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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
September 25, 1996
FAMILY GOLF CENTERS, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 0-25098 11-3223246
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
225 Broadhollow Road
Melville, New York 11747
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(Address of principal executive offices)
Registrant's Telephone Number, including
area code: (516) 694-1666
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(Former Address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
GLEN BURNIE GOLF CENTER
On September 25, 1996, Family Golf Centers, Inc. (the "Company")
acquired all the outstanding shares of Privatization Plus, Inc. ("PPI"), a
Maryland corporation which leases approximately 38 acres of property in Glen
Burnie, Maryland on which it operates the "Glen Burnie Golf Center, " a golf
recreational facility, including a driving range, miniature golf course,
batting cages and pro shop.
Pursuant to the Purchase Agreement, dated as of September 25, 1996,
between the shareholders of PPI and the Company, the Company purchased all the
outstanding shares of PPI in exchange for $1,170,000 in cash ($100,000 of
which was placed in escrow for one year to satisfy indemnification claims of
the Company, if any, under the Purchase Agreement). The source of funds for
the purchase price was derived from working capital.
The Company intends to continue operating PPI and its golf center
in substantially the same manner as previously conducted.
DIXIE GOLF CENTER.
On September 26, 1996, the Company acquired certain assets from Tri-Town
Sports, Inc., a Massachusetts corporation (the "Seller"). The acquired assets
included (i) approximately 70 acres of real property in South Easton,
Massachusetts on which there is a golf driving range, miniature golf course,
batting cages and related facilities operated as the "Dixie Golf Center" (the
"Premises") and (ii) certain equipment, fixtures, personal property and
contracts used in connection with the operation of the golf center (the "Dixie
Assets").
Pursuant to the Purchase Agreement, dated September 26, 1996, between the
Seller and the Company, the Company purchased the Dixie Assets for $2,600,000
payable as follows: (i)
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$1,900,000 in cash and (ii) $700,000 evidenced by four promissory notes made
by the Company in favor of the Seller secured by a first through fourth
mortgage on the Premises. The source of funds for the cash portion of the
purchase price was derived from working capital. As part of the acquisition
the Company also agreed to assume certain liabilities and obligations of the
Seller.
The Company intends to continue operating the Dixie Assets in
substantially the same manner as previously conducted. The Company, however,
intends to build a domed indoor driving range on the Premises.
COLBERT-BALLARD GOLF LEARNING CENTERS, INC
On September 30, 1996, the Company acquired certain assets from
Colbert-Ballard Golf Learning Centers, Inc., a Nevada corporation (the
"Assignor"). The acquired assets included (i) a license to use the names "Jim
Colbert" and "Jimmy Ballard" and the Colbert Ballard golf instructional
program and (ii) certain equipment and personal property used in connection
with the Colbert-Ballard golf instructional program (the "Colbert-Ballard
Assets").
Pursuant to the Assignment and Assumption of License, dated as of
September 30, 1996, between the Assignor and the Company, the Company
purchased the Colbert-Ballard Assets in exchange for (i) 7,000 shares of
common stock of the Company (2,450 of which have been placed in escrow for one
year to satisfy indemnification claims of the Company, if any, under the
Agreement) and (ii) the assumption of certain liabilities. As part of the
acquisition, the Company also loaned the Assignor approximately $450,000.00 to
pay certain retained liabilities of the Assignor in exchange for a secured
promissory note made by the Assignor in favor of the Company. The note matures
on September 30, 1998.
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The Company intends to continue operating the Colbert-Ballard Assets in
substantially the same manner as previously conducted.
CAROLINA SPRINGS GOLF AND COUNTRY CLUB
On September 30, 1996, the Company acquired certain assets from KKL Golf
Partnership, an Illinois general partnership (the "Seller"). The acquired
assets included (i) approximately 283 acres of real property in Fountain
Inn, South Carolina on which there is a 27-hole golf course, driving range and
related facilities operated as the "Carolina Springs Golf and Country Club," and
(ii) certain equipment, fixtures and personal property used in connection with
the operation of the golf course (the "Carolina Springs Assets").
Pursuant to the Purchase Agreement, dated as of September 30, 1996,
between the Seller and the Company (the "Purchase Agreement"), the Company
purchased the Carolina Springs Assets in exchange for (i) $3,350,000 in cash
($25,000 of which has been placed in escrow for one year to satisfy
indemnification claims of the company, if any), and (ii) an irrevocable option
to purchase up to 5,000 shares of the Company's Common Stock at an exercise
price of $40.00 per share, which option expires on September 30, 2001. The
source of funds for the cash portion of the purchase price was derived from
working capital.
The Company intends to continue operating the Carolina Springs Golf and
Country Club in substantially the same manner as previously conducted.
WESTMINSTER GOLF CENTER
On September 30, 1996, the Company acquired certain assets from USA Golf
Centers, Ltd. #2, a California limited partnership (the "Seller"). The
acquired assets included (i) a lease covering
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approximately 17.4 acres in Orange County, California, on which there is a
driving range and related facilities operated as the "Westminster Golf Center,"
and (ii) certain equipment, fixtures and personal property used in connection
with the operation of the driving range (the "Westminster Assets").
Pursuant to the Purchase Agreement, dated September 30, 1996
between the Seller and the Company, the Company purchased the Westminster Assets
in exchange for $1,500,000 in cash ($50,000 of which has been placed in escrow
for six months to satisfy indemnification claims of the Company if any, under
the Purchase Agreement). The source of funds for the purchase price was derived
from working capital.
The Company intends to continue operating the Westminster Assets in
substantially the same manner as previously conducted.
The foregoing summaries of the acquisitions and related transactions are
incomplete and are qualified in their entirety by reference to the copies of
the agreements filed as Exhibits and annexed hereto.
Item 5. Other Events
SWINGMASTER GOLF CENTER
On August 29, 1996, the Company acquired certain assets from Swingmaster
Golf at Centennial, L.P., a Colorado limited partnership (the "Seller"). The
acquired assets included (i) a lease covering approximately 36.1 acres of real
property in Arapahoe County, Colorado (the "Leased Property"), on which there is
a golf driving range and related facilities operated as the "Swingmaster Golf
Center," (ii) an option to lease approximately 36.5 additional acres adjacent to
the Leased Property (the "Option") and (iii) certain equipment, fixtures and
personal property used in connection with the operation of the golf center (the
"Inventory").
Pursuant to the Purchase Agreement, dated as of August 29, 1996, between
the Seller and the Company, the Company purchased the Leased Property and the
Option in exchange for (i) $800,000 in cash and (ii) 40,000 shares of the
Company's Common Stock (36,516 of which have been placed in escrow to be
released pending the satisfaction of certain conditions to the effectiveness of
the Option, except for 5,000 of such shares which will continue to be held in
escrow for one year to satisfy indemnification claims of the Company, if any).
The source of funds for the cash portion of the purchase price was derived from
working capital.
The Company intends to continue operating Swingmaster Golf Center in
substantially the same manner as previously conducted. The Company also intends
to build a golf course on the additional leased property underlying the Option.
The foregoing summary of the acquisition and related transactions is
incomplete and is qualified in its entirety by reference to the copies of the
agreements filed as Exhibits and annexed hereto.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired
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It is impractical to file financial statements of the businesses
acquired by the Company from: (i) the shareholders of Privatization Plus, Inc.,
(ii) Tri-Town Sports, Inc., (iii) Colbert-Ballard Golf Learning Centers, Inc.,
(iv) KKL Golf Partnership, (v) USA Golf Centers, Ltd #2, and (vi) Swingmaster
Golf at Centennial, L.P. The required financial statements will be filed under
cover of a Form 8-K/A within 60 days of October 9, 1996.
(b) Pro Forma Financial Information
It is impractical to file pro forma financial information. The required
pro forma financial information will be filed under cover of a Form 8 K/A
within 60 days of October 9, 1996.
(c) Exhibits
1. Stock Purchase Agreement, dated September 25, 1996, between
Raymond R. Sears, Ronald L. Sears, Henry Bachman, Privatization Plus, Inc. and
Family Golf Centers, Inc.
2. Cash Escrow Agreement, dated September 25, 1996, between
Raymond R. Sears, Ronald L. Sears, Henry Bachman, Privatization Plus, Inc.,
Family Golf Centers, Inc. and Continental Stock Transfer & Trust Company.
3. Purchase Agreement, dated September 26, 1996, between
Tri-Town Sports, Inc. and Easton Family Golf Centers, Inc., a wholly owed
subsidiary of Family Golf Centers, Inc.
4. Promissory Note, dated September 26, 1996, in the principal
amount of $350,000 made by Easton Family Golf Centers, Inc., a wholly owned
subsidiary of Family Golf Centers, Inc., in favor of Tri-Town Sports, Inc.
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5. Promissory Note, dated September 26, 1996, in the principal
amount of $140,000 made by Easton Family Golf Centers, Inc., a wholly owned
subsidiary of Family Golf Centers, Inc., in favor of Tri-Town Sports, Inc.
6. Promissory Note, dated September 26, 1996, in the principal
amount of $122,500 made by Easton Family Golf Centers, Inc., a wholly owned
subsidiary of Family Golf Centers, Inc., in favor of Tri-Town Sports, Inc.
7. Promissory Note, dated September 26, 1996, in the principal
amount of $87,500 made by Easton Family Golf Centers, Inc., a wholly owned
subsidiary of Family Golf Centers, Inc., in favor of Tri-Town Sports, Inc.
8. Guaranty of Promissory Notes made by Family Golf Centers,
Inc. in favor of Tri-Town Sports, Inc.
9. Mortgage Note, dated September 24, 1996 in the principal
amount of $350,000 made by Easton Family Golf Centers, Inc. in favor of
Tri-Town Sports, Inc. and related Mortgage Deed.
10. Mortgage Note, dated September 24, 1996 in the principal
amount of $140,000 made by Easton Family Golf Centers, Inc. in favor of
Tri-Town Sports, Inc. and related Mortgage Deed.
11. Mortgage Note, dated September 24, 1996 in the principal
amount of $122,500 made by Easton Family Golf Centers, Inc. in favor of
Tri-Town Sports, Inc. and related Mortgage Deed.
12. Mortgage Note, dated September 24, 1996 in the principal
amount of $87,500 made by Easton Family Golf Centers, Inc. in favor of
Tri-Town Sports, Inc. and related Mortgage Deed.
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<PAGE>
13. Assignment and Assumption of License Agreement, dated
September 30, 1996, between Colbert-Ballard Golf Learning Centers, Inc. and
C.B. Family Golf Centers, Inc., a wholly owed subsidiary of Family Golf
Centers, Inc.
14. Promissory Note, dated September 30, 1996, in the principal
amount of $446,720 made by Colbert-Ballard Golf Learning Centers, Inc. in
favor of C.B. Family Golf Centers, Inc., a wholly owned subsidiary of Family
Golf Centers, Inc.
15. Guaranty of Promissory Note made by Harry J. Moorhouse and
Dorothy Moorhouse in favor of C.B. Family Golf Centers, Inc., a wholly owned
subsidiary of Family Golf Centers, Inc.
16. Escrow Agreement, dated September 30, 1996, between Family
Golf Centers, Inc., Colbert-Ballard Golf Learning Centers, Inc. and
Continental Stock Transfer & Trust Company.
17. Purchase Agreement, dated September 30, 1996, between KKL
Golf Partnership and Carolina Springs Family Golf Centers, Inc., a wholly
owned subsidiary of Family Golf Centers, Inc.
18. Cash Escrow Agreement, dated September 30, 1996, between
KKL Golf Partnership, Carolina Springs Family Golf Centers, Inc. and Continental
Stock Transfer & Trust Company.
19. Stock Option Agreement, dated September 30, 1996, between
Family Golf Centers, Inc. and KKL Golf Partnership.
20. Purchase Agreement, dated September 30, 1996, between USA
Golf Centers, Ltd. #2 and Westminster Family Golf Centers, Inc., a wholly
owned subsidiary of Family Golf Centers, Inc.
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21. Cash Escrow Agreement, dated September 30, 1996, between
USA Golf Centers, Ltd. #2, Westminster Family Golf Centers, Inc. and
Continental Stock Transfer & Trust Company.
22. Ground Lease, dated August 1, 1992, as amended by Ground
Lease Extension and Modification, dated November 20, 1995, between SCI
California Funeral Services, Inc. (successor in interest to Westminster Memorial
Park) and USA Golf Centers, Ltd. #2.
23. Purchase Agreement, dated August 29, 1996, between
Swingmaster Golf at Centennial, L.P. and Denver Family Golf Centers, Inc., a
wholly owned subsidiary of Family Golf Centers, Inc.
24. Registration Rights Agreement, dated August 29, 1996,
between Swingmaster Golf at Centennial, L.P. and Family Golf Centers, Inc.
25. Registration Rights Agreement, dated August 29, 1996,
between Joseph J. Graham and Family Golf Centers, Inc.
26. Registration Rights Agreement, dated August 29, 1996,
between Andrew Price and Family Golf Centers, Inc.
27. Escrow Agreement, dated August 29, 1996, between Family
Golf Centers, Inc., Denver Family Golf Centers, Inc., Swingmaster Golf at
Centennial, L.P., Joseph J. Graham, Andrew Price and Continental Stock
Transfer & Trust Company.
28. Ground Lease and Agreement, dated November 1, 1994, as
amended by First Amendment to Ground Lease and Agreement dated March 9, 1995 and
Second Amendment to Ground Lease Agreement, dated June 8, 1995, by and between
the Arapahoe County Public Airport Authority and Pinecrest Enterprises, Ltd.
(predecessor-in-interest to Swingmaster Golf at Centennial, L.P.).
29. Option to Lease Agreement, dated August 8, 1996, by and
between the Arapahoe County Public Airport Authority and Swingmaster Golf at
Centennial, L.P.
30. Press release issued on October 4, 1996.
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INDEX TO EXHIBITS
Exhibit Page Number
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1. Stock Purchase Agreement, dated September 25, 1996,
between Raymond R. Sears, Ronald L. Sears, Henry
Bachman, Privatization Plus, Inc. and Family Golf
Centers, Inc.
2. Cash Escrow Agreement, dated September 25, 1996,
between Raymond R. Sears, Ronald L. Sears, Henry
Bachman, Privatization Plus, Inc., Family Golf Centers,
Inc. and Continental Stock Transfer & Trust Company.
3. Purchase Agreement, dated September 26, 1996, between
Tri-Town Sports, Inc. and Easton Family Golf Centers,
Inc., a wholly owed subsidiary of Family Golf Centers,
Inc.
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<PAGE>
4. Promissory Note, dated September 26, 1996, in the principal amount of
$350,000 made by Easton Family Golf Centers, Inc., a wholly owned
subsidiary of Family Golf Centers, Inc., in favor of Tri-Town Sports,
Inc.
5. Promissory Note, dated September 26, 1996, in the principal amount of
$140,000 made by Easton Family Golf Centers, Inc., a wholly owned
subsidiary of Family Golf Centers, Inc., in favor of Tri-Town Sports,
Inc.
6. Promissory Note, dated September 26, 1996, in the principal amount of
$122,500 made by Easton Family Golf Centers, Inc., a wholly owned
subsidiary of Family Golf Centers, Inc., in favor of Tri-Town Sports,
Inc.
7. Promissory Note, dated September 26, 1996, in the principal amount of
$87,500 made by Easton Family Golf Centers, Inc., a wholly owned
subsidiary of Family Golf Centers, Inc., in favor of Tri-Town Sports,
Inc.
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8. Guaranty of Promissory Notes made by Family Golf
Centers, Inc. in favor of Tri-Town Sports, Inc.
9. Mortgage Note, dated September 24, 1996 in the principal
amount of $350,000 made by Easton Family Golf Centers,
Inc. in favor of Tri-Town Sports, Inc. and related
Mortgage Deed.
10. Mortgage Note, dated September 24, 1996 in the principal
amount of $140,000 made by Easton Family Golf Centers,
Inc. in favor of Tri-Town Sports, Inc. and related
Mortgage Deed.
11. Mortgage Note, dated September 24, 1996 in the principal
amount of $122,500 made by Easton Family Golf Centers,
Inc. in favor of Tri-Town Sports, Inc. and related
Mortgage Deed.
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<PAGE>
12. Mortgage Note, dated September 24, 1996 in the principal
amount of $87,500 made by Easton Family Golf Centers,
Inc. in favor of Tri-Town Sports, Inc. and related
Mortgage Deed.
13. Assignment and Assumption of License Agreement, dated
September 30, 1996, between Colbert-Ballard Golf Learning
Centers, Inc. and C.B. Family Golf Centers, Inc., a wholly
owed subsidiary of Family Golf Centers, Inc.
14. Promissory Note, dated September 30, 1996, in the
principal amount of $446,720 made by Colbert-Ballard
Golf Learning Centers, Inc. in favor of C.B. Family Golf
Centers, Inc., a wholly owned subsidiary of Family Golf
Centers, Inc.
15. Guaranty of Promissory Note made by Harry J. Moorhouse
and Dorothy Moorhouse in favor of C.B. Family Golf
Centers, Inc., a wholly owned subsidiary of Family Golf
Centers, Inc.
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16. Escrow Agreement, dated September 30, 1996, between
Family Golf Centers, Inc., Colbert-Ballard Golf Learning
Centers, Inc. and Continental Stock Transfer & Trust
Company.
17. Purchase Agreement, dated September 30, 1996, between KKL Golf
Partnership and Carolina Springs Family Golf Centers, Inc., a wholly
owned subsidiary of Family Golf Centers, Inc.
18. Cash Escrow Agreement, dated September 30, 1996,
between KKL Golf Partnership, Carolina Springs Family Golf
Centers, Inc. and Continental Stock Transfer & Trust
Company.
19. Stock Option Agreement, dated September 30, 1996,
between Family Golf Centers, Inc., and KKL Golf
Partnership.
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20. Purchase Agreement, dated September 30, 1996, between
USA Golf Centers, Ltd. #2 and Westminster Family Golf
Centers, Inc., a wholly owned subsidiary of Family Golf
Centers, Inc.
21. Cash Escrow Agreement, dated September 30, 1996,
between USA Golf Centers, Ltd. #2, Westminster Family
Golf Centers, Inc. and Continental Stock Transfer & Trust
Company.
22. Ground Lease, dated August 1, 1992, as amended by Ground Lease
Extension and Modification, dated November 20, 1995, between
SCI California Funeral Services, Inc. (successor in interest
to Westminster Memorial Park) and USA Golf Centers, Ltd. #2.
23. Purchase Agreement, dated August 29, 1996, between
Swingmaster Golf at Centennial, L.P. and Denver Family
Golf Centers, Inc., a wholly owned subsidiary of Family
Golf Centers, Inc.
24. Registration Rights Agreement, dated August 29, 1996,
between Swingmaster Golf at Centennial, L.P. and Family
Golf Centers, Inc.
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25. Registration Rights Agreement, dated August 29, 1996,
between Joseph J. Graham and Family Golf Centers, Inc.
26. Registration Rights Agreement, dated August 29, 1996,
between Andrew Price and Family Golf Centers, Inc.
27. Escrow Agreement, dated August 29, 1996, between
Family Golf Centers, Inc., Denver Family Golf Centers,
Inc., Swingmaster Golf at Centennial, L.P., Joseph J.
Graham, Andrew Price and Continental Stock Transfer &
Trust Company.
28. Ground Lease and Agreement, dated November 1, 1994, as amended
by First Amendment to Ground Lease and Agreement dated March 9, 1995
and Second Amendment to Ground Lease Agreement, dated June 8, 1995, by
and between the Arapahoe County Public Airport Authority and Pinecrest
Enterprises, Ltd. (predecessor-in-interest to Swingmaster Golf at
Centennial, L.P.).
29. Option to Lease Agreement, dated August 8, 1996, by and between the
Arapahoe County Public Airport Authority and Swingmaster Golf at
Centennial, L.P.
30. Press release issued on October 4, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
October 9, 1996
FAMILY GOLF CENTERS, INC.
By: /s/ Dominic Chang
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Dominic Chang,
President and
Chief Executive Officer
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, made as of September 25, 1996 (this
"AGREEMENT"), by and between RAYMOND R. SEARS, having an address at 2387
Rutland Road, Davidsonville, Maryland 21035 ("RS"), DONALD L. SEARS, having an
address at 2387 Rutland Road, Davidsonville, Maryland 21035 ("DS"), HENRY
BACHMAN, having an address at c/o F. Michael Grace, 300 Frederick Road,
Catonsville, Maryland 21228 ("HB") (RS, DS and HB are collectively referred to
herein as "Seller"), PRIVITIZATION PLUS, INC., a Maryland corporation having
an address at 2387 Rutland Road, Davisonville, Maryland 21035 ("ACQUIRED
CORPORATION"), and FAMILY GOLF CENTERS, INC., a Delaware corporation having an
address at 225 Broadhollow Road, Suite 106E, Melville, New York 11747
("PURCHASER").
W I T N E S S E T H :
WHEREAS, Seller is the owner of all of the outstanding shares of capital
stock
of Acquired Corporation (the "STOCK"); and
WHEREAS, Seller wants to sell to Purchaser, and Purchaser wants to
purchase from Seller, the Stock on the terms, and subject to the conditions,
set forth herein.
NOW, THEREFORE, in consideration of TEN ($10.00) DOLLARS, the terms
and conditions set forth herein, and other good and valuable consideration,
the mutual receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree to the foregoing and as follows:
Agreement to Sell and Purchase. Seller shall sell, assign, transfer,
and convey to Purchaser at the Closing all of the outstanding shares of
capital stock of Acquired Corporation. Seller shall deliver at the Closing
certificates representing such shares duly
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endorsed in blank or accompanied by stock powers duly endorsed in blank, in
each case in proper form for transfer, and with all stock transfer and any
other required documentary stamps affixed thereto.
1. Consideration; Repayment of Indebtedness.
1.1 Consideration. In consideration for the Stock, at the
Closing Purchaser shall deliver:
1.1.1 to RS, $305,009.40 and 00/100 Dollars ($305,009.40) by
bank or certified check or wire transfer;
1.1.2 to DS, $157,392.20 and 00/100 Dollars ($157,392.20) by
bank or certified check or wire transfer;
1.1.3 to HB, $607,598.40 and 00/100 Dollars ($607,598.40) by
bank or certified check or wire transfer; and
1.1.4 to Continental Stock Transfer and Trust Company (the
"ESCROW AGENT"), One Hundred Thousand and 00/100 ($100,000.00) (the "ESCROW
FUND"), to be held pursuant to that certain Escrow Agreement being entered
into among Seller, Purchaser and the Escrow Agent simultaneously herewith (the
"ESCROW AGREEMENT").
1.2 Repayment of Indebtedness to Seller. On the Closing Date,
immediately after the Closing, Purchaser shall pay to each of the individuals
set forth on Schedule 2.2 attached hereto the amounts set forth on such
Schedule by bank or certified check or wire transfer in full satisfaction of
those certain notes (the "Notes"), made by Acquired Corporation in favor of
such individuals, respectively, in the original principal amounts set forth on
Schedule 2.2 attached hereto.
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1.3 Direct Payment. Seller hereby authorizes Purchaser to pay the
amounts required by Section 2.1 and 2.2 hereof to their attorneys, Smith,
Somerville & Case, L.L.C. by wire transfer.
2. Apportionments.
2.1 The parties hereto agree that the Closing hereunder shall
be deemed to be effective as of August 1, 1996 (the "Effective Date"). Seller
shall be entitled to a distribution from Acquired Corporation immediately
prior to the Closing in an amount equal to all cash on hand. Seller shall be
responsible for payment of all liabilities prior to the date hereof ("Retained
Liabilities").
2.2 To the extent that any of the prorations made upon the
Closing Date pursuant to this Article are based upon estimates of payments to
be made and/or expenses to be incurred by Purchaser subsequent to the date
hereof, or either party discovers any errors in or omissions in respect of the
Adjustment, Seller and Purchaser agree to adjust such prorations promptly upon
receipt by Seller or Purchaser, as the case may be, of such payments or of
bills or other documentation setting forth the actual amount of such expenses.
2.3 It is hereby acknowledged that the parties hereto
anticipate that the Lease (as defined in Section 5.6 hereof) will be
renegotiated and that the rent will be reduced from the current rent for a
period of time. The Purchaser hereby agrees that any such rent reduction
attributable to the period prior to the date hereof shall be paid to the
Seller, in the same proportion as the cash consideration was divided among
each Seller in Section 2.1 hereof, as and when such rent reduction is realized
by the Acquired Corporation.
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2.4 Seller and Purchaser shall maintain and make available to
each other any books or records necessary for the adjustment of any item
pursuant to this Article. The provisions of this Article 3 shall survive the
Closing.
3. The Closing. The closing of the transaction provided for in this
Agreement (the "CLOSING") shall take place simultaneously with the execution
and delivery of this Agreement (the actual date of the Closing being referred
to herein as the "CLOSING DATE"), at the offices of Squadron, Ellenoff,
Plesent & Sheinfeld, LLP, 551 Fifth Avenue, New York, New York 10176, or at
such other place as may be mutually agreed to by Seller and Purchaser.
4. Representations and Warranties of Seller.
Each Seller hereby jointly and severally represents and warrants
to Purchaser as of the date hereof as follows:
4.1 Organization and Qualification. Acquired Corporation does
not own any interest in any corporation or other enterprise. Acquired
Corporation is a corporation duly organized, validly existing, and in good
standing under the laws of its jurisdiction of incorporation, with all
requisite power and authority, and all necessary consents, authorizations,
approvals, orders, licenses, certificates, and permits of and from, and
declarations and filings with, all federal, state, local, and other
governmental authorities and all courts and tribunals, to own, lease, license,
and use its properties and assets and to carry on the business in which it is
now engaged. Acquired Corporation is duly qualified to transact the business
in which it is engaged and is in good standing as a foreign corporation in
every jurisdiction in which its ownership, leasing, licensing, or use of
property or assets or the conduct of its business makes such qualification
necessary.
