree in Industrial Engineering from New York University and a
Bachelors Degree from the State University of New York at Stonybrook.
James Ganley has been a director of the Company since 1994. From October
1988 until his retirement in 1990, Mr. Ganley was a Senior Executive Vice
President of The Bank of New York. Mr. Ganley was a member of the Senior
Management Steering Committee at The Bank of New York and was directly
responsible for the merger of the systems, products and operations of The
Bank of New York with Irving Trust Company. Prior to 1988, Mr. Ganley had
held various executive positions at Irving Trust Company and was Group
Executive responsible for Banking Operation activities, which comprised 13
divisions. He was also a member of Irving Trust Company's Senior Executive
Management Committee. Mr. Ganley received a Bachelors Degree in Economics
from New York University and was a participant in Harvard University's
program for management development.
Jimmy C.M. Hsu has been a director of the Company since 1994. Mr. Hsu is
currently the Vice Chairman and a director of Russ Berrie and Company, Inc.
("Russ Berrie"), a New York Stock Exchange listed company which manufactures
and distributes toys and gifts to retail stores. Mr. Hsu joined Russ
6
<PAGE>
Berrie in 1979 as Vice President, Far East Operations. In 1987, he was
appointed Senior Vice President and Director of World-Wide Marketing of Russ
Berrie. In 1991, he was elected to the board of Russ Berrie and was appointed
the position of Executive Vice President. In 1995, Mr. Hsu became Vice
Chairman of Russ Berrie.
Krishnan P. Thampi has been the Chief Financial Officer, Executive Vice
President, Chief Operating Officer, Secretary and Treasurer of the Company
and its predecessors since 1992. He became a director of the Company in 1994.
From 1989 to 1992, he was a Senior Vice President for Administrative Services
at The Bank of New York. From 1988 to 1989, he was a Senior Vice President
for Systems Services at Irving Trust Company. He also performed controller
and personnel management functions while at Irving Trust Company. Mr. Thampi
has a Masters Degree in Business Administration from Columbia University and
a Bachelors Degree in Engineering from McGill University.
Yupin Wang has been a director of the Company since 1994. Mr. Wang is
currently the President of W W International, a worldwide management
consulting firm. Prior to establishing W W International in 1992, Mr. Wang
was a member of the executive management team of International Business
Machines Corp. ("IBM") from 1962 to 1992. He had held various positions at
IBM, including Director of Marketing Operations, Director of Marketing
Strategy and Director of Customer Satisfaction. As Director of Customer
Satisfaction, he established IBM's Customer Satisfaction Management System,
which contributed to IBM Rochester winning the Malcolm Baldrige Award. Mr.
Wang received a Bachelors Degree in Economics from National Taiwan University
and Masters Degrees from Oklahoma State University and New York University.
Vacancies and newly-created directorships resulting from any increase in
the number of authorized directors may be filled by a majority vote of the
directors then in office. Officers are elected by, and serve at the pleasure
of, the Board of Directors.
STOCKHOLDER VOTE REQUIRED
Election of each director requires a plurality of the votes of the
outstanding shares of Common Stock present in person or represented by proxy
at the Annual Meeting and entitled to vote on the election of directors.
THE BOARD OF DIRECTORS Recommends a Vote for Election to the Board of
Directors of the Company for Each of the Nominees, which is designated as
Proposal 2 on the enclosed proxy card.
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------- ----- --------------------------------------------------
<S> <C> <C>
Dominic Chang ......... 46 Chairman of the Board, President and Chief
Executive Officer
Krishnan P. Thampi ... 47 Chief Financial Officer, Chief Operating Officer,
Executive Vice President, Secretary, Treasurer and
Director
Richard W. Hasslinger 46 Vice President--Regional Manager
Garrett J. Kelleher .. 59 Vice President--Finance
Robert J. Krause ...... 50 Vice President--Strategic Planning and Development
Rodger P. Potocki .... 52 Vice President--Regional Manager
Margaret Santorufo ... 30 Controller
</TABLE>
Richard W. Hasslinger joined the Company's predecessor in November 1992 as
a Site Manager and has been Vice President-Regional Manager for the New York
City region since January 1995. From May 1992 to November 1992, he served as
a consultant to the Company. From May 1988 until May 1992, he was Vice
President and Division Head for Facilities Management at The Bank of New
York. His responsibilities there included leasing and acquisitions, design
and construction, and property management. From 1973 to 1988, he managed
several operational activities at Irving Trust Company. Mr. Hasslinger has a
Bachelors Degree in Business Administration from Hope College.
7
Garrett J. Kelleher, a certified public accountant, joined the Company's
predecessor in July 1993 as a Site Manager and served as Controller from
January 1994 to June 1995. He has been the Vice President--Finance since July
1995. From 1980 to September 1990, Mr. Kelleher was Group Controller for Bank
Operations at The Bank of New York. He has held a variety of accounting and
financial management positions at The Bank of New York, and previously in
public accounting. Mr. Kelleher acted as an independent consultant from
September 1990 to July 1993. Mr. Kelleher has a Masters Degree in Finance
from St. Johns University and a Bachelors Degree in Business Administration
from Manhattan College.
Robert J. Krause joined the Company's predecessor in June 1993 and served
as a Site Manager until January 1995, when he became the Vice
President--Strategic Planning and Development. From 1983 to 1993, Mr. Krause
was Vice President of Administrative Services for The Bank of New York. From
1978 to 1983, he held product development, marketing and strategic planning
responsibilities at Irving Trust Company. Mr. Krause has a Bachelors Degree
in Electrical Engineering from the University of Oklahoma.
Rodger P. Potocki was the Northern District Director for the Company from
September 1994 until he was appointed Vice President--Regional Manager,
Northern Region, in February 1995. From October 1979 to September 1994, he
was Executive Vice President of Oneida County Industrial Development
Corporation, a non-profit development corporation ("Oneida Industrial"). At
Oneida Industrial, Mr. Potocki was responsible for new investment and job
creation projects in Oneida County, New York, and implemented New York
State's first direct loan fund for new businesses. Previously, he served as
Director of Planning and Development for the City of Rome, New York. Mr.
Potocki has a Masters Degree in Political Science from the Graduate School of
Public Affairs in Albany, New York and a Bachelors Degree from Syracuse
University.
Margaret M. Santorufo joined the Company as Controller in June 1995. From
January 1990, until she joined the Company in 1995, she was an audit
supervisor with Richard A. Eisner & Company, L.L.P. Ms. Santorufo received a
Bachelors Degree in Accounting from St. John's University.
COMMITTEES OF THE BOARD -- BOARD MEETINGS
The Board has established an audit, a compensation and a stock option
committee to assist it in the discharge of its responsibilities. The
principal responsibilities of each committee and the members of each
committee are described in succeeding paragraphs. Actions taken by any
committee of the Board are reported to the Board of Directors, usually at its
next meeting or by written report.
The Audit Committee of the Board of Directors currently consists of
Dominic Chang, James Ganley and Yupin Wang. The Audit Committee held its
first meeting in March 1996, subsequent to the fiscal year ended December 31,
1995. The Audit Committee is responsible for recommending the appointment of
a firm of independent public accountants to examine the financial statements
of the Company and its subsidiaries for the coming year. In making this
recommendation, it reviews the nature of audit services rendered, or to be
rendered, to the Company and its subsidiaries. It reviews with
representatives of the independent public accountants the auditing
arrangements and scope of the independent public accounts' examination of the
financial statements, results of those audits, their fees and any problems
identified by the independent public accountants regarding internal
accounting controls, together with their recommendations. It also meets with
the Company's Chief Financial Officer and Controller to review reports on the
functioning of the Company's programs for compliance with its policies and
procedures regarding financial controls and internal auditing. This includes
an assessment of internal controls within the Company and its subsidiaries
based upon the activities of the Company's internal auditing personnel as
well as an evaluation of the performance. The Audit Committee is also
prepared to meet at any time upon request of the independent public
accountants or the Controller to review any special situation arising in
relation to any of the foregoing subjects.
The Compensation Committee of the Board of Directors currently consists of
Dominic Chang, James Ganley and Yupin Wang. The Compensation Committee held
no meetings during the fiscal year ended December 31, 1995. Generally, this
Committee is to make recommendations to the Board of Directors as
8
to the remuneration arrangements for directors and executive officers and other
similar matters with respect to employees of the Company. It is intended to
review guidelines for the administration of the Company's incentive programs.
It also is intended to review and approve or make recommendations to the
Board of Directors on any proposed plan or program which would benefit
primarily the senior executive group.
The Stock Option Committee of the Board of Directors currently consists of
James Ganley and Yupin Wang. The Stock Option Committee held two meetings
during the fiscal year ended December 31, 1995. This Committee is responsible
for administering the Company's stock option plan and has such power and
authority as is granted to it under such stock option plan. Specifically, the
Committee determines the persons to be granted options as well as the
exercise price and term of such options. Except for automatic annual grants
of fixed numbers of options, the members of the Stock Option Committee are
not eligible to participate in any stock option plan they administer. It is
anticipated that such Committee will initially administer the 1996 Stock
Incentive Plan (the "1996 Plan"), if the 1996 Plan is approved by the
stockholders at the Annual Meeting.
The Board of Directors does not have a nominating committee. This function
is performed by the Board as a whole. The Board of Directors met or acted by
unanimous written consent on ten occasions during the fiscal year ended
December 31, 1995. All directors attended at least 75% of the meetings held
by the Board and committees of which they are members.
There are no family relationships among any of the directors or executive
officers of the Company. The Company's executive officers serve in such
capacity at the pleasure of the Board of Directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to an Exchange Agreement dated as of September 11, 1994, among
the Company and Dominic Chang, the Chairman of the Board, President, Chief
Executive Officer and a principal stockholder of the Company, Krishnan
Thampi, the Chief Financial Officer, Executive Vice President, Chief
Operating Officer, Secretary, Treasurer and a director and principal
stockholder of the Company, Jimmy C.M. Hsu, a director and principal
stockholder of the Company, John Chen and Tommy Hsu (collectively, the
"Predecessor Holders"), upon the closing of the Company's initial public
offering in November 1994 (the "IPO"), the Company received all of the issued
and outstanding shares of the following corporations (collectively, the
"Subsidiary Shares"): Skycon Construction Co., Inc., which is the general
contractor of the Company's golf centers; Orient Associates International,
Inc., which leases the land upon which the Company's golf centers are located
and is the party which owns the license to the "Golden Bear" trademarks;
Skydrive Co., Inc., Skydrive Greenburgh Co., Inc. and Skydrive Willowbrook
NJ, Inc., each of which operates one of the Company's golf centers; and
Skydrive Alley Pond Company, Inc., which was the general partner of the
partnership that operated the Douglaston golf center. The Predecessor Holders
received an aggregate of 3,445,000 shares of Common Stock in exchange for the
Subsidiary Shares, for which they had paid an aggregate of $2.4 million
(approximately $.70 per share of Common Stock). In connection with the
initial organization of the Company, Mr. Chang purchased 5,000 shares of
Common Stock for nominal consideration in July 1994.
