AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 7, 1996
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REGISTRATION STATEMENT ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
------------------
FAMILY GOLF CENTERS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 11-3223246
(State or jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
(516) 694-1666
(Address, Including Zip Code, and Telephone Number, Including Area
Code, of Registrant's Principal Executive Offices)
Dominic Chang, Chief Executive Officer
Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
(516) 694-1666 / (516) 694-0918 (Fax)
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
Copies to:
Kenneth R. Koch, Esq.
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
(212) 661-6500/(212) 697-6686 (Fax)
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: FROM TIME TO TIME AFTER THE
EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED PURSUANT
TO DIVIDEND OR INTEREST REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING BOX. [ ]
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON A
DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH DIVIDEND OR
INTEREST REINVESTMENT PLANS, CHECK THE FOLLOWING BOX. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING
BOX AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ] _____________
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C) UNDER
THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ] ________________.
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================================================
PROPOSED
MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED UNIT (1) PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value 217,415 shares $27.8125 $6,046,854.69 $1,832.38
$.01 per share
=============================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) under the Securities Act of 1933.
-----------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION, DATED NOVEMBER 7, 1996
FAMILY GOLF CENTERS, INC.
217,415 Shares of Common Stock
This Prospectus relates to the offering that may be made from time to
time of up to 217,415 shares (the "Shares") of common stock, par value $.01 per
share (the "Common Stock"), of Family Golf Centers, Inc., a Delaware
corporation (the "Company"), by, or for the accounts of, the holders thereof
(the "Selling Security Holders"). See "Selling Security Holders." Of the
217,415 Shares being offered hereby, 70,000 are issuable upon the exercise of
certain warrants (the "Warrants") issued to a consultant of the Company.
The Common Stock is quoted on the Nasdaq National Market(R) (the
"Nasdaq National Market") under the symbol "FGCI." On November 5, 1996, the
last sale price of the Common Stock as reported by the Nasdaq National Market
was $30.75 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 HEREIN FOR A DISCUSSION OF
CERTAIN MATTERS THAT SHOULD BE CONSIDERED BY POTENTIAL INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Shares may be sold from time to time by the Selling Security
Holders or their transferees. No underwriting arrangements have been entered
into by the Selling Security Holders as of the date hereof. The distribution of
the Shares by the Selling Security Holders may be effected in one or more
transactions that may take place in the over-the-counter market, including
ordinary broker's transactions, privately negotiated transactions, or through
sales to one or more dealers for resale of such Shares as principals, at
prevailing market prices at the time of sale, prices related to such prevailing
market prices, or negotiated prices. Underwriting discounts and usual and
customary or specifically negotiated brokerage fees or commissions will be paid
by the Selling Security Holders in connection with sales of the Shares. To the
extent required, the number of Shares to be sold, the name of the Selling
Security Holder, the purchase price, the name of any agent or broker, and any
applicable commissions, discounts or otherwise constituting compensation to
such agents or brokers with respect to a particular offering will be set forth
in a supplement or supplements to this Prospectus (each, a "Prospectus
Supplement"). See "Plan of Distribution."
The Company will not receive any proceeds from the sale of the Shares.
By agreement with the Selling Security Holders, the Company will pay all of the
expenses incident to the registration of the Shares under the Securities Act
(other than agent's or underwriter's commissions and discounts), estimated to
be approximately $22,000.
The Selling Security Holders, and any broker-dealers, agents, or
underwriters through whom the Shares are sold, may be deemed "underwriters"
within the meaning of the Securities Act with respect to securities offered by
them, and any profits realized or commissions received by them may be deemed
underwriting compensation.
The date of this Prospectus is November _, 1996
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street, N.W., Washington, D.C. 20549, a Registration
Statement (the "Registration Statement") under the Securities Act with respect
to the offering and sale from time to time of the Shares. This Prospectus does
not contain all the information set forth in the Registration Statement and the
exhibits thereto, as permitted by the rules and regulations of the Commission.
For further information, reference is made to the Registration Statement and to
the exhibits filed therewith. Statements contained in this Prospectus as to the
contents of any contract or other document which has been filed or incorporated
by reference as an exhibit to the Registration Statement are qualified in their
entirety by reference to such exhibits for a complete statement of their terms
and conditions. Additionally, the Company is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports, proxy statements, and other
information statements with the Commission. Copies of such materials may be
inspected without charge at the offices of the Commission, and copies of all or
any part thereof may be obtained from the Commission's public reference
facilities at 450 Fifth Street, N.W., Washington D.C. 20549 or at the regional
offices of the Commission located at 7 World Trade Center, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, upon
payment of the fees prescribed by the Commission. In addition, the Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding the Company (http://www.sec.gov). The Common Stock
is quoted on the Nasdaq National Market. Reports and other information
concerning the Company may be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporated herein by reference and made a part of this Prospectus
are the following: (1) the Company's Annual Report on Form 10-KSB, for the
fiscal year ended December 31, 1995; (2) the Company's Quarterly Report on Form
10- QSB for the three months ended March 31, 1996; (3) the Company's Quarterly
Report on Form 10-QSB for the quarter ended June 30, 1996; (4) the description
of the Common Stock, which is registered under Section 12 of the Exchange Act,
contained in the Company's Registration Statement on Form 8-A dated November 8,
1994; (5) the Current Report on Form 8-K dated February 28, 1996; (6) the
Current Report on Form 8-K dated March 6, 1996; (7) the Current Report on Form
8-K dated April 8, 1996; (8) the Current Report on Form 8-K dated May 20, 1996;
(9) the Current Report on Form 8-K dated June 7, 1996; (10) the Current Report
on Form 8-K dated July 5, 1996; (11) the Current Report on Form 8-K dated
October 11, 1996 and (12) the Current Report on Form 8-K dated October 30,
1996. All documents subsequently filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14, or 15(d) of the Exchange Act after the
date of this Prospectus and prior to the termination of the offering made
hereby will be deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the respective dates of filing of such documents. Any
statement contained in any document incorporated by reference shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus. All information appearing in this Prospectus is qualified in
its entirety by the information and financial statements (including notes
thereto) appearing in the documents incorporated herein by reference, except to
the extent set forth in the immediately preceding statement.
The Company will provide without charge to each person who receives a
Prospectus, upon written or oral request of such person, a copy of the
information that is incorporated by reference herein (not including exhibits to
the information that is incorporated by reference herein). Requests for such
information should be directed to: Family Golf Centers, Inc., 225 Broadhollow
Road, Melville, New York 11747; Attention: Chief Executive Officer. The
Company's telephone number is: (516) 694-1666.
2
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the specific factors
set forth below, as well as the other information included in this Prospectus,
before deciding to invest in the Shares offered hereby.
LIMITED OPERATING HISTORY
The Company opened its first golf center in March 1992 and,
accordingly, has only a limited history of operations. The Company generated
net income of approximately $488,000 during the year ended December 31, 1994,
approximately $1.1 million during the year ended December 31, 1995 and
approximately $1.6 million during the six months ended June 30, 1996. However,
the Company experienced losses prior to 1994 and there can be no assurance that
the Company will operate profitably in the future or that recent results of
operations will be indicative of future results. See "Risk Factors--Expansion
Strategy".
EXPANSION STRATEGY
The Company's ability to significantly increase revenue, net income
and operating cash flow over time depends in large part upon its success in
acquiring or leasing and constructing additional golf facilities at suitable
locations upon satisfactory terms. There can be no assurance that suitable golf
facility acquisition or lease opportunities will be available or that the
Company will be able to consummate acquisition or leasing transactions on
satisfactory terms. The acquisition of golf facilities may become more
expensive in the future to the extent that demand and competition increases.
The likelihood of the success of the Company must be considered in light of the
problems, expenses, difficulties, complications and delays frequently
encountered in connection with the construction and opening of new golf
facilities. See "Risk Factors--Additional Financing Requirements," and "Risk
Factors--Dependence Upon Key Employee; Recruitment of Additional Personnel."
To successfully implement its expansion strategy, the Company must
integrate acquired or newly- opened golf facilities into its existing
operations. As the Company grows, there can be no assurance that additional
golf facilities can be readily assimilated into the Company's operating
structure. Inability to efficiently integrate golf facilities could have a
material adverse effect on the Company's financial condition and results of
operations. In addition, a number of the golf facilities which the Company has
acquired have, and golf facilities it may acquire in the future may have,
experienced losses. On a pro forma basis, as adjusted to give effect to the
acquisitions consummated after January 1, 1995 as if they had occurred as of
January 1, 1995, the Company had a net loss before extraordinary item of
$435,000 (as compared to income before extraordinary item of $1.3 million on a
historical basis) for the year ended December 31, 1995 and income of $1.3
million (as compared to net income of $1.6 million on a historical basis) for
the six months ended June 30, 1996. There can be no assurance that golf
facilities recently acquired by the Company or those that the Company may
acquire in the future will operate profitably and will not adversely affect the
Company's results of operations.
TERMINATION OF LEASES
Although after giving effect to renewal options none of the Company's
leases, as of the date of this Prospectus, is expected to expire until 2007, the
leases may be terminated prior to their scheduled expiration should the Company
default in its obligations thereunder. Such obligations include the Company's
timely payment of rent and maintenance of adequate insurance coverage. The
termination of any of the Company's leases could have an adverse effect on the
Company. If any of the Company's leases were to be terminated, there can be no
assurance that the Company would be able to enter into leases for comparable
properties on favorable terms, or at all.
TERMINATION OF MANAGEMENT AGREEMENTS
The Company's management agreement with the City of New York (the
"City") for the Douglaston, New York golf center, which expires on December 31,
2006, is terminable by the City at will. During the year ended December 31,
1995, the management agreement accounted for 17% of the Company's total
revenue. Pursuant to the management agreement, the Company made approximately
$2.3 million of capital improvements to the Douglaston center. If the
management agreement is terminated, the City may retain, and is not obligated
to pay the Company for the value of, such capital improvements. Unless
reimbursed, for accounting purposes the Company would immediately have to write
off the undepreciated value of these capital improvements and the goodwill
related to its purchase of the limited partners' minority interest in Alley
Pond
3
<PAGE>
Associates, L.P. which are currently being depreciated and amortized over the
life of the management agreement. Accordingly, termination of the management
agreement with the City could have a material adverse effect on the Company.
The Company's management agreement with the City of El Segundo for the
El Segundo golf facility terminates on June 30, 1998, unless earlier terminated
by either party, with or without cause, as of the end of any operating year
during the term of the agreement, upon at least 90 days prior written notice.
Termination of the management agreement with the City of El Segundo may have an
adverse effect on the Company.
GOLDEN BEAR LICENSE
As of November 1, 1996, the Company operated seven of its golf
centers, and intended to operate at least one additional golf center, under the
name "Golden Bear Golf Center" pursuant to a non-exclusive license agreement
(the "License Agreement"), expiring August 2002, with Golden Bear Golf Centers,
Inc. (the "Licensor"). The License Agreement is terminable by the Licensor
prior to August 2002 under certain circumstances, including if the directors of
the Company, as of September 1995, at any time constitute less than 50% of the
Company's directors. The Company agreed to cure an alleged default of the
License Agreement (principally by making certain capital improvements by
November 1996). Failure by the Company to take the agreed upon actions by such
date could result in the termination of the License Agreement. Termination of
the License Agreement could adversely affect the Company's Golden Bear Golf
Centers and, possibly, the Company. The value of the "Golden Bear" name is
dependent, in part, upon the continued popularity of Jack Nicklaus.