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4.2 Capitalization. The authorized capital stock of Acquired
Corporation consists only of 100,000 shares of common stock, $1.00 par value
per share, of which 10,000 shares are outstanding. Each of such outstanding
shares of Acquired Corporation is validly authorized, validly issued, fully
paid and nonassessable, has not been issued and is not owned or held in
violation of any preemptive right of stockholders, and is owned of record and
beneficially by each party comprising Seller in accordance with the following
table:
Name of Seller Number of Shares
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RS 4,000
DS 2,000
HB 4,000
free and clear of all liens, security interests, pledges, charges,
encumbrances, stockholders' agreements except for the provisions of the Stock
Redemption Agreement dated as of March 15, 1992, which provisions are
terminated by the Seller upon the execution and delivery of this Agreement),
and voting trusts. There is no commitment, plan, or arrangement to issue, and
no outstanding option, warrant, or other right calling for the issuance of,
any share of capital stock of Acquired Corporation or any security or other
instrument convertible into, exercisable for, or exchangeable for capital
stock of Acquired Corporation. There is outstanding no security or other
instrument convertible into or exchangeable for capital stock of Acquired
Corporation. Except for the repayment of the Notes as required by Section 2.2
hereof or as otherwise provided in this Agreement, all indebtedness of
Acquired Corporation to Seller shall be deemed satisfied in connection with
the Closing. RS and DS are the only officers and directors of Acquired
Corporation,
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and each of them hereby resign as officers and directors of Acquired
Corporation.
4.3 Financial Condition. Acquired Corporation has delivered to
the Purchaser true and correct copies of the following, initialled by the
chief executive officer of Acquired Corporation: (a) an audited balance sheet
and profit and loss statement of Acquired Corporation as of December 31, 1995
(the "BALANCE SHEET"); and (b) an audited profit and loss statement for
January 1 through June 30, 1996 (the "PROFIT AND LOSS STATEMENT"). Within ten
(10) days of the date hereof, the Acquired Corporation shall deliver to
Purchaser an unaudited profit and loss statement for the period beginning
January 1, 1996 through the day prior to the date hereof. The above-referenced
balance sheets presents fairly the financial condition, assets, liabilities,
and stockholders' equity of Acquired Corporation as of its date and each of
the above profit and loss statements presents fairly the results of operations
of Acquired Corporation for the period indicated and presents fairly the
information purported to be shown therein. The financial statements referred
to in this Section 5.3 have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved and are in accordance with the books and records of Acquired
Corporation. Since December 31, 1995 (the "CLOSING BALANCE SHEET DATE"):
4.3.1 There has at no time been a material adverse change in
the financial condition, results of operations, business,
properties, assets or liabilities of Acquired Corporation.
4.3.2 Acquired Corporation has not authorized, declared, paid,
or effected any dividend or liquidating or other distribution in
respect of its capital stock or any direct or indirect redemption,
purchase, or other acquisition of any
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stock of Acquired Corporation.
4.3.3 The operations and business of Acquired Corporation have
been conducted in all respects only in the ordinary course.
4.3.4 Acquired Corporation has not suffered an extraordinary
loss (whether or not covered by insurance) or waived any right of
substantial value.
4.3.5 Acquired Corporation has not paid or incurred any tax,
other liability, or expense resulting from the preparation of, or
the transactions contemplated by, this Agreement, it being
understood that Seller shall have paid or will pay all such taxes
(including stock transfer taxes resulting from this Agreement or the
transactions contemplated hereby), liabilities, and expenses.
4.4 Tax and Other Liabilities. Acquired Corporation has no liability
of any nature, accrued or contingent, including without limitation liabilities
for federal, state, local, or foreign taxes and penalties, interest, and
additions to tax ("TAXES") and liabilities to customers or suppliers, other
than the following:
4.4.1 Liabilities for which full provision has been made on the
Balance Sheet and the notes thereto referred to in Section 5.3; and
4.4.2 Other liabilities arising since December 31, 1995 and
prior to the Closing in the ordinary course of business which are
not inconsistent with the representations and warranties of any
Seller or any other provision of this Agreement and which are
reflected on the balance sheets and/or profit and loss statements
delivered pursuant to Section 5.3 hereof.
Without limiting the generality of the foregoing, the amounts set up as
provisions for Taxes on the Balance Sheet are sufficient for all accrued and
unpaid Taxes of Acquired
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Corporation, whether or not due and payable and whether or not disputed, under
tax laws, as in effect on the Closing Balance Sheet Date or now in effect, for
the period ended on such date and for all fiscal periods prior thereto. The
execution, delivery, and performance of this Agreement by Acquired Corporation
will not cause any Taxes to be payable (other than by Seller) or cause any
lien, charge, or encumbrance to secure any Taxes to be created either
immediately or upon the nonpayment of any Tax (other than on the properties or
assets of Seller). Acquired Corporation has filed all federal, state, local,
and foreign tax returns required to be filed by it; has delivered to the
Purchaser a true and correct copy of each such return which was filed since
its incorporation, initialled by the chief executive officer of Acquired
Corporation; has paid all Taxes, assessments, and other governmental charges
payable or remittable by it or levied upon it or its properties, assets,
income, or franchises which are due and payable; and has delivered to the
Purchaser a true and correct copy, so initialled, of any report as to
adjustments received by it from any taxing authority since its incorporation
and a statement, so initialled, as to any litigation, governmental or other
proceeding (formal or informal), or investigation pending, threatened, or in
prospect with respect to any such report or the subject matter of such report.
Acquired Corporation has validly elected and at all times validly maintained
its status as a Subchapter S corporation in accordance with all applicable
laws and regulations.
4.5 Litigation and Claims. Except as set forth on Schedule 5.5
attached hereto, there is no litigation, arbitration, claim, governmental or
other proceeding (formal or informal), or investigation pending, or to the
best knowledge of Seller threatened or in prospect (or any basis therefor
known to Acquired Corporation or any Seller), with respect
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to Acquired Corporation, any Seller, or any of its or his respective
businesses, properties, or assets. Acquired Corporation is not affected by any
present or threatened strike or other labor disturbance nor to the knowledge
of any Seller is any union attempting to represent any employee of Acquired
Corporation as collective bargaining agent. Acquired Corporation is not in
violation of, or in default with respect to, any law, rule, regulation, order,
judgment, or decree; nor is Acquired Corporation or any Seller required to
take any action in order to avoid such violation or default.
4.6 The Lease. Attached hereto as EXHIBIT A is a true and correct
copy of the Sublease Agreement for Friendship Park, dated January 1, 1993 (the
"Lease"), between Anne Arundel County, Maryland ("LANDLORD") and Acquired
Corporation. The Lease is in full force and effect, has not been modified or
amended in any way and neither Landlord nor Acquired Corporation is in
default, or sent or received any notice of default, in respect of the Lease.
No event has occurred or circumstance exists which, with the giving of notice
or the passage of time, or both, would constitute a default under the Lease.
Neither Acquired Corporation nor Landlord has exercised any right or option,
or stated its intent, to terminate or cancel the Lease; provided, however,
that it is understood and agreed that Acquired Corporation is in the process
of attempting to negotiate a substitute Lease which would be by and between
the Acquired Corporation and the State of Maryland. Acquired Corporation has
not assigned, mortgaged, pledged, transferred or conveyed the Lease or any
interest therein, or granted any right or option with respect thereto, to any
party other than Purchaser.
4.7 Properties. Acquired Corporation does not have any interest in
any real property other than under the Lease. Except as set forth on
Schedule 5.7 attached
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hereto, Acquired Corporation has good title to all other properties and assets
used in its business or owned by it, free and clear of all liens, mortgages,
security interests, pledges, charges, and encumbrances.
4.7.1 All accounts and notes receivable reflected on the
Closing Balance Sheet, or arising since the Closing Balance Sheet
Date, have been collected, or are and will be good and collectible,
in each case at the aggregate recorded amounts thereof without right
of recourse, defense, deduction, return of goods, counterclaim,
offset, or set off on the part of the obligor.
4.7.2 All inventory is merchantable and fit for the particular
purposes for which it is intended.
4.7.3 Attached as EXHIBIT B is a true and complete list of all
properties and assets owned by Acquired Corporation or leased or
licensed by Acquired Corporation from or to a third party, including
with respect to such properties and assets owned by Acquired
Corporation a statement of cost, book value and (except for land)
reserve for depreciation of each item for tax purposes, and net book
value of each item for financial reporting purposes, and, with
respect to such properties and assets leased or licensed by Acquired
Corporation, a description of such lease or license. All such
properties and assets (including Intangibles) owned by Acquired
Corporation are reflected on the Closing Balance Sheet (except for
acquisitions subsequent to the Closing Balance Sheet Date and prior
to the Closing which are noted in Exhibit B). All real and other
tangible properties and assets owned, leased, or licensed by
Acquired Corporation are in good and usable condition (reasonable
wear and
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tear which is not such as to affect adversely the operation of the
business of Acquired Corporation excepted).
4.7.4 No real property owned, leased, or licensed by Acquired
Corporation lies in an area which is, or to the knowledge of
Acquired Corporation or any Seller will be, subject to zoning, use,
or building code restrictions which would prohibit, and no state of
facts relating to the actions or inaction of another person or
entity or his or its ownership, leasing, licensing, or use of any
real or personal property exists or to the best knowledge of Seller
will exist which would prevent, the continued effective ownership,
leasing, licensing, or use of such real property in the business in
which Acquired Corporation is now engaged.
4.7.5 The real and other properties and assets (including
Intangibles) owned by Acquired Corporation or leased or licensed by
Acquired Corporation from a third party constitute all such
properties and assets which are necessary to the business of
Acquired Corporation as presently conducted.
4.8 Corporate Instruments. Acquired Corporation has furnished to
the Purchaser (a) the articles of incorporation (or other charter document)
and by laws of Acquired Corporation and all amendments thereto, as presently
in effect, certified by the Secretary of the corporation. The stock ledgers
and stock transfer books and the minute book records of Acquired Corporation
relating to all issuances and transfers of stock by Acquired Corporation and
all proceedings of the stockholders and the Board of Directors and committees
thereof of Acquired Corporation since its incorporation made available to the
Purchaser's counsel are the original stock ledgers and stock transfer books
and minute book records of Acquired Corporation or exact copies thereof.
Acquired Corporation is not
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in violation or breach of, or in default with respect to, any term of its
articles of incorporation (or other charter document) or by laws. RS, DS and
HB are the sole stockholders, officers and directors of Acquired Corporation.
Acquired Corporation is not a member of a customer or user organization or of
a trade association.
4.9 Employees. Acquired Corporation does not have or contribute to
any pension, profit-sharing, option, other incentive plan, or any other type
of Employee Benefit Plan (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), or have any
obligation to or customary arrangement with employees for bonuses, incentive
compensation, vacations, severance pay, insurance, or other benefits. Acquired
Corporation does not have any obligation to provide post-retirement medical
benefits or life insurance coverage to any present or former employees.
Acquired Corporation neither currently contributes to or since September 16,
1980 has effectuated either a complete or partial withdrawal from any
multiemployer Pension Plan within the meaning of Section 3(37) of ERISA. There
are no union or employment contracts or agreements (written or oral) involving
employees of Acquired Corporation.
4.10 Patents, Trademarks, Et Cetera. Acquired Corporation does not
own or have pending, or is licensed under, any patent, patent application,
trademark, trademark application, trade name, service mark, copyright,
franchise, or other intangible property or asset (all of the foregoing being
herein called "INTANGIBLES"). Acquired Corporation has not infringed, is
infringing, or has received notice of infringement with asserted Intangibles
of others.
4.11 Authority to Sell. Acquired Corporation and Seller have all
requisite power and authority to execute, deliver, and perform this Agreement.
All necessary
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corporate proceedings of Acquired Corporation have been duly taken to
authorize the execution, delivery, and performance of this Agreement by
Acquired Corporation. This Agreement has been duly authorized, executed, and
delivered by Acquired Corporation, has been duly executed and delivered by
Seller, constitutes the legal, valid, and binding obligation of Acquired
Corporation and Seller, and is enforceable as to them in accordance with its
terms except to the extent that such enforceability (a) may be limited by
bankruptcy, insolvency, or other similar laws relating to creditors' right
generally, and (b) is subject to general principles of equity. No consent,
authorization, approval, order, license, certificate, or permit of or from, or
declaration or filing with, any federal, state, local, or other governmental
authority or any court or other tribunal is required by Acquired Corporation
or any Seller for the execution, delivery, or performance of this Agreement by
Acquired Corporation or any Seller. No consent of any party to any contract,
agreement, instrument, lease, license, arrangement, or understanding to which
Acquired Corporation or any Seller is a party, or to which it or he or any of
its or his respective businesses, properties, or assets are subject, is
required for the execution, delivery, or performance of this Agreement; and
the execution, delivery, and performance of this Agreement will not violate,
result in a breach of, conflict with, or (with or without the giving of notice
or the passage of time or both) entitle any party to terminate or call a
default under, entitle any party to rights and privileges that such party was
not receiving or entitled to receive immediately before this Agreement was
executed under, or create any obligation on the part of Acquired Corporation
that it was not paying or obligated to pay immediately before this Agreement
was executed under, any term of any such contract, agreement, instrument,
lease, license, arrangement, or understanding, or violate or result in a
breach of any term of the certificate
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of incorporation (or other charter document) or by-laws of Acquired
Corporation or violate, result in a breach of, or conflict with any law, rule,
regulation, order, judgment, or decree binding on Acquired Corporation or any
Seller or to which it or he or any of its or his respective businesses,
properties, or assets are subject. Upon the Closing, Purchaser will have good
title to all the capital stock of Acquired Corporation, free and clear of all
liens, security interests, pledges, charges, encumbrances, stockholders'
agreements, and voting trusts.
4.12 Exemption from Registration. The offer, sale, and delivery of
the Stock as contemplated by this Agreement constitute exempted transactions
under the Securities Act of 1933 (as amended, the "SECURITIES ACT"), and
registration of such shares under the Securities Act is not required in
connection with any such offer, sale, or delivery of such shares.
4.13 Contracts. Except for the Lease and the matters set forth on
Schedule 5.13, Acquired Corporation is not a party to any leases, contracts,
orders or agreements (written or otherwise).
4.14 Condition of the Improvements. There are no material structural
or mechanical defects in the improvements located on the land covered by the
Lease, and there are no leaks in any roof on any such improvement.
4.15 Environmental Matters.
As used in this Agreement "HAZARDOUS MATERIAL" shall mean:
(i) any "hazardous substance" as now defined pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, 42 U.S.C. ss. 9601(33); (ii) any "pollutant or contaminant"
as defined in 42
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U.S.C. ss. 9601(33); (iii) any material now defined as "hazardous
waste" pursuant to 40 C.F.R. Part 261; (iv) any petroleum, including
crude oil and any fraction thereof; (v) natural or synthetic gas
usable for fuel; (vi) any "hazardous chemical" as defined pursuant to
29 C.F.R. Part 1910; (vii) any asbestos, asbestos containing material,
polychlorinated biphenyl ("PCB"), or isomer of dioxin, or any material
or thing containing or composed of such substance or substances; and
(viii) any other pollutant, contaminant, chemical, or industrial or
hazardous, toxic or dangerous waste, substance or material, defined or
regulated as such in (or for purposes of any Environmental Law (as
hereinafter defined) and any other toxic, reactive or flammable
chemicals.
4.15.2 To the best knowledge of Seller, there is no Hazardous
Material at, under or on the premises covered by the Lease (the
"PREMISES") and there is no ambient air, surface water, groundwater or
land contamination within, under, originating from or relating to the
Premises. Acquired Corporation has not, and has not caused to be,
manufactured, processed, distributed, used, treated, stored, disposed
of, transported or handled any Hazardous Material at, on or under the
Premises in violation of Environmental Law.
4.15.3 Acquired Corporation has no obligation or liability
imposed or based upon any provision under any foreign, federal, state
or local law, rule, or regulation or common law, or under any code,
order, decree, judgment or injunction applicable to Acquired
Corporation or the Premises or any notice, or request for information
issued, promulgated, approved or entered thereunder, or under the
common law, or any tort, nuisance or absolute liability theory,
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relating to public health or safety, worker health or safety, or
pollution, damage to or protection to the environment, including
without limitation, laws relating to emissions, discharges, releases
or threatened releases of Hazardous Material into the environment
(including without limitation, ambient air, surface water,
groundwater, land surface or subsurface), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
generation, disposal, transport or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances
or wastes (hereinafter collectively referred to as "ENVIRONMENTAL
LAWS").
4.15.4 Acquired Corporation has not been subject to any civil,
criminal or administrative action, suit, claim, hearing, notice of
violation, investigation, inquiry or proceeding for failure to comply
with, or received notice of any violation or potential liability under
the Environmental Laws in respect of the Premises.
4.15.5 The Premises are not (a) listed or to the best
knowledge of Seller proposed for listing on the National Priority List
or (b) listed on the Comprehensive Environmental Response, Compensation,
Liability Information System List ("CERCLIS") promulgated pursuant to
CERCLA, 42 U.S.C. ss. 9601(9), or any comparable list maintained by any
foreign, state or local government authority.
4.15.6 To the best knowledge of Seller, there are no
underground storage tanks at the Premises.
4.16 Tax Proceedings. There are no proceedings pending regarding the
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reduction of real estate taxes or assessments in respect of the Premises.
4.17 Utilities. All water, storm and sanitary sewer, gas,
electricity, telephone and other utilities adequately service the Premises,
enter the Premises through lands as to which valid public or private easements
exist that will inure to the benefit of Purchaser and the Premises are
furnished by facilities of public utilities and the cost of installation of
such utilities has been fully paid.
4.18 Access. To the best of Seller's knowledge, there are no
federal, state, county, municipal or other governmental plans to change the
highway or road system in the vicinity of the Premises which could materially
restrict or change access from any such highway or road to the Premises or any
pending or threatened condemnation or eminent domain proceedings relating to
or affecting the Premises. Purchaser has been provided with a true and
accurate survey of the Premises.
4.19 Insurance. Seller has delivered to Purchaser or its counsel
true and correct copies of all insurance policies carried by Seller or
Acquired Corporation for the benefit of Acquired Corporation or relating to
the Premises. All such policies have been fully paid for and are and have at
all times since their commencement date been in full force and effect. Seller
or Acquired Corporation have at all times since the formation of Acquired
Corporation maintained such policies or substantially similar policies in
effect. All requirements or recommendations by any insurer or by any board of
fire underwriters or similar body in respect of the Premises have been
satisfied.
4.20 Work at the Premises. No services, material or work have been
supplied to the Premises for which payment has not been made in full.
4.21 Full Disclosure. To the best knowledge of Seller, none of the
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information supplied by Seller herein or in the exhibits hereto contains any
untrue statement of a material fact or omits to state a material fact required
to be stated herein or necessary in order to make the statements herein, in
light of the circumstances under which they are made, not misleading.
5. Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller as of the date hereof and as of the Closing
Date as follows:
5.1 Organization; Power and Authority. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite power and authority to carry on its
business as it is now being conducted, to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby.
5.2 Due Authorization and Execution; Effect of Agreement. The
execution, delivery and performance by Purchaser of this Agreement and the
consummation by Purchaser of the transactions contemplated hereby have been
duly authorized by all necessary corporate action required to be taken on the
part of Purchaser. This Agreement has been duly and validly executed and
delivered by Purchaser and constitutes the valid and binding obligation of
Purchaser, enforceable in accordance with its terms, except to the extent that
such enforceability (a) may be limited by bankruptcy, insolvency, or other
similar laws relating to creditors' rights generally, and (b) is subject to
general principles of equity. The execution, delivery and performance by
Purchaser of this Agreement and the consummation by Purchaser of the
transactions contemplated hereby will not, with or without the giving of
notice or the lapse of time, or both, (i) violate any
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provision of any law, rule or regulation to which Purchaser is subject; (ii)
violate any order, judgment or decree applicable to Purchaser; or (iii)
conflict with or result in a breach of or a default under any term or
condition of Purchaser's Certificate of Incorporation or By-Laws or any
agreement or other instrument to which Purchaser is a party or by which it or
its assets may be bound, except in each case, for violations, conflicts,
breaches or defaults which in the aggregate would not materially hinder or
impair the consummation of the transactions contemplated hereby.
5.3 Inspection Opportunity. Purchaser acknowledges that it and its
authorized agents have been given an opportunity to examine such documents and
other information relating to the Acquired Corporation as they have deemed
necessary or advisable in order to make an informed decision relating to the
purchase of the Stock, that they have been afforded an opportunity to ask
questions and to obtain any additional information necessary in order to
verify the accuracy of the information furnished, and that they have, in fact,
asked all such questions and reviewed such documents and other information
that they have deemed necessary in order to enter into this Agreement.
5.4 Purchase for Investment. Purchaser will be acquiring the Stock
solely for its own account for investment and not with a view to or for the
distribution thereof.
5.5 Consents. No consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authorities is required in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated thereby.
6. Survival. The representations and warranties of the parties made in
Articles 5 and 6 hereof shall survive the Closing for a period of one year from
the Closing
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Date.
7. Further Assurances. At any time and from time to time after the
Closing Date, each of the parties hereto shall, at the request of any of the
others, execute and deliver any further instruments or documents and take all
such further action as may be reasonably requested in order to further
consummate the transactions contemplated by this Agreement. This Article shall
survive the Closing.
8. Brokers. Seller and Purchaser warrant and represent to each other
that they dealt with no broker, finder or similar agent or party who or which
might be entitled to a commission or compensation on account of introducing
the parties, the negotiation or execution of this Agreement and/or the closing
of the transaction provided for herein other than Blue Sky Commercial
("Broker"). Purchaser and Seller hereby respectively agree to indemnify and
hold harmless the other party from and against all loss, liability, damage and
expense (including, without limitation, attorneys' fees) imposed upon or
incurred by the other party by reason of any claim for commissions or other
compensation for bringing about this transaction by any broker, finder or
similar agent or party other than Broker who claims to have dealt with the
indemnifying party in connection with this transaction. Seller agrees to pay
Broker any commissions earned by Broker in connection with this transaction
pursuant to a separate agreement between Seller and Broker. The provisions of
this Article shall survive the Closing or any termination of this Agreement.
9. Indemnification.
9.1 Indemnification by Seller. Subject to the further
provisions of this Article, Seller shall protect, defend, hold harmless and
indemnify Purchaser, its officers, directors, shareholders, employees, agents
and affiliates, and their respective successors
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and assigns, from, against and in respect of any and all losses, liabilities,
deficiencies, penalties, fines, costs, damages and expenses whatsoever
(including without limitation, reasonable professional fees and costs of
investigation, litigation, settlement, and judgment and interest) ("LOSSES")
that may be suffered or incurred by any of them arising from or by reason of
(i) any Retained Liability; (ii) the breach of any representation, warranty,
covenant or agreement of Seller contained in this Agreement or in any document
or other writing delivered pursuant to this Agreement; and (iv) any and all
actions, suits, proceedings, claims, demands, assessments, judgments, costs
and expenses (including without limitation, interest, penalties, reasonable
legal fees and accounting fees) incident to the foregoing and the enforcement
of the provisions of this Section 10.1.
9.2 Indemnification by Purchaser. Subject to the further
provisions of this Article, Purchaser and the Acquiring Corporation shall
jointly and severally protect, defend, hold harmless and indemnify each
Seller, and their respective partners, employees and agents, and its
successors and assigns from, against and in respect of any and all Losses that
may be suffered or incurred by any of them arising from or by reason of (i)
the breach of any representation, warranty, covenant or agreement of Purchaser
contained in this Agreement or in any document or other writing delivered
pursuant to this Agreement; and (ii) any and all actions, suits, proceedings,
claims, demands, assessments, judgments, costs and expenses (including without
limitation, interest, penalties, reasonable legal fees and accounting fees)
incident to the foregoing and the enforcement of the provisions of this
Section 10.2.
9.3 Notice and Defense of Claims. Whenever a party hereto
(such party and each of its affiliates which is entitled to indemnification
pursuant to any provision of this
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Agreement, an "INDEMNIFIED PARTY") shall learn after the Closing of a claim
that, if allowed (whether voluntarily or by judicial or quasi-judicial
tribunal or agency), would give rise to an obligation of another party (the
"INDEMNIFYING PARTY") to indemnify the Indemnified Party under any provision
of this Agreement, before paying the same or agreeing thereto, the Indemnified
Party shall promptly notify the Indemnifying Party in writing of all such
facts within the Indemnified Party's knowledge with respect to such claim and
the amount thereof (a "NOTICE OF CLAIM"). If, prior to the expiration of
fifteen (15) days from the mailing of a Notice of Claim, the Indemnifying
Party shall request, in writing, that such claim not be paid, the Indemnified
Party shall not pay the same, provided the Indemnifying Party proceeds
promptly, at its or their own expense (including employment of counsel
reasonably satisfactory to the Indemnified Party), to settle, compromise or
litigate, in good faith, such claim. After notice from the Indemnifying Party
requesting the Indemnified Party not to pay such claim and the Indemnifying
Party's assumption of the defense of such claim at its or their expense, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal
or other expense subsequently incurred by the Indemnified Party in connection
with the defense thereof. However, the Indemnified Party shall have the right
to participate at its expense and with counsel of its choice in such
settlement, compromise or litigation. The Indemnified Party shall not be
required to refrain from paying any claim which has matured by a court
judgment or decree, unless an appeal is duly taken therefrom and execution
thereof has been stayed, nor shall the Indemnified Party be required to
refrain from paying any claim where the delay in paying such claim would
result in the foreclosure of a lien upon any of the property or assets then
held by the Indemnified Party. The failure to provide a timely Notice of Claim
as provided in this Section 10.3 shall
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not excuse the Indemnifying Party from its or their continuing obligations
hereunder; however, the Indemnified Party's claim shall be reduced by any
damages to the Indemnifying Party resulting from the Indemnified Party's delay
or failure to provide a Notice of Claim as provided in this Section 10.3.