In February 1994, Messrs. Chang and Thampi acquired interests in The
Practice Tee, Inc. ("TPT") of 65% and 5%, respectively, for nominal cash
consideration plus Mr. Chang's agreement to obtain up to $4.5 million of bank
loans for TPT and to guarantee such bank loans, if necessary. The remaining
30% was owned by two individuals not affiliated with the Company (although
one of such individuals became an employee of the Company subsequent to the
Company's acquisition of TPT). Also in February 1994, the predecessor of the
Company assigned to TPT its rights under the license agreement for the
establishment of Golden Bear Golf Centers in California. The Company
guaranteed TPT's obligations to the licensor in connection with the
assignment. By agreement dated October 25, 1994, TPT's stockholders granted
the Company the option, exercisable on January 1, 1998 or earlier if TPT had
at least $1.0 million of income, to acquire TPT for a price payable in Common
Stock equal to 12.5 times the net after tax income of TPT during the full 12
months immediately preceding the exercise of such option. In November 1995, the
Company acquired TPT for $4.0 million (payable in the form of a note which
became due and was paid at the closing of the public offering completed by the
Company in December 1995) and up to $2.0 million
9
<PAGE>
of additional purchase price payable upon the achievement of certain operating
income targets. The contingent purchase price in respect of the year ending
December 31, 1996 will be determined by multiplying $1.0 million by the
lesser of (i) 1.0 and (ii) the number obtained by dividing the OIBITA (as
defined below) during such year by $500,000 (the "1996 Multiplier"). The
contingent purchase price in respect of the year ending December 31, 1997
will be determined by multiplying $1.0 million by the lesser of (i) 1.0 and
(ii) the number obtained by dividing the OIBITA during such year by $1.0
million (the "1997 Multiplier"). If the 1997 Multiplier is higher than the
1996 Multiplier, then the former TPT stockholders will also be entitled to
receive an amount equal to (a) the amount which they would have been entitled
to receive in respect of 1996 if the 1996 Multiplier had been as high as the
1997 Multiplier less (b) the contingent amount, if any, that they received in
respect of 1996.
For purposes of the preceding paragraph, "OIBITA" for any year shall mean
the operating income before interest, taxes and depreciation or amortization,
determined in accordance with generally accepted accounting principles
consistently applied, generated by all golf facilities owned by the Company
and located west of the Mississippi River. Dominic Chang and Krishnan Thampi,
officers and directors of the Company, owned 65% and 5% of TPT, respectively,
and received 65% and 5% of the consideration, respectively, from the
acquisition of TPT. The terms of the acquisition were determined by
negotiations involving Messrs. Chang and Thampi and the non-affiliated
stockholders of TPT and the transaction was subject to certain conditions
(which were satisfied on November 8, 1995), including approval by all of the
directors of the Company, other than Messrs. Chang and Thampi, and receipt of
an opinion from an investment banking firm that the consideration to be paid
by the Company for TPT was fair from a financial point of view. The Company
received an opinion from the investment banking firm of Houlihan Lokey that
the consideration to be paid by the Company for TPT was fair from a financial
point of view. Houlihan Lokey has been engaged in the business of providing
financial advisory services since 1970. They specialize in the valuation of
businesses and properties, with substantial experience in the valuation of
securities of recreational companies. In addition to such opinion, such Board
members also considered a number of factors in approving the acquisition of
TPT, including (i) the elimination of potential conflicts of interest, (ii)
the opportunity to expand operations to the West Coast, (iii) the location
and prospects of the golf facilities operated by TPT, (iv) the cost of
establishing golf facilities comparable to those operated by TPT, (v) the
operating history of TPT compared with the operating history of the Company's
East Coast facilities at a comparable stage of development, (vi) the
potential improvement in TPT's performance due to the elimination of
duplicative administrative expenses, (vii) TPT's current financial condition
and (viii) the opportunity to acquire TPT for less than the Company believed
it would pay if it exercised its option to purchase TPT in 1998. Such option
gave the Company the right to acquire TPT, commencing on January 1, 1998 or
earlier if TPT had at least $1.0 million of net income, for 12.5 times TPT's
after tax income, payable in Common Stock.
Mr. Chang, either individually or with his wife, was the guarantor or
co-borrower of $3.7 million and $1.46 million of the Company's indebtedness,
as of December 31, 1994 and December 31, 1995, respectively. The $1.46
million indebtedness represents a portion of a $1.7 million construction loan
made to the Company. In addition, a company ("Hsing Lung") which owns and
operates a dairy farm in New York and has been owned by Mr. Chang since 1986,
was a co-borrower with the predecessor of the Company of a loan that had an
outstanding balance of $2.5 million as of December 31, 1994 and no
outstanding balance as of December 31, 1995. Mr. Chang granted security
interests in certain of his personal assets, including Hsing Lung and his
Common Stock, to secure his obligations under certain of such guarantees.
The Company was indebted to Mr. Chang and Mr. Thampi in the amounts of
$330,000 and $125,000, respectively, as of December 31, 1994. As of December
31, 1995, the Company was not indebted to either Mr. Chang or Mr. Thampi. The
amounts outstanding were paid in full by the Company on November 30, 1995.
Such loans were due on demand and, except for the $310,000 described below,
bore interest at LIBOR (6.5% at December 31, 1994 and 6.8% at November 30,
1995). Interest on such loans aggregated $40,000 and $16,000 for the years
ended December 31, 1994 and 1995, respectively. In addition, from September 1,
1994 through November 21, 1994, Hsing Lung made non-interest bearing loans to
the Company in the aggregate amount of $88,000, which the Company repaid on
December 16, 1994.
10
<PAGE>
The amount due to Mr. Chang as of December 31, 1994 of $330,000 includes
$310,000, representing a distribution payable to Mr. Chang to pay federal and
state income taxes owed by Mr. Chang in respect of the earnings of certain of
the Company's subsidiaries operated under Subchapter S of the Internal
Revenue Code of 1986, as amended, until the closing of the IPO.
The Company believes that each of the foregoing transactions were
completed on terms at least as favorable to the Company as those which could
have been obtained from an unaffiliated party.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who beneficially own more than ten percent of a registered class of
the Company's equity securities, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership
of Common Stock and the other equity securities of the Company. Officers,
directors, and persons who beneficially own more than ten percent of a
registered class of the Company's equities are required by the regulations of
the Securities and Exchange Commission to furnish the Company with copies of
all Section 16(a) forms they file. To the Company's knowledge, based solely
on review of the copies of such reports furnished to the Company and written
representations that no other reports were required, during the two fiscal
years ended December 31, 1994 and December 31, 1995, all Section 16(a) filing
requirements applicable to its officers, directors, and greater than ten
percent beneficial owners were complied with; except that two reports,
covering an aggregate of two transactions, were filed late by Mr. Ganley, a
director of the Company.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation for
services in all capacities paid to Dominic Chang, the Company's Chairman of
the Board, President and Chief Executive Officer, during 1993, 1994 and 1995.
No executive officer received compensation exceeding $100,000 during 1993,
1994 or 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------- ---------------------------------------------------
LONG-TERM
NAME AND OTHER RESTRICTED SECURITIES INCENTIVE ALL
PRINCIPAL ANNUAL STOCK UNDERLYING PLAN OTHER
POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
- ----------------- ------ --------- ------- -------------- ----------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dominic Chang, 1993 $65,000 -- $9,000(1) -- -- -- --
Chairman of the 1994 $65,000 -- $9,000(1)(2) -- -- -- --
Board, Chief 1995 $65,000 -- $9,000(1) -- 10,000(3) -- --
</TABLE>
Executive
Officer and
President .......
(1) Represents amounts paid to lease a car used by Mr. Chang.
(2) Does not include a distribution of $310,000 made to reimburse Mr. Chang
for federal and state income taxes payable by him based on
undistributed earnings of the Company's subsidiaries which elected to
be treated as S corporations pursuant to Section 1362(a) of the
Internal Revenue Code of 1986, as amended, through the date of the
Company's initial public offering of its securities.
(3) Stock options to purchase 10,000 shares of Common Stock were granted in
March 1995 at $6.75 per share (the fair market value of the Common
Stock on the date of such grant); these options became exercisable in
March 1996.
The following table sets forth certain information concerning options
granted to the Chief Executive Officer during the fiscal year ended December
31, 1995.
11
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE
NAME GRANTED(1) FISCAL YEAR ($/SHARE) EXPIRATION DATE
- --------------- ------------ --------------- ------------- ---------------
<S> <C> <C> <C> <C>
DOMINIC CHANG . 10,000 6.5% $6.75 MARCH 8, 2005
</TABLE>
(1) All options were granted pursuant to Mr. Chang's employment agreement
and at an exercise price equal to the fair market value of the Common
Stock on the date of grant.
AGGREGATED OPTION EXERCISES DURING THE FISCAL YEAR ENDED DECEMBER 31, 1995
AND FISCAL YEAR END OPTION VALUES
The following table sets forth certain information concerning the number
and value of securities underlying exercisable and unexercisable stock
options as of the fiscal year ended December 31, 1995 by the Chief Executive
Officer. No options were exercised by the Chief Executive Officer during the
fiscal year ended December 31, 1995.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END(1)
------------------------------ ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
DOMINIC CHANG -- 10,000 -- $115,000
</TABLE>
(1) The value of unexercised options is determined by multiplying the
number of options held by the difference between the closing price of
the Common Stock, $18.25, at December 31, 1995 as reported by the
Nasdaq National Market and the exercise price of the options.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements, each expiring on
December 31, 1999, with each of Mr. Chang and Mr. Thampi, pursuant to which
each will devote at least 95% of his business time to the affairs of the
Company. Pursuant to his employment agreement, Mr. Chang received a base
salary of $65,000 in 1995, and will receive a base salary of $120,000 in
1996, $140,000 in each of 1997 and 1998, and $160,000 in 1999. Such base
salaries are subject to additional increase within the discretion of the
Board of Directors which will take into account, among other things, the
performance of the Company and the performance, duties and responsibilities
of Mr. Chang. Mr. Chang will also receive use of a Company-leased automobile
and such bonuses as may be determined by the Board of Directors through- out
the term of his employment agreement. The employment agreement also provides
that Mr. Chang will not compete with the Company for two years after the
termination of his employment.