Accordingly, the occurrence of any event which diminishes the reputation of Mr.
Nicklaus and the related "Golden Bear" symbol could adversely affect the
Company's Golden Bear Golf Centers. See "Risk Factors--Competition."
COMPETITION
The golf center industry is highly competitive and includes
competition from other golf centers, traditional golf ranges, golf courses and
other recreational pursuits. The Company may face imitation and other forms of
competition and the Company cannot prevent or restrain others from utilizing a
similar operational strategy. Many of the Company's competitors and potential
competitors have considerably greater financial and other resources, experience
and customer recognition than does the Company. Until September 1995, the
Company had the exclusive right to open Golden Bear Golf Centers in certain
territories. As a result of a change in the License Agreement, the Licensor now
is permitted to establish, or license others to establish, "Golden Bear" golf
centers that compete with the Company's golf centers, including its Golden Bear
Golf Centers. Golden Bear Golf, Inc., an affiliate of the Licensor, has
recently publicly indicated that it intends to focus its efforts on the direct
ownership and operation of golf facilities through the acquisition or
development of additional golf centers and to pursue new licensees and enter
into additional territorial development agreements only in locations and
territories where it and its affiliates do not intend to acquire or develop
their own facilities. There can be no assurance that such competition will not
adversely affect the Company's ability to acquire additional properties.
VULNERABILITY TO WEATHER CONDITIONS AND SEASONAL RESULTS
Historically, the second and third quarters of the year have accounted
for a greater portion of the Company's operating revenue than have the first
and fourth quarters of the year. This is primarily due to an outdoor playing
season limited by inclement weather. Although most of the Company's driving
ranges are designed to be all-weather facilities (including the domed
facilities), and although the Company has recently expanded its operations into
territories where inclement weather may have less of an impact than in the
Northeast, portions of the Company's facilities, including the miniature golf
courses, are outdoors and vulnerable to weather conditions. Also, golfers are
less inclined to practice when weather conditions limit their ability to play
golf on outdoor courses. This seasonal pattern, as well as the timing of new
center openings and acquisitions, may cause the Company's results of operations
to vary significantly from quarter to quarter. Accordingly, period- to-period
comparisons are not necessarily meaningful and should not be relied on as
indicative of future results. In addition, variability in the Company's results
of operations could cause the Company's stock price to fluctuate following the
release of interim results of operations or other information and may have a
material adverse effect on the Company and its stock price.
ADDITIONAL FINANCING REQUIREMENTS
As of June 30, 1996, the Company had a working capital deficit of
approximately $2.2 million. However, in July 1996, the Company raised
approximately $75 million of equity capital. The Company anticipates, based on
its currently proposed expansion plans and assumptions relating to its
operations, that such capital, together with availability under its primary
credit
4
<PAGE>
facility and cash flow from operations, will be sufficient to permit the
Company to conduct its operations and to carry on its contemplated expansion
through December 1997. The Company also anticipates that it will need to raise
substantial additional equity capital in the future to continue its longer term
expansion plans. There can be no assurance that the Company will be able to
obtain additional financing on favorable terms or at all.
ENVIRONMENTAL REGULATION
Operations at the Company's golf facilities involve the use and
limited storage of various hazardous materials such as pesticides, herbicides,
motor oil, gasoline and paint. Under various federal, state and local laws,
ordinances and regulations, an owner or operator of real property is generally
liable for the costs of removal or remediation of hazardous substances that are
released on or in its property regardless of whether the property owner or
operator knew of, or was responsible for, the release of hazardous materials.
The Company has not been informed by any governmental authority of any
non-compliance or violation of any environmental laws, ordinances or
regulations and the Company believes that it is in substantial compliance with
all such laws, ordinances and regulations applicable to its properties or
operations. However, the Company is aware of one notice of violation issued by
the New York Department of Environmental Conservation (the "DEC") against the
owner of the land leased by the Company in Elmsford, New York alleging that
certain hazardous materials were placed on the site. The owner has taken
remedial action and the Company does not believe it will be affected by the
alleged violation. As of the date of this Prospectus, the Company has not
incurred material costs of remediation and the Company knows of no material
environmental liability to which it may become subject. Although the Company
usually hires environmental consultants to conduct environmental studies,
including invasive procedures such as soil sampling or ground water analysis on
golf facilities it owns, operates or intends to acquire, in some cases only
limited invasive procedures are conducted on such properties. Even when
invasive procedures are used, environmental studies may fail to discover all
potential environmental problems. Accordingly, there may be potential
environmental liabilities or conditions of which the Company is not aware.
DEPENDENCE UPON KEY EMPLOYEE; RECRUITMENT OF ADDITIONAL PERSONNEL
The Company is heavily dependent on the services of Dominic Chang, its
Chairman of the Board, President and Chief Executive Officer. The loss of the
services of Mr. Chang could materially adversely affect the Company. Mr. Chang
has entered into an employment agreement with the Company which terminates on
December 31, 1999. The Company owns, and is the sole beneficiary of, key person
life insurance in the amount of $1.5 million on the life of Mr. Chang. The
Company will also be required to hire additional personnel and PGA-certified
professionals to staff the golf centers it intends to acquire, lease or
construct. There can be no assurance that the Company will be able to attract
and retain qualified personnel.
CONTROL BY CURRENT STOCKHOLDER
As of the date of this Prospectus, Dominic Chang beneficially owned
2,549,334 shares of Common Stock, constituting approximately 21.7% of the
outstanding shares. Mr. Chang is, therefore, able to exercise significant
influence with respect to the election of the directors of the Company and all
matters submitted to a vote of the stockholders of the Company, including the
acquisition or disposition of material assets.
DEPENDENCE ON DISCRETIONARY CONSUMER SPENDING
The amount spent by consumers on discretionary items, such as family
and entertainment activities like those offered by the Company's golf
facilities, have historically been dependent upon levels of discretionary
income, which may be adversely affected by general economic conditions. A
decrease in consumer spending on golf could have an adverse effect on the
Company's financial condition and results of operations.
DIVIDEND POLICY
The Company has not paid any cash dividends on the Common Stock since
inception and does not intend to pay any dividends to its stockholders in the
foreseeable future. The Company currently intends to reinvest earnings, if any,
in the development and expansion of its business.
5
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
The sale, or availability for sale, of substantial amounts of Common
Stock in the public market pursuant to Rule 144 under the Securities Act ("Rule
144") or otherwise could materially adversely affect the market price of the
Common Stock and could impair the Company's ability to raise additional capital
through the sale of its equity securities or debt financing. In general, under
Rule 144 as currently in effect, a person (or persons whose shares are
aggregated), including a person who may be deemed to be an "affiliate" of the
Company as that term is defined under the Securities Act, would be entitled to
sell within any three month period a number of shares beneficially owned for at
least two years that does not exceed the greater of (i) 1% of the then
outstanding shares of Common Stock, or (ii) the average weekly trading volume
in the Common Stock during the four calendar weeks preceding such sale. Sales
under Rule 144 are also subject to certain requirements as to the manner of
sale, notice and the availability of current public information about the
Company. However, a person who is not deemed to have been an affiliate of the
Company during the 90 days preceding a sale by such person and who has
beneficially owned shares of Common Stock for at least three years may sell
such shares without regard to the volume, manner of sale or notice requirements
of Rule 144.
Of the 11,769,346 shares of Common Stock outstanding as of the date of
this Prospectus, 7,986,233 shares are freely tradeable without restrictions
currently, unless held by "affiliates" of the Company who are subject to
certain volume limitations and manner of sale restrictions, and 3,783,113 are
"restricted securities" as that term is defined in Rule 144. The two-year
holding period for substantially all of the "restricted securities" will have
been met by November 1996 and such securities may, subject to the agreements
described below, be sold without registration under the Securities Act, subject
to volume limitations and other restrictions. The holders of 3,161,950 shares
of Common Stock have agreed not to publicly sell or otherwise dispose of any
securities of the Company without the prior written consent of Jefferies &
Company, Inc. (the underwriter of two of the Company's public offerings) until
December 13, 1996. As of November 1, 1996, Mr. Chang has pledged 361,750 shares
of Common Stock to banks, and may in the future pledge additional shares to
secure certain personal loans, which shares are not, or would not be, subject
to such agreements.
The holders of warrants to purchase 300,000 shares of Common Stock
(the "Representatives' Warrants") issued to the underwriters in the Company's
second public offering have certain demand and "piggyback" registration rights
with respect to such warrants and/or the shares of Common Stock underlying such
warrants, commencing December 12, 1996. In addition, the holders of an
aggregate of 175,815 shares of Common Stock (including 147,415 shares
registered in this offering) have certain "piggyback" registration rights.
PREFERRED STOCK; POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER AND
CONTRACTUAL PROVISIONS
The Company's Certificate of Incorporation authorizes the Board of
Directors to issue up to 2,000,000 shares of preferred stock, par value $.10
per share. The preferred stock may be issued in one or more series, the terms
of which may be determined at the time of issuance by the Board of Directors,
without further action by stockholders. Although no preferred stock is
currently outstanding and the Company currently has no plans for the issuance
of any preferred stock, there can be no assurance that the Company will not do
so in the future. The ability of the Board of Directors to issue preferred
stock could have the effect of delaying, deferring or preventing a change of
control of the Company or the removal of existing management and, as a result,
could prevent the stockholders of the Company from being paid a premium over
the market value for their shares of Common Stock. The Company's By-Laws
contain provisions requiring advance notice of stockholder proposals and
imposing certain procedural restrictions on stockholders wishing to call a
special meeting of stockholders. The License Agreement may be terminated by the
Licensor if members of the Company's Board of Directors, as of September 1995,
do not constitute at least 50% of the Company's Board of Directors.
Accordingly, such provision could discourage possible future attempts to gain
control of the Company (which attempts, if stockholders were offered a premium
over the market value of their Common Stock, might be viewed as beneficial to
stockholders).
6
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THE COMPANY
Family Golf Centers, Inc. operates golf centers designed to provide a
wide variety of practice opportunities, including facilities for driving,
chipping, putting, pitching and sand play. In addition, the Company's golf
centers typically offer golf lessons instructed by PGA-certified golf
professionals, full-line pro shops and other amenities to encourage family
participation. As of November 1, 1996, the Company owned, leased or managed 33
golf facilities comprised of 24 golf centers and nine combination golf center
and golf course facilities located in 13 states. Of the golf centers operated
by the Company as of November 1, 1996, seven were operated under the name
"Golden Bear Golf Centers," licensed from Jack Nicklaus' licensing company,
Golden Bear Golf Centers, Inc. Of the nine combination golf center and golf
course facilities as of November 1, 1996, six include par-3 golf courses,
generally designed to facilitate the practice of golf, and three include
regulation 18-hole golf courses. The Company has experienced significant recent
growth, primarily through the acquisition or opening of 29 facilities since the
Company's initial public offering in November 1994. The Company's total revenue
increased from $1.9 million in 1992 to $12.4 million for the year ended
December 31, 1995. During the same period, the Company's net income increased
from a net loss of $22,000 to a net profit of $1.1 million.