9.4 Assertions Deemed True. For purposes of this Article, any
assertion of fact and/or law by a third party that, if true, would constitute
a breach of a representation or warranty made by a party to this Agreement or
make operational an indemnification obligation hereunder, shall, on the date
that such assertion is made, immediately invoke the Indemnifying Party's
obligation to protect, defend, hold harmless and indemnify the Indemnified
Party pursuant to this Article.
9.5 The obligation of Seller under Section 10.1 shall be
satisfied first from the Escrow Fund and, if the Escrow Fund is inadequate to
provide indemnification to Purchaser, then from Seller directly.
9.6 In addition, to the extent that the Acquired Corporation
continues to have the benefit of any insurance coverage that existed prior to
the Closing which insurance coverage includes coverage for any claim, the
Acquired Corporation will cooperate with Seller in pursuit of recovery under
such insurance coverage so as to minimize the amount of any uninsured losses
to be borne by the parties hereunder. Purchaser, the Acquired Corporation and
Seller agree to use reasonable efforts to collect amounts available under any
such other agreement or insurance.
10. Releases.
10.1 Each Seller fully and unconditionally releases and
discharges all claims and causes of action which he or his heirs, personal
representatives, successors,
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or assigns ever had, now have, or hereafter may have against Purchaser,
Acquired Corporation and, when acting as such, their respective officers,
directors, employees, counsel, agents, and stockholders, in each case past,
present, or as they may exist at any time after the date of this Agreement,
and each person, if any, who controls, controlled, or will control any of them
within the meaning of Section 15 of the Securities Act, except claims and
causes of action arising out of, based upon, or in connection with this
Agreement or any other agreement or instrument executed and delivered in
connection with this Agreement.
10.2 Acquired Corporation fully and unconditionally releases
and discharges all claims and causes of action which it, its agents,
successors or assigns ever had, now have, or hereafter may have against each
Seller except claims and causes of action arising out of, based upon, or in
connection with this Agreement or any other Agreement or instrument executed
and delivered in connection with this Agreement.
11. Costs and Fees. The parties shall pay for their own legal and
other advisers retained in connection with this transaction except that the
Purchaser shall pay the fees of the Acquired Corporation's accountants in
connection with their preparation of the financial statements referred to in
Section 5.3 hereof which amount shall not exceed $6,000.00. The provisions of
this Article shall survive the Closing.
12. Notices. All notices, demands, requests, consents or other
communications ("NOTICES") which either party may desire or be required to
give to the other hereunder shall be in writing and shall be delivered by
hand, overnight express carrier, or sent by registered or certified mail,
return receipt requested, postage prepaid, in either event, addressed to the
parties at their respective addresses first above set forth.
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A copy of any Notice given by Seller to Purchaser shall simultaneously be
given in either manner provided above to Squadron, Ellenoff, Plesent &
Sheinfeld, LLP, 551 Fifth Avenue, New York, New York 10176, Attention: Alan
Schacter, Esq. A copy of any Notice given by Purchaser to Seller shall
simultaneously be given in either manner provided above to Smith, Sommerville
& Case, L.L.C., 100 Light Street, Baltimore, Maryland 21202, Attention:
Douglas Worrell, Esq. Notices given in the manner aforesaid shall be deemed to
have been given three (3) business days after the day so mailed, the day after
delivery to any overnight express carrier and on the day so delivered by hand.
Either party shall have the right to change its address(es) for the receipt of
Notices by giving Notice to the other party in either manner aforesaid. Any
Notice required or permitted to be given by either party may be given by that
party's attorney.
13. Miscellaneous.
13.1 Successors and Assigns; Joint and Several Liability. This
Agreement shall bind and inure to the benefit of the parties hereto and their
respective successors and assigns. The agreements, obligations,
representations and warranties of Seller or any of the parties comprising
Seller hereunder shall be deemed to be the joint and several agreements,
obligations, representations and warranties of each party comprising Seller.
13.2 Governing Law. This Agreement shall be governed by,
interpreted under and construed and enforced in accordance with, the laws of
the State of New York.
13.3 Captions. The captions or article headings in this
Agreement are for convenience only and do not constitute part of this
Agreement.
13.4 Construction. This Agreement has been fully negotiated by
the
25
<PAGE>
parties and rules of construction construing ambiguities against the party
responsible for drafting agreements shall not apply.
13.5 Entire Agreement. This Agreement (including the Exhibits
annexed hereto) contain the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior understandings, if any,
with respect thereto.
13.6 Amendments. This Agreement may not be modified, changed,
supplemented or terminated, nor may any obligations hereunder be waived,
except by written instrument signed by the party to be charged or by its agent
duly authorized in writing or as otherwise expressly permitted herein.
13.7 No Waiver or Extension. No waiver of any breach of any
agreement or provision herein contained shall be deemed a waiver of any
preceding or succeeding breach thereof or of any other agreement or provision
herein contained. No extension of the time for performance of any obligations
or acts shall be deemed an extension of the time for performance of any other
obligations or acts.
13.8 Counterparts. This Agreement may be executed in one or
more counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which taken together shall constitute but one
and the same original.
26
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.
----------------------------
RAYMOND R. SEARS
----------------------------
DONALD L. SEARS
----------------------------
HENRY BACHMAN
PRIVITIZATION PLUS, INC.
By: _______________________
Name: Donald L. Sears
Title: President
FAMILY GOLF CENTERS, INC.
By: ______________________
Name: Robert Krause
Title: Vice President
27
CASH ESCROW AGREEMENT
CASH ESCROW AGREEMENT, dated as of September 25, 1996 (this
"AGREEMENT"), by and among RAYMOND R. SEARS, having an address at 2387 Rutland
Road, Davidsonville, Maryland 21035 ("RS") and DONALD L. SEARS, having an
address at 2387 Rutland Road, Davidson, Maryland 21035 ("DS"), HENRY BACHMAN,
having an address at c/o F. Michael Grace, 300 Frederick Road, Catonsville,
Maryland 21228 ("HB") (DS, HB and RS are collectively referred to herein as
"Seller"), FAMILY GOLF CENTERS, INC., a Delaware corporation having an address
at 225 Broadhollow Road, Suite 106E, Melville, New York 11747 ("PURCHASER"),
and CONTINENTAL STOCK TRANSFER & TRUST COMPANY, incorporated under the laws of
the United States of America with executive offices at 2 Broadway, New York,
New York 10004 (together with its successors, the "ESCROW AGENT").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution hereof, Seller and
Purchaser are consummating the transactions contemplated by the Stock Purchase
Agreement, dated as of the date hereof (the "PURCHASE AGREEMENT"), between
Seller and Purchaser;
WHEREAS, pursuant to the Purchase Agreement, Purchaser is required to
deposit $100,000 into an escrow account to be maintained by Escrow Agent to be
held against any claims for indemnity under Article 10 of the Purchase
Agreement; and
WHEREAS, this is the Escrow Agreement referred to in the Purchase
Agreement. Capitalized terms used in this Escrow Agreement and not otherwise
defined herein shall
<PAGE>
have the respective meanings given to them in the Purchase Agreement.
NOW, THEREFORE, it is agreed as follows:
1. ESCROW.
1.01 APPOINTMENT OF ESCROW AGENT.
(a) Seller and Purchaser hereby appoint Escrow Agent, and Escrow Agent
hereby agrees to serve, as Escrow Agent in accordance with, and pursuant to,
this Agreement.
(b) Escrow Agent shall establish at Chemical Bank a separate
Federally insured, interest bearing account (the "ESCROW ACCOUNT") for any
amounts received by it hereunder.
(c) All monies, including interest thereon, held by Escrow Agent in
the Escrow Account pursuant to the terms hereof shall be hereinafter referred
to as the "ESCROWED FUNDS".
(d) RS's social security number is _____________. DS's social
security number is _____________. HB's Social Security No. is
#________________. RS, DS and HB shall each be jointly and severally
responsible for the payment of any income taxes payable in connection with any
interest earned in the Escrow Account.
1.02 OPERATION OF ESCROW ACCOUNT. The parties hereto agree that the
Escrow Account shall operate as follows:
(a) Simultaneously with the execution and delivery hereof,
Purchaser
-2-
<PAGE>
shall deliver or cause to be delivered to Escrow Agent $100,000. Escrow Agent
shall hold such amount as Escrowed Funds in the Escrow Account.
(b) At any time prior to the first anniversary of the Closing
Date, Purchaser shall be entitled to give a notice to Escrow Agent, signed by
Purchaser's President or any Vice President (with a copy to Seller), to the
effect that there has been an event entitling Purchaser to indemnification
from Seller pursuant to the Purchase Agreement, which notice shall specify the
amounts owed by Seller pursuant to the Purchase Agreement, the calculation of
such amounts and the basis therefor.
(c) Twenty (20) days after Escrow Agent has received a notice
pursuant to Section 1.02(b) hereof (or, if not a business day, on the next
business day following such twentieth day) Escrow Agent shall deliver to
Purchaser such portion of the Escrowed Funds as is specified in such notice
unless Seller shall have notified Escrow Agent (with a copy to Purchaser) in
writing before such date that Seller disagrees with Purchaser's determination
that Purchaser is entitled to indemnification with respect to the Purchase
Agreement, which notice shall be set forth in reasonable detail the basis for
such disagreement.
(d) Should any dispute arise with respect to the delivery,
ownership, or right of possession of any of the Escrowed Funds, Escrow Agent,
as more fully set forth in Section 3.11 hereof, is authorized and directed to
retain in its possession without liability to anyone all or any part of the
Escrowed Funds until such dispute shall have been settled either by mutual
agreement by the parties concerned or by a final order, decree, or
- 3 -
judgment of a court of competent jurisdiction in the United States of America
and time for appeal has expired and no appeal has been perfected, but Escrow
Agent shall be under no duty whatsoever to institute or defend any such
proceedings, and may, in its discretion, deposit such Escrowed Funds with a
court of competent jurisdiction in the United States of America and be relieved
of any and all liability to any of the parties hereto upon such deposit.
1.03 DISTRIBUTION OF ESCROWED FUNDS. Unless a notice under Section
1.02(b) hereof has been given and Escrowed Funds in satisfaction of such notice
have not been delivered to Purchaser, either because the 20-day period has not
yet run out or because a dispute relating to the claim made by such notice is
then pending, the Escrowed Funds or such portion of them as at the time remains
in escrow, together with all dividends and distributions received by Escrow
Agent with respect thereto, shall be returned to Seller on the first
anniversary of the Closing Date. Any funds returned to Seller shall be paid 50%
to RS, 25% to DS and 25% to HB.
1.04 TERMINATION OF ESCROW ACCOUNT. This Agreement and the Escrow
Account will terminate at 5:00 P.M., New York City local time, on the date on
which all of the Escrowed Funds contained in the Escrow Account shall be
distributed as set forth above.
2. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be (a) delivered by hand, (b)
facsimile, or (c) over-night
- 4 -
delivery with proper postage prepaid, and addressed as follows:
If to Purchaser to:
225 Broadhollow Road
Melville, New York 11747
Attention: Dominic Chang, President
Telephone: (516) 694-1666
Facsimile: (516) 694-0918
If to RS to:
Raymond L. Sears
2387 Rutland Road
Davidsonville, Maryland 21035
Telephone:
Facsimile:
If to DS to:
Donald L. Sears
2387 Rutland Road
Davidsonville, Maryland 21035
If to HB to:
Henry Bachman
c/o F. Michael Grace
300 Frederick Road
Catonsville, Maryland 21228
Telephone:
Facsimile:
with, in the case of RS, DS and HB, a copy to:
Smith, Sommerville & Case, L.L.C.
100 Light Street
Baltimore, Maryland 21202
Attention: Douglas Worrell, Esq.
Telephone: (410) 727-1164
Facsimile: (410) 385-8060
- 5 -
If to Escrow Agent, to:
2 Broadway
New York, New York 10004
Telephone: (212) 509-4000
Facsimile: (212) 509-5150
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. Except as
otherwise provided herein, no notice or communication shall be effective until
received. A notice by and of RS, DS or HB shall constitute notice on behalf of
Seller.
3. CONCERNING ESCROW AGENT.
To induce Escrow Agent to act hereunder, it is further agreed by each
of Seller and Purchaser that:
3.01 Escrow Agent shall not be under any duty to give the Escrowed
Funds held by it hereunder any greater degree of care than it gives its own
similar property and shall not be required to invest any funds held hereunder
except as directed in this Agreement.
3.02 This Agreement expressly sets forth all the duties of Escrow
Agent with respect to any and all matters pertinent hereto. No implied duties
or obligations shall be read into this Agreement against Escrow Agent. Escrow
Agent shall not be bound by the provisions of any agreement among the other
parties hereto except this Agreement.
3.03 Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct, and, except with respect to claims based
upon such gross negligence
- 6 -
or willful misconduct that are successfully asserted against Escrow Agent, the
other parties hereto shall jointly and severally indemnify and hold harmless
Escrow Agent (and any successor Escrow Agent) from and against any and all
losses, liabilities, claims, actions, damages, and expenses, including
reasonable attorneys' fees and disbursements, arising out of, and in connection
with, this Agreement. Without limiting the foregoing, Escrow Agent shall in no
event be liable in connection with its investment or reinvestment of any cash
held by it hereunder in good faith, in accordance with the terms hereof,
including, without limitation, any liability for any delays (not resulting from
gross negligence or willful misconduct) in the investment or reinvestment of the
Escrowed Funds, or any loss of interest incident to any such delays. This
Section 3.03 shall survive notwithstanding any termination of this Agreement or
the resignation of Escrow Agent.
3.04 Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument, or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. Escrow Agent may act in reliance upon any instrument or
signature believed by it in good faith to be genuine and may assume, if in good
faith, that any person purporting to give notice or receipt or advice or make
any statement or execute any document in connection with the provisions hereof
has been duly authorized to do so.
3.05 Escrow Agent may act pursuant to the advice of counsel with
respect to any
- 7 -
matter relating to this Escrow Agreement and shall not be liable for any action
taken or omitted in good faith and in accordance with such advice.
3.06 Escrow Agent does not have any interest in the Escrowed Funds
deposited hereunder, but is serving as escrow holder only. Any payments of
income from the Escrow Account shall be subject to withholding regulations
then in force with respect to United States taxes. This Section 3.06 shall
survive notwithstanding any termination of this Agreement or the resignation
of Escrow Agent.
3.07 Escrow Agent makes no representation as to the validity, value,
genuineness, or the collectibility of any security or other documents or
instrument held by, or delivered to, it.
3.08 Escrow Agent shall not be called upon to advise any party as to
the wisdom in selling or retaining or taking or refraining from any action
with respect to any securities or other property deposited hereunder.
3.09 Escrow Agent (and any successor escrow agent) at any time may be
discharged from its duties and obligations hereunder by the delivery to it of
notice of termination signed by Purchaser and Seller or at any time may resign
by giving written notice to such effect to Purchaser and Seller. Upon any such
termination or resignation, Escrow Agent shall deliver the Escrowed Funds to any
successor escrow agent jointly designated by the other parties hereto in
writing, or to any court of competent jurisdiction if no such successor escrow
agent is agreed upon, whereupon Escrow Agent shall be
- 8 -
discharged of and from any and all further obligations arising in connection
with this Escrow Agreement. The termination or resignation of Escrow Agent shall
take effect on the earlier of (a) the appointment of a successor (including a
court of competent jurisdiction) or (b) the day that is thirty (30) days after
the date of delivery: (i) to Escrow Agent of the other parties' notice of
termination or (ii) to the other parties hereto of Escrow Agent's written notice
of resignation. If at that time Escrow Agent has not received a designation of a
successor escrow agent, Escrow Agent's sole responsibility after that time shall
be to keep the Escrowed Funds safe until receipt of a designation of successor
escrow agent or a joint written disposition instruction by the other parties
hereto or an enforceable order of a court of competent jurisdiction.
3.10 Escrow Agent shall have no responsibility for the contents of
any writing of any third party contemplated herein as a means to resolve
disputes and may rely without any liability upon the contents thereof.
3.11 In the event of any disagreement among or between the other
parties hereto resulting in adverse claims or demands being made in connection
with the Escrowed Funds, or in the event that Escrow Agent in good faith is in
doubt as to what action it should take hereunder, Escrow Agent shall be
entitled to retain the Escrowed Funds until Escrow Agent shall have received
(a) a final and non-appealable order of a court of competent jurisdiction
directing delivery of the Escrowed Funds or (b) a written agreement executed by
the other parties hereto directing delivery of the Escrowed Funds, in which
- 9 -
event Escrow Agent shall disburse the Escrowed Funds in accordance with such
order or agreement. Any court order referred to in (a) above shall be
accompanied by a legal opinion by counsel for the presenting party satisfactory
to Escrow Agent to the effect that said court order is final and non-appealable.
Escrow Agent shall act on such court order and legal opinions without further
question.
3.12 As consideration for its agreement to act as Escrow Agent as
herein described, Purchaser shall pay the Escrow Agent's fees determined in
accordance with the terms set forth on Exhibit A hereto (and made a part of
this Escrow Agreement as if herein set forth). In addition, Purchaser and
Seller agree to reimburse Escrow Agent (on a 50/50 basis) for all reasonable
expenses, disbursements, and advances incurred or made by Escrow Agent in
performance of its duties hereunder (including reasonable fees, expenses, and
disbursements of its counsel).
3.13 No publicly distributed material or other matter in any language
(including, without limitation, notices and reports) which mentions Escrow
Agent's name or the rights, powers, or duties of Escrow Agent shall be issued by
the other parties hereto or on such parties' behalf unless Escrow Agent shall
first have given its specific written consent thereto.
4. MISCELLANEOUS.
4.01 BINDING EFFECT. This Escrow Agreement shall be binding upon, and
inure solely to the benefit of, the parties hereto and their respective
successors and assigns,
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heirs, administrators, and representatives, and shall not be enforceable by, or
inure to the benefit of, any other third party, except as provided in Section
3.09 hereof with respect to the termination of, or resignation by, Escrow Agent.
No party may assign any of its rights or obligations under this Agreement
without the written consent of the other parties.
4.02 CHOICE OF LAW. This Agreement shall be construed in accordance
with, and governed by, the internal law of the State of New York (without
reference to its rules as to conflicts of law).
4.03 MODIFICATION. This Agreement may only be modified by a writing
signed by all of the parties hereto.
4.04 HEADINGS. The section headings herein are for convenience only
and shall not affect the construction thereof. Unless otherwise indicated,
references to Sections and Articles are to Sections and Articles,
respectively, contained herein.
4.05 COUNTERPARTS. This Agreement may be executed in one or more
counterparts but all such separate counterparts shall constitute but one and
the same instrument; provided that, although executed in counterparts, the
executed signature pages of each such counterpart may be affixed to a single
copy of this Agreement which shall constitute an original.
- 11 -
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
By: __________________________________
Name: Robert Krause
Title: Vice President
--------------------------------------
RAYMOND R. SEARS
--------------------------------------
DONALD L. SEARS
--------------------------------------
HENRY BACHMAN
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
By: __________________________________
Name:
Title:
- 12 -
<PAGE>
PURCHASE AGREEMENT
------------------
by and between
TRI-TOWN SPORTS, INC.
Seller,
and
EASTON FAMILY GOLF CENTERS, INC.,
Purchaser
PREMISES:
530 Turnpike Street
South Easton, Massachusetts
<PAGE>
PURCHASE AGREEMENT
PURCHASE AGREEMENT, made as of the 26th day of September, 1996 (this
"Agreement"), by and between TRI-TOWN SPORTS, INC., a Massachusetts
corporation having an address at 1200 Providence Highway, Suite 102N, Sharon,
Massachusetts 02067 ("Seller"), and EASTON FAMILY GOLF CENTERS, INC., a
Delaware corporation having an address at 225 Broadhollow Road, Suite 106E,
Melville, New York 11747 ("Purchaser").
W I T N E S S E T H :
WHEREAS, Seller is the owner of certain real property located at 530
Turnpike Street, South Easton, Massachusetts 02375 and more particularly
described on Exhibit A attached hereto and made a part hereof (the "Land") and
the buildings and improvements located on the Land (the "Improvements" and,
together with the Land, the "Premises");
WHEREAS, Seller operates a driving range and related facilities at the
Premises under the name "Dixie Golf Center" (the "Business"); and
WHEREAS, Seller wants to sell the Premises to Purchaser, and Purchaser
wants to purchase the Premises from Seller, on the terms, and subject to the
conditions, set forth herein.
NOW, THEREFORE, in consideration of TEN ($10.00) DOLLARS, the terms and
conditions set forth herein, and other good and valuable consideration, the
mutual receipt and sufficiency of which are hereby acknowledged, the parties
hereby agree to the foregoing and as follows:
<PAGE>
1. Agreement to Sell and Purchase.
1.1 Property to be Purchased by Purchaser. Seller agrees to sell
and convey to Purchaser, and Purchaser agrees to purchase and acquire from
Seller, upon the terms and conditions hereinafter set forth, all of Seller's
right, title and interest in and to the following property (collectively, the
"Property"):
1.1.1 the Premises;
1.1.2 the easements, rights of way,
appurtenances and other rights and benefits of Seller in and to the Premises,
including without limitation, all of Seller's interest in any air rights,
water rights and irrigation rights;
1.1.3 all furnishings, fixtures, machinery,
equipment, vehicles and personalty attached or appurtenant to or used in
connection with the Premises that are owned by Seller, and all inventories,
supplies, sales, marketing and instructional materials of every kind and
description relating to the Business, wherever located, including without
limitation, the items described on Exhibit B attached hereto and made a part
hereof (the "Personal Property");
1.1.4 the files, books, notices and other
correspondence from any governmental agencies, and other records used or
employed by Seller or its affiliates in connection with the ownership and/or
operation of the Premises and the Business (collectively, the "Records");
- 2 -
<PAGE>
1.1.5 any consents, authorizations, variances,
waivers, licenses, certificates, permits and approvals held by or granted to
Seller in connection with the ownership of the Premises (collectively, the
"Permits");
1.1.6 the contracts, leases and other
agreements of or relating to the Business described on Exhibit C attached
hereto and made a part hereof, except to the extent the same relate solely to
any Retained Assets or Retained Liabilities (as hereinafter defined) (the
"Contracts");
1.1.7 all accounts receivable of Seller arising
out of the sale of goods or services rendered at the Premises or otherwise in
connection with the Business on or after July 15, 1996 (the "Effective Date");
1.1.8 any manufacturers' and vendors'
warranties and guarantees, except to the extent the same relate solely to any
Retained Assets or Retained Liabilities (the "Claims"); and
1.1.9 any other properties and assets of every
kind and nature, real or personal, tangible or intangible, relating in any way
whatsoever to the Premises or the Business, except to the extent the same
relate solely to the Retained Assets or Retained Liabilities.
1.2 Assets to be Retained by Seller. Anything herein to the
contrary notwithstanding, Seller shall not sell, and Purchaser shall not
acquire, the following assets of Seller (the "Retained Assets"):
- 3 -
<PAGE>
1.2.1 all trade accounts receivable arising out of
the sale of goods or services prior to the Effective Date;
1.2.2 any rights of Seller with respect to insurance
policies owned by Seller or for which Seller is the named insured;
1.2.3 all cash, funds in bank accounts and cash
equivalents existing as of the Effective Date hereof; and
1.2.4 any patents, trademarks, trademark
registrations, copyrights, copyright registrations, trade names and all
registrations thereof and all applications for any of the foregoing, whether
issued or pending, if any, and all goodwill associated with any of the
foregoing (the "Intangible Assets").
1.3 Assumption of Certain Liabilities. Purchaser shall assume
and agree to pay and discharge when due all liabilities and obligations of
Seller under the Contracts to the extent the same arise from and after the
Effective Date (the "Assumed Liabilities").
1.4 Liabilities to be Retained by Purchaser. Seller shall retain,
and Purchaser shall not assume, perform, discharge or pay, and shall not be
responsible for, any and all liabilities or obligations of any nature
whatsoever in connection with or relating to the Property, Seller or the
Business or any predecessor owner of the Property or the Business other than
the Assumed Liabilities (collectively, the "Retained Liabilities").
2. Consideration.
- 4 -
<PAGE>
2.1 The purchase price for the Property is Two Million Six Hundred
Thousand Dollars ($2,600,000.00) payable as follows:
2.1.1 One Million Nine Hundred Thousand Dollars
($1,900,000.00), subject to adjustment as hereinafter provided, payable on the
date hereof in cash, or by certified or bank check or by the wire transfer of
funds; and
2.1.2 Seven Hundred Thousand Dollars ($700,000.00)
evidenced by four promissory notes made by Purchaser in favor of Seller (the
"Promissory Notes") secured by a first through fourth mortgage on the Premises
in the form of Exhibit D attached hereto and made a part hereof. Such
Promissory Notes shall be guaranteed by Family Golf Centers, Inc.