Pursuant to his employment agreement, Mr. Thampi received a base salary of
$60,000 in 1995 and will receive a base salary of $100,000 in 1996, $120,000
in each of 1997 and 1998 and $140,000 in 1999. Such base salaries are subject
to additional increase within the discretion of the Board of Directors which
will take into account, among other things, the performance of the Company
and the performance, duties and responsibilities of Mr. Thampi. Mr. Thampi
will also receive use of a Company-leased automobile and such bonuses as may
be determined by the Board of Directors through out the term of his
employment agreement. The employment agreement also provides that Mr. Thampi
will not compete with the Company for two years after the termination of his
employment.
The Company does not have written employment agreements with Messrs.
Hasslinger, Kelleher, Krause and Potocki or with Ms. Santorufo.
DIRECTOR'S COMPENSATION
The Company's employee directors do not receive any additional
compensation for their services as directors. Non-employee directors do not
receive a fee for serving as such, but are reimbursed for
12
<PAGE>
expenses. In addition, non-employee directors are eligible to participate in the
Company's 1994 Stock Option Plan (the "1994 Plan"). The 1994 Plan provides for
an automatic grant of non-qualified stock options to purchase 5,000 shares of
Common Stock to each non-employee director upon the earlier of the adoption
of the 1994 Plan or his or her election or appointment to the Board of
Directors and, thereafter, annual grants of non-qualified stock options to
purchase 2,000 shares of Common Stock at the fair market value on the date of
such grant. If the 1996 Plan is approved, such automatic grants will cease
and be replaced by the automatic grants to non-employee directors provided by
the 1996 Plan.
REPORT ON REPRICING OF STOCK OPTIONS
The Company did not adjust or amend the exercise price of stock options
previously awarded to the Company's Chairman of the Board, President and
Chief Executive Officer.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of May 1, 1996
regarding the beneficial ownership of the Company's Common Stock by (i) each
person known by the Company to own beneficially more than 5% of the Company's
Common Stock, (ii) each director and the chief executive officer of the
Company and (iii) all directors and executive officers of the Company as a
group. Except as otherwise indicated and subject to community property laws
where applicable, the persons named in the table below have sole voting and
dispositive power with respect to the shares of Common Stock shown as
beneficially owned by them.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING SHARES
- --------------------------------------------------- ------------------------ ------------------
<S> <C> <C>
Dominic Chang (1) .................................. 2,822,750 (4)(5) 32.8%
Janus Capital Corporation (2) ...................... 1,015,875 11.8%
George Soros (3) ................................... 500,000 5.8%
Jimmy C.M. Hsu (1) ................................. 191,084 (6)(7) 2.2%
Krishnan P. Thampi (1) ............................. 181,950 (8) 2.1%
James Ganley (1) ................................... 15,834 (7) *
Yupin Wang (1) ..................................... 7,334 (7) *
All directors and executive officers of the Company
as a group (ten persons) .......................... 3,233,286(4)(5)(6)(8)(9) 37.3%
</TABLE>
* Less than 1%.
(1) The address of such stockholder is: c/o Family Golf Centers, Inc., 225
Broadhollow Road, Melville, New York 11747.
(2) The address of Janus Capital Corporation ("JCC"), Janus Enterprise Fund
("JEF") and Mr. Thomas H. Bailey is: 100 Fillmore Street, Suite 300,
Denver, Colorado 80206. Information regarding the aggregate number of
shares of Common Stock beneficially owned by JCC, JEF and Mr. Thomas H.
Bailey and their investment and voting power with respect to such
shares is based on the information as reported in the Schedule 13G
filed by these persons, dated January 9, 1996. Mr. Thomas H. Bailey
owns approximately 12.2% of JCC and may be deemed to exercise control
over JCC as a result. JCC is an Investment Advisor registered under
Section 203 of the Investment Advisors Act of 1940 ("IAA"). JEF is an
Investment Company registered under Section 8 of the IAA. JCC provides
investment advice to individuals, institutional clients and investment
companies registered under Section 8 of the IAA, including, JEF
("Managed Portfolios"). As a result of its role of adviser to such
entities, JCC may be deemed to be the beneficial owner of the 1,015,875
shares of Common Stock held by such Managed Portfolios, including JEF.
Neither Mr. Bailey nor JCC owns of record any shares of Common Stock in
the Company, and neither has the right to receive dividends from or the
proceeds from the sale of any such shares by the Managed Portfolios and
each disclaims any beneficial ownership of such shares held by the
Managed Portfolios (including JEF). JCC's Managed Portfolios have the
right to receive all dividends from and proceeds from the sale of such
shares of Common Stock. JEF, one of the Managed Portfolios, holds
402,050 shares of Common Stock.
(3) George Soros ("Soros") holds these shares of Common Stock in his
capacity as the sole proprietor of the investment advisory firm, Soros
Fund Management ("SFM"), which holds the shares for the account of
Quantum Partners, LDC ("Quantum"), a Cayman Islands company. The
address of Soros and SFM is: 888 Seventh Avenue, 33rd Floor, New York,
New York 10106. Information regarding the aggregate number of shares of
Common Stock beneficially owned by Soros and Quantum and their investment
and voting power with respect to such shares is based on the information
as reported in the Schedule 13D filed by these persons, dated December
20, 1995.
(4) Includes 1,000 shares of Common Stock owned by Mr. Chang's children.
Includes 10,000 shares of Common Stock issuable upon exercise of
options which are currently exercisable.
13
<PAGE>
(5) Of such shares, 174,000 are pledged to United Orient Bank and 187,750
are pledged to Chemical Bank, each to secure a personal loan to Mr.
Chang.
(6) Does not include 66,250 shares of Common Stock beneficially owned by
Mr. Hsu's brother. Mr. Hsu disclaims beneficial ownership of his
brother's shares.
(7) Includes 2,334 shares of Common Stock issuable upon exercise of options
which are currently exercisable.
(8) Includes 45,000 shares of Common Stock issuable upon exercise of
options which are currently exercisable.
(9) Includes 16,336 shares of Common Stock issuable upon exercise of
options which are currently exercisable.
PROPOSAL 3
APPROVAL OF THE
1996 STOCK INCENTIVE PLAN
The Company's Board of Directors has recommended, and at the meeting the
stockholders will be asked to approve, the adoption of the 1996 Stock
Incentive Plan. A description of the 1996 Plan, which 1996 Plan is attached
hereto as Annex B, appears below.
The 1994 Plan. Options to purchase up to 6,000 shares of Common Stock
remain available for future grant under the 1994 Stock Option Plan. If
adopted by the stockholders, the 1996 Stock Incentive Plan will supplement
the 1994 Plan, except that no further grants will be made under the 1994 Plan
to non-employee directors.
1996 STOCK OPTION PLAN
The 1996 Plan provides for the grant of options to purchase up to 500,000
shares of Common Stock to employees, officers, directors and consultants of
the Company. Options may be either "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or non-qualified options. Incentive stock options may be granted
only to employees of the Company, while non-qualified options may be issued
to non-employee directors, consultants and others, as well as to employees of
the Company.
The terms of the 1996 Plan are identical to the terms of the 1994 Plan
except that the number of shares available under the 1996 Plan is 500,000 and
the number of shares to be issued to each non-employee director has been
increased to options to purchase 10,000 shares upon initial appointment and
options to purchase 10,000 shares, annually. If the 1996 Plan is approved by
stockholders options for 10,000 shares shall be granted to all non-employee
directors immediately following the Annual Meeting.
The 1996 Plan will be administered by the Stock Option Committee, which
determines, among other things, those individuals who receive options, the
time period during which the options may be partially or fully exercised, the
number of shares of Common Stock issuable upon the exercise of each option
and the option exercise price. As mentioned above, the 1996 Plan also
provides for an automatic grant of non-qualified stock options to purchase
10,000 shares of Common Stock to each non-employee director upon his election
or appointment to the Board of Directors and annual grants of non-qualified
stock options to purchase 10,000 shares of Common Stock at the fair market
value of the Common Stock on the date of such grant.
The exercise price per share of Common Stock subject to an incentive stock
option may not be less than the fair market value per share of Common Stock
on the date the option is granted. The per share exercise price of the Common
Stock subject to a non-qualified option may be established by the Stock
Option Committee. The aggregate fair market value (determined as of the date
the option is granted) of Common Stock for which any person may be granted
incentive stock options which first become exercisable in any calendar year
may not exceed $100,000. No person who owns, directly or indirectly, at the
time of the granting of an incentive stock option to such person, 10% or more
of the total combined voting power of all classes of stock of the Company (a
"10% Stockholder") shall be eligible to receive any incentive stock options
under the 1996 Plan unless the exercise price is at least 110% of the fair
market value of the shares of Common Stock subject to the option, determined
on the date of grant. Non-qualified options are not subject to such
limitation.
No stock option may be transferred by an optionee other than by will or
the laws of descent and distribution, and, during the lifetime of an
optionee, the option will be exercisable only by the optionee. In the event
of termination of employment other than by death or disability, the optionee
will have no more than three months after such termination during which the
optionee shall be entitled to exercise the
14
<PAGE>
option, unless otherwise determined by the Stock Option Committee. Upon
termination of employment of an optionee by reason of death or permanent
disability, such optionee's options remain exercisable for one year thereafter
to the extent such options were exercisable on the date of such termination.