The Company's strategy is to grow revenue and net income by (i)
increasing the number of golf centers it owns, leases or manages by (a)
identifying and acquiring well-located ranges that have the potential for
improvement under better management and with improved or expanded facilities,
including the addition of enclosed hitting areas, full-line pro shops,
miniature golf courses and other amenities and (b) building new centers in
locations where suitable acquisition opportunities are not available and (ii)
seeking to realize economies of scale through centralized purchasing,
accounting, management information systems and cash management.
According to the National Golf Foundation (the "NGF"), there were
approximately 25 million golfers in the United States in 1995. According to the
Golf Range and Recreational Association, there are currently between 1,900 and
2,300 stand-alone driving ranges in the United States. The NGF estimates that
in 1993 92% of all stand-alone driving ranges were managed by owner-operators.
The Company believes that many of these owner-operated ranges are managed by
individuals who may lack the experience, expertise and financial resources to
compete effectively. The Company believes this highly fragmented industry
presents numerous opportunities for the Company to acquire, upgrade and
renovate golf centers and driving ranges.
The Company believes that it attracts customers to its golf centers
primarily due to the quality, convenience and comfort of its facilities and
their appeal to the whole family. The Company's golf centers are designed
around a driving range with target greens, bunkers and traps to simulate golf
course conditions. The ranges are lighted to permit night play and the hitting
tees are enclosed or sheltered from above and from the rear in a
climate-controlled environment and, in three cases, all or a portion of the
range is enclosed under an air inflated dome to permit all-weather play. There
are approximately 80 to 100 hitting tees in facilities with the two-tier design
and approximately 30 to 60 hitting tees at smaller golf centers. In addition to
the driving range, the Company's golf centers include a number of amenities
designed to appeal to golfers and their families, such as a 4,000-6,000 square
foot clubhouse (including a full-line pro shop, locker facilities, a restaurant
or snack bar and video games), PGA-certified golf instructors, landscaped
18-hole miniature golf courses and a short game practice area (with putting
green and sand traps). The Company's pro shops are stocked with clubs, bags,
shoes, apparel, videos and related accessories from a number of suppliers,
including brand name manufacturers such as Karsten Manufacturing Corporation
(Ping), Callaway Golf Company, Tommy Armour Golf, Wilson Golf Company, Mizuno
Golf Company, Spalding Sports Worldwide, Titleist and Footjoy Worldwide
(Division of American Brands, Inc.), Ashworth Clothing Company and Nicklaus
Golf Equipment Company.
The Company was incorporated in the State of Delaware on July 13,
1994. The Company operates through its wholly-owned subsidiaries, the first of
which was incorporated on March 27, 1991. The Company's principal executive
offices are located at 225 Broadhollow Road, Melville, New York 11747 and its
telephone number is (516) 694-1666.
USE OF PROCEEDS
The net proceeds to the Company from the exercise of the Warrants are
estimated to be $1.4 million. The Company is unable to predict the time, if
ever, when the Warrants will be exercised. Accordingly, it is expected that the
net proceeds from the sale of the Shares underlying the Warrants will be used by
the Company for general corporate purposes. The Company will not receive any
proceeds from the sale of the Shares by the Selling Security Holders.
7
<PAGE>
SELLING SECURITY HOLDERS
The following table sets forth the ownership of the Common Stock by
the Selling Security Holders as of the date such information was provided to
the Company. Since the dates such information was provided to the Company, such
information may have changed. Any or all of the Shares listed below may be
offered for sale by the Selling Security Holders from time to time and therefore
no estimate can be given as to the number of Shares that will be held by the
Selling Security Holders upon termination of this offering (except that in each
case, such number will represent less than 1% of the Common Stock outstanding).
Except as otherwise indicated, the Selling Security Holders listed in the table
have sole voting and investment powers with respect to the Shares indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK NUMBER OF
NAME OF SELLING OWNED BEFORE THE SHARES
SECURITY HOLDER OFFERING OFFERED
- -------------------- ------------------ -----------
<S> <C> <C>
Monness, Crespi, 85,000(2) 70,000
Hardt & Co.,
Inc.(1)
Thomas C. Broyles 20,681(3) 4,014
Frank N. Bilisoly 5,171 5,171
Alfred E. 5,171 5,171
Abiouness
Marion R. Adams 1,358 1,358
Craig L. Slingluff 2,585 2,585
Grover Brook 815 815
Parker
Richard A. and 2,519 2,519
Elly D. Mladick(4)
C. Randolph 5,171 5,171
Hudgins, Jr.
W. Mackenzie 5,171 5,171
Jenkins
Catherine H. Doser 679 679
Residuary Trust
Under Declaration
of Trust
Clarence John 679 679
Doser Declaration
of Trust, FBO
Clarence John
Doser
William R. 2,402(5) 2,184
Battle III
Roger I. Hallock 1,702(6) 750
Hallock Investment 877(7) 734
Partnership
Timothy M. 1,476(8) 1,342
Halloran
JDR Enterprises, 1,577(7) 1,434
Inc. Profit Sharing
Plan, John E.
Kreikemeier &
Jeanett H.
Kreikemeier,
Trustees
DSG Inc. Profit 1,577(7) 1,434
Sharing Trust
8
<PAGE>
Henry F. 1,577(7) 1,434
McCamish, Jr.
Revocable Trust
Frances L. Mellett 2,402(5) 2,184
Sally E. Mitchell 789(9) 717
Thomas L. 2,402(5) 2,184
O'Rourke
Peter F. 1,201(10) 1,092
Shahpazian
H. Charles 1,577(7) 1,434
White, Jr.
H.P. Whitehead, 1,577(7) 1,434
Jr. & Lucinda G.
Whitehead
William M. 789(9) 717
Billingsley
Johnny M. & 1,614(11) 1,467
Donna Johnson(4)
Wilburn E. 788(9) 716
George, Jr.
Gerald F. Schmidt 3,437(12) 3,125
W. Steven Brown 8,976(13) 8,160
John A. Damico 9,218(14) 8,380
Michael McGovern 8,976(13) 8,160
Stacey A. Hart 75,000(15) 65,000
==============================================================
</TABLE>
(1) Monness, Crespi, Hardt & Co., Inc. is a consultant to the Company
pursuant to a consulting agreement and acted as one of the selected
dealers in the Company's public offerings.
(2) Includes 70,000 shares of Common Stock which are issuable upon
exercise of the Warrants issued in connection with the consulting
agreement. The exercise price of the Warrants is $19.875 per Share.
Also includes 15,000 shares of Common Stock which are issuable upon
exercise of the warrants issued in connection with the Company's
public offering in December of 1995. These warrants shall be
exercisable commencing on December 18, 1996 at the exercise price of
$20.25 per Share.
(3) Includes 16,667 shares of Common Stock which are being held in escrow
until March 6, 1997 to satisfy indemnification claims of the Company,
if any, in connection with the Company's acquisition of the Owl Creek
Golf Center in Virginia Beach, Virginia.
(4) Joint tenants with right of survivorship.
(5) Includes options to purchase 218 shares of Common Stock which are
currently exercisable.
(6) Includes options to purchase 75 shares of Common Stock which are
currently exercisable. Also includes 877 shares of Common Stock owned
by Hallock Investment Partnership, a partnership of which Mr. Hallock
is the President of the corporate Managing General Partner.
(7) Includes options to purchase 143 shares of Common Stock which are
currently exercisable.
(8) Includes options to purchase 134 shares of Common Stock which are
currently exercisable.
9
<PAGE>
(9) Includes options to purchase 72 shares of Common Stock which are
currently exercisable.
(10) Includes options to purchase 109 shares of Common Stock which are
currently exercisable.
(11) Includes options to purchase 147 shares of Common Stock which are
currently exercisable.
(12) Includes options to purchase 312 shares of Common Stock which are
currently exercisable.
(13) Includes options to purchase 816 shares of Common Stock which are
currently exercisable.
(14) Includes options to purchase 838 shares of Common Stock which are
currently exercisable.
(15) Includes 10,000 shares of Common Stock which are being held in escrow
until October 30, 1997 to satisfy indemnification claims of the
Company, if any, in connection with the Company's acquisition of The
Seven Iron, Inc., a Colorado corporation, which holds the concession
license from the City of Denver to operate golf and related facilities
at the J.F. Kennedy Golf Course located in Denver, Colorado.
DESCRIPTION OF CAPITAL STOCK
A description of the Company's capital stock is contained in the
Company's registration statement on Form 8-A, which is incorporated by
reference herein. See "Incorporation of Certain Documents by Reference."
PLAN OF DISTRIBUTION
The Shares offered by this Prospectus may be sold from time to time by
the Selling Security Holders or by transferees thereof. No underwriting
arrangements have been entered into by the Selling Security Holders. The
distribution of the Shares by the Selling Security Holders may be effected in
one or more transactions that may take place in the over-the-counter market,
including ordinary broker's transactions, privately negotiated transactions, or
through sales to one or more dealers for resale of such shares as principals,
at prevailing market prices at the time of sale, prices related to prevailing
market prices, or negotiated prices. Underwriter's discounts and usual and
customary or specifically negotiated brokerage fees or commissions may be paid
by a Selling Security Holder in connection with sales of the Shares. To the
extent required, the number of Shares to be sold, the name of the Selling
Security Holder, the purchase price, the name of any agent or broker, and any
applicable commissions, discounts or other compensation to such agents or
brokers with respect to a particular offering will be set forth in a Prospectus
Supplement.
In order to comply with certain state securities laws, if applicable,
the Shares will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In certain states, the Shares may not be sold
unless such Shares have been registered or qualified for sale in such state or
an exemption from registration or qualification is available and is complied
with.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Shares may not simultaneously engage in
market-making activities with respect to such Shares for a period of two or
nine business days prior to the commencement of such distribution. In addition
to, and without limiting, the foregoing, each of the Selling Security Holders
and any other person participating in a distribution will be subject to the
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, rules 10b-2, 10b-6, and 10b-7, which
provisions may limit the timing of purchases and sales of any of the Shares by
the Selling Security Holders or any such other person. All of the foregoing may
affect the marketability of the Shares.
Pursuant to the Warrants and certain Registration Rights Agreements,
the Company will pay all the fees and expenses incident to the registration of
the Shares (other than underwriting discounts and commissions, if any, and the
Selling Security Holders' counsel fees and expenses, if any).
10
<PAGE>
In addition, the Company has agreed to indemnify the Selling Security
Holders against certain liabilities, including liabilities under the Securities
Act. In addition, each Selling Security Holder has agreed to indemnify the
Company against certain liabilities, including liabilities under the Securities
Act. Such agreements also provide for rights of contribution if such
indemnification is not available.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by Delaware law. Delaware law
provides that directors of a company will not be personally liable for monetary
damages for breach of their fiduciary duties as directors, except for liability
for (i) any breach of their duty of loyalty to the company or its stockholders,
(ii) acts or omissions not in good faith or involving intentional misconduct or
a knowing violation of law, (iii) unlawful payment of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law or (iv) any transaction from which the director derived
an improper personal benefit.
The Company's Certificate of Incorporation provides that the Company
shall indemnify its officers, directors, employees and other agents to the
fullest extent permitted by Delaware law.