3. Title; Permitted Exceptions.
3.1 Seller will convey the Property to Purchaser, free and clear
of any and all liens, charges, encumbrances, mortgages, pledges, security
interests, easements, agreements and other interests and adverse claims
(collectively, "Encumbrances"), other than the matters set forth in Exhibit E
attached hereto and made a part hereof (the "Permitted Exceptions").
3.2 Purchaser may order an examination of title from a title
company licensed or authorized to issue title insurance in the State of
Massachusetts ("Title Company"), and shall cause a copy of any title report to
be forwarded to Seller's attorney upon receipt. If a title examination shall
- 5 -
<PAGE>
disclose any Encumbrances other than the Permitted Exceptions, Seller shall
cause the same to be discharged of record or otherwise cured.
3.3 If a search of the title discloses judgments, bankruptcies or
other returns against other persons having names the same as or similar to
that of Seller, Seller will on request deliver to the Title Company or
Purchaser an affidavit showing that such judgments, bankruptcies or other
returns are not against Seller, in form sufficient to permit deletion of such
exception from the title policy.
4. Apportionments.
4.1 The parties hereto agree that (i) all operating expenses of
Seller relating to the Premises (i.e., real estate taxes, utilities, cost of
inventories advertising, collections, fees, hired services, insurance,
miscellaneous expenses, postage, repairs and maintenance, supplies, taxes and
wages, but specifically not including interest on indebtedness, professional
fees and expenses, travel, lodging, or depreciation), and (ii) all income of
Seller, shall be apportioned between Seller and Purchaser as of the Effective
Date based on the portion of each such expense or revenue attributable to the
period falling on or before the Effective Date on the one hand, which Seller
shall bear the responsibility and benefit of, and the portion of each such
expense or revenue attributable to the period falling after the Effective
Date, on the other hand, which Purchaser shall bear the responsibility and
benefit of
- 6 -
<PAGE>
(the "Adjustment"). The expenses and liabilities for which Seller shall be
liable pursuant to this Section shall be included within the meaning of the
term "Retained Liabilities".
4.2 To the extent that any of the prorations made pursuant to this
Article are based upon estimates of payments to be made and/or expenses to be
incurred by Purchaser subsequent to the Effective Date, or either party
discovers any errors in or omissions in respect of the Adjustment, Seller and
Purchaser agree to adjust such prorations promptly upon receipt by Seller or
Purchaser, as the case may be, of such payments or of bills or other
documentation setting forth the actual amount of such expenses.
4.3 Seller and Purchaser shall maintain and make available to each
other any books or records necessary for the adjustment of any item pursuant
to this Article. The provisions of this Article shall survive the closing of
the transactions described herein (the "Closing").
5. The Closing.
5.1 The Closing of the transaction provided for in this Agreement
shall take place simultaneously with the execution and delivery of this
Agreement (the actual date of the Closing being referred to herein as the
"Closing Date").
5.2 At the Closing, Seller shall deliver or cause to be delivered
to Purchaser physical possession of the Property (receipt of which may be
actual or constructive) and the following:
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<PAGE>
5.2.1 a quitclaim deed with covenants against
grantor's acts, duly executed and acknowledged by Seller, in proper statutory
form for recording, so as to convey to Purchaser fee simple title to the
Premises, subject to and in accordance with the provisions of this Agreement
(the "Deed");
5.2.2 a bill of sale conveying, transferring
and selling to Purchaser all right, title and interest of Seller in and to all
of the Personal Property, which bill of sale shall contain a warranty that
such property is free and clear of all Encumbrances other than the Permitted
Exceptions, duly executed and acknowledged by Seller;
5.2.3 an assignment and assumption agreement
(the "Assignment and Assumption Agreement") assigning to Purchaser all of
Seller's right, title and interest in and to the Contracts, the Permits and
the Claims, duly executed and acknowledged by Seller;
5.2.4 a settlement statement (the "Settlement
Statement") setting forth the amounts paid by or on behalf of and/or credited
to each of Purchaser and Seller pursuant to this Agreement;
5.2.5 an owner's affidavit of title;
5.2.6 a Certificate or Certificates of
Occupancy for all Improvements;
5.2.7 original counterparts of each of the
Contracts;
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<PAGE>
5.2.8 any transfer tax or other return required
by any applicable governmental authority in connection with the sale of the
Property, duly executed and acknowledged by Seller;
5.2.9 an affidavit (the "FIRPTA Affidavit")
duly executed and acknowledged by Seller pursuant to Section 1445 (b)(2) of the
Internal Revenue Code of 1986, as amended, stating that Seller is not a
foreign person within the meaning of such provision;
5.2.10 keys to all locks relating to the
Property, appropriately labeled;
5.2.11 all other instruments and documents to
be executed, acknowledged where appropriate and/or delivered by Seller to
Purchaser pursuant to any of the other provisions of this Agreement; and
5.2.12 such other documents as may be
reasonably required by Purchaser's counsel in connection with this transaction.
5.3 At the Closing, Purchaser shall deliver or cause to be
delivered to Seller the following:
5.3.1 the cash consideration referred to in
Section 2 hereof;
5.3.2 the Promissory Notes referred to in
Section 2 hereof;
5.3.3 the Assignment and Assumption Agreement,
duly executed and acknowledged by Purchaser;
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5.3.4 the Settlement Statement, duly executed
and acknowledged by Purchaser;
5.3.5 all other instruments and documents to
be executed, acknowledged where appropriate and/or delivered by Purchaser to
Seller; and
5.3.6 such other documents as may be reasonably
required by Seller's counsel in connection with this transaction.
6. Representations and Warranties.
6.1 Seller represents and warrants to Purchaser as follows:
6.1.1 Organization; Power and Authority.
Seller is a corporation duly formed, validly existing and in good standing
under the laws of the State of Massachusetts, and has all requisite power and
authority to carry on its business as it is now being conducted, to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby.
6.1.2 Due Authorization and Execution; Effect
of Agreement. The execution, delivery and performance by Seller of this
Agreement and the consummation by Seller of the transactions contemplated
hereby have been duly authorized by all necessary corporate action required to
be taken on the part of Seller. This Agreement has been duly and validly
executed and delivered by Seller and constitutes the valid and binding
obligation of Seller, enforceable in accordance with its terms, except to the
extent that such
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enforceability (a) may be limited by bankruptcy, insolvency, or other similar
laws relating to creditors' rights generally; and (b) is subject to general
principles of equity.
6.1.3 Consents. No consent, approval or
authorization of, exemption by, or filing with, any governmental or regulatory
authority or any third party is required in connection with the execution,
delivery and performance by Seller of this Agreement, except for consents,
approvals, authorizations, exemptions and filings, if any, which have been
obtained.
6.1.4 Compliance with Applicable Laws. Seller
is not engaging in any activity or omitting to take any action as a result of
which Seller is in violation of any material law, rule, regulation, ordinance,
statute, order, injunction or decree, or any other requirement of any court or
governmental or administrative body or agency, applicable to the Property or
the Business, and neither the execution and delivery by Seller of this Agreement
or of any of the other agreements and instruments to be executed and delivered
by it pursuant hereto, the performance by Seller of its obligations hereunder
or thereunder or the consummation of the transactions contemplated hereby or
thereby will result in any such violation. Seller is in compliance with all
material requirements imposed in writing by any insurance carrier of Seller to
the extent such carrier is an insurer or indemnitor of the Property. The
Premises are not subject to any notice of violation of law, municipal
ordinance,
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orders or requirements issued by any building department or other governmental
agency or subdivision having jurisdiction.
6.1.5 Permits. To the best of Seller's
knowledge all Permits required by any federal, state, or local law, rule or
regulation and necessary for the operation of the Property and the Business as
currently being conducted have been obtained and are currently in effect. No
registrations, filings, applications, notices, transfers, consents, approvals,
orders, qualifications, waivers or other actions of any kind are required by
virtue of the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby (a) to avoid the loss of any Permit or
the violation of any law, regulation, order or other requirement of law, or
(b) to enable Purchaser to continue the operation of the Property as presently
conducted after the Closing. The current use and occupation of any portion of
the Property does not violate any of, and, where applicable, is in material
compliance with, the Permits, any applicable deed restrictions or other
covenants, restrictions or agreements including without limitation, any of the
Permitted Exceptions, site plan approvals, zoning or subdivision regulations
or urban redevelopment plans applicable to the Premises.
6.1.6 Title to Assets. Seller has good and
marketable title to the Property free and clear of all Encumbrances other than
the Permitted Exceptions.
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6.1.7 Contracts. Except as set forth on
Exhibit C, Seller is not a party to any leases, contracts, orders or
agreements relating to the Property or the Business (written or otherwise)
(collectively, "Contracts"). Exhibits C sets forth a full and complete
description of the Contracts described therein, and none of such Contracts
have been amended or modified except as reflected on said Exhibits. Seller is
not holding any security deposits under any of said Contracts. Each of the
Contracts are in full force and effect and no party under any such Contract,
including Seller, is in default, or has sent or received notice of default, in
any respect of any such Contract.
6.1.8 Condition of the Improvements. There are
no material structural or mechanical defects in the Improvements, and there
are no leaks in any roof on any Improvement.
6.1.9 Condition of Personal Property. To the
best of Seller's knowledge the Personal Property is in good operating
condition and repair, ordinary wear and tear excepted, and is adequate,
suitable and sufficient to meet the needs of and to operate the Property as
currently conducted.
6.1.10 Environmental Matters.
6.1.10.1 As used in this Agreement
"Hazardous Material" shall mean: (i) any "hazardous substance" as now defined
pursuant to the Comprehensive Environmental Response, Compensation and
Liability
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Act of 1980 ("CERCLA"), 42 U.S.C. ss. 9601(33); (ii) any "pollutant or
contaminant" as defined in 42 U.S.C. ss. 9601(33); (iii) any material now
defined as "hazardous waste" pursuant to 40 C.F.R. Part 261; (iv) any
petroleum, including crude oil and any fraction thereof; (v) natural or
synthetic gas usable for fuel; (vi) any "hazardous chemical" as defined
pursuant to 29 C.F.R. Part 1910; (vii) any asbestos, asbestos containing
material, polychlorinated biphenyl ("PCB"), or isomer of dioxin, or any
material or thing containing or composed of such substance or substances; and
(viii) any other pollutant, contaminant, chemical, or industrial or hazardous,
toxic or dangerous waste, substance or material, defined or regulated as such
in (or for purposes of any Environmental Law (as hereinafter defined) and any
other toxic, reactive or flammable chemicals.
6.1.10.2 To the best of Seller's
knowledge, there is no Hazardous Material at, under or on the Premises and
there is no ambient air, surface water, groundwater or land contamination
within, under, originating from or relating to the Premises. Seller has not,
and has not caused to be, manufactured, processed, distributed, used, treated,
stored, disposed of, transported or handled any Hazardous Material at, on or
under the Premises.
6.1.10.3 To the best of Seller's
knowledge, seller has no obligation or liability imposed or based upon any
provision under any foreign, federal, state or local law, rule, or regulation
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or common law, or under any code, order, decree, judgment or injunction
applicable to Seller or the Property or any notice, or request for information
issued, promulgated, approved or entered thereunder, or under the common law,
or any tort, nuisance or absolute liability theory, relating to public health
or safety, worker health or safety, or pollution, damage to or protection to
the environment, including without limitation, laws relating to emissions,
discharges, releases or threatened releases of Hazardous Material into the
environment (including without limitation, ambient air, surface water,
groundwater, land surface or subsurface), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, generation,
disposal, transport or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes (hereinafter collectively
referred to as "Environmental Laws").
6.1.10.4 Seller has not been subject
to any civil, criminal or administrative action, suit, claim, hearing, notice
of violation, investigation, inquiry or proceeding for failure to comply with,
or received notice of any violation or potential liability under the
Environmental Laws in respect of the Premises.
6.1.10.5 The Premises are not (a)
listed or proposed for listing on the National Priority List or (b) listed on
the Comprehensive Environmental Response, Compensation, Liability Information
System List ("CERCLIS") promulgated pursuant to CERCLA, 42 U.S.C. ss. 9601(9),
or
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any comparable list maintained by any foreign, state or local government
authority.
6.1.10.6 To the best of Seller's
knowledge, there are no underground storage tanks at the Premises other than
as disclosed on the Phase I environmental report commissioned by the Purchaser
in connection with this transaction and Seller further warrants and represents
that any prior use and operation of underground storage tanks by Seller has
been in compliance with all Environmental Laws.
6.1.11 Tax Proceedings. There are no
proceedings pending regarding the reduction of real estate taxes or
assessments in respect of the Premises.
6.1.12 Utilities. All water, storm and
sanitary sewer, gas, electricity, telephone and other utilities adequately
service the Premises, enter the Premises through lands as to which valid
public or private easements exist that will inure to the benefit of Purchaser
and the Premises are furnished by facilities of public utilities and the cost
of installation of such utilities has been fully paid.
6.1.13 Access. To the best of Seller's
knowledge, there are no federal, state, county, municipal or other
governmental plans to change the highway or road system in the vicinity of the
Premises which could materially restrict or change access from any such
highway or road to the Premises or any pending or threatened condemnation or
eminent domain proceedings
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relating to or affecting the Premises. All roads bounding the Premises are
public roads and the Deed is the only instrument necessary to convey to
Purchaser full access to and the right to use such roads freely, subject to
the provisions of Massachusetts Law relating to roads and highways, as well as
to convey all rights appurtenant to the Premises in such roads.
6.1.14 Insurance Requirements. All
requirements or recommendations by any insurer or by any board of fire
underwriters or similar body in respect of the Property have been satisfied.
6.1.15 Litigation. There is no action or
proceeding (zoning or otherwise) or governmental investigation pending, or, to
the best of Seller's knowledge, threatened against, or relating to, Seller
(insofar as it relates to the Premises or the Business), the Premises, the
Business or the transactions contemplated by this Agreement, nor is there any
basis for any such action, proceeding or investigation.
6.1.16 Assessments. There are no special or
other assessments for public improvements or otherwise now affecting the
Premises nor does Seller know of (a) any pending or threatened special
assessments affecting the Premises or (b) any contemplated improvements
affecting the Premises that may result in special assessments affecting the
Premises.
6.1.17 Employee Agreements. There are no union
or employment contracts or agreements (written or oral) involving employees of
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Seller or its affiliates affecting the Property or the Business which will
survive the Closing. All employees of Seller will have been terminated as of
the date hereof.
6.1.18 Work at the Premises. No services,
material or work have been supplied to the Premises for which payment has not
been made in full.
6.1.19 Financial Condition. Seller has
delivered to Purchaser, or will promptly upon execution hereof deliver, true
and correct copies of audited financial statements consisting of balance
sheets and income statements of Seller as of December 31, 1995. Seller has
delivered true and correct copies of monthly internal reports for the months
January through September, 1996. Each such balance sheet presents fairly the
financial condition, assets and liabilities of Seller as of its date; each
such statement of income presents fairly the results of operations of Seller
for the period indicated. The financial statements referred to in this Section
are in accordance with the books and records of Seller. Since December 31,
1995 and since June 30, 1996: (a) there has at no time been a material adverse
change in the financial condition, results of operations, businesses,
properties, assets, liabilities or future prospects of Seller, the Property or
Business; (b) the Business has been conducted in all respects only in the
ordinary course; and (c) Seller has not suffered an extraordinary loss (whether
or not covered by insurance) or waived any right of substantial value.
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6.1.20 Full Disclosure. To the best knowledge
of Seller, none of the information supplied by Seller herein or in the
exhibits hereto contains any untrue statement of a material fact or omits to
state a material fact required to be stated herein or necessary in order to
make the statements herein, in light of the circumstances under which they are
made, not misleading.
6.2 Representations and Warranties of Purchaser. Purchaser
hereby represents and warrants to Seller as follows:
6.2.1 Organization; Power and Authority.
Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has all requisite power
and authority to carry on its business as it is now being conducted, to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby.
6.2.2 Due Authorization and Execution; Effect
of Agreement. The execution, delivery and performance by Purchaser of this
Agreement and the consummation by Purchaser of the transactions contemplated
hereby have been duly authorized by all necessary corporate action required to
be taken on the part of Purchaser. This Agreement has been duly and validly
executed and delivered by Purchaser and constitutes the valid and binding
obligation of Purchaser, enforceable in accordance with its terms. The
execution, delivery and performance by Purchaser of this Agreement and the
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consummation by Purchaser of the transactions contemplated hereby will not,
with or without the giving of notice or the lapse of time, or both, (a)
violate any provision of any law, rule or regulation to which Purchaser is
subject; (b) violate any order, judgment or decree applicable to Purchaser; or
(c) conflict with or result in a breach of or a default under any term or
condition of Purchaser's Certificate of Incorporation or By-Laws or any
agreement or other instrument to which Purchaser is a party or by which it or
its assets may be bound, except in each case, for violations, conflicts,
breaches or defaults which in the aggregate would not materially hinder or
impair the consummation of the transactions contemplated hereby.
6.3 Survival. The representations and warranties of the parties
made in this Article 6 shall survive the Closing.
7. Further Assurances. At any time and from time to time after the
Closing, Seller shall, at the request of Purchaser, execute and deliver any
further instruments or documents and take all such further action as Purchaser
may reasonably request in order to transfer into the name of Purchaser any and
all Property contemplated to be sold pursuant to this Agreement and to further
consummate the transactions contemplated by this Agreement. This Article shall
survive the Closing.
8. Brokers. Seller and Purchaser warrant and represent to each other
that they dealt with no broker, finder or similar agent or party who or which
might be entitled to a commission or compensation on account of introducing the
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parties, the negotiation or execution of this Agreement and/or the closing of
the transaction provided for herein. Purchaser and Seller hereby respectively
agree to indemnify and hold harmless the other party from and against all loss,
liability, damage and expense (including, without limitation, attorneys' fees)
imposed upon or incurred by the other party by reason of any claim for
commissions or other compensation for bringing about this transaction by any
broker, finder or similar agent or party other than the Brokers who claims to
have dealt with the indemnifying party in connection with this transaction. The
provisions of this Article shall survive the Closing or any termination of this
Agreement.
9. "As Is". Purchaser represents that it has inspected the Property
and is familiar with the physical condition thereof, and that in reliance upon
such inspection and the representations, warranties, covenants and agreements
of Seller contained herein, it agrees to accept the Property "as is", in its
condition at the date of this Agreement.
10. Costs and Fees. Documentary stamps for the Deed, deed transfer or
conveyancing taxes, if any, shall be payable by Seller, and in no event be
payable by Purchaser. Purchaser shall pay the expenses incurred in connection
with (a) the examination of title, (b) the issuance of an owner's policy of
title insurance for Purchaser, and (c) a survey of the Property. The Seller
shall pay the cost of obtaining four lender's policies of title insurance for
the Sellers. Any other similar costs not expressly provided for elsewhere in
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this Agreement shall be divided and borne in accordance with the usual
practices in the jurisdiction where the Premises are located. The provisions
of this Article shall survive the Closing.
11. Indemnification.
11.1 Subject to the further provisions of this Article, Seller
shall protect, defend, hold harmless and indemnify Purchaser, its officers,
directors, shareholders, employees, agents and affiliates, and their
respective successors and assigns, from, against and in respect of any and all
losses, liabilities, deficiencies, penalties, fines, costs, damages and
expenses whatsoever (including without limitation, reasonable professional
fees and costs of investigation, litigation, settlement, and judgment and
interest) ("Losses") that may be suffered or incurred by any of them arising
from or by reason of (i) any Retained Liability or other liability or
obligation of Seller which is not an Assumed Liability; (ii) the breach of any
representation, warranty, covenant or agreement of Seller contained in this
Agreement or in any document or other writing delivered pursuant to this
Agreement; and (iii) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses (including without limitation,
interest, penalties, reasonable legal fees and accounting fees) incident to the
foregoing and the enforcement of the provisions of this Section 11.1.
11.2 Subject to the further provisions of this Article, Purchaser
shall protect, defend, hold harmless and indemnify Seller, its partners,
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employees and agents, and its successors and assigns from, against and in
respect of any and all Losses that may be suffered or incurred by any of them
arising from or by reason of (i) any of the Assumed Liabilities on and after
the date hereof, (ii) the breach of any representation, warranty, covenant or
agreement of Purchaser contained in this Agreement or in any document or other
writing delivered pursuant to this Agreement; and (iii) any and all actions,
suits, proceedings, claims, demands, assessments, judgments, costs and
expenses (including without limitation, interest, penalties, reasonable legal
fees and accounting fees) incident to the foregoing and the enforcement of the
provisions of this Section 11.2.
11.3 Whenever a party hereto (such party and each of its
affiliates which is entitled to indemnification pursuant to any provision of
this Agreement, an "Indemnified Party") shall learn after the Closing of a
claim that, if allowed (whether voluntarily or by judicial or quasi-judicial
tribunal or agency), would give rise to an obligation of another party (the
"Indemnifying Party") to indemnify the Indemnified Party under any provision
of this Agreement, before paying the same or agreeing thereto, the Indemnified
Party shall promptly notify the Indemnifying Party in writing of all such
facts within the Indemnified Party's knowledge with respect to such claim and
the amount thereof (a "Notice of Claim"). If, prior to the expiration of
fifteen (15) days from the mailing of a Notice of Claim, the Indemnifying
Party shall request, in writing, that such claim not be paid, the Indemnified
Party shall not pay the
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same, provided the Indemnifying Party proceeds promptly, at its or their own
expense (including employment of counsel reasonably satisfactory to the
Indemnified Party), to settle, compromise or litigate, in good faith, such
claim. After notice from the Indemnifying Party requesting the Indemnified
Party not to pay such claim and the Indemnifying Party's assumption of the
defense of such claim at its or their expense, the Indemnifying Party shall
not be liable to the Indemnified Party for any legal or other expense
subsequently incurred by the Indemnified Party in connection with the defense
thereof. However, the Indemnified Party shall have the right to participate at
its expense and with counsel of its choice in such settlement, compromise or
litigation. The Indemnified Party shall not be required to refrain from paying
any claim which has matured by a court judgment or decree, unless an appeal is
duly taken therefrom and execution thereof has been stayed, nor shall the
Indemnified Party be required to refrain from paying any claim where the delay
in paying such claim would result in the foreclosure of a lien upon any of the
property or assets then held by the Indemnified Party. The failure to provide
a timely Notice of Claim as provided in this Section 11.3 shall not excuse the
Indemnifying Party from its or their continuing obligations hereunder;
however, the Indemnified Party's claim shall be reduced by any damages to the
Indemnifying Party resulting from the Indemnified Party's delay or failure to
provide a Notice of Claim as provided in this Section 11.3.
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11.4 For purposes of this Article, any assertion of fact and/or
law by a third party that, if true, would constitute a breach of a
representation or warranty made by a party to this Agreement or make
operational an indemnification obligation hereunder, shall, on the date that
such assertion is made, immediately invoke the Indemnifying Party's obligation
to protect, defend, hold harmless and indemnify the Indemnified Party pursuant
to this Article.
12. Bulk Sales. The parties agree to waive the requirements, if any, of
all applicable bulk sales laws. As an inducement to Purchaser to enter into
such waiver, Seller represents and warrants that (a) it will not be rendered
insolvent by the transactions contemplated by this Agreement, (b) all debts,
obligations and liabilities relating to the Property and Business that are not
expressly assumed by Purchaser under this Agreement will be promptly paid and
discharged by Seller as and when they become due, and (c) the sale of the
Property pursuant to this Agreement does not constitute a "bulk sale" within
the meaning of applicable law. Seller agrees to indemnify and hold Purchaser
harmless from, and reimburse Purchaser for, any loss, cost, expense, liability
or damage which Purchaser may suffer or incur by virtue of the noncompliance
by Seller or Purchaser with any law pertaining to fraudulent conveyance, bulk
sales or any similar law which might make the sale or transfer of any part of
the Property or Business ineffective as to creditors of or claimants against
Seller.
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13. Notices. All notices, demands, requests, consents or other
communications ("Notices") which either party may desire or be required to
give to the other hereunder shall be in writing and shall be delivered by
hand, overnight express carrier, or sent by registered or certified mail,
return receipt requested, postage prepaid, in either event, addressed to the
parties at their respective addresses first above set forth. A copy of any
Notice given by Seller to Purchaser shall simultaneously be given in either
manner provided above to Squadron, Ellenoff, Plesent & Sheinfeld, LLP, 551
Fifth Avenue, New York, New York 10176, Attention: Kenneth R. Koch, Esq. A
copy of any Notice given by Purchaser to Seller shall simultaneously be given
in either manner provided above to Roche, Carens & DeGiacomo, One Post Office
Square, Boston, Massachusetts 02109, Attention: John J. O'Connor, Jr., Esq.
Notices given in the manner aforesaid shall be deemed to have been given three
(3) business days after the day so mailed, the day after delivery to any
overnight express carrier and on the day so delivered by hand. Either party
shall have the right to change its address(es) for the receipt of Notices by
giving Notice to the other party in either manner aforesaid. Any Notice
required or permitted to be given by either party may be given by that party's
attorney.
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14. Miscellaneous.
14.1 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns. Each of the
individuals comprising Seller shall be jointly and severally liable for each
and every covenant, agreement, obligation, representation and warranty of
Seller hereunder.
14.2 This Agreement shall be governed by, interpreted under and
construed and enforced in accordance with, the laws of the State of New York.
14.3 The captions or article headings in this Agreement are for
convenience only and do not constitute part of this Agreement.
14.4 This Agreement has been fully negotiated by the parties and
rules of construction construing ambiguities against the party responsible for
drafting agreements shall not apply.