Options under the 1996 Plan must be issued within 10 years from the
effective date of the 1996 Plan which will be June 7, 1996 if the
stockholders of the Company approve the adoption of the 1996 Plan. Incentive
stock options granted under the 1996 Plan cannot be exercised more than 10
years from the date of grant. Incentive stock options issued to a 10%
Stockholder are limited to five-year terms. All options granted under the
1996 Plan provide for the payment of the exercise price in cash or by
delivery to the Company of shares of Common Stock already owned by the
optionee having a fair market value equal to the exercise price of the
options being exercised, or by a combination of such methods. Therefore, an
optionee may be able to tender shares of Common Stock to purchase additional
shares of Common Stock and may theoretically exercise all of such optionee's
stock options with no additional investment other than the purchase of the
original shares.
Any unexercised options that expire or that terminate upon an employee's
ceasing to be employed by the Company become available again for issuance
under the 1996 Plan.
The 1996 Plan may be terminated or amended at any time by the Board of
Directors except that stockholder approval is required if the amendment is
within 12 months before or after adoption of the Plan and such approval is
necessary to comply with any applicable tax or regulatory requirement,
including any such approval as may be necessary to satisfy the requirements
for exemptive relief under Rule 16b-3 of the Exchange Act or any successor
provision. The 1996 Plan shall terminate June 7, 2006, unless terminated
prior thereto by action of the Board. No further grants shall be made from
the 1996 Plan after termination; provided, however, that termination shall
not affect the right of any optionee with respect to grants made prior to
termination.
The vesting of outstanding options under the 1996 Plan will be subject to
acceleration upon certain changes in the ownership or control of the Company.
The acceleration of the vesting of options in the event of such changes in
control may be seen as an anti-takeover provision and may have the effect of
discouraging a merger proposal, a takeover attempt or other efforts to gain
control of the Company.
It is estimated that approximately 400 individuals are currently eligible
to participate in the 1996 Plan.
REGISTRATION OF SHARES ISSUED UNDER 1996 PLAN
The Company has registered the 300,000 shares authorized under the 1994
Plan under the Securities Act of 1933, as amended. The Company intends that
the 500,000 shares to be reserved for and issued under the 1996 Plan, for
which approval is now sought, will be registered under the Securities Act of
1933, as amended. Such registration, if completed, would in most cases permit
the unrestricted resale in the public market of shares issued pursuant to the
1996 Plan.
NEW PLAN BENEFITS--1996 STOCK INCENTIVE PLAN
The Company has not issued any options to purchase shares of Common Stock
under the 1996 Plan. The Company has not issued any options under the 1996
Plan to (i) the Company's Chief Executive Officer, Chairman of the Board and
President, (ii) any current executive officer, (iii) any current director who
is not an executive officer, (iv) any director or nominee for election as a
director and (v) any associate of any of the persons referenced in (i)
through (iv) above. The Company does not currently know nor is it
determinable the number of options that the Company will grant under the 1996
Plan to any of the aforementioned persons, except for the automatic grant of
options to purchase 10,000 shares of Common Stock to each non-employee
director of the Company immediately following the Annual Meeting (and
thereafter annually), at the fair market value of the Common Stock on the
date of such grant.
15
<PAGE>
NEW PLAN BENEFITS
1996 STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
NUMBER OF
SHARES UNDERLYING
NAME AND POSITION DOLLAR VALUE ($) OPTIONS
- ---------------------------------------------------------------- ------------------ ---------------------
<S> <C> <C>
Dominic Chang ................................................... 0 --
Chairman of the Board, Chief Executive Officer and President
Executive officers as a Group ................................... 0 --
Non-executive directors as a Group .............................. 0 --
Nominees for Election as Directors as a Group ................... 0 --
Non-executive Employees as a Group .............................. 0 --
</TABLE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE 1996 PLAN UNDER CURRENT LAW
An optionee will recognize no taxable income at the time an option is
granted.
An optionee will recognize no taxable income at the time of exercise of an
incentive stock option. If the optionee makes no disposition of the acquired
shares within two years after the date of grant of the incentive stock
option, or within one year after the exercise of such option, the employee
will recognize no taxable income and any gain or loss that is realized on a
subsequent disposition of such shares will be treated as long-term capital
gain or loss. As to options exercised, the excess, if any, of the fair market
value of the shares on the date of exercise over the option price will be an
item of tax preference for purposes of computing the alternative minimum tax.
If the foregoing holding period requirements are not satisfied, the
optionee will realize (i) ordinary income for federal income tax purposes in
the year of disposition in an amount equal to the lesser of (a) the excess,
if any, of the fair market value of the shares on the date of exercise over
the option price thereof, or (b) the excess, if any, of the selling price
over the optionee's adjusted basis of such shares (provided that the
disposition is a sale or exchange with respect to which a loss (if sustained)
would be recognized by such individual) and (ii) capital gain equal to the
excess, if any, of the amount realized upon the disposition of shares over
the fair market value of such shares on the date of exercise.
Employees, directors, officers, consultants, agents and independent
contractors of the Company will be required to include in their gross income
in the year of exercise of a non-qualified stock option the difference
between the fair market value on the exercise date of the shares transferred
and the option price.
The Company will be entitled (provided it complies with certain reporting
requirements with respect to the income received by the employee) to a
deduction for federal income tax purposes at the same time and in the same
amount as the optionee is considered to be in receipt of compensation income
in connection with the exercise of non-qualified stock options or, in the
case of an incentive stock option, a disqualifying disposition of shares
received upon exercise thereof. If the holding period requirements outlined
above are met, no deduction will be available to the Company in connection
with an incentive stock option. Under the Revenue Reconciliation Act of 1993,
the Company may not be able to deduct compensation to certain employees to
the extent compensation exceeds one million dollars per tax year. Covered
employees include the chief executive officer and the four other highest
compensated officers of the Company for that tax year. The 1996 Stock
Incentive Plan will not qualify as performance-based compensation.
STOCKHOLDER VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of the
Company's voting Common Stock present in person or represented by proxy at
the Annual Meeting is required for approval of the 1996 Plan. If such
stockholder approval is not obtained, then the 1996 Plan will not be adopted.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE COMPANY'S
1996 STOCK INCENTIVE PLAN, WHICH IS DESIGNATED AS PROPOSAL 3 ON THE ENCLOSED
PROXY CARD.
16
<PAGE>
PROPOSAL 4
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has appointed Richard A. Eisner &
Company, LLP as independent accountants for the 1996 fiscal year and to
render other professional services as required.
The appointment of Richard A. Eisner & Company, LLP is being submitted to
stockholders for ratification.
Representatives of Richard A. Eisner & Company, LLP will be present at the
Annual Meeting, where they will have the opportunity to make a statement if
they desire to do so, and are expected to be available to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF RICHARD
A. EISNER & COMPANY, LLP AS INDEPENDENT AUDITORS OF THE COMPANY, WHICH IS
DESIGNATED AS PROPOSAL 4 ON THE ENCLOSED PROXY CARD.
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended December 31,
1995 is being mailed to stockholders with this proxy statement.
STOCKHOLDERS PROPOSALS
Stockholder proposals intended to be considered for inclusion in the proxy
statement for presentation at the Company's 1997 Annual Meeting of
Stockholders must be received at the Company's offices at 225 Broadhollow Road,
Melville, New York 11747 no later than February 5, 1997, for inclusion in the
Company's proxy statement and form of proxy relating to such meeting. All
proposals must comply with applicable Commission rules and regulations.
OTHER MATTERS
The Board of Directors is not aware of any other matter other than those
set forth in this proxy statement that will be presented for action at the
meeting. If other matters properly come before the meeting, the persons named
as proxies intend to vote the shares they represent in accordance with their
best judgment in the interest of the Company.
THE COMPANY UNDERTAKES TO PROVIDE ITS STOCKHOLDERS WITHOUT CHARGE A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB, INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULES FILED THEREWITH. WRITTEN REQUESTS FOR SUCH REPORT
SHOULD BE ADDRESSED TO THE OFFICE OF THE SECRETARY, FAMILY GOLF CENTERS,
INC., 225 BROADHOLLOW ROAD, MELVILLE, NEW YORK 11747.
16
<PAGE>
ANNEX A
PROPOSED AMENDMENT TO PARAGRAPH (A) OF ARTICLE
FOURTH OF THE COMPANY'S CERTIFICATE OF INCORPORATION
(AMENDS PARAGRAPH (A) OF ARTICLE FOURTH BY REPLACING IT IN ITS ENTIRETY WITH
THE FOLLOWING PARAGRAPH)
"A. The aggregate number of shares which the Company shall have
authority to issue is 52,000,000, of which 2,000,000 shares of the par
value of $.10 per share shall be designated "Preferred Stock" and
50,000,000 shares of the par value of $.01 per share shall be designated
"Common Stock.";
17
<PAGE>
ANNEX B
FAMILY GOLF CENTERS, INC.
1996 STOCK INCENTIVE PLAN
APPROVED AND ADOPTED BY THE BOARD OF DIRECTORS ON MARCH 6, 1996
SECTION 1. PURPOSE. The purpose of the Family Golf Centers, Inc. 1996
Stock Incentive Plan (the "Plan") is to provide a means whereby directors and
selected employees, officers, agents, consultants, and independent
contractors of Family Golf Centers, Inc., a Delaware corporation (the
"Company"), or of any parent or subsidiary (as defined in subsection 5.7
hereof and referred to hereinafter as "Affiliates") thereof, may be granted
incentive stock options and/or nonqualified stock options to purchase shares
of common stock, $.01 par value ("Common Stock"), in order to attract and
retain the services or advice of such directors, employees, officers, agents,
consultants, and independent contractors and to provide additional incentive
for such persons to exert maximum efforts for the success of the Company and
its Affiliates by encouraging stock ownership in the Company.
SECTION 2. ADMINISTRATION. Subject to Section 2.3 hereof, the Plan shall
be administered by the Board of Directors of the Company (the "Board") or, in
the event the Board shall appoint and/or authorize a committee of two or more
members of the Board to administer the Plan, by such committee. The
administrator of the Plan shall hereinafter be referred to as the "Plan
Administrator".
The foregoing notwithstanding, with respect to grants to be made to
directors: (a) the Plan Administrator shall be constituted so as to meet the
requirements of Section 16(b) of the Exchange Act and Rule 16b-3 thereunder,
each as amended from time to time, or (b) if the Plan Administrator cannot be
so constituted, no options shall be granted under the Plan to any directors.
2.1 PROCEDURES. The Board shall designate one of the members of the Plan
Administrator as chairman. The Plan Administrator may hold meetings at such
times and places as it shall determine. The acts of a majority of the members
of the Plan Administrator present at meetings at which a quorum exists, or
acts approved in writing by all Plan Administrator members, shall be valid
acts of the Plan Administrator.