The Company maintains a policy of insurance under which the directors
and officers of the Company are insured, subject to the limits of the policy,
against certain losses arising from claims made against such directors and
officers by reason of any acts or omissions covered under such policy in their
respective capacities as directors or officers, including liabilities under the
Securities Act. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
(the "Commission") such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
LEGAL MATTERS
The validity of the Shares has been passed upon for the Company by
Squadron, Ellenoff, Plesent & Sheinfeld, LLP, 551 Fifth Avenue, New York, New
York 10176. Kenneth R. Koch, Esq., a partner of Squadron, Ellenoff, Plesent &
Sheinfeld, LLP, holds options to purchase shares of the Company's Common Stock.
EXPERTS
The consolidated financial statements of the Company as of December
31, 1995 and for each of the years in the two year period then ended,
incorporated herein by reference to the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1995 have been so incorporated in
reliance on the report of Richard A. Eisner & Company, LLP, independent
auditors, given upon the authority of said firm as experts in accounting and
auditing.
11
<PAGE>
=================================================================
No dealer, salesman, or any other person has been authorized to give any
information or to make any representation not contained in this Prospectus
in connection with the offering made hereby, and, if given or made, such
information or representation must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, any of the securities offered hereby
in any jurisdiction to any person to whom it is unlawful to make such an
offer or solicitation in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances
create any implication that there has been no change in the affairs of the
Company since the date hereof or that the information contained herein is
correct as of any time subsequent to the dates as of which such information
is furnished.
--------------------
TABLE OF CONTENTS
Page
Available Information................................... 2
Incorporation of Certain Documents by Reference......... 2
Risk Factors............................................ 3
The Company............................................. 7
Use of Proceeds......................................... 7
Selling Security Holders................................ 8
Description of Capital Stock............................ 10
Plan of Distribution.................................... 10
Limitation of Liability and Indemnification of Directors
and Officers............................................ 11
Legal Matters........................................... 11
Experts................................................. 11
<PAGE>
=================================================
217,415 SHARES
_________________
FAMILY GOLF
CENTERS, INC.
COMMON STOCK
_________________
PROSPECTUS
_________________
NOVEMBER __, 1996
=================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all expenses (subject to
future contingencies) incurred or expected to be incurred by the Company in
connection with the issuance and distribution of the securities being offered
hereby (items marked with an asterisk (*) represent estimated expenses):
SEC Registration Fee .................................. $1,832.38
Legal Fees and Expenses................................... 15,000*
Accounting Fees and Expenses............................... 3,500*
Transfer Agent and Registrar Fees......................... 1,000*
Miscellaneous............................................. 667.62*
-------
Total..................................................... 22,000*
=======
* Estimate
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Delaware General Corporation Law, Section 102(b)(7), enables a
corporation in its original certificate of incorporation, or an amendment
thereto validly approved by stockholders, to eliminate or limit personal
liability of members of its Board of Directors for violations of a director's
fiduciary duty of care. However, the elimination or limitation shall not apply
where there has been a breach of the duty of loyalty, failure to act in good
faith, intentional misconduct or a knowing violation of a law, the payment of a
dividend or approval of a stock repurchase which is deemed illegal or an
improper personal benefit is obtained. The Company's Certificate of
Incorporation includes the following language:
No director of the Corporation shall be liable to the Corporation or
any of its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that this provision does not eliminate the liability of the
director (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of Title 8 of the Delaware Code, or (iv) for any transaction
from which the director derived an improper personal benefit.
Article Eighth of the Certificate of Incorporation of the Company
permits indemnification of, and advancement of expenses to, among others,
officers and directors of the Corporation. Such Article provides as follows:
"(a) Each person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a director,
officer , employee, or agent of the Corporation or any of its direct or
indirect subsidiaries or is or was serving at the request of the Corporation as
a director, officer, employee, or agent of any other corporation of a
partnership, joint venture, trust, or other enterprise, including service with
respect to an employee benefit plan (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a
director, officer, employee, or agent or in any other capacity while serving as
a director, officer, employee, or agent, shall be indemnified and held harmless
by the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than permitted prior
thereto), against all expense, liability, and loss (including attorneys' fees,
judgments, fines, excise or other taxes assessed with respect to an employee
benefit plan, penalties, and amounts paid in settlement) reasonable incurred or
suffered by such indemnitee in connection therewith, and such indemnification
shall continue as to an indemnitee who has ceased to be a director, officer,
employee, or agent and shall inure to the benefit of the indemnitee's heirs,
executors, and administrators; provided, however, that, except as provided in
paragraph (c) of this Article Eighth with respect to proceedings to enforce
rights to indemnification, the Corporation shall indemnify and such indemnitee
in connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation.
(b) The right to indemnification conferred in paragraph (a) of this
Article Eighth shall include the right to be paid by the Corporation the
expenses incurred in defending any proceeding for which such right to
indemnification is applicable in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that, if the Delaware General
II-II
<PAGE>
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking (hereinafter an "undertaking"),
by or on behalf of such indemnitee, to repay all amounts so advanced if it
shall ultimately be determined by final judicial decision from which there is
not further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Article Eighth or otherwise.
(c) The rights to indemnification and to the advancement of expenses
conferred in paragraphs (a) and (b) of this Article Eighth shall be contract
rights. If a claim under paragraph (a) or (b) of this Article Eighth is not
paid in full by the Corporation within sixty days after a written claim has
been received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be twenty
days, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole
or in part in any such suit, or in a suit brought by the Corporation to recover
an advancement of expenses pursuant to the terms of an undertaking, the
indemnitee shall be entitled to be paid also the expenses of prosecuting or
defending such suit. In (i) any suit brought by the indemnitee to enforce a
right to indemnification hereunder (but not in a suit brought by an indemnitee
to enforce a right to an advancement of expenses) it shall be a defense that,
the indemnitee has not met any applicable standard for indemnification set
forth in the Delaware General Corporation Law, and (ii) any suit by the
Corporation to recover an advancement of expense pursuant to the terms of an
undertaking, the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the indemnitee has not met such
applicable standard of conduct, shall create a presumption that the indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the indemnitee, be a defense to such suit. In any suit brought by
the indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under this Article Eighth or otherwise, shall be on the Corporation.
(d) The rights to indemnification and to the advancement of expenses
conferred in this Article Eighth shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, this
certificate of incorporation, by-law, agreement, vote of stockholders or
disinterested directors, or otherwise.
(e) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee, or agent of the Corporation or
another corporation, partnership, joint venture, trust, or other enterprise
against any expense, liability, or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability, or
loss under the Delaware General Corporation Law.
(f) The Corporation's obligation, if any, to indemnify any person who
was or is serving as a director, officer, employee, or agent of any direct or
indirect subsidiary of the Corporation or, at the request of the Corporation,
of any other corporation or of a partnership, joint venture, trust, or other
enterprise shall be reduced by an amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust
or other enterprise.
(g) Any repeal or modification of the foregoing provisions of this
Article Eighth shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of
such repeal or modification."
<PAGE>
The Company maintains a policy of insurance under which the directors
and officers of the Company are insured, subject to the limits of the policy,
against certain losses arising from claims made against such directors and
officers by reason of any acts or omissions covered under such policy in their
respect capacities as directors and officers.
ITEM 16. EXHIBITS
(a) The following exhibits are filed herewith:
*3.1 Certificate of Incorporation, as amended.
**3.2 Amended and Restated Bylaws.
II-III
<PAGE>
5.1 Opinion of Squadron, Ellenoff, Plesent & Sheinfeld, LLP.
10.1 Form of Warrant to purchase 70,000 shares of Common Stock issued to
Monness, Crespi, Hardt & Co., Inc. by Family Golf Centers, Inc.
23.1 Consent of Richard A. Eisner & Company, LLP.
23.2 Consent of Squadron, Ellenoff, Plesent & Sheinfeld, LLP (contained in
Opinion filed as Exhibit 5.1)
- ----------
* Incorporated by reference to exhibit 3.1 filed in Amendment No. 1 to
the Company's Registration Statement on Form SB-2 filed on June 12,
1996 (Registration No. 333-4541).
** Incorporated by reference to exhibit 3.2 to the Company's Registration
Statement on Form SB-2 filed on May 24, 1996 (Registration Statement
No. 333-4541).
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) that, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(b) That, for purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at the time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of Registrant
pursuant to the foregoing provisions, or otherwise, Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a director, officer, or controlling person of Registrant in
the successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities
being registered, Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-IV
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing this Registration Statement on Form S-3
("Registration Statement") and authorized this Registration Statement to be
signed on its behalf by the undersigned, in the City of Melville, State of New
York on November 6, 1996.
FAMILY GOLF CENTERS, INC.
By: /s/ Krishnan P. Thampi
----------------------------
Krishnan P. Thampi
Chief Financial Officer
and Director (Principal
Financial and
Accounting Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Dominic Chang and Krishnan P. Thampi, or
any one of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place, and
stead, in any and all capacities, to sign and file (i) any and all pre- or
post-effective amendments to this Registration Statement, and other documents
in connection therewith, and (ii) a Registration Statement, and any and all
amendments thereto, relating to the offering covered hereby filed pursuant to
Rule 462(b) under the Securities Act of 1933, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
--------- ----- ----
/s/ Dominic Chang Chairman of the Board, November 6, 1996
------------------------- President and Chief
Dominic Chang Executive Officer
(Principal Executive
Officer)
/s/ Krishnan P. Thampi Chief Financial Officer November 6, 1996
------------------------- and Director (Principal
Krishnan P. Thampi Financial and
Accounting Officer)
/s/ James Ganley
------------------------- Director November 6, 1996
James Ganley
------------------------- Director November 6, 1996
Jimmy C.M. Hsu
------------------------- Director November 6, 1996
Yupin Wang
II-V
<PAGE>
Index to Exhibits
Page In
Sequential
Numbering
Exhibit No. System
*3.1 Certificate of Incorporation, as amended.
**3.2 Amended and Restated Bylaws.
5.1 Opinion of Squadron, Ellenoff, Plesent & Sheinfeld, LLP.
10.1 Form of Warrant to purchase 70,000 shares of Common Stock, issued to
Monness, Crespi, Hardt and Co., Inc. by Family Golf Centers, Inc.
23.1 Consent of Richard A. Eisner & Company, LLP.
23.2 Consent of Squadron, Ellenoff, Plesent & Sheinfeld, LLP (contained in
Opinion filed as Exhibit 5.1).
- ----------
* Incorporated by reference to exhibit 3.1 filed in amendment No. 1 to
the Company's Registration Statement on Form SB-2, filed on June 12,
1996 (Registration No. 333-4541).
** Incorporated by reference to exhibit 3.2 to the Company's Registration
Statement on Form SB-2 filed on May 24, 1996 (Registration Statement
No. 333-4541).
II-VI
[LETTERHEAD OF SQUADRON, ELLENOFF, PLESENT & SHEINFELD, LLP]
NOVEMBER 7, 1996
Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
You have requested our opinion, as counsel for Family Golf Centers,
Inc., a Delaware corporation (the "Company"), in connection with the
Registration Statement on Form S-3 (the "Registration Statement"), filed with
the Securities and Exchange Commission under the Securities Act of 1933 (the
"Act"). The Registration Statement relates to an offering by certain selling
stockholders named therein (the "Stockholders") from time to time of up to
217,415 shares (the "Shares") of common stock, par value $.01 per share, of the
Company (the "Common Stock"). Of such Shares, 70,000 shares (the "Warrant
Shares") are issuable upon the exercise of certain warrants (the "Warrants")
issued to a consultant of the Company.