14.5 It is agreed that, except where otherwise expressly provided
in particular Articles or Sections of this Agreement, none of the provisions
of this Agreement shall survive the Closing.
14.6 This Agreement (including the Exhibits annexed hereto)
contains the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior understandings, if any, with respect
thereto.
14.7 This Agreement may not be modified, changed, supplemented or
terminated, nor may any obligations hereunder be waived, except by written
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instrument signed by the party to be charged or by its agent duly authorized
in writing or as otherwise expressly permitted herein.
14.8 No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof or of any other agreement or provision herein contained. No extension
of the time for performance of any obligations or acts shall be deemed an
extension of the time for performance of any other obligations or acts.
14.9 This Agreement may be executed in one or more counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which taken together shall constitute but one and the same original.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
TRI-TOWN SPORTS, INC.
By:______________________
Name:
Title:
EASTON FAMILY GOLF CENTERS, INC.
By: _____________________
Name:
Title:
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<PAGE>
PROMISSORY NOTE
$350,000.00 September 26, 1996
FOR VALUE RECEIVED, EASTON FAMILY GOLF CENTERS, INC., a Delaware
corporation (herein called "Maker") hereby promises to pay to the order of
TRI-TOWN SPORTS, INC., a Massachusetts corporation (the "Payee") the principal
sum of Three Hundred and Fifty Thousand Dollars ($350,000.00), together with
accrued interest on such principal amount outstanding from time to time, from
the date hereof, at the rate of 8% per annum; said principal and interest to
be due and payable on July 15, 1997 (the "Maturity Date").
1. SECURITY.
This Note is secured by that certain Security Agreement (the
"Mortgage") of even date herewith, encumbering that certain property located
at 530 Turnpike Street, South Easton, Massachusetts as more particularly
described therein (the "Property").
2. NO PREPAYMENTS.
Subject to Section 4, Maker shall not be permitted to prepay
any principal or interest under this Note prior to the Maturity Date.
3. PAYMENT.
Payment of principal and interest shall be made in lawful
money of the United States of America at such place as the Payee shall have
designated to the Maker.
4. CONVERSION.
(a) The Payee may, at any time, commencing on the date hereof
until the Maturity Date, on the terms set forth in this Section 4, convert all
or any portion of the amounts then outstanding under this Promissory Note (the
"Conversion Right") into a number of shares of the common stock, par value
$0.01 per share (the "Common Stock") of Family Golf Centers, Inc. (the
"Company"), determined by dividing the outstanding amount which the Payee
wishes to convert (the "Conversion Amount") by $25 (as adjusted in accordance
herewith, the "Conversion Price"). If the Payee converts less than all amounts
then outstanding hereunder, the Maker shall have the right to either pay the
balance outstanding to Payee in lawful money of the United States upon
conversion or at the Maturity Date.
<PAGE>
(b) To exercise the Conversion Right, the Payee, shall deliver
to the Company, at its office at 225 Broadhollow Road, Melville, New York
11747, or at such other place as is designated in writing by the Company, a
notice (the "Conversion Notice") stating that the Payee is exercising the
Conversion Right, the intended Conversion Amount and the name or names in
which the Payee wishes the certificates for shares of Common Stock to be
issued.
(c) Fifteen days after the Company's receipt of the Conversion
Notice, the Payee shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise (the "Conversion Shares"),
notwithstanding that the transfer books of the Company shall then be closed or
certificates representing such Conversion Shares shall not then have been
actually delivered to the Payee. As soon as practicable after exercise of the
Conversion Right, the Company shall issue and deliver to the Payee a
certificate or certificates for the Conversion Shares issuable upon such
exercise registered in the name of the Payee or its designees, together with
two copies of the Registration Rights Agreement in the form of Exhibit A
attached hereto, executed by the Company. The Payee shall promptly return one
copy of the Registration Rights Agreement, executed by Payee to the Maker.
(d) The issuance of any shares or other securities upon the
exercise of the Conversion Right, and the delivery of certificates or other
instruments representing such shares or other securities, shall be made
without charge to the Payee for any tax or other charge in respect of such
issuance. Neither the Maker nor the Company shall however, be required to pay
any tax which may be payable in respect of any transfer involved in the issue
and delivery of any certificate in a name other than that of the Payee and
neither the Maker nor the Company shall be required to issue or deliver any
such certificate unless and until the person or persons requesting the issue
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(e) The Payee shall not have, solely on account of such status
as a Payee of this Promissory Note, any rights of a stockholder of the
Company, either at law or in equity, or any notice of meetings of stockholders
or of any other proceedings of the Company except as provided in this
Promissory Note.
5. ADJUSTMENT OF CONVERSION PRICE.
(a) In case the Company shall at any time after the date this
Promissory Note is first issued (i) declare a dividend on the outstanding
Common Stock payable in shares of its capital stock, (ii) subdivide the
outstanding Common Stock, (iii) combine the outstanding Common Stock into a
smaller number of shares, or (iv) issue any shares of its capital stock by
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing corporation), then, in each case, the Conversion Price, and the
number of Conversion Shares issuable upon exercise of this Promissory Note, in
effect at the time of the record date for such dividend or of the effective
date of such subdivision, combination, or reclassification, shall be
proportionately adjusted so that the Payee after such time shall be entitled
to receive the aggregate number and kind of shares which, if the Conversion
Right had been exercised immediately prior to such time, he would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision,
2
<PAGE>
combination, or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) The Company shall not be required to issue fractions of
shares of Common Stock or other capital stock of the Company upon the exercise
of the Conversion Right. The remainder of the Conversion Amount which is not
fully divisible by the Conversion Price shall be satisfied by the Company in
lawful money of the United States of America.
6. SECURITIES ACT; LEGEND.
(a) The Payee acknowledges that he has been advised that
neither this Promissory Note nor the Conversion Shares have been registered
under the Securities Act of 1933 (the "Act"), that the Promissory Note is
being or has been issued and the Conversion Shares may be issued on the basis
of the statutory exemption provided by Section 4(2) of the Act or Regulation D
promulgated thereunder, or both, relating to transactions by an issuer not
involving any public offering. The Payee acknowledges that he has been
informed of, or is otherwise familiar with, the nature of the limitations
imposed by the Act and the rules and regulations thereunder on the transfer of
securities. In particular, the Payee agrees that no sale, assignment or
transfer of the Promissory Note or Conversion Shares shall be valid or
effective, and the Company shall not be required to give any effect to any
such sale, assignment or transfer, unless (i) the sale, assignment or transfer
of the Promissory Note or Conversion Shares is registered under the Act, it
being understood that neither the Promissory Note nor the Conversion Shares
are currently registered for sale and that the Company has no obligation or
intention to so register the Promissory Note or Conversion Shares except as
specifically provided herein, or (ii) the Promissory Note or Conversion Shares
are sold, assigned or transferred in accordance with all the requirements and
limitations of Rule 144 under the Act, it being understood that Rule 144 is
not available at the time of the original issuance of this Promissory Note for
the sale of the Promissory Note or the Conversion Shares and that there can be
no assurance that Rule 144 sales will be available at any subsequent time, or
(iii) such sale, assignment, or transfer is otherwise exempt from registration
under the Act.
(b) Unless registered, the Conversion Shares issued upon
exercise of the Conversion Right shall be subject to a stop transfer order and
the certificate or certificates evidencing such Conversion Shares shall bear
the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL
TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE
3
<PAGE>
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD,
PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR APPLICABLE STATE
SECURITIES LAWS."
7. EVENTS OF DEFAULT.
If any of the following events shall occur (each a "Default"):
(i) the Maker shall fail to pay any principal of or interest on this
Promissory Note when due and such failure shall remain unremedied for fifteen
days after written notice thereof, (ii) an entry of a decree or order by a
court having jurisdiction adjudging Maker bankrupt or insolvent, or approving
a petition seeking reorganization, arrangement, adjustment or composition of
or in respect of Maker, under federal bankruptcy law, as now or hereafter
constituted, and the continuance of such decree or order is unstayed and in
effect for a period of 60 days; (iii) the commencement by Maker of a voluntary
case under federal bankruptcy law, as now or hereafter constituted, or the
consent of Maker to the institution of bankruptcy or insolvency proceedings
against it; (iv) the filing by Maker of a petition or consent seeking
reorganization or relief under federal bankruptcy law; or (v) the appointment
of a receiver, liquidator, assignee, trustee, or similar official of Maker or
the making by Maker of an assignment for the benefit or creditors; then the
Payee may declare the outstanding principal amount of this Promissory Note and
all other amounts due hereunder to be immediately due and payable, whereupon
the outstanding principal amount of this Promissory Note and all such other
amounts shall become and shall be forthwith due and payable, without
diligence, presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived.
8. NOTICES.
(a) Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service or delivered (in person or by telecopy,
telex or similar telecommunications equipment) against receipt to the party to
whom it is to be given, (i) if to the Payee, for itself and as agent for all
of its transferees, at its address at Tri-Town Sports, 1200 Providence
Highway, Suite 102N, Sharon, Massachusetts 02067, (ii) if to the Maker, at its
address at 225 Broadhollow Road, Melville New York 11747, Attention: Robert J.
Krause; (iii) if to the Company at its address at 225 Broadhollow Road,
Melville, New York 11747, Attention: Robert J. Krause; or (iv) in any case, to
such other address as the party shall have furnished in writing in accordance
with the provisions of this Section 8. Any notice or other communication given
by certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof. Any notice given by other means permitted by this
Section 8 shall be deemed given at the time of receipt thereof.
(b) The Maker hereby covenants and agrees to provide the Payee
with notice, at least 20 days prior to the Company filing any registration
statement under the Act, covering equity securities of the Company (other than
registration statements on Form S-8 or S-4 or any other form not generally
available for the registration of securities for sale to public) for its own
account or for the account of others.
4
<PAGE>
9. MISCELLANEOUS.
The rights and obligations of the Maker under this Promissory
Note may not be assigned, conveyed or otherwise transferred to any third party
and any attempt to assign, convey or transfer such rights and/or obligations
shall be null and void. Prior written notice of any assignment; conveyance or
transfer of this Promissory Note by the Payee must be given to the Maker. This
Promissory Note may not be changed orally, but only by an agreement in writing
and signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
This Promissory Note is made and delivered in New York, New York, and
shall be governed by the laws of the State of New York.
EASTON FAMILY GOLF CENTERS,
INC.
By: ______________________
Name:
Title:
<PAGE>
PROMISSORY NOTE
$140,000.00 September 26, 1996
FOR VALUE RECEIVED, EASTON FAMILY GOLF CENTERS, INC., a Delaware
corporation (herein called "Maker") hereby promises to pay to the order of
TRI-TOWN SPORTS, INC., a Massachusetts corporation (the "Payee") the principal
sum of One Hundred Forty Thousand Dollars ($140,000.00), together with accrued
interest on such principal amount outstanding from time to time, from the date
hereof, at the rate of 8% per annum; said principal and interest to be due and
payable on July 15, 1997 (the "Maturity Date").
1. SECURITY.
This Note is secured by that certain Security Agreement (the
"Mortgage") of even date herewith, encumbering that certain property located
at 530 Turnpike Street, South Easton, Massachusetts as more particularly
described therein (the "Property").
2. NO PREPAYMENTS.
Subject to Section 4, Maker shall not be permitted to prepay
any principal or interest under this Note prior to the Maturity Date.
3. PAYMENT.
Payment of principal and interest shall be made in lawful
money of the United States of America at such place as the Payee shall have
designated to the Maker.
4. CONVERSION.
(a) The Payee may, at any time, commencing on the date hereof
until the Maturity Date, on the terms set forth in this Section 4, convert all
or any portion of the amounts then outstanding under this Promissory Note (the
"Conversion Right") into a number of shares of the common stock, par value
$0.01 per share (the "Common Stock") of Family Golf Centers, Inc. (the
"Company"), determined by dividing the outstanding amount which the Payee
wishes to convert (the "Conversion Amount") by $25 (as adjusted in accordance
herewith, the "Conversion Price"). If the Payee converts less than all amounts
then outstanding hereunder, the Maker shall have the right to either pay the
balance outstanding to Payee in lawful money of the United States upon
conversion or at the Maturity Date.
7
<PAGE>
(b) To exercise the Conversion Right, the Payee, shall deliver to the
Company, at its office at 225 Broadhollow Road, Melville, New York 11747, or
at such other place as is designated in writing by the Company, a notice (the
"Conversion Notice") stating that the Payee is exercising the Conversion
Right, the intended Conversion Amount and the name or names in which the Payee
wishes the certificates for shares of Common Stock to be issued.
(c) Fifteen days after the Company's receipt of the Conversion
Notice, the Payee shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise (the "Conversion Shares"),
notwithstanding that the transfer books of the Company shall then be closed or
certificates representing such Conversion Shares shall not then have been
actually delivered to the Payee. As soon as practicable after exercise of the
Conversion Right, the Company shall issue and deliver to the Payee a
certificate or certificates for the Conversion Shares issuable upon such
exercise registered in the name of the Payee or its designees, together with
two copies of the Registration Rights Agreement in the form of Exhibit A
attached hereto, executed by the Company. The Payee shall promptly return one
copy of the Registration Rights Agreement, executed by Payee to the Maker.
(d) The issuance of any shares or other securities upon the
exercise of the Conversion Right, and the delivery of certificates or other
instruments representing such shares or other securities, shall be made
without charge to the Payee for any tax or other charge in respect of such
issuance. Neither the Maker nor the Company shall however, be required to pay
any tax which may be payable in respect of any transfer involved in the issue
and delivery of any certificate in a name other than that of the Payee and
neither the Maker nor the Company shall be required to issue or deliver any
such certificate unless and until the person or persons requesting the issue
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(e) The Payee shall not have, solely on account of such status
as a Payee of this Promissory Note, any rights of a stockholder of the
Company, either at law or in equity, or any notice of meetings of stockholders
or of any other proceedings of the Company except as provided in this
Promissory Note.
5. ADJUSTMENT OF CONVERSION PRICE.
(a) In case the Company shall at any time after the date this
Promissory Note is first issued (i) declare a dividend on the outstanding
Common Stock payable in shares of its capital stock, (ii) subdivide the
outstanding Common Stock, (iii) combine the outstanding Common Stock into a
smaller number of shares, or (iv) issue any shares of its capital stock by
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing corporation), then, in each case, the Conversion Price, and the
number of Conversion Shares issuable upon exercise of this Promissory Note, in
effect at the time of the record date for such dividend or of the effective
date of such subdivision, combination, or reclassification, shall be
proportionately adjusted so that the Payee after such time shall be entitled
to receive the aggregate number and kind of shares which, if the Conversion
Right had been exercised immediately prior to such time, he would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision,
2
<PAGE>
combination, or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) The Company shall not be required to issue fractions of
shares of Common Stock or other capital stock of the Company upon the exercise
of the Conversion Right. The remainder of the Conversion Amount which is not
fully divisible by the Conversion Price shall be satisfied by the Company in
lawful money of the United States of America.
6. SECURITIES ACT; LEGEND.
(a) The Payee acknowledges that he has been advised that
neither this Promissory Note nor the Conversion Shares have been registered
under the Securities Act of 1933 (the "Act"), that the Promissory Note is
being or has been issued and the Conversion Shares may be issued on the basis
of the statutory exemption provided by Section 4(2) of the Act or Regulation D
promulgated thereunder, or both, relating to transactions by an issuer not
involving any public offering. The Payee acknowledges that he has been
informed of, or is otherwise familiar with, the nature of the limitations
imposed by the Act and the rules and regulations thereunder on the transfer of
securities. In particular, the Payee agrees that no sale, assignment or
transfer of the Promissory Note or Conversion Shares shall be valid or
effective, and the Company shall not be required to give any effect to any
such sale, assignment or transfer, unless (i) the sale, assignment or transfer
of the Promissory Note or Conversion Shares is registered under the Act, it
being understood that neither the Promissory Note nor the Conversion Shares
are currently registered for sale and that the Company has no obligation or
intention to so register the Promissory Note or Conversion Shares except as
specifically provided herein, or (ii) the Promissory Note or Conversion Shares
are sold, assigned or transferred in accordance with all the requirements and
limitations of Rule 144 under the Act, it being understood that Rule 144 is
not available at the time of the original issuance of this Promissory Note for
the sale of the Promissory Note or the Conversion Shares and that there can be
no assurance that Rule 144 sales will be available at any subsequent time, or
(iii) such sale, assignment, or transfer is otherwise exempt from registration
under the Act.
(b) Unless registered, the Conversion Shares issued upon
exercise of the Conversion Right shall be subject to a stop transfer order and
the certificate or certificates evidencing such Conversion Shares shall bear
the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL
TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE
3
<PAGE>
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE
SECURITIES LAWS."
7. EVENTS OF DEFAULT.
If any of the following events shall occur (each a "Default"):
(i) the Maker shall fail to pay any principal of or interest on this
Promissory Note when due and such failure shall remain unremedied for fifteen
days after written notice thereof, (ii) an entry of a decree or order by a
court having jurisdiction adjudging Maker bankrupt or insolvent, or approving
a petition seeking reorganization, arrangement, adjustment or composition of
or in respect of Maker, under federal bankruptcy law, as now or hereafter
constituted, and the continuance of such decree or order is unstayed and in
effect for a period of 60 days; (iii) the commencement by Maker of a voluntary
case under federal bankruptcy law, as now or hereafter constituted, or the
consent of Maker to the institution of bankruptcy or insolvency proceedings
against it; (iv) the filing by Maker of a petition or consent seeking
reorganization or relief under federal bankruptcy law; or (v) the appointment
of a receiver, liquidator, assignee, trustee, or similar official of Maker or
the making by Maker of an assignment for the benefit or creditors; then the
Payee may declare the outstanding principal amount of this Promissory Note and
all other amounts due hereunder to be immediately due and payable, whereupon
the outstanding principal amount of this Promissory Note and all such other
amounts shall become and shall be forthwith due and payable, without
diligence, presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived.
8. NOTICES.
(a) Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service or delivered (in person or by telecopy,
telex or similar telecommunications equipment) against receipt to the party to
whom it is to be given, (i) if to the Payee, for itself and as agent for all
of its transferees, at its address at Tri-Town Sports, 1200 Providence
Highway, Suite 102N, Sharon, Massachusetts 02067, (ii) if to the Maker, at its
address at 225 Broadhollow Road, Melville New York 11747, Attention: Robert J.
Krause; (iii) if to the Company at its address at 225 Broadhollow Road,
Melville, New York 11747, Attention: Robert J. Krause; or (iv) in any case, to
such other address as the party shall have furnished in writing in accordance
with the provisions of this Section 8. Any notice or other communication given
by certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof. Any notice given by other means permitted by this
Section 8 shall be deemed given at the time of receipt thereof.
(b) The Maker hereby covenants and agrees to provide the Payee
with notice, at least 20 days prior to the Company filing any registration
statement under the Act, covering equity securities of the Company (other than
registration statements on Form S-8 or S-4 or any other form not generally
available for the registration of securities for sale to public) for its own
account or for the account of others.
4
<PAGE>
9. MISCELLANEOUS.
The rights and obligations of the Maker under this Promissory
Note may not be assigned, conveyed or otherwise transferred to any third party
and any attempt to assign, convey or transfer such rights and/or obligations
shall be null and void. Prior written notice of any assignment; conveyance or
transfer of this Promissory Note by the Payee must be given to the Maker. This
Promissory Note may not be changed orally, but only by an agreement in writing
and signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
This Promissory Note is made and delivered in New York, New York, and
shall be governed by the laws of the State of New York.
EASTON FAMILY GOLF CENTERS,
INC.
By: ______________________
Name:
Title:
6
<PAGE>
PROMISSORY NOTE
$122,500.00 September 26, 1996
FOR VALUE RECEIVED, EASTON FAMILY GOLF CENTERS, INC., a Delaware
corporation (herein called "Maker") hereby promises to pay to the order of
TRI-TOWN SPORTS, INC., a Massachusetts corporation (the "Payee") the principal
sum of One Hundred Twenty Two Thousand Five Hundred Dollars ($122,500.00),
together with accrued interest on such principal amount outstanding from time
to time, from the date hereof, at the rate of 8% per annum; said principal and
interest to be due and payable on July 15, 1997 (the "Maturity Date").
1. SECURITY.
This Note is secured by that certain Security Agreement (the
"Mortgage") of even date herewith, encumbering that certain property located
at 530 Turnpike Street, South Easton, Massachusetts as more particularly
described therein (the "Property").
2. NO PREPAYMENTS.
Subject to Section 4, Maker shall not be permitted to prepay
any principal or interest under this Note prior to the Maturity Date.
3. PAYMENT.
Payment of principal and interest shall be made in lawful
money of the United States of America at such place as the Payee shall have
designated to the Maker.
4. CONVERSION.
(a) The Payee may, at any time, commencing on the date hereof
until the Maturity Date, on the terms set forth in this Section 4, convert all
or any portion of the amounts then outstanding under this Promissory Note (the
"Conversion Right") into a number of shares of the common stock, par value
$0.01 per share (the "Common Stock") of Family Golf Centers, Inc. (the
"Company"), determined by dividing the outstanding amount which the Payee
wishes to convert (the "Conversion Amount") by $25 (as adjusted in accordance
herewith, the "Conversion Price"). If the Payee converts less than all amounts
then outstanding hereunder, the Maker shall have the right to either pay the
balance outstanding to Payee in lawful money of the United States upon
conversion or at the Maturity Date.
9
<PAGE>
(b) To exercise the Conversion Right, the Payee, shall
deliver to the Company, at its office at 225 Broadhollow Road, Melville, New
York 11747, or at such other place as is designated in writing by the Company,
a notice (the "Conversion Notice") stating that the Payee is exercising the
Conversion Right, the intended Conversion Amount and the name or names in
which the Payee wishes the certificates for shares of Common Stock to be
issued.
(c) Fifteen days after the Company's receipt of the Conversion
Notice, the Payee shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise (the "Conversion Shares"),
notwithstanding that the transfer books of the Company shall then be closed or
certificates representing such Conversion Shares shall not then have been
actually delivered to the Payee. As soon as practicable after exercise of the
Conversion Right, the Company shall issue and deliver to the Payee a
certificate or certificates for the Conversion Shares issuable upon such
exercise registered in the name of the Payee or its designees, together with
two copies of the Registration Rights Agreement in the form of Exhibit A
attached hereto, executed by the Company. The Payee shall promptly return one
copy of the Registration Rights Agreement, executed by Payee to the Maker.
(d) The issuance of any shares or other securities upon the
exercise of the Conversion Right, and the delivery of certificates or other
instruments representing such shares or other securities, shall be made
without charge to the Payee for any tax or other charge in respect of such
issuance. Neither the Maker nor the Company shall however, be required to pay
any tax which may be payable in respect of any transfer involved in the issue
and delivery of any certificate in a name other than that of the Payee and
neither the Maker nor the Company shall be required to issue or deliver any
such certificate unless and until the person or persons requesting the issue
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(e) The Payee shall not have, solely on account of such status
as a Payee of this Promissory Note, any rights of a stockholder of the
Company, either at law or in equity, or any notice of meetings of stockholders
or of any other proceedings of the Company except as provided in this
Promissory Note.
5. ADJUSTMENT OF CONVERSION PRICE.
(a) In case the Company shall at any time after the date this
Promissory Note is first issued (i) declare a dividend on the outstanding
Common Stock payable in shares of its capital stock, (ii) subdivide the
outstanding Common Stock, (iii) combine the outstanding Common Stock into a
smaller number of shares, or (iv) issue any shares of its capital stock by
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing corporation), then, in each case, the Conversion Price, and the
number of Conversion Shares issuable upon exercise of this Promissory Note, in
effect at the time of the record date for such dividend or of the effective
date of such subdivision, combination, or reclassification, shall be
proportionately adjusted so that the Payee after such time shall be entitled
to receive the aggregate number and kind of shares which, if the Conversion
Right had been exercised immediately prior to such time, he would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision,
<PAGE>
combination, or reclassification. Such adjustment shall be made
successively whenever any event listed above shall occur.
(b) The Company shall not be required to issue fractions of
shares of Common Stock or other capital stock of the Company upon the exercise
of the Conversion Right. The remainder of the Conversion Amount which is not
fully divisible by the Conversion Price shall be satisfied by the Company in
lawful money of the United States of America.
6. SECURITIES ACT; LEGEND.
(a) The Payee acknowledges that he has been advised that
neither this Promissory Note nor the Conversion Shares have been registered
under the Securities Act of 1933 (the "Act"), that the Promissory Note is
being or has been issued and the Conversion Shares may be issued on the basis
of the statutory exemption provided by Section 4(2) of the Act or Regulation D
promulgated thereunder, or both, relating to transactions by an issuer not
involving any public offering. The Payee acknowledges that he has been
informed of, or is otherwise familiar with, the nature of the limitations
imposed by the Act and the rules and regulations thereunder on the transfer of
securities. In particular, the Payee agrees that no sale, assignment or
transfer of the Promissory Note or Conversion Shares shall be valid or
effective, and the Company shall not be required to give any effect to any
such sale, assignment or transfer, unless (i) the sale, assignment or transfer
of the Promissory Note or Conversion Shares is registered under the Act, it
being understood that neither the Promissory Note nor the Conversion Shares
are currently registered for sale and that the Company has no obligation or
intention to so register the Promissory Note or Conversion Shares except as
specifically provided herein, or (ii) the Promissory Note or Conversion Shares
are sold, assigned or transferred in accordance with all the requirements and
limitations of Rule 144 under the Act, it being understood that Rule 144 is
not available at the time of the original issuance of this Promissory Note for
the sale of the Promissory Note or the Conversion Shares and that there can be
no assurance that Rule 144 sales will be available at any subsequent time, or
(iii) such sale, assignment, or transfer is otherwise exempt from registration
under the Act.