2.2 RESPONSIBILITIES. Except for the terms and conditions explicitly set
forth herein, the Plan Administrator shall have the authority, in its
discretion, to determine all matters relating to the options to be granted
under the Plan, including, without limitation, selection of whether an option
will be an incentive stock option or a nonqualified stock option, selection
of the individuals to be granted options, the number of shares to be subject
to each option, the exercise price per share, the timing of grants and all
other terms and conditions of the options. Grants under the Plan need not be
identical in any respect, even when made simultaneously. The Plan
Administrator may also establish, amend, and revoke rules and regulations for
the administration of the Plan. The interpretation and construction by the
Plan Administrator of any terms or provisions of the Plan or any option
issued hereunder, or of any rule or regulation promulgated in connection
herewith, shall be conclusive and binding on all interested parties, so long
as such interpretation and construction with respect to incentive stock
options corresponds to the requirements of Internal Revenue Code of 1986, as
amended (the "Code"), Section 422, the regulations thereunder, and any
amendments thereto. The Plan Administrator shall not be personally liable for
any action made in good faith with respect to the Plan or any option granted
thereunder.
2.3 RULE 16B-3 AND SECTION 16(B) COMPLIANCE; BIFURCATION OF PLAN. It is
the intention of the Company that the Plan comply in all respects with Rule
16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act") to the
extent applicable, and in all events the Plan shall be construed in favor of
its meeting the requirements of Rule 16b-3. If any Plan provision is later
found not to be in compliance with such Rule, such provision shall be deemed
null and void. The Board of Directors may act under the Plan only if all
members thereof are "disinterested persons" as defined in Rule 16b-3 and
further described in Section 4 hereof; and no director or officer or other
Company "insider" subject to Section 16 of the Exchange Act may sell shares
received upon the exercise of an option during the six-month period
immediately following the grant of the option. Notwithstanding anything in
the Plan to the
19
<PAGE>
contrary, the Board, in its absolute discretion, may bifurcate the Plan so as
to restrict, limit, or condition the use of any provision of the Plan to
participants who are officers and directors or other persons subject to
Section 16(b) of the Exchange Act without so restricting, limiting, or
conditioning the Plan with respect to other participants.
SECTION 3. STOCK SUBJECT TO THE PLAN. The stock subject to this Plan shall
be the Common Stock, presently authorized but unissued or subsequently
acquired by the Company. Subject to adjustment as provided in Section 7
hereof, the aggregate amount of Common Stock to be delivered upon the
exercise of all options granted under the Plan shall not exceed in the
aggregate 500,000 shares as such Common Stock was constituted on the
effective date of the Plan. If any option granted under the Plan shall
expire, be surrendered, exchanged for another option, cancelled, or
terminated for any reason without having been exercised in full, the
unpurchased shares subject thereto shall thereupon again be available for
purposes of the Plan, including for replacement options which may be granted
in exchange for such surrendered, cancelled, or terminated options.
SECTION 4. ELIGIBILITY. An incentive stock option may be granted only to
any individual who, at the time the option is granted, is an employee of the
Company or any Affiliate thereof. A nonqualified stock option may be granted
to any director, employee, officer, agent, consultant, or independent
contractor of the Company or any Affiliate thereof, whether an individual or
an entity. Any party to whom an option is granted under the Plan shall be
referred to hereinafter as an "Optionee".
A director shall in no event be eligible for the benefits of the Plan
unless at the time discretion is exercised in the selection of a director as
a person to whom options may be granted, or in the determination of the
number of shares which may be covered by options granted to the director, the
Plan complies with the requirements of Rule 16b-3 under the Exchange Act.
SECTION 5. TERMS AND CONDITIONS OF OPTIONS. Options granted under the Plan
shall be evidenced by written agreements which shall contain such terms,
conditions, limitations, and restrictions as the Plan Administrator shall
deem advisable and which are not inconsistent with the Plan. Notwithstanding
the foregoing, options shall include or incorporate by reference the
following terms and conditions:
5.1 NUMBER OF SHARES AND PRICE.
(a) Upon first election or appointment to the Board, each non-employee
director will be granted a non-qualified option to purchase 10,000 shares of
Common Stock at the fair market value of the Common Stock on the date of such
election or appointment; and
(b) Each non-employee director will be annually granted a non-qualified
option to purchase 10,000 shares of Common Stock at the fair market value of
the Common Stock on the date of such grant with the first such grant to occur
at the Annual Meeting of Stockholders at which this Plan is approved by the
Company's stockholders (the "Approval"); and
(c) Notwithstanding subsections (a) and (b) hereof, the maximum number of
shares that may be purchased pursuant to the exercise of each option, and the
price per share at which such option is exercisable (the "exercise price"),
shall be as established by the Plan Administrator; provided, that the Plan
Administrator shall act in good faith to establish the exercise price, which
shall be not less than 100% of the fair market value per share of the Common
Stock at the time of grant of the option with respect to incentive stock
options; and provided, further, that, with respect to incentive stock options
granted to greater than ten percent stockholders, the exercise price shall be
as required by Section 6 hereof.
(d) The provisions of subparagraphs (a) and (b) hereof shall supersede the
provisions of the Family Golf Centers, Inc. 1994 Stock Option Plan (the "1994
Plan") as to non-employee directors. After the Approval, no options shall be
granted to non-employee directors under the 1994 Plan.
5.2 TERM AND MATURITY. Subject to the restrictions contained in Section 6
hereof with respect to granting stock options to greater than ten percent
stockholders, the term of each stock option shall be as established by the
Plan Administrator and, if not so established, shall be ten years from the
date of its grant, but in no event shall the term of any incentive stock
option exceed a ten year period. To ensure that
20
<PAGE>
the Company or Affiliate will achieve the purpose and receive the benefits
contemplated in the Plan, any option granted to any Optionee hereunder shall,
unless the condition of this sentence is waived or modified in the agreement
evidencing the option or by resolution adopted by the Plan Administrator, be
exercisable according to the following schedule:
Period of Optionee's
Continuous Relationship
With the Company or
<TABLE>
<CAPTION>
AFFILIATE FROM THE DATE PORTION OF TOTAL OPTION
THE OPTION IS GRANTED WHICH IS EXERCISABLE
- --------------------------- ---------------------------
<S> <C>
1 year ..................... 33%
2 years .................... 67%
3 years .................... 100%
</TABLE>
5.3 EXERCISE. Subject to the vesting schedule described in subsection 5.2
hereof, each option may be exercised in whole or in part; provided, that only
whole shares may be issued pursuant to the exercise of any option. Subject to
any other terms and conditions herein, the Plan Administrator may provide
that an option may not be exercised in whole or in part for a stated period
or periods of time during which such option is outstanding; provided, that
the Plan Administrator may rescind, modify, or waive any such limitation
(including by the acceleration of the vesting schedule upon a change in
control of the Company) at any time and from time to time after the grant
date thereof. During an Optionee's lifetime, any incentive stock options
granted under the Plan are personal to such Optionee and are exercisable
solely by such Optionee. Options shall be exercised by delivery to the
Company of notice of the number of shares with respect to which the option is
exercised, together with payment of the exercise price in accordance with
Section 5.4 hereof.
5.4 PAYMENT OF EXERCISE PRICE. Payment of the option exercise price shall
be made in full at the time the notice of exercise of the option is delivered
to the Company and shall be in cash, bank certified or cashier's check, or
personal check (unless at the time of exercise the Plan Administrator in a
particular case determines not to accept a personal check) for shares of
Common Stock being purchased.
The Plan Administrator can determine at the time the option is granted in
the case of incentive stock options, or at any time before exercise in the
case of nonqualified stock options, that additional forms of payment will be
permitted. To the extent permitted by the Plan Administrator and applicable
laws and regulations (including, without limitation, federal tax and
securities laws and regulations and state corporate law), an option may be
exercised by:
(a) delivery of shares of Common Stock of the Company held by an Optionee
having a fair market value equal to the exercise price, such fair market
value to be determined in good faith by the Plan Administrator;
(b) delivery of a properly executed Notice of Exercise, together with
irrevocable instructions to a broker, all in accordance with the regulations
of the Federal Reserve Board, to promptly deliver to the Company the amount
of sale or loan proceeds to pay the exercise price and any federal, state, or
local withholding tax obligations that may arise in connection with the
exercise;
(c) delivery of a properly executed Notice of Exercise, together with
instructions to the Company to withhold from the shares of Common Stock that
would otherwise be issued upon exercise that number of shares of Common Stock
having a fair market value equal to the option exercise price.
5.5 WITHHOLDING TAX REQUIREMENT. The Company or any Affiliate thereof
shall have the right to retain and withhold from any payment of cash or
Common Stock under the Plan the amount of taxes required by any government to
be withheld or otherwise deducted and paid with respect to such payment. No
option may be exercised unless and until arrangements satisfactory to the
Company, in its sole discretion, to pay such withholding taxes are made. At
its discretion, the Company may require an Optionee to reimburse the Company
for any such taxes required to be withheld by the Company and withhold any
distribution in whole or in part until the Company is so reimbursed. In lieu
thereof, the
21
<PAGE>
Company shall have the right to withhold from any other cash amounts due or
to become due from the Company to the Optionee an amount equal to such taxes
or retain and withhold a number of shares having a market value not less than
the amount of such taxes required to be withheld by the Company to reimburse
the Company for any such taxes and cancel (in whole or in part) any such
shares of Common Stock so withheld. If required by Section 16(b) of the
Exchange Act, the election to pay withholding taxes by delivery of shares of
Common Stock held by any person who at the time of exercise is subject to
Section 16(b) of the Exchange Act shall be made either six months prior to
the date the option exercise becomes taxable or at such other times as the
Company may determine as necessary to comply with Section 16(b) of the
Exchange Act. Although the Company may, in its discretion, accept Common
Stock as payment of withholding taxes, the Company shall not be obligated to
do so.