We have examined such records and documents and made such examinations
of law as we have deemed relevant in connection with this opinion. We have
assumed that there will be no changes in applicable law between the date of this
opinion and the date the Shares proposed to be sold by the Stockholders pursuant
to the Registration Statement are actually sold. It is our opinion that (i) the
Warrant Shares have been duly authorized and, when issued and delivered upon
exercise of the Warrants in accordance with the terms of the Warrant, will be
validly issued, fully paid and non-assessable, and (ii) the Shares (other than
the Warrant Shares) have been duly authorized and validly issued and are fully-
paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Registration Statement. In so doing, we do not admit
that we are in the category of persons whose consent is required under Section
7 of the Act or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
Very truly yours,
/S/ Squadron, Ellenoff
Plesent & Sheinfeld, LLP
Exhibit 10.1
------------
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY BE REOFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
VOID AFTER 5:00 P.M., NEW YORK TIME, ON MARCH 7, 1997 OR IF NOT A BUSINESS DAY,
AS DEFINED HEREIN, AT 5:00 P.M., NEW YORK TIME, ON THE NEXT FOLLOWING BUSINESS
DAY.
NO. MC-1
WARRANT TO PURCHASE SHARES OF
COMMON STOCK
OF
FAMILY GOLF CENTERS, INC.
TRANSFER RESTRICTED -- SEE SECTION 6.02
____________ SHARES
This certifies that, for good and valuable consideration, Monness, Crespi,
Hardt & Co., Inc., and its registered, permitted assigns (collectively, the
"WARRANTHOLDER"), is entitled to purchase from Family Golf Centers, Inc., a
corporation incorporated under the laws of the State of Delaware (the
"COMPANY"), subject to the terms and conditions hereof, at any time on or after
March 7, 1996, and before 5:00 P.M., New York time, on March 7, 1997 (or, if
such day is not a Business Day, at or before 5:00 P.M., New York time, on the
next following Business Day), the number of fully-paid and non-assessable
shares of common stock (par value $.01 per share) of the Company stated above
at the Exercise Price. The Exercise Price and the number of shares purchasable
hereunder are subject to adjustment as provided in Article III hereof.
ARTICLE I
Section 1.01: Definition of Terms. As used in this Warrant, the
following capitalized terms shall have the following respective meanings:
(a) Business Day: A day other than a Saturday, Sunday or other day on
which banks in the State of New York are authorized by law to remain closed.
(b) Common Stock: Common Stock, par value $.01 per share, of the
Company.
(c) Common Stock Equivalents: Securities that are convertible into or
exercisable for shares of Common Stock.
(d) Exchange Act: The Securities Exchange Act of 1934, as amended.
(e) Exercise Price: $19 7/8 per Warrant Share, as such price may be
adjusted from time to time pursuant to Article III hereof.
(f) Expiration Date: 5:00 P.M., New York time, on March 7, 1997 or, if
such day is not a Business Day, the next succeeding day which is a Business
Day.
(g) Holder: A holder of Warrants and/or Registrable Securities.
(h) NASD: National Association of Securities Dealers, Inc.
II-VIII
<PAGE>
(i) Person: An individual, partnership, joint venture, corporation,
trust, unincorporated organization or government or any department or agency
thereof.
(j) Piggyback Registration: See Section 7.01.
(k) Prospectus: Any prospectus included in any Registration Statement,
as amended or supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable Securities covered by
such Registration Statement and all other amendments and supplements to the
Prospectus, including post-effective amendments and all material incorporated
by reference in such Prospectus.
(l) Public Offering: A public offering of any of the Company's equity
or debt securities pursuant to a registration statement under the Securities
Act.
(m) Registrable Securities: Any Warrant Shares issued or issuable to
the Warrant holder, and/or its designees or transferees as permitted under
Section 6.02 and/or other securities that may be or are issued by the Company
upon exercise of Warrants, including those which may thereafter be issued by
the Company in respect of any such securities by means of any stock splits,
stock dividends, recapitalizations or the like, and as adjusted pursuant to
Article III hereof; provided, however, that as to any particular security
contained in Registrable Securities, such securities shall cease to be
Registrable Securities (i) when a Registration Statement with respect to the
sale of such securities shall have become effective under the Securities Act;
or (ii) when they shall have been sold or are saleable pursuant to Rule 144 (or
any successor provision) under the Securities Act.
(n) Registration Expenses: Any and all expenses incident to
performance of or compliance with Article VII, including, without limitation,
(i) all SEC, stock exchange, NASD registration and filing fees, listing and
transfer agent fees; (ii) all fees and expenses of complying with securities or
blue sky laws (including the fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities); (iii) all printing, mailing, messenger and delivery expenses and
(iv) all fees and disbursements of counsel for the Company and of its
independent certified public accountants, including the expenses of any special
audits and/or "cold comfort" letters required by or incident to such
performance and compliance, but excluding underwriting fees, discounts and
commissions and transfer taxes, if any.
(o) Registration Statement: Any registration statement of the Company
filed or to be filed with the SEC which covers any of the Registrable
Securities pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such Registration Statement,
including post-effective amendments and all exhibits to and material
incorporated by reference by such registration statement.
(p) SEC: The Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act or the Exchange Act.
(q) Securities Act: The Securities Act of 1933, as amended.
(r) Warrant Shares: Common Stock purchasable upon exercise of the
Warrants.
(s) Warrantholder: The person(s) or entity(ies) to whom this Warrant
is originally issued, or any successor in interest thereto, or any assignee or
transferee thereof, in whose name this Warrant is registered upon the books to
be maintained by the Company for that purpose.
(t) Warrants: This Warrant and all other warrants that may be issued
in its or their place (together initially evidencing the right to purchase an
aggregate of 70,000 shares of Common Stock).
<PAGE>
ARTICLE II
Duration and Exercise of Warrant
Section 2.01: Duration of Warrant. (a) Subject to the terms contained
herein, this Warrant may be exercised at any time after March 7, 1996, and
before 5:00 P.M., New York time, on the Expiration Date. If this Warrant is not
exercised on the Expiration Date, it shall become void, and all rights
hereunder shall thereupon cease.
Section 2.02 : Exercise of Warrant. (a) The Warrantholder may exercise
this Warrant, in whole or in part, as follows:
i) By presentation and surrender of this Warrant to the
Company at its corporate office at 225 Broadhollow Road, Melville, New
York 11747, with the Subscription Form annexed hereto duly executed
and accompanied by payment of the Exercise Price for each Warrant
Share to be purchased. Payment for Warrant Shares shall be made in
cash or by certified or official bank check payable to the order of
the Company; or
ii) By presentation and surrender of this Warrant to
the Company at its corporate office set forth above, with a Cashless
Exercise Form annexed hereto duly executed (a "CASHLESS EXERCISE").
Such presentation and surrender shall be deemed a waiver of the
Warrantholder's obligation to pay all or any portion of the aggregate
Exercise Price. In the event of a Cashless Exercise, the Warrantholder
shall exchange its Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares for which the
Warrantholder desires to exercise this Warrant by a fraction, the
numerator of which shall be the difference between the then current
market price per share of the Common Stock and the Exercise Price, and
the denominator of which shall be the then current market price per
share of Common Stock. For purposes of any computation under this
Section 2.02(a)(ii), the then current market price per share of Common
Stock at any date shall be deemed to be the average for the thirty
consecutive business days immediately prior to the Cashless Exercise
of the daily closing prices of the Common Stock on the principal
national securities exchange on which the Common Stock is admitted to
trading or listed, or if not listed or admitted to trading on any such
exchange, the closing prices as reported by the Nasdaq National
Market, or if not then listed on the Nasdaq National Market, the
average of the highest reported bid and lowest reported asked prices
as reported by the National Association of Securities Dealers, Inc.
Automated Quotations System ("Nasdaq") or if not then publicly traded,
the fair market price of the Common Stock as determined by the Board
of Directors of the Company.
(b) Upon receipt of this Warrant with the Subscription Form
duly executed and accompanied by payment of the aggregate Exercise Price or
upon receipt of this Warrant with a Cashless Exercise form duly executed, in
each case as set forth in Section 2.02(a) for the Warrant Shares for which this
Warrant is then being exercised, the Company shall cause to be issued
certificates for the total number of whole shares of Common Stock for which
this Warrant is being exercised or the net amount of Warrant Shares which the
Warrantholder is entitled to receive upon a Cashless Exercise (adjusted to
reflect the effect of the anti-dilution provisions contained in Article III
hereof, if any, and as provided in Section 4.04 hereof) in such denominations
as are requested for delivery to the Warrantholder, and the Company shall
thereupon deliver such certificates to the Warrantholder. If at the time this
Warrant is exercised a registration statement is not in effect to register
under the Securities Act the Warrant Shares issuable upon exercise of this
Warrant, the Company may require the Warrantholder to make such investment
intent representations, and may place such legends on certificates representing
the Warrant Shares, as may be reasonably required in the opinion of counsel to
the Company to permit the Warrant Shares to be issued without such
registration.
(c) In case the Warrantholder shall exercise this Warrant
with respect to less than all of the Warrant Shares that may be purchased under
this Warrant, the Company shall execute a new warrant in the form of this
Warrant for the balance of such Warrant Shares and deliver such new warrant to
the Warrantholder.
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<PAGE>
(d) The Company shall pay any and all stock transfer and
similar taxes which may be payable in respect of the issue of this Warrant or
in respect of the issue of any Warrant Shares. The Company shall not, however,
be required to pay any tax imposed on income or gross receipts of the
Warrantholder or any tax which may be payable by the Warrantholder in respect
of any transfer involved in the issuance or delivery of this Warrant or of
Warrant Shares in a name other than that of the Warrantholder at the time of
surrender and, until the payment of such tax, shall not be required to issue
such Warrant Shares.
(e) The Company shall use its best efforts to cause all
Warrant Shares to be listed on each securities exchange, if any, on which
similar securities issued by the Company are then listed or, if not then
listed, cause such Warrant Shares to be included in a national automated
quotation system.
ARTICLE III
Adjustment of Shares of Common Stock
Purchasable and of Exercise Price
The Exercise Price and the number and kind of Warrant Shares shall be
subject to adjustment from time to time upon the happening of certain events as
provided in this Article III.
Section 3.01: Mechanical Adjustments. (a) If at any time prior to the
exercise of this Warrant in full, the Company shall (i) pay a dividend or make
a distribution on its shares of Common Stock in either case in shares of Common
Stock; (ii) subdivide, reclassify or recapitalize its outstanding Common Stock
into a greater number of shares; (iii) combine, reclassify or recapitalize its
outstanding Common Stock into a smaller number of shares; or (iv) issue by
reclassification of its Common Stock any shares of capital stock of the
Company, the Exercise Price in effect at the time of the record date of such
dividend, distribution, subdivision, combination, reclassification or
recapitalization shall be adjusted so that the Warrantholder shall be entitled
to receive, upon exercise of this Warrant, the aggregate number and kind of
shares which, if this Warrant had been exercised in full immediately prior to
such time, he would have owned upon such exercise and been entitled to receive
upon such dividend, subdivision combination, reclassification or
recapitalization. Any adjustment required by this paragraph 3.01(a) shall be
made whenever any event listed in this paragraph 3.01(a) shall occur.