(b) Unless registered, the Conversion Shares issued upon
exercise of the Conversion Right shall be subject to a stop transfer order and
the certificate or certificates evidencing such Conversion Shares shall bear
the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL
TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE
3
<PAGE>
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE
SECURITIES LAWS."
7. EVENTS OF DEFAULT.
If any of the following events shall occur (each a "Default"):
(i) the Maker shall fail to pay any principal of or interest on this
Promissory Note when due and such failure shall remain unremedied for fifteen
days after written notice thereof, (ii) an entry of a decree or order by a
court having jurisdiction adjudging Maker bankrupt or insolvent, or approving
a petition seeking reorganization, arrangement, adjustment or composition of
or in respect of Maker, under federal bankruptcy law, as now or hereafter
constituted, and the continuance of such decree or order is unstayed and in
effect for a period of 60 days; (iii) the commencement by Maker of a voluntary
case under federal bankruptcy law, as now or hereafter constituted, or the
consent of Maker to the institution of bankruptcy or insolvency proceedings
against it; (iv) the filing by Maker of a petition or consent seeking
reorganization or relief under federal bankruptcy law; or (v) the appointment
of a receiver, liquidator, assignee, trustee, or similar official of Maker or
the making by Maker of an assignment for the benefit or creditors; then the
Payee may declare the outstanding principal amount of this Promissory Note and
all other amounts due hereunder to be immediately due and payable, whereupon
the outstanding principal amount of this Promissory Note and all such other
amounts shall become and shall be forthwith due and payable, without
diligence, presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived.
8. NOTICES.
(a) Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service or delivered (in person or by telecopy,
telex or similar telecommunications equipment) against receipt to the party to
whom it is to be given, (i) if to the Payee, for itself and as agent for all
of its transferees, at its address at Tri-Town Sports, 1200 Providence
Highway, Suite 102N, Sharon, Massachusetts 02067, (ii) if to the Maker, at its
address at 225 Broadhollow Road, Melville New York 11747, Attention: Robert J.
Krause; (iii) if to the Company at its address at 225 Broadhollow Road,
Melville, New York 11747, Attention: Robert J. Krause; or (iv) in any case, to
such other address as the party shall have furnished in writing in accordance
with the provisions of this Section 8. Any notice or other communication given
by certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof. Any notice given by other means permitted by this
Section 8 shall be deemed given at the time of receipt thereof.
(b) The Maker hereby covenants and agrees to provide the Payee
with notice, at least 20 days prior to the Company filing any registration
statement under the Act, covering equity securities of the Company (other than
registration statements on Form S-8 or S-4 or any other form not generally
available for the registration of securities for sale to public) for its own
account or for the account of others.
- 4 -
<PAGE>
9. MISCELLANEOUS.
The rights and obligations of the Maker under this Promissory
Note may not be assigned, conveyed or otherwise transferred to any third party
and any attempt to assign, convey or transfer such rights and/or obligations
shall be null and void. Prior written notice of any assignment; conveyance or
transfer of this Promissory Note by the Payee must be given to the Maker. This
Promissory Note may not be changed orally, but only by an agreement in writing
and signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
This Promissory Note is made and delivered in New York, New York, and
shall be governed by the laws of the State of New York.
EASTON FAMILY GOLF CENTERS,
INC.
By: ______________________
Name:
Title:
6
<PAGE>
PROMISSORY NOTE
---------------
$87,500.00 September 26, 1996
FOR VALUE RECEIVED, EASTON FAMILY GOLF CENTERS, INC., a Delaware
corporation (herein called "Maker") hereby promises to pay to the order of
TRI-TOWN SPORTS, INC., a Massachusetts corporation (the "Payee") the principal
sum of Eighty Seven Thousand Five Hundred Dollars ($87,500.00), together with
accrued interest on such principal amount outstanding from time to time, from
the date hereof, at the rate of 8% per annum; said principal and interest to
be due and payable on July 15, 1997 (the "Maturity Date").
1. SECURITY.
This Note is secured by that certain Security Agreement (the
"Mortgage") of even date herewith, encumbering that certain property located
at 530 Turnpike Street, South Easton, Massachusetts as more particularly
described therein (the "Property").
2. NO PREPAYMENTS.
Subject to Section 4, Maker shall not be permitted to prepay
any principal or interest under this Note prior to the Maturity Date.
3. PAYMENT.
Payment of principal and interest shall be made in lawful
money of the United States of America at such place as the Payee shall have
designated to the Maker.
4. CONVERSION.
(a) The Payee may, at any time, commencing on the date hereof
until the Maturity Date, on the terms set forth in this Section 4, convert all
or any portion of the amounts then outstanding under this Promissory Note (the
"Conversion Right") into a number of shares of the common stock, par value
$0.01 per share (the "Common Stock") of Family Golf Centers, Inc. (the
"Company"), determined by dividing the outstanding amount which the Payee
wishes to convert (the "Conversion Amount") by $25 (as adjusted in accordance
herewith, the "Conversion Price"). If the Payee converts less than all amounts
then outstanding hereunder, the Maker shall have the right to either pay the
balance outstanding to Payee in lawful money of the United States upon
conversion or at the Maturity Date.
11
<PAGE>
(b) To exercise the Conversion Right, the Payee, shall
deliver to the Company, at its office at 225 Broadhollow Road, Melville, New
York 11747, or at such other place as is designated in writing by the Company,
a notice (the "Conversion Notice") stating that the Payee is exercising the
Conversion Right, the intended Conversion Amount and the name or names in
which the Payee wishes the certificates for shares of Common Stock to be
issued.
(c) Fifteen days after the Company's receipt of the Conversion
Notice, the Payee shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise (the "Conversion Shares"),
notwithstanding that the transfer books of the Company shall then be closed or
certificates representing such Conversion Shares shall not then have been
actually delivered to the Payee. As soon as practicable after exercise of the
Conversion Right, the Company shall issue and deliver to the Payee a
certificate or certificates for the Conversion Shares issuable upon such
exercise registered in the name of the Payee or its designees, together with
two copies of the Registration Rights Agreement in the form of Exhibit A
attached hereto, executed by the Company. The Payee shall promptly return one
copy of the Registration Rights Agreement, executed by Payee to the Maker.
(d) The issuance of any shares or other securities upon the
exercise of the Conversion Right, and the delivery of certificates or other
instruments representing such shares or other securities, shall be made
without charge to the Payee for any tax or other charge in respect of such
issuance. Neither the Maker nor the Company shall however, be required to pay
any tax which may be payable in respect of any transfer involved in the issue
and delivery of any certificate in a name other than that of the Payee and
neither the Maker nor the Company shall be required to issue or deliver any
such certificate unless and until the person or persons requesting the issue
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(e) The Payee shall not have, solely on account of such status
as a Payee of this Promissory Note, any rights of a stockholder of the
Company, either at law or in equity, or any notice of meetings of stockholders
or of any other proceedings of the Company except as provided in this
Promissory Note.
5. ADJUSTMENT OF CONVERSION PRICE.
(a) In case the Company shall at any time after the date this
Promissory Note is first issued (i) declare a dividend on the outstanding
Common Stock payable in shares of its capital stock, (ii) subdivide the
outstanding Common Stock, (iii) combine the outstanding Common Stock into a
smaller number of shares, or (iv) issue any shares of its capital stock by
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing corporation), then, in each case, the Conversion Price, and the
number of Conversion Shares issuable upon exercise of this Promissory Note, in
effect at the time of the record date for such dividend or of the effective
date of such subdivision, combination, or reclassification, shall be
proportionately adjusted so that the Payee after such time shall be entitled
to receive the aggregate number and kind of shares which, if the Conversion
Right had been exercised immediately prior to such time, he would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision,
2
<PAGE>
combination, or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) The Company shall not be required to issue fractions of
shares of Common Stock or other capital stock of the Company upon the exercise
of the Conversion Right. The remainder of the Conversion Amount which is not
fully divisible by the Conversion Price shall be satisfied by the Company in
lawful money of the United States of America.
6. SECURITIES ACT; LEGEND.
(a) The Payee acknowledges that he has been advised that
neither this Promissory Note nor the Conversion Shares have been registered
under the Securities Act of 1933 (the "Act"), that the Promissory Note is
being or has been issued and the Conversion Shares may be issued on the basis
of the statutory exemption provided by Section 4(2) of the Act or Regulation D
promulgated thereunder, or both, relating to transactions by an issuer not
involving any public offering. The Payee acknowledges that he has been
informed of, or is otherwise familiar with, the nature of the limitations
imposed by the Act and the rules and regulations thereunder on the transfer of
securities. In particular, the Payee agrees that no sale, assignment or
transfer of the Promissory Note or Conversion Shares shall be valid or
effective, and the Company shall not be required to give any effect to any
such sale, assignment or transfer, unless (i) the sale, assignment or transfer
of the Promissory Note or Conversion Shares is registered under the Act, it
being understood that neither the Promissory Note nor the Conversion Shares
are currently registered for sale and that the Company has no obligation or
intention to so register the Promissory Note or Conversion Shares except as
specifically provided herein, or (ii) the Promissory Note or Conversion Shares
are sold, assigned or transferred in accordance with all the requirements and
limitations of Rule 144 under the Act, it being understood that Rule 144 is
not available at the time of the original issuance of this Promissory Note for
the sale of the Promissory Note or the Conversion Shares and that there can be
no assurance that Rule 144 sales will be available at any subsequent time, or
(iii) such sale, assignment, or transfer is otherwise exempt from registration
under the Act.
(b) Unless registered, the Conversion Shares issued upon
exercise of the Conversion Right shall be subject to a stop transfer order and
the certificate or certificates evidencing such Conversion Shares shall bear
the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL
TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE
3
<PAGE>
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
APPLICABLE STATE SECURITIES LAWS."
7. EVENTS OF DEFAULT.
If any of the following events shall occur (each a "Default"):
(i) the Maker shall fail to pay any principal of or interest on this
Promissory Note when due and such failure shall remain unremedied for fifteen
days after written notice thereof, (ii) an entry of a decree or order by a
court having jurisdiction adjudging Maker bankrupt or insolvent, or approving
a petition seeking reorganization, arrangement, adjustment or composition of
or in respect of Maker, under federal bankruptcy law, as now or hereafter
constituted, and the continuance of such decree or order is unstayed and in
effect for a period of 60 days; (iii) the commencement by Maker of a voluntary
case under federal bankruptcy law, as now or hereafter constituted, or the
consent of Maker to the institution of bankruptcy or insolvency proceedings
against it; (iv) the filing by Maker of a petition or consent seeking
reorganization or relief under federal bankruptcy law; or (v) the appointment
of a receiver, liquidator, assignee, trustee, or similar official of Maker or
the making by Maker of an assignment for the benefit or creditors; then the
Payee may declare the outstanding principal amount of this Promissory Note and
all other amounts due hereunder to be immediately due and payable, whereupon
the outstanding principal amount of this Promissory Note and all such other
amounts shall become and shall be forthwith due and payable, without
diligence, presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived.
8. NOTICES.
(a) Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service or delivered (in person or by telecopy,
telex or similar telecommunications equipment) against receipt to the party to
whom it is to be given, (i) if to the Payee, for itself and as agent for all
of its transferees, at its address at Tri-Town Sports, 1200 Providence
Highway, Suite 102N, Sharon, Massachusetts 02067, (ii) if to the Maker, at its
address at 225 Broadhollow Road, Melville New York 11747, Attention: Robert J.
Krause; (iii) if to the Company at its address at 225 Broadhollow Road,
Melville, New York 11747, Attention: Robert J. Krause; or (iv) in any case, to
such other address as the party shall have furnished in writing in accordance
with the provisions of this Section 8. Any notice or other communication given
by certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof. Any notice given by other means permitted by this
Section 8 shall be deemed given at the time of receipt thereof.
(b) The Maker hereby covenants and agrees to provide the Payee
with notice, at least 20 days prior to the Company filing any registration
statement under the Act, covering equity securities of the Company (other than
registration statements on Form S-8 or S-4 or any other form not generally
available for the registration of securities for sale to public) for its own
account or for the account of others.
4
<PAGE>
9. MISCELLANEOUS.
The rights and obligations of the Maker under this Promissory
Note may not be assigned, conveyed or otherwise transferred to any third party
and any attempt to assign, convey or transfer such rights and/or obligations
shall be null and void. Prior written notice of any assignment; conveyance or
transfer of this Promissory Note by the Payee must be given to the Maker. This
Promissory Note may not be changed orally, but only by an agreement in writing
and signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
This Promissory Note is made and delivered in New York, New York, and
shall be governed by the laws of the State of New York.
EASTON FAMILY GOLF CENTERS,
INC.
By: ______________________
Name:
Title:
6
<PAGE>
GUARANTY OF PROMISSORY NOTE
To induce Tri-Town Sports, Inc. ("Payee") to accept certain
promissory notes dated September 26, 1996 made by Easton Family Golf Centers,
Inc. ("Maker") to the order of Payee, in the aggregate principal amount of
$700,000.00 ("the Promissory Notes"), the undersigned, Family Golf Centers,
Inc. ("Guarantor"), for valuable consideration, hereby, unconditionally and
irrevocably guarantees to Payee, its administrators, legal representatives and
its successors and assigns, and to every subsequent holder of the Promissory
Notes, irrespective of the genuineness, validity, regularity or enforceability
thereof, of the obligation evidenced thereby, or any claims or defenses
available to or asserted by Maker, and irrespective of any other circumstance,
that all sums stated therein to be payable on the Promissory Notes shall
promptly be paid in full, in accordance with the provisions of the Promissory
Notes, and, in the case of any extension of time of payment or renewal in
whole or in part, all sums shall be promptly paid when due according to such
extension or extensions, renewal or renewals, at maturity, by acceleration or
otherwise.
In order to induce Payee to accept the Promissory Notes of Maker
and intending Payee to rely thereon, Guarantor hereby represents and warrants
as follows, such representations and warranties to survive the delivery
hereof:
(a) This Guaranty is in no way conditional or contingent and
constitutes a valid, present, continuing and absolute obligation of such
Guarantor which shall not be impaired or affected by (i) any modification,
waiver, forbearance, extension or renewal granted with respect to the
Promissory Notes, or (ii) any failure to exercise or delay in exercising of any
<PAGE>
rights granted to the Payee, its successors and assigns, or
any subsequent holder of the Promissory Notes pursuant to the terms of the
Promissory Notes or by any statute or rule of law.
(b) The execution, delivery and performance by such Guarantor
of this Guaranty does not contravene any law or contractual restriction
binding on or affecting such Guarantor.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by such Guarantor of
this Guaranty.
(d) This Guaranty is the legal, valid and binding obligation
of Guarantor enforceable against Guarantor in accordance with its terms.
Guarantor hereby waives notice of acceptance of this Guaranty,
presentment, demand for payment, notice of dishonor, notice of protest and
protest, and all other notices or demands in connection with the delivery,
acceptance, performance, default, endorsement, or guaranty of the Promissory
Notes or this Guaranty, to which the Maker, such Guarantor or any other
Guarantor may be entitled including, but not limited to, recourse to
suretyship defenses, releases of security of Guarantor or any other
indulgences granted by Payee.
This is a continuing guaranty, primary and unconditional, and shall
remain in full force and effect and may not be revoked as to any unpaid
amounts which may be due or become due nor may it be changed or modified
orally. This Guaranty is binding upon each and every Guarantor, its heirs,
executors, administrators, successors and assigns and shall inure to the
benefit of Payee, its successors and assigns.
Guarantor shall be liable hereunder for the principal amount and
all interest due on the Promissory Notes and for all costs and expenses,
including reasonable attorneys' fees, in
<PAGE>
connection with the collection of the Promissory Notes and the enforcement of
this Guaranty. Guarantor hereby waives trial by jury.
This Guaranty has been executed and delivered in the State of New
York and the construction, validity and performance hereof shall be governed
by the internal laws of the State of New York, without regard to principles of
conflict of laws.
If any provision of this Guaranty shall be unenforceable in whole
or in part for any reason whatsoever, then such provision, to the extent it is
unenforceable, shall be ineffective and the balance of this Guaranty shall be
deemed valid and enforceable and construed as if the offending provisions had
been deleted therefrom.
IN WITNESS WHEREOF the Guarantor has signed this Guaranty as of the
26 day of September, 1996.
FAMILY GOLF CENTERS, INC.
By: _____________________________
Name:
Title:
- 3 -
<PAGE>
MORTGAGE
Easton Family Golf Centers, Inc., a corporation duly established under
the laws of Delaware having its usual place of business at 225 Broadhollow
Road, Suite 106E, Melville, New York 11747 (the Mortgagor), for consideration
paid, grants to Tri-Town Sports, Inc. a corporation duly established under the
laws of the Commonwealth of Massachusetts and having its usual place of
business at 1200 Providence Highway, Sharon, Norfolk County, Massachusetts
02067 (the Mortgagee) with MORTGAGE COVENANTS to secure the payment of Three
Hundred Fifty Thousand and 00/100 Dollars ($350,000.00) as provided in its
note of even, the land in Easton, Bristol County, Massachusetts described as
follows:
PARCEL ONE
The land in Easton, Bristol County, Massachusetts shown as Lot 3 on a Plan of
Land entitled "Plan of Land in Easton Massachusetts, Prepared for Foundry
Turnpike Limited Partnership, 61 Main Street, Andover, MA 01810, Scale
1"=100', Date: 09-03-91, Prepared by K & Associates", being recorded as Plan
316-40.
Said Lot 3 contains 1,021,632 square feet of land more or less all as shown on
said plan.
PARCEL TWO
The land in Easton, Bristol County; MA shown as Lot 4A on a Plan of Land
entitled, "Plan of Land in Easton Massachusetts, Prepared for: Foundry
Turnpike Limited Partnership, 61 Main Street, Andover, MA 01810, Scale: 1" =
100', Date: 12102192, Prepared by K & Associates/LAN-COM, Inc." recorded as
Plan
- -----------------.
Said Lot 4A contains 2,430,983 square feet of land (55.808 acres) more or less
all as shown on said plan.
For title, see deed of Tri-Town Sports, Inc. recorded herewith.
This mortgage is upon the STATUTORY CONDITION, for any breach of which
the Mortgagee shall have the STATUTORY POWER OF SALE.
IN WITNESS WHEREOF, the said Easton Family Golf Centers, Inc. has caused
its corporate sale to be hereto affixed and these presents to be signed,
<PAGE>
acknowledged and delivered in its name and behalf by Dominic Chang, its
President, and Krishnan Thampi, its Treasurer, this ______ day of September,
1996.
Easton Family Golf Center Inc.
By:___________________________
Dominic Chang, President
By:___________________________
Krishnan Thampi, Treasurer
STATE OF NEW YORK
____________, ss. ____________________, 1996
Then personally appeared the above-named Dominic Chang as he is President
of Easton Family Golf Centers, Inc. and acknowledged the foregoing to be the
free act and deed of said corporation, before me,
-------------------------------
Notary Public
My Commission Expires:___________
STATE OF NEW YORK
____________, ss. ____________________, 1996
Then personally appeared the above-named Krishnan Thampi as he is
Treasurer of Easton Family Golf Centers, Inc. and acknowledged the foregoing to
be the free act and deed of said corporation, before me,
-------------------------------
Notary Public
My Commission Expires:___________
- 2 -
<PAGE>
MORTGAGE
Easton Family Golf Centers, Inc., a corporation duly established under
the laws of Delaware having its usual place of business at 225 Broadhollow
Road, Suite 106E, Melville, New York 11747 (the Mortgagor), for consideration
paid, grants to Tri-Town Sports, Inc. a corporation duly established under the
laws of the Commonwealth of Massachusetts and having its usual place of
business at 1200 Providence Highway, Sharon, Norfolk County, Massachusetts
02067 (the Mortgagee) with MORTGAGE COVENANTS to secure the payment of One
Hundred Forty Thousand and 00/100 Dollars ($140,000.00) as provided in its
note of even, the land in Easton, Bristol County, Massachusetts described as
follows:
PARCEL ONE
The land in Easton, Bristol County, Massachusetts shown as Lot 3 on a Plan of
Land entitled "Plan of Land in Easton Massachusetts, Prepared for Foundry
Tumpike Limited Partnership, 61 Main Street, Andover, MA 01810, Scale 1"=100',
Date: 09-03-91, Prepared by K & Associates", being recorded as Plan 316-40.
Said Lot 3 contains 1,021,632 square feet of land more or less all as shown on
said plan.
PARCEL TWO
The land in Easton, Bristol County, MA shown as Lot 4A on a Plan of Land
entitled, "Plan of Land in Easton Massachusetts, Prepared for Foundry Tumpike
Limited Partnership, 61 Main Street, Andover, MA 01810, Scale: 1" = 100',
Date: 12/02192, Prepared by K & Associates/LAN-COM, Inc." recorded as Plan
________________.
Said Lot 4A contains 2,430,983 square feet of land (55.808 acres) more or less
all as shown on said plan.
This mortgage is subject to a $350,000.00 mortgage from Easton
Family Golf Centers, Inc. to Tri-Town Sports, Inc. of even date
and recorded herewith.
For title, see deed of Tri-Town Sports, Inc. recorded
herewith.
This mortgage is upon the STATUTORY CONDITION, for any breach of which
the Mortgagee shall have the STATUTORY POWER OF SALE.
IN WITNESS WHEREOF, the said Easton Family Golf Centers, Inc. has caused
its corporate sale to be hereto affixed and these presents to be signed,
acknowledged and delivered in its name and
<PAGE>
behalf by Dominic Chang, its President, and Krishnan Thampi, its Treasurer,
this __ day of ____________, 1996.
Easton Family Golf Centers, Inc.
By:
Dominic Chang, President
By:
Krishnan Thampi, Treasurer
STATE OF NEW YORK
________________, ss. _________________, 1996
Then personally appeared the above-named Dominic Chang, as he
is President of Easton Family Golf Centers, Inc. and acknowledged
the foregoing to be the free act and deed of said corporation,
before me,
-----------------------------
Notary Public
My Commission Expires: _______
STATE OF NEW YORK
________________, ss. _________________, 1996
Then personally appeared the above-named Krishnan Thampi as
he is Treasurer of Easton Family Golf Centers, Inc. and
acknowledged the foregoing to be the free act and deed of said
corporation, before me,
-----------------------------
Notary Public
My Commission Expires: _______
- 2 -
<PAGE>
MORTGAGE
Easton Family Golf Centers, Inc., a corporation duly established under
the laws of Delaware having its usual place of business at 225 Broadhollow
Road, Suite 106E, Melville, New York 11747 (the Mortgagor), for consideration
paid, grants to Tri-Town Sports, Inc. a corporation duly established under the
laws of the Commonwealth of Massachusetts and having its usual place of
business at 1200 Providence Highway, Sharon, Norfolk County, Massachusetts
02067 (the Mortgagee) with MORTGAGE COVENANTS to secure the payment of One
Hundred Twenty-Two Thousand Five Hundred and 00/100 Dollars ($122,500.00) as
provided in its note of even, the land in Easton, Bristol County,
Massachusetts described as follows:
PARCEL ONE
The land in Easton, Bristol County, Massachusetts shown as Lot 3 on a Plan of
Land entitled "Plan of Land in Easton Massachusetts, Prepared for Foundry
Tumpike Limited Partnership, 61 Main Street, Andover, MA 01810, Scale 1"=100',
Date: 09-03-91, Prepared by K & Associates", being recorded as Plan 316-40.
Said Lot 3 contains 1,021,632 square feet of land more or less all as shown on
said plan.
PARCEL TWO
The land in Easton, Bristol County, MA shown as Lot 4A on a Plan of Land
entitled, "Plan of Land in Easton Massachusetts, Prepared for: Foundry
Turnpike Limited Partnership, 61 Main Street, Andover, MA 01810, Scale: 1"=
100', Date: 12/02/92, Prepared by K & Associates/LAN-COM, Inc." recorded as
Plan ________________.
Said Lot 4A contains 2,430,983 square feet of land (55.808 acres) more or less
all as shown on said plan.
This mortgage is subject to a $350,000.00 mortgage from
Easton Family Golf Centers, Inc. to Tri-Town Sports, Inc. and a
$140,000.00 mortgage from Easton Family Golf Centers, Inc. to
Tri-Town Sports, Inc., both of even date and recorded herewith.
For title, see deed of Tri-Town Sports, Inc. recorded
herewith.
This mortgage is upon the STATUTORY CONDITION, for any breach of which
the Mortgagee shall have the STATUTORY POWER OF SALE.
IN WITNESS WHEREOF, the said Easton Family Golf Centers, Inc. has caused
its corporate sale to be hereto affixed and these presents to be signed,
acknowledged and delivered in its name and
<PAGE>
behalf by Dominic Chang, its President, and Krishnan Thampi, its Treasurer,
this ___ day of _____________, 1996.
Easton Family Golf Centers, Inc.