5.6 NONTRANSFERABILITY.
5.6.1 OPTION. Options granted under the Plan and the rights and
privileges conferred hereby may not be transferred, assigned, pledged, or
hypothecated in any manner (whether by operation of law or otherwise) other
than by will or by the applicable laws of descent and distribution or
pursuant to a qualified domestic relations order as defined in Section 414(p)
of the Code, or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder, and shall not be subject to
execution, attachment, or similar process. Any attempt to transfer, assign,
pledge, hypothecate, or otherwise dispose of any option under the Plan or of
any right or privilege conferred hereby, contrary to the Code or to the
provisions of the Plan, or the sale or levy or any attachment or similar
process upon the rights and privileges conferred hereby shall be null and
void ab initio. The designation by an Optionee of a beneficiary does not, in
and of itself, constitute an impermissible transfer under this subsection
5.6.1.
5.6.2 STOCK. The Plan Administrator may provide in the agreement
granting the option that (a) the Optionee may not transfer or otherwise
dispose of shares acquired upon exercise of an option without first offering
such shares to the Company for purchase on the same terms and conditions as
those offered to the proposed transferee or (b) upon termination of
employment of an Optionee the Company shall have a six-month right of
repurchase as to the shares acquired upon exercise, which right of repurchase
shall allow for a maximum purchase price equal to the fair market value of
the shares on the termination date. The foregoing rights of the Company shall
be assignable by the Company upon reasonable written notice to the Optionee.
5.7 TERMINATION OF RELATIONSHIP. If the Optionee's relationship with the
Company or any Affiliate thereof ceases for any reason other than termination
for cause, death, or total disability, and unless by its terms the option
sooner terminates or expires, then the Optionee may exercise, for a
three-month period, that portion of the Optionee's option which is
exercisable at the time of such cessation, but the Optionee's option shall
terminate at the end of the three-month period following such cessation as to
all shares for which it has not theretofore been exercised, unless, in the
case of a nonqualified stock option, such provision is waived in the
agreement evidencing the option or by resolution adopted by the Plan
Administrator within 90 days of such cessation. If, in the case of an
incentive stock option, an Optionee's relationship with the Company or
Affiliate thereof changes from employee to nonemployee (i.e., from employee
to a position such as a consultant), such change shall constitute a
termination of an Optionee's employment with the Company or Affiliate and the
Optionee's incentive stock option shall terminate in accordance with this
subsection 5.7.
If an Optionee is terminated for cause, any option granted hereunder shall
automatically terminate as of the first discovery by the Company of any
reason for termination for cause, and such Optionee shall thereupon have no
right to purchase any shares pursuant to such option. "Termination for cause"
shall mean dismissal for dishonesty, conviction or confession of a crime
punishable by law (except minor violations), fraud, misconduct, or disclosure
of confidential information. If an Optionee's relationship with the Company
or any Affiliate thereof is suspended pending an investigation of whether or
not the Optionee shall be terminated for cause, all Optionee's rights under
any option granted hereunder likewise shall be suspended during the period of
investigation.
If an Optionee's relationship with the Company or any Affiliate thereof
ceases because of a total disability, the Optionee's option shall not
terminate or, in the case of an incentive stock option, cease to
22
<PAGE>
be treated as an incentive stock option until the end of the 12 month period
following such cessation (unless by its terms it sooner terminates and
expires). As used in the Plan, the term "total disability" refers to a mental
or physical impairment of the Optionee which is expected to result in death
or which has lasted or is, in the opinion of the Company and two independent
physicians, expected to last for a continuous period of 12 months or more and
which causes or is, in such opinion, expected to cause the Optionee to be
unable to perform his or her duties for the Company and to be engaged in any
substantial gainful activity. Total disability shall be deemed to have
occurred on the first day after the Company and the two independent
physicians have furnished their opinion of total disability to the Plan
Administrator.
For purposes of this subsection 5.7, a transfer of relationship between or
among the Company and/or any Affiliate thereof shall not be deemed to
constitute a cessation of relationship with the Company or any of its
Affiliates. For purposes of this subsection 5.7, with respect to incentive
stock options, employment shall be deemed to continue while the Optionee is
on military leave, sick leave, or other bona fide leave of absence (as
determined by the Plan Administrator). The foregoing notwithstanding,
employment shall not be deemed to continue beyond the first 90 days of such
leave, unless the Optionee's reemployment rights are guaranteed by statute or
by contract.
As used herein, the term "Affiliate" shall be defined as follows: (a) when
referring to a subsidiary corporation, "Affiliate" shall mean any corporation
(other than the Company) in an unbroken chain of corporations ending with the
Company if, at the time of the granting of the option stock possessing 50% or
more of the total combined voting power of all classes of stock of each of
the corporations other than the Company is owned by one of the other
corporations in such chain; and (b) when referring to a parent corporation,
"Affiliate" shall mean any corporation in an unbroken chain of corporations
ending with the Company if, at the time of the granting of the option, each
of the corporations other than the Company owns stock possessing 50% or more
of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
5.8 DEATH OF OPTIONEE. If an Optionee dies while he or she has a
relationship with the Company or any Affiliate thereof or within the
three-month period (or 12-month period in the case of totally disabled
Optionees) following cessation of such relationship, any option held by such
Optionee, to the extent that the Optionee would have been entitled to
exercise such option, may be exercised within one year after his or her death
by the personal representative of his or her estate or by the person or
persons to whom the Optionee's rights under the option shall pass by will or
by the applicable laws of descent and distribution.
5.9 STATUS OF STOCKHOLDER. Neither the Optionee nor any party to which the
Optionee's rights and privileges under the option may pass shall be, or have
any of the rights or privileges of, a stockholder of the Company with respect
to any of the shares issuable upon the exercise of any option granted under
the Plan unless and until such option has been exercised.
5.10 CONTINUATION OF EMPLOYMENT. Nothing in the Plan or in any option
granted pursuant to the Plan shall confer upon any Optionee any right to
continue in the employ of the Company or of an Affiliate thereof, or to
interfere in any way with the right of the Company or of any such Affiliate
to terminate his or her employment or other relationship with the Company at
any time.
5.11 MODIFICATION AND AMENDMENT OF OPTION. Subject to the requirements of
Section 422 of the Code with respect to incentive stock options and to the
terms and conditions and within the limitations of the Plan, including,
without limitation, Section 9.1 hereof, the Plan Administrator may modify or
amend outstanding options granted under the Plan. The modification or
amendment of an outstanding option shall not, without the consent of the
Optionee, impair or diminish any of his or her rights or any of the
obligations of the Company under such option. Except as otherwise provided
herein, no outstanding option shall be terminated without the consent of the
Optionee. Unless the Optionee agrees otherwise, any changes or adjustments
made to outstanding incentive stock options granted under the Plan shall be
made in such a manner so as not to constitute a "modification" as defined in
Section 424(h) of the Code and so as not to cause any incentive stock option
issued hereunder to fail to continue to qualify as an incentive stock option
as defined in Section 422(b) of the Code.
23
<PAGE>
5.12 LIMITATION ON VALUE FOR INCENTIVE STOCK OPTIONS. As to all incentive
stock options granted under the terms of the Plan, to the extent that the
aggregate fair market value (determined at the time of the grant of the
incentive stock option) of the shares of Common Stock with respect to which
incentive stock options are exercisable for the first time by the Optionee
during any calendar year (under the Plan and all other incentive stock option
plans of the Company, an Affiliate thereof or a predecessor corporation)
exceeds $100,000, such options shall be treated as nonqualified stock
options. The foregoing sentence shall not apply, and the limitation shall be
that provided by the Code or the Internal Revenue Service, as the case may
be, if such annual limit is changed or eliminated by (a) amendment of the
Code or (b) issuance by the Internal Revenue Service of (i) a Revenue ruling,
(ii) a Private Letter ruling to any of the Company, any Optionee, or any
legatee, personal representative, or distributee of any Optionee, or (iii)
regulations.
5.13 VALUATION OF COMMON STOCK RECEIVED UPON EXERCISE.
5.13.1 EXERCISE OF OPTIONS UNDER SECTIONS 5.4(A) AND (C). The value of
Common Stock received by the Optionee from an exercise under Sections 5.4(a)
and 5.4(c) hereof shall be the fair market value as determined by the Plan
Administrator, provided, that if the Common Stock is traded in a public
market, such valuation shall be the average of the high and low trading
prices or bid and asked prices, as applicable, of the Common Stock for the
date of receipt by the Company of the Optionee's delivery of shares under
Section 5.4(a) hereof or delivery of the Notice of Exercise under Section
5.4(c) hereof, determined as of the trading day immediately preceding such
date (or, if no sale of shares is reported for such trading day, on the next
preceding day on which any sale shall have been reported).
5.13.2 EXERCISE OF OPTION UNDER SECTION 5.4(B). The value of Common
Stock received by the Optionee from an exercise under Section 5.4(b) hereof
shall equal the sales price received for such shares.
SECTION 6. GREATER THAN TEN PERCENT STOCKHOLDERS.
6.1 Exercise Price and Term of Incentive Stock Options. If incentive stock
options are granted under the Plan to employees who, at the time of such
grant, own greater than ten percent of the total combined voting power of all
classes of stock of the Company or any Affiliate thereof, the term of such
incentive stock options shall not exceed five years and the exercise price
shall be not less than 110% of the fair market value of the Common Stock at
the time of grant of the incentive stock option. This provision shall control
notwithstanding any contrary terms contained in an option agreement or any
other document. The term and exercise price limitations of this provision
shall be amended to conform to any change required by a change in the Code or
by ruling or pronouncement of the Internal Revenue Service.
6.2 ATTRIBUTION RULE. For purposes of subsection 6.1, in determining stock
ownership, an employee shall be deemed to own the stock owned, directly or
indirectly, by or for his or her brothers, sisters, spouse, ancestors, and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership estate, or trust shall be deemed to be owned
proportionately by or for its stockholders, partners, or beneficiaries. If an
employee or a person related to the employee owns an unexercised option or
warrant to purchase stock of the Company, the stock subject to that portion
of the option or warrant which is unexercised shall not be counted in
determining stock ownership. For purposes of this Section 6, stock owned by
an employee shall include all stock owned by him or her which is actually
issued and outstanding immediately before the grant of the incentive stock
option to the employee.
SECTION 7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The aggregate
number and class of shares for which options may be granted under the Plan,
the number and class of shares covered by each outstanding option, and the
exercise price per share thereof (but not the total price), and each such
option, shall all be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock of the Company resulting from a
split or consolidation of shares or any like capital adjustment, or the
payment of any stock dividend.