(b) If at any time prior to the exercise of this Warrant in
full, the Company shall issue or distribute to the holders of shares of Common
Stock evidences of its indebtedness, any other securities of the Company or any
cash, property or other assets (excluding a dividend, distribution,
combination, reclassification or recapitalization referred to in Section
3.01(a), cash dividends or cash distributions paid out of net profits legally
available therefor if the full amount thereof, together with the value of other
dividends and distributions made substantially concurrently therewith or
pursuant to a plan which includes payment thereof, is equivalent to not more
than 5% of the Company's net worth) (any such nonexcluded event being herein
called a "SPECIAL DIVIDEND"), the Exercise Price shall be decreased immediately
after the effective date of such Special Dividend to a price determined by
multiplying the Exercise Price then in effect by a fraction the numerator of
which shall be the then current market price per share of the Common Stock (as
defined in Section 3.01(e)) on such effective date less the fair market value
(as determined in good faith by the Company's Board of Directors) of the
evidences of indebtedness, securities or property, or other assets issued or
distributed in such Special Dividend applicable to one share of Common Stock
and the denominator of which shall be the then current market price per share
of Common Stock. Any adjustment required by this paragraph 3.01(b) shall be
made whenever the effective date of any such Special Dividend occurs.
(c) If at any time prior to the exercise of this Warrant in
full, the Company shall make a distribution to the holders of shares of Common
Stock other than dividends or distributions covered by Section 3.01(a) or (b)
of subscription rights, options or warrants for Common Stock or Common Stock
Equivalents, then
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<PAGE>
in each such case the Exercise Price in effect after the effective date of such
distribution shall be adjusted to the price determined by multiplying the
Exercise Price in effect immediately prior thereto by a fraction, the numerator
of which shall be the current market price per share of Common Stock (as
defined in Section 3.01(e)), less the fair market value (as determined in good
faith by the Company's Board of Directors) of said Common Stock subscription
rights, options and warrants or of such Common Stock Equivalents applicable to
one share of Common Stock, and the denominator of which shall be the current
market price per share of Common Stock. Any adjustment required by this
paragraph 3.01(c) shall be made whenever the effective date of any such
distribution occurs. To the extent such shares of Common Stock (or Common Stock
Equivalents) are not delivered after the expiration of such subscription
rights, options or warrants, the Exercise Price shall be readjusted to the
Exercise Price which would then be in effect had the adjustments made upon the
issuance of such rights, options or warrants been made on the basis of delivery
of only the number of shares of Common Stock (or Common Stock Equivalents)
actually delivered, but no such readjustment shall have the effect of
increasing the Exercise Price to an amount which exceeds the lower of (i) the
Exercise Price on the original adjustment date (prior to the original
adjustment) or (ii) the Exercise Price that would have resulted from any other
adjustments pursuant to this Article III (other than adjustments for the
issuance of subscription rights, options or warrants which expire unexercised).
(d) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to one or more of paragraphs (a), (b) and (c) of
this Section 3.01, the Warrant Shares shall simultaneously be adjusted by
multiplying the number of Warrant Shares initially issuable upon exercise of
each Warrant by the Exercise Price in effect immediately prior to the date
thereof and dividing the product so obtained by the Exercise Price, as
adjusted.
(e) For the purpose of any computation under this Section
3.01, the current market price per share of Common Stock at any date shall be
deemed to be the average of the daily closing price for 30 consecutive Business
Days commencing 45 Business Days before such date. The closing price for each
day shall be the closing price of the Common Stock as reported by the national
securities exchange upon which the Common Stock is then listed or if not listed
on any such exchange, the average of the closing prices as reported by the
Nasdaq National Market, or if not then listed on the Nasdaq National Market,
the average of the highest reported bid and lowest reported asked prices as
reported by Nasdaq, or if not then publicly traded, as the fair market price as
determined by the Company's Board of Directors.
(f) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least ten
cents ($.10) in such price; provided, however, that any adjustments which by
reason of this paragraph (f) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 3.01 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
(g) If at any time, as a result of any adjustment made
pursuant to Section 3.01(a), the Warrantholder thereafter shall become entitled
to receive any shares of the Company other than Common Stock, thereafter the
number of such other shares so receivable upon exercise of any Warrant shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Stock
contained in this Section 3.01.
(h) In case any event shall occur as to which the other
provisions of this Article III are not strictly applicable but as to which the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles hereof then, in each such case, the Warrantholders representing the
right to purchase a majority of the Warrant Shares subject to all outstanding
Warrants may appoint a firm of independent public accountants of recognized
national standing reasonably acceptable to the Company, which shall give their
opinion as to the adjustment, if any, on a basis consistent with the essential
intent and principles established herein, necessary to preserve the purchase
rights represented by the Warrants. Upon
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<PAGE>
receipt of such opinion, the Company will promptly mail a copy thereof to the
Warrantholder and shall make the adjustments described therein. The fees and
expenses of such independent public accountants shall be borne by the Company.
(i) If, as a result of an adjustment made pursuant to this
Article III, the Warrantholder thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or shares of
Common Stock and other capital stock of the Company, the Board of Directors
(whose determination shall be conclusive and shall be described in a written
notice to the Warrantholder promptly after such adjustment) shall determine the
allocation of the adjusted Exercise Price between or among shares or such
classes of capital stock or shares of Common Stock and other capital stock.
Section 3.02: Notice of Adjustment. Whenever the number of Warrant
Shares or the Exercise Price is adjusted as herein provided, the Company shall
prepare and deliver to the Warrantholder a certificate signed by its President,
any Vice President, Treasurer or Secretary, setting forth the adjusted number
of shares purchasable upon the exercise of this Warrant and the Exercise Price
of such shares after such adjustment, setting forth a brief statement of the
facts requiring such adjustment and setting forth the computation by which such
adjustment was made.
Section 3.03: No Adjustment for Dividends. Except as provided in
Section 3.01(b) and (c) of this Agreement, no adjustment in respect of any cash
dividends shall be made during the term of this Warrant or upon the exercise of
this Warrant.
Section 3.04: Preservation of Purchase Rights in Certain Transactions.
In case of any capital reorganization or reclassification, or any consolidation
or merger to which the Company is a party other than a merger or consolidation
in which the Company is the continuing corporation, or in case of any sale or
conveyance to another entity of the property of the Company as an entirety or
substantially as an entirety, or in the case of any statutory exchange of
securities with another corporation (including any exchange effected in
connection with a merger of a third corporation into the Company), this
Warrantholder shall have the right thereafter to receive on the exercise of
this Warrant the kind and amount of securities, cash or other property which
the Warrantholder would have owned or have been entitled to receive immediately
after such reorganization, reclassification, consolidation, merger, statutory
exchange, sale or conveyance had this Warrant been exercised immediately prior
to the effective date of such reorganization, reclassification, consolidation,
merger, statutory exchange, sale or conveyance and in any such case, if
necessary, appropriate adjustment shall be made in the application of the
provisions set forth in this Article III with respect to the rights and
interests thereafter of the Warrantholder to the end that the provisions set
forth in this Article III shall thereafter correspondingly be made applicable,
as nearly as may reasonably be, in relation to any shares of stock or other
securities or property thereafter deliverable on the exercise of this Warrant.
The provisions of this Section 3.04 shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, statutory
exchanges, sales or conveyances. The issuer of any shares of stock or other
securities or property thereafter deliverable on the exercise of this Warrant
shall be responsible for all of the agreements and obligations of the Company
hereunder. Notice of any such reorganization, reclassification, consolidation,
merger, statutory exchange, sale or conveyance and of said provisions so
proposed to be made, shall be mailed to the Holders of the Warrants not less
than 30 days prior to such event. A sale of all or substantially all of the
assets of the Company for a consideration consisting primarily of securities
shall be deemed a consolidation or merger for the foregoing purposes.
Section 3.05: Form of Warrant After Adjustments. The form of this
Warrant need not be changed because of any adjustments in the Exercise Price or
the number or kind of the Warrant Shares, and Warrants theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in this Warrant, as initially issued.
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<PAGE>
ARTICLE IV
Other Provisions Relating
to Rights of Warrantholder
Section 4.01: No Rights as Stockholders; Notice to Warrantholders.
Nothing contained in this Warrant shall be construed as conferring upon the
Warrantholder or his or its transferees the right to vote or to receive
dividends or to consent or to receive notice as a stockholder in respect of any
meeting of stockholders for the election of directors of the Company or of any
other matter, or any rights whatsoever as stockholders of the Company. The
Company shall give notice to the Warrantholder if at any time prior to the
expiration or exercise in full of the Warrants, any of the following events
shall occur:
(a) the Company shall declare any dividend payable in any
securities upon shares of Common Stock or make any distribution (other than a
cash dividend subject to the parenthetical set forth in Section 3.01(b)) to the
holders of shares of Common Stock;
(b) the Company shall offer to the holders of shares of
Common Stock any additional shares of Common Stock or Common Stock Equivalents
or any right to subscribe thereto;
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, or sale of all, or
substantially all, of its property, assets, and business as an entirety) shall
be proposed; or
(d) any consolidation of the Company with or merger of the
Company into another corporation, or in the case of any sale or conveyance to
another corporation of the property of the Company, as an entirety or
substantially as an entirety shall be proposed.
Such giving of notice shall be initiated (i) at least ten (10) Business Days
prior to the date fixed as a record date or the date of closing of the
Company's stock transfer books for the determination of the stockholders
entitled to such dividend, distribution, or subscription rights, or for the
determination of the stockholders entitled to vote on such proposed merger,
consolidation, sale, conveyance, dissolution, liquidation or winding up. Such
notice shall specify such record date or the date of closing the stock transfer
books, as the case may be. Failure to provide such notice shall not affect the
validity of any action taken in connection with such dividend, distribution or
subscription rights, or proposed merger, consolidation, sale, conveyance,
dissolution, liquidation or winding up.
Section 4.02: Lost, Stolen, Mutilated or Destroyed Warrants. If this
Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms
as to indemnity or otherwise as it may in its discretion impose (which shall,
in the case of a mutilated Warrant, include the surrender thereof), issue a new
Warrant of like denomination and tenor as, and in substitution for, this
Warrant.
Section 4.03: Reservation of Shares.
(a) The Company shall at all times reserve and keep available
for the exercise of this Warrant such number of authorized shares of Common
Stock as are sufficient to permit the exercise in full of this Warrant.
(b) Prior to the issuance of any shares of Common Stock upon
exercise of this Warrant, the Company shall use its best efforts to secure the
listing of such shares of Common Stock upon the securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed.
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(c) The Company covenants that all shares of Common Stock
issued on exercise of this Warrant will be validly issued, fully paid,
nonassessable and free of preemptive rights.
Section 4.04: No Fractional Shares. Anything contained herein to the
contrary notwithstanding, the Company shall not be required to issue any
fraction of a share in connection with the exercise of this Warrant, and in any
case where the Warrantholder would, except for the provisions of this Section
4.04, be entitled under the terms of this Warrant to receive a fraction of a
share upon the exercise of this Warrant, the Company shall, upon the exercise
of this Warrant and receipt of the Exercise Price, issue the smaller number of
whole shares purchasable upon exercise of this Warrant and shall make a cash
adjustment in respect of such fraction of a share to which the Warrantholder
would otherwise be entitled.