By:__________________________
Dominic Chang, President
By: __________________________
Krishnan Thampi, Treasurer
STATE OF NEW YORK
________________, ss. _________________, 1996
Then personally appeared the above-named Dominic Chang, as he
is President of Easton Family Golf Centers, Inc. and acknowledged
the foregoing to be the free act and deed of said corporation,
before me,
-----------------------------
Notary Public
My Commission Expires: _______
STATE OF NEW YORK
________________, ss. _________________, 1996
Then personally appeared the above-named Krishnan Thampi as
he is Treasurer of Easton Family Golf Centers, Inc. and
acknowledged the foregoing to be the free act and deed of said
corporation, before me,
-----------------------------
Notary Public
My Commission Expires: _______
- 2 -
<PAGE>
MORTGAGE
Easton Family Golf Centers, Inc., a corporation duly established under
the laws of Delaware having its usual place of business at 225 Broadhollow
Road, Suite 106E, Melville, New York 11747 (the Mortgagor), for consideration
paid, grants to Tri-Town Sports, Inc. a corporation duly established under the
laws of the Commonwealth of Massachusetts and having its usual place of
business at 1200 Providence Highway, Sharon, Norfolk County, Massachusetts
02067 (the Mortgagee) with MORTGAGE COVENANTS to secure the payment of
Eighty-Seven Thousand Five Hundred and 00/100 Dollars ($87,500.00) as provided
in its note of even, the land in Easton, Bristol County, Massachusetts
described as follows:
PARCEL ONE
The land in Easton, Bristol County, Massachusetts shown as Lot 3 on a Plan of
Land entitled "Plan of Land in Easton Massachusetts, Prepared for Foundry
Turnpike Limited Partnership, 61 Main Street, Andover, MA 01810, Scale
1"=100', Date: 09-03-91, Prepared by K & Associates", being recorded as Plan
316-40.
Said Lot 3 contains 1,021,632 square feet of land more or less all as shown on
said plan.
PARCEL TWO
The land in Easton, Bristol County, MA shown as Lot 4A on a Plan of Land
entitled, "Plan of Land in Easton Massachusetts, Prepared for: Foundry
Turnpike Limited Partnership, 61 Main Street, Andover, MA 01810, Scale: 1" =
100', Date: 12/02/92, Prepared by K & Associates/LAN-COM, Inc." recorded as
Plan _________________.
Said Lot 4A contains 2,430,983 square feet of land (55.808 acres) more or less
all as shown on said plan.
This mortgage is subject to a $350,000.00 mortgage from Easton
Family Golf Centers, Inc. to Tri-Town Sports, Inc., a $140,000.00
mortgage from Easton Family Golf Centers, Inc. to Tri-Town Sports,
Inc., and a $122,500.00 mortgage from Easton Family Golf Centers,
Inc. to Tri-Town Sports, Inc., all of even date and recorded
herewith.
For title, see deed of Tri-Town Sports, Inc. recorded
herewith.
This mortgage is upon the STATUTORY CONDITION, for any breach of which
the Mortgagee shall have the STATUTORY POWER OF SALE.
IN WITNESS WHEREOF, the said Easton Family Golf Centers, Inc. has caused
its corporate sale to be hereto affixed and these presents to be signed,
acknowledged and
<PAGE>
delivered in its name and behalf by Dominic Chang, its President, and Krishnan
Thampi, its Treasurer, this __ day of ____________, 1996.
Easton Family Golf Center, Inc.
By:______________________________
Dominic, President
By:______________________________
Krishnan Thampi, Treasurer
STATE OF NEW YORK
___________, ss. ________________, 1996
Then personally appeared the above-named Dominic Chang, as he
is President of Easton Family Golf Centers, Inc. and acknowledged
the foregoing to be the free act and deed of said corporation,
before me,
------------------------------
Notary Public
My Commission Expires:________
STATE OF NEW YORK
___________, ss. ________________, 1996
Then personally appeared the above-named Krishnan Thampi as
he is Treasurer of Easton Family Golf Centers, Inc. and
acknowledged the foregoing to be the free act and deed of said
corporation, before me,
------------------------------
Notary Public
My Commission Expires:________
- 2 -
<PAGE>
ASSIGNMENT AND ASSUMPTION OF LICENSE
ASSIGNMENT AND ASSUMPTION OF LICENSE, made as of the 30 day of
September, 1996 (this "Agreement"), by and between COLBERT BALLARD GOLF
LEARNING CENTERS, INC., a Nevada corporation having an address at 37101 W. Six
Mile, Livonia, Michigan 48154 ("Assignor"), and C.B. FAMILY GOLF CENTERS,
INC., a Delaware corporation having an address at 225 Broadhollow Road, Suite
106E, Melville, New York 11747 ("Assignee").
W I T N E S S E T H :
WHEREAS, by License, (the "License") by and between James Colbert, James
Ballard (collectively, the "Licensors") and Assignor, Assignor was granted the
license to use the Licensors' names and teaching system (the "Licensed
Property");
WHEREAS, Assignor desires to assign to Assignee its entire interest as
licensee under the License and Assignee desires to accept such assignment and
assume Assignor's obligations under the License on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of TEN ($10.00) DOLLARS, the terms and
conditions set forth herein, and other good and valuable consideration, the
mutual receipt and sufficiency of which are hereby acknowledged, the parties
hereby agree to the foregoing and as follows:
1. Assignment and Assumption. Effective as of July 15, 1996 (the
"Effective Date") Assignor assigns, sets over and transfers to Assignee all
right, title and interest of Assignor in and to the License, and Assignee
assumes and agrees to perform any and all of the obligations to be performed
by the Assignor under the License (as if Assignee executed the License
originally as licensee thereunder) accruing from and after the Effective Date.
Assignee further agrees to be bound by and fully responsible for all of the
covenants, agreements, terms, provisions, and conditions of Assignor under the
License to be performed by Assignor from and after the Effective Date.
Assignee agrees that the obligations assumed hereunder and agreements
contained herein shall benefit the Licensors and their successors and assigns
as well as Assignor.
<PAGE>
2. Bill of Sale. Assignor does hereby sell, assign, transfer and convey
to Assignee, and Assignee does hereby purchase and acquire from Assignor, all
of Assignor's right, title and interest in and to the following property
(collectively, the "Property"):
2.1 all personalty, inventories, supplies, sales, marketing and
instructional materials of every kind and description relating to the use of
the Licensed Property by the Assignor (the "Business"), wherever located,
including without limitation, the items described on Exhibit B attached hereto
and made a part hereof (the "Personal Property");
2.2 the files, books, notices and other correspondence from any
governmental agencies, and other records used or employed by Assignor or its
affiliates in connection with the ownership and/or operation of the Business
(collectively, the "Records");
2.3 any consents, authorizations, variances, waivers, licenses,
certificates, permits and approvals held by or granted to Assignor in
connection with the ownership of the Business (collectively, the "Permits");
2.4 the contracts, leases and other agreements of or relating to
the operation of the Business described on Exhibit C attached hereto and made
a part hereof (the "Contracts");
2.5 any patents, trademarks, servicemarks, trademark or servicemark
registrations, copyrights, copyright registrations, trade names and all
registrations thereof and all applications for any of the foregoing, whether
issued or pending, if any, and all goodwill associated with any of the
foregoing, including, but not limited to, the service mark "perfect practice"
and the name "Colbert Ballard Golf Learning Centers" (the "Intangible
Assets"); and
2.6 any other properties and assets of every kind and nature, real
or personal, tangible or intangible, relating in any way whatsoever to the
Business, except to the extent the same relate solely to the Retained Assets
or Retained Liabilities.
3. Assets to be Retained by Assignor. Anything herein to the contrary
notwithstanding, Assignor shall not sell, and
2
<PAGE>
Assignee shall not acquire, the following assets of Assignor (the "Retained
Assets"):
3.1 any rights of Assignor with respect to insurance
policies owned by Assignor or for which Assignor is the named
insured; and
3.2 all cash, funds in bank accounts and cash equivalents existing
as of the date hereof.
4. Assumption of Certain Liabilities. Assignee shall
assume and agree to pay and discharge when due all liabilities and
obligations of Assignor under:
4.1 the License, to the extent the same arise from and
after the date hereof;
4.2 the Contracts, to the extent the same arise from
and after the date hereof; and
4.3 the liabilities listed on Exhibit D hereto (the
"Assumed Liabilities").
4.4 Assignor shall retain, and Assignee shall not assume, perform,
discharge or pay, and shall not be responsible for, any and all liabilities or
obligations of any nature whatsoever in connection with or relating to the
Assignor or the Business or any predecessor owner of the Business other than
the Assumed Liabilities (collectively, the "Retained Liabilities").
5. Consideration.
5.1 In consideration for the assignment of the License,
Assignee shall:
(a) cause Family Golf Centers, Inc., a Delaware corporation
(the "Parent") to issue 7,000 validly issued, fully paid and non-assessable
shares of common stock, par value $.01 per share, of Parent (the "Common
Stock") free and clear of all liens, claims and encumbrances and to deliver at
Closing: (1) a certificate representing 4,550 shares of Common Stock
registered in the name of "Colbert Ballard Golf Learning Centers, Inc.", and
(2) a certificate representing the 2,450 shares of Common Stock
3
<PAGE>
registered in the name of Continental Stock Transfer and Trust Company, as
escrow agent, to be held and distributed in accordance with the provisions of
the Escrow Agreement, dated as of even date herewith;
(b) assume the Assumed Liabilities listed on Exhibit D hereto.
5.2 The parties agree that, given the restrictions on the Common
Stock, the price at which the shares of common stock of Parent are trading on
the NASDAQ exchange on the Closing Date may not be an accurate measure of the
value of the Common Stock. Therefore, in order to properly prepare transfer,
gains, sales, income and other tax and similar forms, the parties have agreed
that a fair and reasonable valuation of the Common Stock as of the Closing
Date is $25 per share.
6. Apportionments.
6.1 The parties hereto agree that (i) all compensation payable to
the Licensors under the License and all other operating expenses of Assignor
relating to the Business (i.e., advertising, collections, fees, hired
services, insurance, miscellaneous expenses, postage, repairs and maintenance,
supplies, taxes, utilities, wages and interest on indebtedness, but
specifically not including professional fees and expenses, travel and lodging
or depreciation), and (ii) all income of Assignor, including accounts
receivable, shall be apportioned between Assignor and Assignee as of the
Effective Date based on the portion of each such expense or revenue
attributable to the period falling on or before the Effective Date on the one
hand, which Assignor shall bear the responsibility and benefit of, and the
portion of each such expense or revenue attributable to the period falling
after the Effective Date, on the other hand, which Assignee shall bear the
responsibility and benefit of (the "Adjustment"). The net Adjustment will be
paid by the party owing the same to the other in cash or by certified or
official bank check or wire transfer. The expenses and liabilities for which
Assignor shall be liable pursuant to this Section shall be included within the
meaning of the term "Retained Liabilities".
6.2 To the extent that any of the prorations made pursuant to this
Article are based upon estimates of payments to be made and/or expenses to be
incurred by Assignee subsequent to the Effective Date, or either party
discovers any errors in or
4
<PAGE>
omissions in respect of the Adjustment, Assignor and Assignee agree to adjust
such prorations promptly upon receipt by Assignor or Assignee, as the case may
be, of such payments or of bills or other documentation setting forth the
actual amount of such expenses.
6.3 Assignor and Assignee shall maintain and make available to each
other any books or records necessary for the adjustment of any item pursuant
to this Article. The provisions of this Article shall survive the closing of
the transactions described herein (the "Closing").
7. Loan to Assignor. The Assignee hereby agrees to lend
the Assignor $446,720.00 to pay certain Retained Liabilities of
the Assignor listed on Exhibit E hereto, in exchange for a secured
promissory note made by the Assignor in favor of the Assignee in
the face amount of $446,720.00, which note shall be personally
guaranteed by Harry J. Moorhouse and Dorothy Moorhouse.
8. Representations and Warranties of Assignor. Assignor
hereby represents and warrants to Assignee as follows:
8.1 Organization; Power and Authority. Assignor is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada, and has all requisite power and authority to carry on its
business as it is now being conducted, to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby.
8.2 Due Authorization and Execution; Effect of Agreement. The
execution, delivery and performance by Assignor of this Agreement and the
consummation by Assignor of the transactions contemplated hereby have been
duly authorized by all necessary corporate action required to be taken on the
part of the Assignor. This Agreement has been duly and validly executed and
delivered by Assignor and constitutes the valid and binding obligation of
Assignor, enforceable in accordance with its terms. The execution, delivery
and performance by Assignor of this Agreement and the consummation by Assignor
of the transactions contemplated hereby will not, with or without the giving
of notice or the lapse of time, or both, (a) violate any provision of any law,
rule or regulation to which Assignor is subject; (b) violate any order,
judgment or decree applicable to Assignor; or (c)
5
<PAGE>
conflict with or result in a breach of or a default under any term or
condition of Assignor's Certificate of Incorporation or By-laws or any term or
condition of any agreement or other instrument to which Assignor is a party or
by which it or its assets may be bound, except in each case, for violations,
conflicts, breaches or defaults which in the aggregate would not materially
hinder or impair the consummation of the transactions contemplated hereby.
8.3 Consents. No consent, approval or authorization of, exemption
by, or filing with, any governmental or regulatory authority or any third
party is required in connection with the execution, delivery and performance
by Assignor of this Agreement, except for consents, approvals, authorizations,
exemptions and filings, if any, which have been obtained.
8.4 Compliance with Applicable Laws. Assignor is not engaging in
any activity or omitting to take any action as a result of which Assignor is
in violation of any law, rule, regulation, ordinance, statute, order,
injunction or decree, or any other requirement of any court or governmental or
administrative body or agency, applicable to the Business, and neither the
execution and delivery by Assignor of this Agreement or of any of the other
agreements and instruments to be executed and delivered by it pursuant hereto,
the performance by Assignor of its obligations hereunder or thereunder or the
consummation of the transactions contemplated hereby or thereby will result in
any such violation. Assignor is in compliance with all material requirements
imposed in writing by any insurance carrier of Assignor to the extent such
carrier is an insurer or indemnitor of the Business. The Business is not
subject to any notice of violation of law, municipal ordinance, orders or
requirements issued by any building department or other governmental agency or
subdivision having jurisdiction, other than notice of its failure to pay
federal taxes.
8.5 Permits. All Permits required by any federal, state, or local
law, rule or regulation and necessary for the operation of the Business as
currently being conducted have been obtained and are currently in effect. No
registrations, filings, applications, notices, transfers, consents, approvals,
orders, qualifications, waivers or other actions of any kind are required by
virtue of the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby (a) to avoid the loss of any Permit or
the violation of any law, regulation,
6
<PAGE>
order or other requirement of law, or (b) to enable Assignee to continue the
operation of the Business as presently conducted after the Closing.
8.6 The License. Attached hereto as Exhibit A is a true and correct
copy of the License. The License is in full force and effect, has not been
modified or amended in any way and neither the Licensor nor Assignor is in
default, or sent or received any notice of default, in respect of the License.
No event has occurred or circumstance exists which, with the giving of notice
or the passage of time, or both, would constitute a default under the License.
Neither Assignor nor Licensors has exercised any right or option, or stated
its intent, to terminate or cancel the License. Assignor has not assigned,
transferred or conveyed the License or any interest therein, or granted any
right or option with respect thereto, to any party other than Assignee.
8.7 Personal Property. Exhibit B sets forth a complete
list of all Personal Property necessary for the use and operation
of the Business as currently conducted.
8.8 Title to the License and Property. The License and the Property
are free and clear of any and all liens, charges, encumbrances, mortgages,
pledges, security interests, easements, agreements and other interests and
adverse claims (collectively, "Encumbrances").
8.9 Contracts. Except for the License and the Contracts listed on
Exhibit C hereto, Assignor is not a party to any leases, contracts, orders or
agreements relating to the Business or the Property (written or otherwise).
8.10 Litigation. There is no action or proceeding or governmental
investigation pending, or, to the best of Assignor's knowledge, threatened
against, or relating to, Assignor (insofar as it relates to the License or the
Business), the transactions contemplated by this Agreement, nor is there any
basis for any such action, proceeding or investigation.
8.11 Employee Agreements. There are no union or employment
contracts or agreements (written or oral) involving employees of Assignor or
its affiliates affecting the License or the Business which will survive the
Closing. All employees of Assignor will have been terminated as of the Closing
Date.
7
<PAGE>
8.12 Financial Condition. Assignor has delivered to Assignee true
and correct copies of audited financial statements consisting of balance
sheets and income statements of Assignor as of December 31, 1995 and for the
quarters ended March 31, 1996 and June 30, 1996. Such balance sheet presents
fairly the financial condition, assets and liabilities of Assignor as of its
date; such statement of income presents fairly the results of operations of
Assignor for the period indicated. The financial statements referred to in
this Section are in accordance with the books and records of Assignor. Since
December 31, 1995 and since June 30, 1996: (a) there has at no time been a
material adverse change in the financial condition, results of operations,
businesses, properties, assets, liabilities or future prospects of Assignor,
the License, the Property or Business; (b) the Business has been conducted in
all respects only in the ordinary course; and (c) Assignor has not suffered an
extraordinary loss (whether or not covered by insurance) or waived any right
of substantial value.
8.13 Full Disclosure. To the best knowledge of Assignor, none of
the information supplied by Assignor herein or in the exhibits hereto contains
any untrue statement of a material fact or omits to state a material fact
required to be stated herein or necessary in order to make the statements
herein, in light of the circumstances under which they are made, not
misleading.
9. Representations and Warranties of Assignee. Assignee
hereby represents and warrants to Assignor as follows:
9.1 Organization; Power and Authority. Assignee is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite power and authority to carry on its
business as it is now being conducted, to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby.
9.2 Due Authorization and Execution; Effect of Agreement. The
execution, delivery and performance by Assignee of this Agreement and the
consummation by Assignee of the transactions contemplated hereby have been
duly authorized by all necessary corporate action required to be taken on the
part of Assignee. This Agreement has been duly and validly executed and
delivered by Assignee and constitutes the valid and binding
8
<PAGE>
obligation of Assignee, enforceable in accordance with its terms. The
execution, delivery and performance by Assignee of this Agreement and the
consummation by Assignee of the transactions contemplated hereby will not,
with or without the giving of notice or the lapse of time, or both, (a)
violate any provision of any law, rule or regulation to which Assignee is
subject; (b) violate any order, judgment or decree applicable to Assignee; or
(c) conflict with or result in a breach of or a default under any term or
condition of Assignee's Certificate of Incorporation or By-Laws or any
agreement or other instrument to which Assignee is a party or by which it or
its assets may be bound, except in each case, for violations, conflicts,
breaches or defaults which in the aggregate would not materially hinder or
impair the consummation of the transactions contemplated hereby.
10. Survival. The representations and warranties of the
parties made in Articles 8 and 9 shall survive the Closing.
11. Further Assurances. At any time and from time to time
after the date hereof, either party shall, at the request of the
other party, execute and deliver any further instruments or documents
and take all such further action as the requesting party may
reasonably request in order to transfer into the name of Assignee the License
and any and all Property contemplated to be sold pursuant to this Agreement
and to further consummate the transactions contemplated by this Agreement.
This Article shall survive the Closing.
12. Brokers. Assignor and Assignee warrant and represent to each other
that they dealt with no broker, finder or similar agent or party who or which
might be entitled to a commission or compensation on account of introducing
the parties, the negotiation or execution of this Agreement and/or the closing
of the transaction provided for herein, other than _______________ (the
"Broker"). Assignee and Assignor hereby respectively agree to indemnify and
hold harmless the other party from and against all loss, liability, damage and
expense (including, without limitation, attorneys' fees) imposed upon or
incurred by the other party by reason of any claim for commissions or other
compensation for bringing about this transaction by any broker, finder or
similar agent or party other than the Broker who claims to have dealt with the
indemnifying party in connection with this transaction. Assignor agrees to pay
the Broker any commissions due the Broker in connection with this transaction
pursuant to a
9
<PAGE>
separate agreement between Assignor and the Broker. The provisions of this
Article shall survive the Closing or any termination of this Agreement.
13. Indemnification.
13.1 Subject to the further provisions of this Article, Assignor
shall protect, defend, hold harmless and indemnify Assignee, its officers,
directors, shareholders, employees, agents and affiliates, and their
respective successors and assigns, from, against and in respect of any and all
losses, liabilities, deficiencies, penalties, fines, costs, damages and
expenses whatsoever (including without limitation, reasonable professional
fees and costs of investigation, litigation, settlement, and judgment and
interest) ("Losses") that may be suffered or incurred by any of them arising
from or by reason of (i) any Retained Liability or other liability or
obligation of Assignor which is not an Assumed Liability; (ii) the breach of
any representation, warranty, covenant or agreement of Assignor contained in
this Agreement or in any document or other writing delivered pursuant to this
Agreement; and (iii) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses (including without limitation,
interest, penalties, reasonable legal fees and accounting fees) incident to
the foregoing and the enforcement of the provisions of this Section 13.1.
13.2 Subject to the further provisions of this Article, Assignee
shall protect, defend, hold harmless and indemnify Assignor, its partners,
employees and agents, and its successors and assigns from, against and in
respect of any and all Losses that may be suffered or incurred by any of them
arising from or by reason of (i) any of the Assumed Liabilities on and after
the date hereof, (ii) the breach of any representation, warranty, covenant or
agreement of Assignee contained in this Agreement or in any document or other
writing delivered pursuant to this Agreement; and (iii) any and all actions,
suits, proceedings, claims, demands, assessments, judgments, costs and
expenses (including without limitation, interest, penalties, reasonable legal
fees and accounting fees) incident to the foregoing and the enforcement of the
provisions of this Section 13.2.
13.3 Whenever a party hereto (such party and each of its affiliates
which is entitled to indemnification pursuant to any
10
<PAGE>
provision of this Agreement, an "Indemnified Party") shall learn after the
Closing of a claim that, if allowed (whether voluntarily or by judicial or
quasi-judicial tribunal or agency), would give rise to an obligation of
another party (the "Indemnifying Party") to indemnify the Indemnified Party
under any provision of this Agreement, before paying the same or agreeing
thereto, the Indemnified Party shall promptly notify the Indemnifying Party in
writing of all such facts within the Indemnified Party's knowledge with
respect to such claim and the amount thereof (a "Notice of Claim"). If, prior
to the expiration of fifteen (15) days from the mailing of a Notice of Claim,
the Indemnifying Party shall request, in writing, that such claim not be paid,
the Indemnified Party shall not pay the same, provided the Indemnifying Party
proceeds promptly, at its or their own expense (including employment of
counsel reasonably satisfactory to the Indemnified Party), to settle,
compromise or litigate, in good faith, such claim. After notice from the
Indemnifying Party requesting the Indemnified Party not to pay such claim and
the Indemnifying Party's assumption of the defense of such claim at its or
their expense, the Indemnifying Party shall not be liable to the Indemnified
Party for any legal or other expense subsequently incurred by the Indemnified
Party in connection with the defense thereof. However, the Indemnified Party
shall have the right to participate at its expense and with counsel of its
choice in such settlement, compromise or litigation. The Indemnified Party
shall not be required to refrain from paying any claim which has matured by a
court judgment or decree, unless an appeal is duly taken therefrom and
execution thereof has been stayed, nor shall the Indemnified Party be required
to refrain from paying any claim where the delay in paying such claim would
result in the foreclosure of a lien upon any of the property or assets then
held by the Indemnified Party. The failure to provide a timely Notice of Claim
as provided in this Section 13.3 shall not excuse the Indemnifying Party from
its or their continuing obligations hereunder; however, the Indemnified
Party's claim shall be reduced by any damages to the Indemnifying Party
resulting from the Indemnified Party's delay or failure to provide a Notice of
Claim as provided in this Section 13.3.
13.4 For purposes of this Article, any assertion of fact and/or law
by a third party that, if true, would constitute a breach of a representation
or warranty made by a party to this Agreement or make operational an
indemnification obligation hereunder, shall, on the date that such assertion
is made,
11
<PAGE>
immediately invoke the Indemnifying Party's obligation to protect, defend,
hold harmless and indemnify the Indemnified Party pursuant to this Article.
13.5 The obligation of the Assignor under Section 13.1 hereof
shall be satisfied first from the Escrowed Funds (as defined in the Escrow
Agreement, dated as of the date hereof, among Assignor, Assignee and
Continental Stock Transfer & Trust Company), and, if the Escrowed is
inadequate to provide indemnification to Assignee, then from Assignor
directly.
14. Post=Closing Covenants. Promptly upon the execution of this
Agreement, the Assignor shall: (1) change its name such that it shall no
longer use the words "Colbert" or "Ballard", (2) withdraw its qualification to
do business in all states in which it is now so qualified, and (3) cease from
using the names "Colbert" and "Ballard" or any combination thereof.
15. Notices. All notices, demands, requests, consents or other
communications ("Notices") which either party may desire or be required to
give to the other hereunder shall be in writing and shall be delivered by
hand, overnight express carrier, or sent by registered or certified mail,
return receipt requested, postage prepaid, in either event, addressed to the
parties at their respective addresses first above set forth. A copy of any
Notice given by Assignor to Assignee shall simultaneously be given in either
manner provided above to Squadron, Ellenoff, Plesent & Sheinfeld, LLP, 551
Fifth Avenue, New York, New York 10176, Attention: Kenneth R. Koch, Esq.
Notices given in the manner aforesaid shall be deemed to have been given three
(3) business days after the day so mailed, the day after delivery to any
overnight express carrier and on the day so delivered by hand. Either party
shall have the right to change its address(es) for the receipt of Notices by
giving Notice to the other party in either manner aforesaid. Any Notice
required or permitted to be given by either party may be given by that party's
attorney.
12
<PAGE>
16. Miscellaneous.
16.1 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns.
16.2 This Agreement shall be governed by, interpreted under and
construed and enforced in accordance with, the laws of the State of New York.
16.3 The captions or article headings in this Agreement are for
convenience only and do not constitute part of this Agreement.
16.4 This Agreement has been fully negotiated by the parties and
rules of construction construing ambiguities against the party responsible for
drafting agreements shall not apply.