7.1. EFFECT OF LIQUIDATION, REORGANIZATION, OR CHANGE IN CONTROL.
7.1.1 Cash, Stock, or Other Property for Stock. Except as provided in
subsection 7.1.2 hereof, upon a merger (other than a merger of the Company in
which the holders of Common Stock immediately
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<PAGE>
prior to the merger have the same proportionate ownership of common stock in
the surviving corporation immediately after the merger), consolidation,
acquisition of property or stock, separation, reorganization (other than mere
reincorporation or creation of a holding company), or liquidation of the
Company (each, an "event"), as a result of which the stockholders of the
Company receive cash, stock, or other property in exchange for, or in
connection with, their shares of Common Stock, any option granted hereunder
shall terminate, but the time during which such options may be exercised
shall be accelerated as follows: the Optionee shall have the right
immediately prior to any such event to exercise such Optionee's option in
whole or in part whether or not the vesting requirements set forth in the
option agreement have been satisfied.
7.1.2 CONVERSION OF OPTIONS ON STOCK FOR EXCHANGE STOCK. If the
stockholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any
transaction involving a merger (other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of common stock in the surviving corporation
immediately after the merger), consolidation, acquisition of property or
stock, separation, or reorganization (other than mere reincorporation or
creation of a holding company), all options granted hereunder shall be
converted into options to purchase shares of Exchange Stock unless the
Company and corporation issuing the Exchange Stock, in their sole discretion,
determine that any or all such options granted hereunder shall not be
converted into options to purchase shares of Exchange Stock but instead shall
terminate in accordance with the provisions of subsection 7.1.1 hereof. The
amount and price of converted options shall be determined by adjusting the
amount and price of the options granted hereunder in the same proportion as
used for determining the number of shares of Exchange Stock the holders of
the Common Stock receive in such merger, consolidation, acquisition,
separation, or reorganization. Unless the Board determines otherwise, the
converted options shall be fully vested whether or not the vesting
requirements set forth in the option agreement have been satisfied.
7.2 FRACTIONAL SHARES. In the event of any adjustment in the number of
shares covered by an option, any fractional shares resulting from such
adjustment shall be disregarded and each such option shall cover only the
number of full shares resulting from such adjustment.
7.3 DETERMINATION OF BOARD TO BE FINAL. Except as otherwise required for
the Plan to qualify for the exemption afforded by Rule 16b-3 under the
Exchange Act, all adjustments under this Section 7 shall be made by the
Board, and its determination as to what adjustments shall be made, and the
extent thereof, shall be final, binding, and conclusive. Unless an Optionee
agrees otherwise, any change or adjustment to an incentive stock option shall
be made in such a manner so as not to constitute a "modification" as defined
in Section 424(h) of the Code and so as not to cause the incentive stock
option issued hereunder to fail to continue to qualify as an incentive stock
option as defined in Section 422(b) of the Code.
SECTION 8. SECURITIES LAW COMPLIANCE. Shares shall not be issued with
respect to an option granted under the Plan unless the exercise of such
option and the issuance and delivery of such shares pursuant thereto shall
comply with all relevant provisions of law, including, without limitation,
any applicable state securities laws, the Securities Act of 1933, as amended
(the "Act"), the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the shares
may then be listed, and shall be further subject to the approval of counsel
for the Company with respect to such compliance, including, without
limitation, the availability of an exemption from registration for the
issuance and sale of any shares hereunder. Inability of the Company to obtain
from any regulatory body having jurisdiction, the authority deemed by the
Company's counsel to be necessary for the lawful issuance and sale of any
shares hereunder or the unavailability of an exemption from registration for
the issuance and sale of any shares hereunder shall relieve the Company of
any liability in respect of the nonissuance or sale of such shares as to
which such requisite authority shall not have been obtained.
As a condition to the exercise of an option, if, in the opinion of counsel
for the Company, assurances are required by any relevant provision of the
aforementioned laws, the Company may require the Optionee to give written
assurances satisfactory to the Company at the time of any such exercise (a)
as to the Optionee's knowledge and experience in financial and business
matters (and/or to employ a
25
<PAGE>
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters) and that
such Optionee is capable of evaluating, either alone or with the purchaser
representative, the merits and risks of exercising the option or (b) that the
shares are being purchased only for investment and without any present
intention to sell or distribute such shares. The foregoing requirements shall
be inoperative if the issuance of the shares upon the exercise of the option
has been registered under a then currently effective registration statement
under the Act.
At the option of the Company, a stop-transfer order against any shares may
be placed on the official stock books and records of the Company, and a
legend indicating that the stock may not be pledged, sold, or otherwise
transferred unless an opinion of counsel is provided (concurred in by counsel
for the Company) stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on stock certificates in order
to assure exemption from registration. The Plan Administrator may also
require such other action or agreement by the Optionees as may from time to
time be necessary to comply with the federal and state securities laws. NONE
OF THE ABOVE SHALL BE CONSTRUED TO IMPLY AN OBLIGATION ON THE PART OF THE
COMPANY TO UNDERTAKE REGISTRATION OF THE OPTIONS OR STOCK HEREUNDER.
Should any of the Company's capital stock of the same class as the stock
subject to options granted hereunder be listed on a national securities
exchange or on the NASDAQ National Market, all stock issued hereunder if not
previously listed on such exchange or market shall, if required by the rules
of such exchange or market, be authorized by that exchange or market for
listing thereon prior to the issuance thereof.
SECTION 9. USE OF PROCEEDS. The proceeds received by the Company from the
sale of shares pursuant to the exercise of options granted hereunder shall
constitute general funds of the Company.
SECTION 10. AMENDMENT AND TERMINATION.
10.1 BOARD ACTION. The Board may at any time suspend, amend, or terminate
the Plan, provided, that no amendment shall be made without stockholder
approval within 12 months before or after adoption of the Plan if such
approval is necessary to comply with any applicable tax or regulatory
requirement, including any such approval as may be necessary to satisfy the
requirements for exemptive relief under Rule 16b-3 of the Exchange Act or any
successor provision. Rights and obligations under any option granted before
amendment of the Plan shall not be altered or impaired by any amendment of
the Plan unless the Company requests the consent of the person to whom the
option was granted and such person consents in writing thereto.
10.2 AUTOMATIC TERMINATION. Unless sooner terminated by the Board, the
Plan shall terminate ten years from the earlier of (a) the date on which the
Plan is adopted by the Board or (b) the date on which the Plan is approved by
the stockholders of the Company. No option may be granted after such
termination or during any suspension of the Plan. The amendment or
termination of the Plan shall not, without the consent of the option holder,
alter or impair any rights or obligations under any option theretofore
granted under the Plan.
SECTION 11. EFFECTIVENESS OF THE PLAN. The Plan shall become effective
upon adoption by the Board so long as it is approved by the holders of a
majority of the Company's outstanding shares of voting capital stock at any
time within 12 months before or after the adoption of the Plan by the Board.
26
<PAGE>
FAMILY GOLF CENTERS, INC.
[INCENTIVE][NONQUALIFIED] STOCK OPTION LETTER AGREEMENT
TO:
We are pleased to inform you that you have been selected by the Plan
Administrator of the Family Golf Centers, Inc. (the "Company") 1996 Stock
Incentive Plan (the "Plan") to receive a(n) [INCENTIVE] [NONQUALIFIED] option
for the purchase of shares of the Company's common stock, $.01 par value, at
an exercise price of $ per share (the "exercise price"). A copy of the
Plan is attached and the provisions thereof, including, without limitation,
those relating to withholding taxes, are incorporated into this Agreement by
reference.
The terms of the option are as set forth in the Plan and in this
Agreement. The most important of the terms set forth in the Plan are
summarized as follows:
Term. The term of the option is ten years from date of grant, unless
sooner terminated.
Exercise. During your lifetime only you can exercise the option. The Plan
also provides for exercise of the option by the personal representative of
your estate or the beneficiary thereof following your death. You may use the
Notice of Exercise in the form attached to this Agreement when you exercise
the option.
Payment for Shares. The option may be exercised by the delivery of:
(a) Cash, personal check (unless at the time of exercise the Plan
Administrator determines otherwise), or bank certified or cashier's
checks;
(b) Unless the Plan Administrator in its sole discretion determines
otherwise, shares of the capital stock of the Company held by you having a
fair market value at the time of exercise, as determined in good faith by
the Plan Administrator, equal to the exercise price;
(c) Unless the Plan Administrator in its sole discretion determines
otherwise, a properly executed Notice of Exercise, together with
instructions to the Company to withhold from the shares that would
otherwise be issued upon exercise that number of shares having a fair
market value equal to the option exercise price; or
(d) Unless the Plan Administrator in its sole discretion determines
otherwise, a properly executed Notice of Exercise, together with
irrevocable instructions to a broker to promptly deliver to the Company
the amount of sale or loan proceeds to pay the exercise price.
Acceleration. Notwithstanding the vesting schedule for the option set
forth below, the option will be automatically exercisable for the total
number of shares the subject of the option upon a "Change in Control" (as
defined below), or, if advised by the Plan Administrator in writing, upon any
actually- anticipated "Change in Control," unless otherwise advised in
writing by the Plan Administrator, who has complete discretion in determining
the specific conditions upon which the option is to accelerate in connection
with a Change in Control.
Termination. The option will terminate: (i) immediately upon termination
for cause, as defined in the Plan, or three months after cessation of your
relationship as a director of the Company, unless cessation is due to death
or total disability, in which case the option shall terminate 12 months after
cessation of such relationship; (ii) three months after a "Change in
Control", unless otherwise advised in writing by the Plan Administrator, who
has complete discretion in determining the specific conditions upon which the
option is to terminate in connection with a Change in Control, if at all.
Transfer of Option. The option is not transferable except by will or by
the applicable laws of descent and distribution or pursuant to a qualified
domestic relations order.
25
<PAGE>
Vesting. The option is vested according to the following schedule:
<TABLE>
<CAPTION>
PERIOD OF OPTIONEE'S
CONTINUOUS RELATIONSHIP
WITH THE COMPANY OR
AFFILIATE FROM THE DATE PORTION OF TOTAL OPTION
THE OPTION IS GRANTED WHICH IS EXERCISABLE
- --------------------------- ---------------------------
<S> <C>
1 year 33%
2 years 67%
3 years 100%
</TABLE>
Date of Grant. The date of grant of the option is .