ARTICLE V
Treatment of Warrantholder
Prior to due presentment for registration of transfer of this Warrant,
the Company may deem and treat the Warrantholder as the absolute owner of this
Warrant (notwithstanding any notation of ownership or other writing hereon) for
all purposes and shall not be affected by any notice to the contrary.
ARTICLE VI
Split-Up, Combination.
Exchange and Transfer of Warrants
Section 6.01: Split-Up, Combination and Exchange of Warrants. Subject
to the provisions of Section 6.02 hereof, this Warrant may be split up,
combined or exchanged for another Warrant or Warrants containing the same terms
to purchase a like aggregate number of Warrant Shares. If the Warrantholder
desires to split up, combine or exchange this Warrant, he or it shall make such
request in writing delivered to the Company and shall surrender to the Company
this Warrant and any other Warrants to be so split up, combined or exchanged.
Upon any such surrender for a split up, combination or exchange, the Company
shall execute and deliver to the person entitled thereto a Warrant or Warrants,
as the case may be, as so requested. The Company shall not be required to
effect any split up, combination or exchange which will result in the issuance
of a Warrant entitling the Warrantholder to purchase upon exercise a fraction
of a share of Common Stock or a fractional Warrant. The Company may require
such Warrantholder to pay a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Warrants.
Section 6.02: Restrictions on Transfer. This Warrant may not be sold,
hypothecated, exercised, assigned or transferred (any such action, a
"TRANSFER") except in accordance with and subject to the provisions of the
Securities Act and the rules and regulations promulgated thereunder. If at the
time of a Transfer, a Registration Statement is not in effect to register this
Warrant, the Company may require the Warrantholder to make such
representations, and may place such legends on certificates representing this
Warrant, as may be reasonably required in the opinion of counsel to the Company
to permit a Transfer without such registration.
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ARTICLE VII
Registration Under the Securities Act of 1933
Section 7.01: Piggyback and Automatic Registration.
(a) Right to Include Registrable Securities. If at any time
after March 7, 1997 and prior to March 7, 1999, the Company proposes to
register any shares of the Common Stock or any other class of equity security
or any Common Stock Equivalent under the Securities Act on any form for the
registration of securities under such Act, whether or not for its own account
(other than (i) a registration of a stock option, stock purchase or
compensation or incentive plan or of stock issued or issuable pursuant to any
such plan, or a dividend investment plan; (ii) a registration of securities
proposed to be issued in exchange for securities or assets of, or in connection
with a merger or consolidation with, another corporation; or (iii) a
registration of securities proposed to be issued in exchange for other
securities of the Company) in a manner which would permit registration of
Registrable Securities for sale to the public under the Securities Act (a
"PIGGYBACK REGISTRATION"), it shall at such time give written notice to all
Holders of its intention to do so and of such Holders' rights under this
Section 7.01. Such rights are referred to hereinafter as "PIGGYBACK
REGISTRATION RIGHTS". Upon the written request of such Holder made within 20
days after the giving of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such Holder and the
intended method of disposition thereof), the Company shall include in the
Registration Statement the Registrable Securities which the Company has been so
requested to register by the Holders thereof.
(b) Withdrawal of Piggyback Registration by Company. If, at
any time after giving written notice of its intention to register any
securities in a Piggyback Registration but prior to the effective date of the
related Registration Statement filed in connection with such Piggyback
Registration, the Company shall determine for any reason not to register such
securities, the Company shall give written notice of such determination to each
Holder and, thereupon, shall be relieved of its obligation to register any
Registrable Securities in connection with such Piggyback Registration. All best
efforts obligations of the Company pursuant to Section 7.03 shall cease if the
Company determines to terminate any registration where Registrable Securities
are being registered pursuant to this Section 7.01.
(c) Piggyback Registration of Underwritten Public Offerings.
If a Piggyback Registration involves an underwritten offering, then all Holders
requesting to have Registrable Securities included in the Company's
registration must sell their Registrable Securities to the underwriters
selected by the Company on the same terms and conditions as apply to other
selling stockholders.
(d) Payment of Registration Expenses for Piggyback
Registration. The Company shall pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to a
Piggyback Registration Right contained in this Section 7.01, except for the
fees and disbursements of any counsel retained by the Holders for whom
Registrable Securities are being registered and any underwriting fees, selling
discounts or commissions or transfer taxes.
(e) Priority in Piggyback Registration. If a Piggyback
Registration involves an underwritten offering and the managing underwriter
advises the Company in writing that, in its opinion, marketing or other factors
require or make it desirable for there to be a limitation of the number of
shares to be underwritten, then the Registrable Securities to be offered for
the accounts of Holders pursuant to a Piggyback Registration Right shall be
eliminated entirely or reduced pro rata as to all requesting Holders on the
basis of the relative number of Registrable Securities each such Holder has
requested to be included in such registration, to the extent necessary to
reduce the total amount or kind of Registrable Securities to be included in
such offering to the amount advised by such managing underwriter; provided,
however, that no securities may be offered in such registration for the account
of
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<PAGE>
persons other than the Company (including for this purpose any affiliate of the
Company) by virtue of their also having "piggyback" registration rights, or
otherwise, unless the Registrable Securities requested to be included in such
registration are so included on a pro rata basis (by percentage of each class
of securities) as to such other persons holding "piggyback" registration rights
and the Holders requesting registration and provided, further, that nothing in
this paragraph (e) shall be implied to permit the Company to include in such
registration shares of any person other than persons holding "piggyback"
registration rights unless the Registrable Securities requested to be included
in such registration are so included.
(f) Expiration of Piggyback Registration Rights. The
Piggyback Registration Rights shall survive the exercise of the Warrant or the
transactions or events pursuant to which such Registrable Securities were
issued, but all such rights will terminate in all events on March 7, 1999.
(g) Demand Registration. The Holder of Warrants to purchase
at least 36,000 shares of Common Stock shall be entitled to demand that the
Company use its best efforts to file a registration statement on Form S-3
registering the shares of Common Stock underlying this Warrant at any time 31
days after the closing of the Company's next public offering and, if such
offering does not occur by six months from May 24, 1996, such Holder shall have
such demand rights from and after such date.
Section 7.02: Registration Procedures. If and whenever the Company is
required to use its best efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this Article
VII, the Company shall, at its expense and as expeditiously as practicable:
(a) before filing a Registration Statement or Prospectus or
any amendment or supplements thereto, including documents incorporated by
reference after the initial filing of any Registration Statement, the Company
shall furnish to the selling Holders pursuant to such Registration Statement
and the underwriters, if any, copies of all such documents proposed to be
filed, which documents will be subject to the review of such Holders and
underwriters;
(b) prepare and file with the SEC such amendments and
post-effective amendments to a Registration Statement as may be necessary to
keep such Registration Statement effective for at least 90 days or until the
Holder or Holders have completed the distribution described in the Registration
Statement relating thereto, whichever first occurs; cause the related
Prospectus to be supplemented by any required Prospectus supplement, and as so
supplemented, to be filed pursuant to Rule 424 under the Securities Act; and
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration Statement during
such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such Registration Statement or supplement to such
Prospectus;
(c) notify the selling Holders and the managing underwriters,
if any, promptly, and (if requested by any such Person) confirm such advice in
writing, (i) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the SEC for amendments or supplements to a Registration Statement or
related Prospectus or for additional information; (iii) of the issuance by the
SEC of any stop order suspending the effectiveness of a Registration Statement
or the initiation of any proceedings for that purpose; (iv) if at any time the
representations and warranties of the Company contemplated by paragraph (l)
below cease to be true and correct; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and (vi) of the happening of
any event that makes any statement made in the Registration Statement, the
Prospectus or any document incorporated therein by reference untrue or which
requires the making of any changes in the Registration Statement or Prospectus
so that they will not contain any untrue
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<PAGE>
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
(d) deliver to each selling Holder and the underwriters, if
any, without charge, as many copies of the Prospectus or Prospectuses
(including each preliminary Prospectus) and any amendment or supplement thereto
as such Persons may reasonably request; the Company consents to the use of such
Prospectus or any amendment or supplement thereto by each of the selling
Holders and the underwriters, if any, in connection with the offering and sale
of the Registrable Securities covered by such Prospectus or any amendment or
supplement thereto;
(e) cooperate with the selling Holders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends; and enable such Registrable Securities to be in such
denominations and registered in such names as the managing underwriters may
request at least two Business Days prior to any sale of Registrable Securities
to the underwriters;
(f) upon the occurrence of any event contemplated by
paragraph (c)(vi) above, prepare a supplement or post-effective amendment to
the applicable Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities being
sold thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(g) with respect to each issue or class of Registrable
Securities, use its best efforts to cause all Registrable Securities covered by
the applicable Registration Statement to be listed on each securities exchange,
if any, on which similar securities issued by the Company are then listed or,
if not then listed, cause such Registered Securities to be included in a
national automated quotation system;
(h) make available for inspection by a representative of the
selling Holders, any underwriter participating in any disposition pursuant to
such registration and any attorney or accountant retained by such selling
Holders or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such representative, underwriter, attorney or accountant in connection with
such registration; provided, that any records, information or documents that
are designated by the Company in writing as confidential shall be kept
confidential by such Persons unless disclosure of such records, information or
documents is requested by court or administrative order;
(i) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make generally available to
its security holders an earnings statement, covering a period of not less than
12 months satisfying the provisions of Section 11(a) or Rule 158 of the
Securities Act not later than 16 months after the first day of the month
following the effective date of the applicable Registration Statement;
(j) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to enable
the sellers thereof to consummate the disposition of such Registrable
Securities; and
Except as otherwise provided in this Agreement, the Company
shall have sole control in connection with the preparation, filing, withdrawal,
amendment or supplementing of each Registration Statement, the selection of
underwriters and the distribution of any preliminary prospectus included in the
Registration Statement, and may include within the coverage thereof additional
shares of Common Stock or other securities for its own account or for the
account of one or more of its other security holders.
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<PAGE>
Holders shall have no registration rights hereunder in
respect of any proposed transfer of such securities if, in the opinion of
recognized securities counsel to the Company, (A) registration under the
Securities Act is not required for the transfer of the Registrable Securities
in the manner provided by such Holder or (B) a post-effective amendment to an
existing registration statement would be legally sufficient for such transfer
and such post-effective amendment is filed with the SEC and declared effective.
Each seller of Registrable Securities as to which any
registration is being effected shall furnish to the Company such information
regarding the distribution of such securities and such other information as may
otherwise be required by the Securities Act to be included in such Registration
Statement.
Each Holder shall give at least three (3) business days'
prior written notice (a "Sale Notice") to the Company of any proposed sale of
Registrable Securities under the Registration Statement effective pursuant to
this Section 7.02 and shall not make such sale (i) unless such three (3) days
lapse without written response from the Company, or (ii) in the event the
Company responds by stating that a prospectus supplement or post-effective
amendment will be filed pursuant to this Section 7.02, until the Company has
notified such Holder pursuant to Section 7.02 l(c) that any such post-effective
amendment has become effective or prospectus supplement has been filed. The
Sale Notice shall specify the proposed date of sale and the amount of
Registrable Securities to be sold. A Sale Notice shall be effective for 30 days
after it is given, unless terminated earlier by notice to the Company by the
Holder withdrawing such Sale Notice or until the Holder giving such Sale Notice
shall no longer own any Registrable Securities or Warrants; provided, however,
that if during the period when such Sale Notice is effective the Company
notifies the Holder that a prospectus supplement or post-effective amendment
must be filed pursuant to Section 7.02(c) as a result of the happening of an
event that results in the Registration Statement, as then in effect, including
an untrue statement of a material fact or omitting to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, the Holder shall not
make any sale until the Company has notified the Holder pursuant to Section
7.02(c) that any such post-effective amendment has become effective or
prospectus supplement has been filed.