A "Change of Control" will be deemed to occur (i) should a person or
related group of persons (other than the Company or its affiliates), who does
not own of record 10% or more (a "10% Acquisition") of the Company's
outstanding voting stock, which 10% Acquisition of the Company's outstanding
voting stock is not approved by the Board; and (ii) within any period of
twenty-four consecutive months or less from the date of such 10% Acquisition
(the "Period"), there is effected a change in the composition of the Board of
Directors such that a majority of the Board members (rounded up to the next
whole number) cease to be comprised of individuals who either (A) have been
members of the Board continuously before such 10% Acquisition and throughout
the Period or (B) have been elected or nominated for election as Board
members during the Period by at least a majority of the Board members
described in clause (A) who were still in office at the time such election or
nomination was approved by the Board.
YOUR PARTICULAR ATTENTION IS DIRECTED TO SECTION 8 OF THE PLAN WHICH
DESCRIBES CERTAIN IMPORTANT CONDITIONS RELATING TO FEDERAL AND STATE
SECURITIES LAWS THAT MUST BE SATISFIED BEFORE THE OPTION CAN BE EXERCISED AND
BEFORE THE COMPANY CAN ISSUE ANY SHARES TO YOU. THE COMPANY HAS NO OBLIGATION
TO REGISTER THE SHARES THAT WOULD BE ISSUED UPON THE EXERCISE OF YOUR OPTION,
AND IF IT NEVER REGISTERS THE SHARES, YOU WILL NOT BE ABLE TO EXERCISE THE
OPTION UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. AT THE PRESENT
TIME, EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES LAWS
ARE VERY LIMITED AND MIGHT BE UNAVAILABLE TO YOU PRIOR TO THE EXPIRATION OF
THE OPTION. CONSEQUENTLY, YOU MIGHT HAVE NO OPPORTUNITY TO EXERCISE THE
OPTION AND TO RECEIVE SHARES UPON SUCH EXERCISE. IN ADDITION, YOU SHOULD
CONSULT WITH YOUR TAX ADVISOR CONCERNING THE RAMIFICATIONS TO YOU OF HOLDING
OR EXERCISING YOUR OPTIONS OR HOLDING OR SELLING THE SHARES UNDERLYING SUCH
OPTIONS.
IN ADDITION TO THE FOREGOING, (i) IF YOU WERE A DIRECTOR, OFFICER OR
STOCKHOLDER OF THE COMPANY ON NOVEMBER 6, 1994, YOU MAY NOT, PRIOR TO
NOVEMBER 6, 1996, NOTWITHSTANDING ANY REGISTRATION OR OTHER RIGHTS THAT YOU
MAY HAVE, DIRECTLY OR INDIRECTLY, OFFER, SELL, CONTRACT TO SELL, GRANT ANY
OPTION WITH RESPECT TO, TRANSFER, ASSIGN, PLEDGE OR OTHERWISE DISPOSE OF
(EITHER PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
OTHERWISE) ANY SHARES WHICH YOU RECEIVE UPON THE EXERCISE OF ANY OPTIONS
HEREUNDER, UNLESS YOU RECEIVE THE WRITTEN CONSENT OF HAMPSHIRE SECURITIES
CORPORATION, 919 THIRD AVENUE, NEW YORK, NEW YORK 10022 AND (ii) IF YOU WERE
A DIRECTOR, OFFICER OR HOLDER OF 5% OR MORE OF THE COMPANY'S CAPITAL STOCK ON
DECEMBER 12, 1995, YOU MAY NOT, PRIOR TO DECEMBER 13, 1996, NOTWITHSTANDING
ANY REGISTRATION OR OTHER RIGHTS THAT YOU MAY HAVE, DIRECTLY OR INDIRECTLY,
OFFER, SELL, CONTRACT TO SELL, GRANT ANY OPTION WITH RESPECT TO, TRANSFER,
ASSIGN, PLEDGE OR OTHERWISE DISPOSE OF (EITHER PURSUANT TO RULE 144 UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR OTHERWISE) ANY SHARES WHICH YOU
RECEIVE UPON THE EXERCISE OF ANY OPTIONS HEREUNDER, UNLESS YOU RECEIVE THE
WRITTEN CONSENT OF JEFFERIES & COMPANY, INC., 650 FIFTH AVENUE, NEW YORK, NEW
YORK 10019.
28
<PAGE>
You understand that, during any period in which the shares which may be
acquired pursuant to your option are subject to the provisions of Section 16
of the Securities Exchange Act of 1934, as amended (and you yourself are also
so subject), in order for your transactions under the Plan to qualify for the
exemption from Section 16(b) provided by Rule 16b-3, a total of six months
must elapse between the grant of the option and the sale of shares underlying
the option.
Please execute the Acceptance and Acknowledgement set forth below on the
enclosed copy of this Agreement and return it to the undersigned.
Very truly yours,
FAMILY GOLF CENTERS, INC.
BY:
-----------------------------------
NAME:
TITLE:
29
<PAGE>
ACCEPTANCE AND ACKNOWLEDGEMENT
I, a resident of the State of , accept the stock option described above
granted under the Family Golf Centers, Inc. 1996 Stock Incentive Plan, and
acknowledge receipt of a copy of this Agreement, including a copy of the
Plan. I have read and understand the Plan, including the provisions of
Section 8 thereof.
Dated:
------------------
- --------------------------- ---------------------------
Taxpayer I.D. Number Signature
By his or her signature below, the spouse of the Optionee, if such
Optionee is legally married as of the date of such Optionee's execution of
this Agreement, acknowledges that he or she has read this Agreement and the
Plan and is familiar with the terms and provisions thereof, and agrees to be
bound by all the terms and conditions of this Agreement and the Plan.
Dated:
------------------
-----------------------------------
Spouse's Signature
-----------------------------------
Printed Name
30
<PAGE>
NOTICE OF EXERCISE
The undersigned, pursuant to a(n) [INCENTIVE] [NONQUALIFIED] Stock Option
Letter Agreement (the "Agreement") between the undersigned and Family Golf
Centers, Inc. (the "Company"), hereby irrevocably elects to exercise purchase
rights represented by the Agreement, and to purchase thereunder shares (the
"Shares") of the Company's common stock, $.01 par value ("Common Stock"),
covered by the Agreement and herewith makes payment in full therefor.
1. If the sale of the Shares and the resale thereof has not, prior to the
date hereof, been registered pursuant to a registration statement filed and
declared effective under the Securities Act of 1933, as amended (the "Act"),
the undersigned hereby agrees, represents, and warrants that:
(a) the undersigned is acquiring the Shares for his or her own account
(and not for the account of others), for investment and not with a view to
the distribution or resale thereof;
(b) By virtue of his or her position, the undersigned has access to
the same kind of information which would be available in a registration
statement filed under the Act;
(c) the undersigned is a sophisticated investor;
(d) the undersigned understands that he or she may not sell or
otherwise dispose of the Shares in the absence of either (i) a
registration statement filed under the Act or (ii) an exemption from the
registration provisions thereof; and
(e) The certificates representing the Shares may contain a legend to
the effect of subsection (d) of this Section 1.
2. If the sale of the Shares and the resale thereof has been registered
pursuant to a registration statement filed and declared effective under the
Act, the undersigned hereby represents and warrants that he or she has
received the applicable prospectus and a copy of the most recent annual
report, as well as all other material sent to stockholders generally.
3. The undersigned acknowledges that the number of shares of Common Stock
subject to the Agreement is hereafter reduced by the number of shares of
Common Stock represented by the Shares.
Very truly yours,
-----------------------------------
(type name under signature line)
Social Security No.
-----------------------------------
Address:
-----------------------------------
31
<PAGE>
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
FAMILY GOLF CENTERS, INC.
ANNUAL MEETING OF STOCKHOLDERS--JUNE 7, 1996
THE UNDERSIGNED STOCKHOLDER IN FAMILY GOLF CENTERS, INC. ("COMPANY") HEREBY
CONSTITUTES AND APPOINTS DOMINIC CHANG AND KRISHNAN P. THAMPI, AND EACH OF
THEM, HIS OR HER TRUE AND LAWFUL ATTORNEYS AND PROXIES, WITH FULL POWER OF
SUBSTITUTION IN AND FOR EACH OF THEM, TO VOTE ALL SHARES OF THE COMPANY WHICH
THE UNDERSIGNED IS ENTITLED TO VOTE AT THE ANNUAL MEETING OF STOCKHOLDERS TO
BE HELD AT FLEMINGTON FAMILY GOLF CENTER, 99 ROUTE 202 AND 31 SOUTH,
FLEMINGTON, NEW JERSEY, ON FRIDAY, JUNE 7, 1996 AT 10:00 A.M., EASTERN
DAYLIGHT SAVINGS TIME, OR AT ANY POSTPONEMENT OR ADJOURNMENT THEREOF, ON ANY
AND ALL OF THE PROPOSALS CONTAINED IN THE NOTICE OF THE ANNUAL MEETING OF
STOCKHOLDERS, WITH ALL THE POWERS THE UNDERSIGNED WOULD POSSESS IF PRESENT
PERSONALLY AT SAID MEETING, OR AT ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE NOMINEES LISTED BELOW AND FOR THE APPROVAL OF PROPOSALS 1, 3
AND 4.
1. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED SHARES OF CAPITAL STOCK.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF DIRECTORS.
[ ] FOR all nominees listed
[ ] WITHHOLD AUTHORITY
(except as marked to the contrary, seeto vote for all nominees listed at left
instruction below)
NOMINEES: Dominic Chang, Krishnan P. Thampi, James Ganley, Jimmy C.M. Hsu and
Yupin Wang
INSTRUCTION: To withhold authority to vote for any individual nominee, line
through the name of the nominee above.
TO BE SIGNED ON OTHER SIDE
<PAGE>
(Continued from front)
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
3. PROPOSAL TO APPROVE THE FAMILY GOLF CENTERS, INC. 1996 STOCK INCENTIVE
PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL TO RATIFY RICHARD A. EISNER, LLP. AS INDEPENDENT AUDITORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE ABOVE NAMED PROXIES ARE GRANTED THE AUTHORITY, IN THEIR DISCRETION, TO
ACT UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
POSTPONEMENT OR ADJOURNMENT THEREOF.
Dated: , 1996
-----------------------
Signature(s)
-----------------------------------
Signatures
-----------------------------------
Please sign exactly as your name
appears and return this proxy
immediately in the enclosed stamped
self-addressed envelope.