Each Holder agrees by acquisition of such Registrable
Securities that, upon receipt of any notice from the Company of the happening
of any event of the kind described in paragraph (c) hereof, such Holder will
forthwith discontinue disposition of such Registrable Securities covered by
such Registration Statement or Prospectus until such Holder's receipt of the
copies of the supplemented or amended Prospectus contemplated by paragraph (f)
hereof, or until it is advised in writing by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any additional
or supplemental filings which are incorporated by reference in such Prospectus,
and, if so directed by the Company, such Holder will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in
such Holder's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice.
Section 7.03: Indemnification.
(a) Indemnification by Company. The Company agrees to
indemnify and hold harmless each Holder, its officers, directors and agents and
each Person who controls such Holder or agents (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) against any and all
losses, claims, damages and liabilities, joint or several (including any
reasonable investigation, legal and other expenses incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other Federal or state law or regulation,
at common law or otherwise, insofar as such losses, claims, damages or
liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement,
Prospectus or preliminary prospectus or any amendment thereof or supplement
thereto, or arise out of or are based upon any omission or alleged omission to
state therein a material fact required to be stated therein or
- XIX -
<PAGE>
necessary to make the statements therein not misleading; provided, however,
that such indemnity shall not inure to the benefit of any Holder (or any Person
controlling such Holder within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) on account of any losses, claims, damages or
liabilities arising from the sale of the Registrable Securities if such untrue
statement or omission or alleged untrue statement or omission was made in such
Registration Statement, Prospectus or preliminary prospectus, or such amendment
or supplement, in reliance upon and in conformity with information furnished in
writing to the Company by the Holder specifically for use therein. The Company
shall also indemnify underwriters and selling brokers participating in the
distribution, their officers and directors and each Person who controls such
Persons (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) to the same extent as provided above with respect to the
indemnification of the Holders, if requested. This indemnity agreement shall be
in addition to any liability which the Company may otherwise have.
(b) Indemnification by Selling Holders. In connection with
any registration, each selling Holder will furnish to the Company in writing
such information as the Company reasonably requests for use in connection with
any Registration Statement or Prospectus and agrees to indemnify, to the same
extent as the indemnification provided by the Company in Section 7.03(a), the
Company, its directors and officers and each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act) but only insofar as such losses, claims, damages and liabilities
arise out of or are based upon any untrue statement or omission or alleged
untrue statement or omission which was made in the Registration Statement, the
Prospectus or preliminary prospectus or any amendment thereof or supplement
thereto, in reliance upon and in conformity with information furnished in
writing by such Holder to the Company specifically for use therein. In no event
shall the liability of any selling Holder hereunder be greater in amount than
the dollar amount of the net proceeds received by such Holder upon the sale of
the Registrable Securities giving rise to such indemnification obligation. The
Company shall be entitled to receive indemnities from underwriters and selling
brokers participating in the distribution, to the same extent as provided above
with respect to information so furnished in writing by such Persons
specifically for inclusion in any Prospectus, Registration Statement or
preliminary prospectus or any amendment thereof or supplement thereto.
(c) Conduct of Indemnification Procedure. Any party that
proposes to assert the right to be indemnified hereunder will, promptly after
receipt of notice of commencement of any action, suit or proceeding against
such party in respect of which a claim is to be made against an indemnifying
party or parties under this Section, notify each such indemnifying party of the
commencement of such action, suit or proceeding, enclosing a copy of all papers
served. No indemnification provided for in Section 7.03(a) or 7.03(b) shall be
available to any party who shall fail to give notice as provided in this
Section 7.03(c) if the party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was prejudiced by the
failure to give such notice, but the omission so to notify such indemnifying
party of any such action, suit or proceeding shall not relieve it from any
liability that it may have to any indemnified party for contribution or
otherwise than under this Section. In case any such action, suit or proceeding
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses, except as provided
below and except for the reasonable costs of investigation subsequently
incurred by such indemnified party in connection with the defense thereof. The
indemnified party shall have the right to employ its counsel in any such
action, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the employment of counsel by such indemnified
party has been authorized in writing by the indemnifying parties, (ii) the
indemnified party shall have reasonably concluded that there may be a conflict
of interest between the indemnifying parties and the indemnified party in the
conduct of the defense of such action (in which case the indemnifying parties
shall not have the right to direct the defense of such action on behalf of the
indemnified party) or (iii) the indemnifying parties shall not have employed
- XX -
<PAGE>
counsel to assume the defense of such action within a reasonable time after
notice of the commencement thereof, in each of which cases the fees and
expenses of counsel shall be at the expense of the indemnifying parties. An
indemnifying party shall not be liable for any settlement of any action, suit,
proceeding or claim effected without its written consent, which consent shall
not be unreasonably withheld. It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm in such jurisdiction at any one time for all such indemnified
party or parties.
Section 7.04: Restrictions on Public Sale by Holder of Registrable
Securities. Each Holder whose Registrable Securities are covered by a
Registration Statement filed pursuant to Article VII hereof agrees, if
requested by the managing underwriters in an underwritten offering, not to
effect any public sale or distribution of any securities of the Company of the
same class as the securities included in such Registration Statement, including
a sale pursuant to Rule 144 under the Securities Act (except as part of such
underwritten registration), during the 10-day period prior to, and during the
90-day period beginning on, the closing date of each underwritten offering made
pursuant to such Registration Agreement, to the extent timely notified in
writing by the managing underwriters.
ARTICLE VIII
Other Matters
Section 8.01: Expenses of Transfer. The Company shall from time to
time promptly pay, subject to the provisions of Section 6.01 and paragraph (d)
of Section 2.02, all taxes and charges that may be imposed upon the Company in
respect to the issuance or delivery of Warrant Shares upon the exercise of this
Warrant by the Warrantholder.
Section 8.02: Successors and Assigns. All the covenants and provisions
of this Warrant by or for the benefit of the Company shall bind and inure to
the benefit of its successors and assigns hereunder.
Section 8.03: Amendments and Waivers. The provisions of this Warrant,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waiver or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of
Holders of at least a majority of the outstanding Registrable Securities
(assuming exercise of the Warrants). Holders shall be bound by any consent
authorized by this Section whether or not certificates representing such
Registrable Securities have been marked to indicate such consent.
Section 8.04: Counterparts. This Warrant may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
Section 8.05: Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of New York.
Section 8.06: Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provisions in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
- XXI -
<PAGE>
Section 8.07: Integration/Entire Agreement. This Warrant is intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. This Warrant
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
Section 8.08: Attorneys' Fees. In any action or proceeding brought to
enforce any provisions of this Warrant, or where any provisions hereof are
validly asserted as a defense, the successful party shall be entitled to
recover reasonable attorneys' fees and disbursements in addition to its costs
and expenses and any other available remedy.
Section 8.09: Computations of Consent. Whenever the consent or
approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Warrants and/or Registrable Securities held by the Company
or its affiliates (other than the Warrantholder or subsequent Holders if they
are deemed to be such affiliates solely by reason of their holdings of such
Registrable Securities) shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.
Section 8.10: Notices. Notice or demand pursuant to this Warrant to be
given or made by the Warrantholder to or on the Company shall be sufficiently
given or made if sent by first class mail, postage prepaid, addressed, until
another address is designated in writing by the Company, as follows:
Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Any notice or demand authorized by this Warrant to be given or made by
the Company to or on the Warrantholder or a Holder of Registrable Securities
shall be sufficiently given or made if sent by first class mail, postage
prepaid, to the Warrantholder or the Holder of Registrable Securities at his or
its last known address as it shall appear on the books of the Company.
Section 8.11: Headings. The headings herein are for convenience only
and are not part of this Warrant and shall not affect the interpretation
thereof.
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<PAGE>
IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
under its corporate seal as of the 7th day of May, 1996.
FAMILY GOLF CENTERS, INC.
By:_______________________________________
Name: Dominic Chang,
Title: President,
Chief Executive Officer and
Chairman of the Board
Attest:________________________
Secretary
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<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, _________________________ hereby sells,
assigns and transfers unto _____________________ the within Warrant
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint __________________ attorney, to
transfer said Warrant Certificate on the books of the within-named Company with
respect to the number of Warrants set forth below, with full power of
substitution in the premises:
Name(s) of
Assignee(s) Address No. of Warrants
----------- ------- ---------------
And if said number of Warrants shall not be all the Warrants represented by the
Warrant Certificate, a new Warrant Certificate is to be issued in the name of
said undersigned for the balance remaining of the Warrants represented by said
Warrant Certificate.
Dated: _________________, 19__ _____________________________________
Note: The above signature should
correspond exactly with the name
on the face of this Warrant
Certificate.
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<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant)
FAMILY GOLF CENTERS, INC.:
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder, _____________________ shares of Common Stock, as provided for
therein, and tenders herewith payment of the purchase price in full in the form
of cash or a certified or official bank check in the amount of $ .
If said number of shares shall not be all the shares purchasable under
the within Warrant Certificate, a new Warrant Certificate is to be issued in
the name of said undersigned for the balance remaining of the shares
purchasable thereunder.
Please issue a certificate or certificates for such Common Stock in
the name of, and pay any cash for any fractional share to:
Name:______________________________
(Please Print Name, Address and Social
Security No.)
Address:_____________________________
_____________________________________
_____________________________________
Social Security Number:______________
Signature:___________________________
NOTE: The above signature should correspond
exactly with the name on the first page of
this Warrant Certificate or with the name
of the assignee appearing in the assignment
form below.
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<PAGE>
CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant
pursuant to Section 2.02(a)(ii))
The undersigned hereby irrevocably elects to surrender its Warrant for
________ shares of Common Stock pursuant to the Cashless Exercise provisions of
the within Warrant, as provided for in Section 2.02(a)(ii) of such Warrant.
If said number of shares shall not be all the shares exchangeable or
purchasable under the within Warrant, a new Warrant is to be issued in the name
of the undersigned for the balance remaining of the shares purchasable
thereunder.
Please issue a certificate or certificates for such Common Stock in
the name of, and pay cash for fractional shares to:
Name:______________________________
(Please Print Name, Address and Social
Security No.)
Address:_____________________________
_____________________________________
_____________________________________
Social Security Number:______________
Signature:___________________________
NOTE: The above signature should correspond
exactly with the name on the first page of
this Warrant Certificate or with the name
of the assignee appearing in the assignment
form below.
- XXVI -
Exhibit 23.1
------------
[LETTERHEAD OF RICHARD A. EISNER & COMPANY, LLP]
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated March 15, 1996 on our audit of the
financial statements of Family Golf Centers, Inc. and subsidiaries as at
December 31, 1995 and for each of the years in the two-year period ended
December 31, 1995. We also consent to the reference to our firm under the
caption "Experts".
/s/ Richard A. Eisner & Company, LLP
New York, New York
November 6, 1996