16.5 It is agreed that, except where otherwise expressly provided
in particular Articles or Sections of this Agreement, none of the provisions
of this Agreement shall survive the Closing.
16.6 This Agreement (including the Exhibits annexed hereto)
contains the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior understandings, if any, with respect
thereto.
16.7 This Agreement may not be modified, changed, supplemented or
terminated, nor may any obligations hereunder be waived, except by written
instrument signed by the party to be charged or by its agent duly authorized
in writing or as otherwise expressly permitted herein.
16.8 No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof or of any other agreement or provision herein contained. No extension
of the time for performance of any obligations or acts shall be deemed an
extension of the time for performance of any other obligations or acts.
16.9 This Agreement may be executed in one or more counterparts,
each of which when so executed and delivered shall
13
be deemed an original, but all of which taken together shall constitute but
one and the same original.
16.10 Either party may cause this Agreement to be recorded in the
appropriate public office.
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
COLBERT BALLARD GOLF
LEARNING CENTERS, INC.
By:_______________________
Name:
Title:
C.B. FAMILY GOLF CENTERS,
INC.
By: ______________________
Name:
Title:
15
PROMISSORY NOTE
$446,720.00
September 30, 1996
FOR VALUE RECEIVED, COLBERT BALLARD GOLF LEARNING CENTERS, INC., a Nevada
corporation (herein called "Maker") hereby promises to pay to the order of C.B.
FAMILY GOLF CENTERS, INC., a Delaware corporation (the "Payee") the principal
sum of Four Hundred Forty Six Thousand Seven Hundred Twenty Dollars
($446,720.00), together with accrued interest on such principal amount
outstanding from time to time, from the date hereof, at the rate of 6.02% per
annum; said principal and interest to be due and payable on September 30, 1998
(the "Maturity Date").
1. SECURITY.
This Promissory Note is secured by that certain Security Agreement (the
"Mortgage") of even date herewith, encumbering that certain property located at
8037 Brace Street, Detroit, Michigan 48228 as more particularly described
therein (the "Property").
2. PREPAYMENTS.
This Promissory Note may be prepaid in part from time to time or in whole
at any time without premium or penalty.
3. PAYMENT.
Payment of principal and interest shall be made in lawful money of the
United States of America at such place as the Payee shall have designated to
the Maker.
4. EVENTS OF DEFAULT.
If any of the following events shall occur (each a "Default"): (i) the
Maker shall fail to pay any principal of or interest on this Promissory Note
when due and such failure shall remain unremedied for fifteen days after
written notice thereof, (ii) an entry of a decree or order by a court having
jurisdiction adjudging Maker bankrupt or insolvent, or approving a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of Maker, under federal bankruptcy law, as now or hereafter constituted, and
the continuance of such decree or order is unstayed and in effect for a period
of 60 days; (iii) the commencement by Maker of a voluntary case under federal
bankruptcy law, as now or hereafter constituted, or the consent of Maker to the
institution of bankruptcy or insolvency proceedings against it; (iv) the filing
by Maker of a petition or consent seeking reorganization or relief under
federal bankruptcy law; or (v) the appointment
of a receiver, liquidator, assignee, trustee, or similar official of Maker or
the making by Maker of an assignment for the benefit or creditors; then the
Payee may declare the outstanding principal amount of this Promissory Note and
all other amounts due hereunder to be immediately due and payable, whereupon the
outstanding principal amount of this Promissory Note and all such other amounts
shall become and shall be forthwith due and payable, without diligence,
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived.
5. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or by Federal Express, Express Mail or similar overnight
delivery or courier service or delivered (in person or by telecopy, telex or
similar telecommunications equipment) against receipt to the party to whom it
is to be given, (i) if to the Payee, 225 Broadhollow Road, Melville New York
11747, Attention: Robert J. Krause; (ii) if to the Maker at its address at
37101 W. Six Mile, Livonia, Michigan 48154; or (iii) in any case, to such other
address as the party shall have furnished in writing in accordance with the
provisions of this Section 5. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof. Any notice given by other means permitted by this
Section 5 shall be deemed given at the time of receipt thereof.
6. MISCELLANEOUS.
The Payee may transfer this Promissory Note to a transferee(s) who shall
thereupon become vested with all powers and rights herein given to the Payee.
Notice of any assignment, conveyance or transfer of this Promissory Note by the
Payee shall be given to the Maker. The rights and obligations of the Maker
under this Promissory Note may not be assigned, conveyed or otherwise
transferred to any third party and any attempt to assign, convey or transfer
such rights and/or obligations shall be null and void. This Promissory Note may
not be changed orally, but only by an agreement in writing and signed by the
party against whom enforcement of any waiver, change, modification or discharge
is sought.
This Promissory Note is made and delivered in New York, New York, and
shall be governed by the laws of the State of New York.
COLBERT BALLARD GOLF LEARNING CENTERS, INC.
By: ______________________
Name:
Title:
- 2 -
GUARANTY OF PROMISSORY NOTE
To induce C.B. Family Golf Centers, Inc. ("Payee") to accept a promissory
note dated September 30, 1996 made by Colbert Ballard Golf Learning Centers,
Inc. ("Maker") to the order of Payee, in the aggregate principal amount of
$446,720.00 ("the Promissory Note"), the undersigned individuals, Harry J.
Moorhouse and Dorothy R. Moorhouse ("Guarantors"), for valuable consideration,
hereby, unconditionally and irrevocably, jointly and severally, guarantee to
Payee, its administrators, legal representatives and its successors and
assigns, and to every subsequent holder of the Promissory Note, irrespective of
the genuineness, validity, regularity or enforceability thereof, of the
obligation evidenced thereby, or any claims or defenses available to or
asserted by Maker, and irrespective of any other circumstance, that all sums
stated therein to be payable on the Promissory Note shall promptly be paid in
full, in accordance with the provisions of the Promissory Note, and, in the
case of any extension of time of payment or renewal in whole or in part, all
sums shall be promptly paid when due according to such extension or extensions,
renewal or renewals, at maturity, by acceleration or otherwise.
In order to induce Payee to accept the Promissory Note of Maker and
intending Payee to rely thereon, the Guarantors hereby represent and warrant,
jointly and severally, as follows, such representations and warranties to
survive the delivery hereof:
(a) This Guaranty is in no way conditional or contingent and constitutes
a valid, present, continuing and absolute obligation of each Guarantor which
shall not be impaired or affected by (i) any modification, waiver, forbearance,
extension or renewal granted with respect to the Promissory Note, or (ii) any
failure to exercise or delay in exercising of any
rights granted to the Payee, its successors and assigns, or any subsequent
holder of the Promissory Note pursuant to the terms of the Promissory Note or by
any statute or rule of law.
(b) The execution, delivery and performance by such Guarantor of this
Guaranty does not contravene any law or contractual restriction binding on or
affecting such Guarantor.
(c) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by such Guarantor of this Guaranty.
(d) This Guaranty is the legal, valid and binding obligation of such
Guarantor enforceable against such Guarantor in accordance with its terms.
The Guarantors hereby waive notice of acceptance of this Guaranty,
presentment, demand for payment, notice of dishonor, notice of protest and
protest, and all other notices or demands in connection with the delivery,
acceptance, performance, default, endorsement, or guaranty of the Promissory
Note or this Guaranty, to which the Maker, such Guarantor or any other Guarantor
may be entitled including, but not limited to, recourse to suretyship defenses,
releases of security of Guarantors or any other indulgences granted by Payee.
This is a continuing guaranty, primary and unconditional, and shall remain
in full force and effect and may not be revoked as to any unpaid amounts which
may be due or become due nor may it be changed or modified orally. This Guaranty
is binding upon the Guarantors, their successors and assigns, but not their
heirs, and shall inure to the benefit of Payee, its successors and assigns.
Notwithstanding anything contained herein to the contrary, in the event
that Harry J. Moorhouse is an employee in good standing with Payee on the second
anniversary of the date
hereof, which determintaion shall be made by Payee in its sole and absolute
discretion, the Payee shall release the Guarantors from this Guaranty.
The Guarantors shall be liable hereunder for the principal amount and all
interest due on the Promissory Note and for all costs and expenses, including
reasonable attorneys' fees, in connection with the collection of the Promissory
Note and the enforcement of this Guaranty. The Guarantors hereby waive trial by
jury.
This Guaranty has been executed and delivered in the State of New York and
the construction, validity and performance hereof shall be governed by the
internal laws of the State of New York, without regard to principles of conflict
of laws.
If any provision of this Guaranty shall be unenforceable in whole or in
part for any reason whatsoever, then such provision, to the extent it is
unenforceable, shall be ineffective and the balance of this Guaranty shall be
deemed valid and enforceable and construed as if the offending provisions had
been deleted therefrom.
IN WITNESS WHEREOF the Guarantors have signed this Guaranty as of
the 30 day of September, 1996.
________________________________
Harry J. Moorhouse
________________________________
Dorothy R. Moorhouse
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<PAGE>
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of September 30, 1996, among FAMILY GOLF
CENTERS, INC., a Delaware corporation with executive offices at 225 Broadhollow
Road, Melville, New York 11747 ("FGC"), COLBERT BALLARD GOLF LEARNING CENTERS,
INC., a Nevada coporation with executive offices at 37101 W. Six Mile, Livonia,
Michigan 48154 (the "Seller") and CONTINENTAL STOCK TRANSFER & TRUST COMPANY
incorporated under the laws of the United States of America with executive
offices at 2 Broadway, New York, New York 10004 (the "Escrow Agent").
W I T N E S E T H:
WHEREAS, simultaneously with the execution hereof, the Seller, FGC and
C.B. Family Golf Centers, Inc., a wholly-owned Delaware subsidiary of FGC
("Subsidiary"), are consummating the transactions contemplated by the
Assignment and Assumption of License Agreement, dated as of even date herewith
(the "Assignment Agreement"), among the Seller and Subsidiary, pursuant to
which, among other things, Subsidiary shall purchase certain assets of Seller
in exchange for 7,000 shares of common stock, par value $.01 per share (the
"FGC
Common Stock").
WHEREAS, pursuant to Section 5 of the Assignment Agreement, 2,450
shares (the "Escrowed Property") of the FGC Common Stock are required to be
placed into an escrow account (the "Escrow Account") to be maintained by the
Escrow Agent against any claims for indemnity under the Assignment Agreement;
and
WHEREAS, this is the Escrow Agreement referred to in Section 5 of the
Assignment Agreement. Capitalized terms used in this Escrow Agreement and not
otherwise defined herein shall have the respective meanings given to them in
the Assignment Agreement.
NOW, THEREFORE, it is agreed as follows:
I. ESCROW.
SECTION 1.01 APPOINTMENT OF ESCROW AGENT. The Seller and FGC hereby
appoint the Escrow Agent, and the Escrow Agent hereby agrees to serve, as
Escrow Agent in accordance with, and pursuant to, this Agreement.
SECTION 1.02 OPERATION OF ESCROW ACCOUNT. The parties hereto agree
that, subject to Section 1.03 hereof, the Escrow Account shall operate as
follows:
(a) As soon as reasonably practicable following the Effective
Time, FGC shall deposit, in accordance with Section 1.03 hereof, into the Escrow
Account an aggregate of 2,450 shares of FGC Common Stock pursuant to the
Assignment Agreement.
(b) At any time prior to September 30, 1997, FGC shall be
entitled
to give a notice to the Escrow Agent, signed by its President or any
Vice President (with a copy to the Seller), (i) to the effect that there has
been an event entitling the Subsidiary to indemnification from the Seller
pursuant to the Assignment Agreement, which notice shall specify the amounts
owed by the Seller pursuant to the Assignment Agreement, the calculation of
such amounts and the basis therefore.
(c) Twenty days after the Escrow Agent has received a notice pursuant to
Section 1.02(a) (or, if not a business day, on the next business day
following such twentieth day) it shall deliver to FGC the Escrowed Property
(the "Escrowed Property") to be valued as set forth in Section 1.02(e) in the
amounts specified in such notice unless the Seller shall have notified the
Escrow Agent (with a copy to FGC) in writing before such date that it disagrees
with the Subsidiary's determination that it is entitled to indemnification with
respect to the Assignment Agreement, which notice shall be set forth in
reasonable detail the basis for such disagreement.
(d) Should any dispute arise with respect to the delivery,
ownership, or right of possession of the Escrowed Property, the Escrow Agent,
as more fully set forth in Section IV(xi), is authorized and directed to retain
in its possession without liability to anyone all or any part of the Escrowed
Property until such dispute shall have been settled either by mutual agreement
- 3 -
by the parties concerned or by a final order, decree, or judgment of a court of
competent jurisdiction in the United States of America and time for appeal has
expired and no appeal has been perfected, but the Escrow Agent shall be under no
duty whatsoever to institute or defend any such proceedings, and may, in its
discretion, deposit such Escrowed Property with a court of competent
jurisdiction in the United States of America which is hearing such dispute.
(e) For purposes of this Agreement, the value of each share
of FGC Common Stock which is part of the Escrowed Property shall be deemed
equal to the Current Market Price (as hereinafter defined).
(f) The "Current Market Price" per share of FGC Common Stock
shall mean the average of the daily closing sales price as reported on the
NASDAQ Stock Market for the five consecutive trading days immediately preceding
the date of determination.
SECTION 1.03 DISTRIBUTION OF ESCROWED PROPERTY. Unless a notice under
Section 1.02(a) has been given and Escrowed Property in satisfaction of such
notice has not been delivered to FGC, either because the 20-day period has not
yet run out or because a dispute relating to the claim made by such notice is
then pending, the Escrowed Property or such portion of it as at the time
remains in escrow, together with all dividends and distributions received by
the Escrow Agent with respect thereto, shall be returned to the Seller on
September 30,
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1997.
SECTION 1.04 TERMINATION OF ESCROW ACCOUNT. This Agreement and the
Escrow Account will terminate at 5:00 P.M., New York City local time, on the
date on which all of the shares of FGC Common Stock contained therein shall be
distributed as set forth above.
SECTION 1.05 VOTING. The shares of FGC Common Stock held in the Escrow
Account shall be voted by the Seller or its designee.
II. DEPOSIT OF ESCROWED PROPERTY.
SECTION 2.01 DEPOSIT OF ESCROWED PROPERTY. As soon as reasonably
practicable following the Closing Date (as defined in the Assignment Agreement),
FGC shall, as set forth in Section 1.02, deposit with the Escrow Agent 2,450
shares of FGC Common Stock.
III. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be (a) delivered by hand, (b) sent by
certified mail return receipt requested, or (c) sent by over-night delivery
with proper postage prepaid, and addressed as follows:
If to FGC to:
225 Broadhollow Road
Melville, New York 11747
(516) 694-1666
- 5 -
If to Seller to:
Harry J. Moorhouse
8037 Brace Street
Detroit, Michigan 48228
If to the Escrow Agent, to:
2 Broadway
New York, New York 10004
(212) 509-4000
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. Except as
otherwise provided herein, no notice or communication shall be effective until
received or refused.
IV. CONCERNING THE ESCROW AGENT.
To induce the Escrow Agent to act hereunder, it is further agreed by
each of the Seller and FGC that:
(i) The Escrow Agent shall not be under any duty to give the
Escrowed Property held by it hereunder any greater degree of care than it gives
its own similar property and shall not be required to invest any funds held
hereunder except as directed in this Agreement. Uninvested funds held hereunder
shall not earn or accrue interest.
(ii) This Agreement expressly sets forth all the duties of the
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Escrow Agent with respect to any and all matters pertinent hereto. No implied
duties or obligations shall be read into this Agreement against the Escrow
Agent. The Escrow Agent shall not be bound by the provisions of any agreement
among the other parties hereto except this Agreement.
(iii) The Escrow Agent shall not be liable, except for its
own gross negligence or willful misconduct, and, except with respect to claims
based upon such gross negligence or willful misconduct that are successfully
asserted against the Escrow Agent, the other parties hereto shall jointly and
severally indemnify and hold harmless the Escrow Agent (and any successor
Escrow Agent) from and against any and all losses, liabilities, claims,
actions, damages, and expenses, including reasonable attorneys' fees and
disbursements, arising out of, and in connection with, this Agreement. Without
limiting the foregoing, the Escrow Agent shall in no event be liable in
connection with its investment or reinvestment of any cash held by it hereunder
in good faith, in accordance with the terms hereof, including, without
limitation, any liability for any delays (not resulting from gross negligence or
willful misconduct) in the investment or reinvestment of the Escrowed Funds, or
any loss of interest incident to any such delays.
(iv) The Escrow Agent shall be entitled to rely upon any
order, judgment, certification, demand, notice, instrument, or other writing
delivered
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to it hereunder without being required to determine the authenticity
or the correctness of any fact stated therein or the propriety or validity of
the service thereof. The Escrow Agent may act in reliance upon any instrument
or signature believed by it in good faith to be genuine and may assume, if in
good faith, that any person purporting to give notice or receipt or advice or
make any statement or execute any document in connection with the provisions
hereof has been duly authorized to do so.
(v) The Escrow Agent may act pursuant to the advice of
counsel with respect to any matter relating to this Escrow Agreement and shall
not be liable for any action taken or omitted in good faith and in accordance
with such advice.
(vi) The Escrow Agent does not have any interest in the
Escrowed Funds deposited hereunder, but is serving as escrow holder only. Any
payments of income from the Escrow Account shall be subject to withholding
regulations then in force with respect to United States taxes.
This paragraph (vi) and paragraph (iii) of this Article V shall
survive notwithstanding any termination of this Agreement or the resignation of
the Escrow Agent.
(vii) The Escrow Agent makes no representation as to the
validity, value, genuineness, or the collectibility of any security or other
documents or instrument held by, or delivered to, it.
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(viii) The Escrow Agent shall not be called upon to advise
any party as to the wisdom in selling or retaining or taking or refraining from
any action with respect to any securities or other property deposited
hereunder.
(ix) The Escrow Agent (and any successor escrow agent) at any
time may be discharged from its duties and obligations hereunder by the
delivery to it of notice of termination signed by FGC and the Seller or at any
time may resign by giving written notice to such effect to FGC and the Seller.
Upon any such termination or resignation, the Escrow Agent shall deliver the
Escrowed Property to any successor escrow agent jointly designated by the other
parties hereto in writing, or to any court of competent jurisdiction if no such
successor escrow agent is agreed upon, whereupon the Escrow Agent shall be
discharged of and from any and all further obligations arising in connection
with this Escrow Agreement. The termination or resignation of the Escrow Agent
shall take effect on the earlier of (A) the appointment of a successor
(including a court of competent jurisdiction) or (B) the day that is 30 days
after the date of delivery: (1) to the Escrow Agent of the other parties'
notice of termination or (2) to the other parties hereto of the Escrow Agent's
written notice of resignation. If at that time the Escrow Agent has not
received a designation of a successor escrow agent, the Escrow Agent's sole
responsibility after that time shall be to keep the Escrowed Property safe
until receipt of a designation of
- 9 -
successor escrow agent or a joint written disposition instruction by the other
parties hereto or an enforceable order of a court of competent jurisdiction.
(x) The Escrow Agent shall have no responsibility for the
contents of any writing of any third party contemplated herein as a means to
resolve disputes and may rely without any liability upon the contents thereof.
(xi) In the event of any disagreement among or between the
other parties hereto resulting in adverse claims or demands being made in
connection with the Escrowed Property, or in the event that the Escrow Agent in
good faith is in doubt as to what action it should take hereunder, the Escrow
Agent shall be entitled to retain the Escrowed Property until the Escrow Agent
shall have received (A) a final and non-appealable order of a court of competent
jurisdiction directing delivery of the Escrowed Property or (B) a written
agreement executed by the other parties hereto directing delivery of the
Escrowed Property, in which event the Escrow Agent shall disburse the Escrowed
Property in accordance with such order or agreement. Any court order referred to
in (A) above shall be accompanied by a legal opinion by counsel for the
presenting party satisfactory to the Escrow Agent to the effect that said court
order is final and non-appealable. The Escrow Agent shall act on such court
order and legal opinions without further question.
(xii) As consideration for its agreement to act as Escrow
Agent as
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herein described, FGC agrees to pay the Escrow Agent fees determined in
accordance with the terms set forth on Exhibit A hereto (and made a part of
this Escrow Agreement as if herein set forth). In addition, FGC and the Seller
agrees to reimburse the Escrow Agent for all reasonable expenses,
disbursements, and advances incurred or made by the Escrow Agent in performance
of its duties hereunder (including reasonable fees, expenses, and disbursements
of its counsel).
(xiii) No publicly distributed material or other matter in
any language (including, without limitation, notices and reports) which
mentions the Escrow Agent's name or the rights, powers, or duties of the Escrow
Agent shall be issued by the other parties hereto or on such parties' behalf
unless the Escrow Agent shall first have given its specific written consent
thereto.
V. MISCELLANEOUS.
SECTION 5.01 BINDING EFFECT. This Escrow Agreement shall be binding
upon, and inure solely to the benefit of, the parties hereto and their
respective successors and assigns, heirs, administrators, and representatives,
and shall not be enforceable by, or inure to the benefit of, any other third
party, except as provided in paragraph (ix) of Article V with respect to the
termination of, or resignation by, the Escrow Agent. No party may assign any of
its rights or
- 11 -
obligations under this Agreement without the written consent of the other
parties.
SECTION 5.02 CHOICE OF LAW. This Agreement shall be construed in
accordance with, and governed by, the internal law of the State of New York
(without reference to its rules as to conflicts of law).
SECTION 5.03 MODIFICATION. This Agreement may only be modified by a
writing signed by all of the parties hereto.
SECTION 5.04 HEADINGS. The section headings herein are for convenience
only and shall not affect the construction thereof. Unless otherwise indicated,
references to Sections and Articles are to Sections and Articles, respectively,
contained herein.
SECTION 5.05 COUNTERPARTS. This Agreement may be executed in one or
more counterparts but all such separate counterparts shall constitute but one
and the same instrument; provided that, although executed in counterparts, the
executed signature pages of each such counterpart may be affixed to a single
copy of this Agreement which shall constitute an original.
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IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
BY:________________________________
NAME:
TITLE:
COLBERT BALLARD GOLF LEARNING CENTERS, INC.
BY:________________________________
NAME:
TITLE:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
BY: ________________________________
NAME:
TITLE:
- 13 -
PURCHASE AGREEMENT
by and between
KKL GOLF PARTNERSHIP
Seller,
and
CAROLINA SPRINGS FAMILY GOLF CENTERS, INC.,
Purchaser
PREMISES:
1680 Scuffletown Road
Fountain Inn, South Carolina
PURCHASE AGREEMENT
PURCHASE AGREEMENT, made as of the 30th day of September,
1996 (this "Agreement"), by and between KKL GOLF PARTNERSHIP,
INC., an Illinois general partnership having an address at c/o
Kemper Sports Management, 500 Skokie Boulevard, Suite 444,
Northbrook, Illinois 60062 ("Seller"), and CAROLINA SPRINGS FAMILY
GOLF CENTERS, INC., a Delaware corporation having an address at
225 Broadhollow Road, Suite 106E, Melville, New York 11747
("Purchaser").
W I T N E S S E T H :
WHEREAS, Seller is the owner of certain real property
located at 1680 Scuffletown Road, Fountain Inn, South Carolina
29644-9464 and more particularly described on Exhibit A attached
hereto and made a part hereof (the "Land") and the buildings and
improvements located on the Land (the "Improvements" and, together
with the Land, the "Premises");
WHEREAS, Seller operates a golf course and related
facilities at the Premises under the name "Carolina Springs Golf
and Country Club" (the "Business"); and
WHEREAS, Seller wants to sell the Premises to Purchaser, and
Purchaser wants to purchase the Premises from Seller, on the
terms, and subject to the conditions, set forth herein.
<PAGE>
NOW, THEREFORE, in consideration of TEN ($10.00) DOLLARS,
the terms and conditions set forth herein, and other good and
valuable consideration, the mutual receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree to the
foregoing and as follows:
1. Agreement to Sell and Purchase.
1.1 Property to be Purchased by Purchaser. Seller
agrees to sell and convey to Purchaser, and Purchaser agrees to
purchase and acquire from Seller, upon the terms and conditions
hereinafter set forth, all of Seller's right, title and interest
in and to the following property (collectively, the "Property"):
1.1.1 the Premises;
1.1.2 the easements, rights of way,
appurtenances and other rights and benefits of Seller in and to
the Premises, including without limitation, all of Seller's
interest in any air rights, water rights and irrigation rights;
1.1.3 all furnishings, fixtures,
machinery, equipment, vehicles and personalty attached or
appurtenant to or used in connection with the Premises that are
owned by Seller, and all inventories, supplies, sales, marketing
and instructional materials of every kind and description relating
to the Business, wherever located, including without limitation,
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<PAGE>
the items described on Exhibit B attached hereto and made a part
hereof (the "Personal Property");
1.1.4 the files, books, notices and
other correspondence from any governmental agencies, and other
records used or employed by Seller or its affiliates in connection
with the ownership and/or operation of the Premises and the
Business other than internal partnership records and tax returns
(collectively, the "Records");
1.1.5 any consents, authorizations,
variances, waivers, licenses, certificates, permits and approvals
held by or granted to Seller in connection with the ownership of
the Premises to the extent assignable to the Purchaser
(collectively, the "Permits");
1.1.6 the contracts, leases and other
agreements of or relating to the Business described on Exhibit C
attached hereto and made a part hereof, except to the extent the
same relate solely to any Retained Assets or Retained Liabilities
(as hereinafter defined) (the "Contracts");
1.1.7 all accounts receivable of Seller
arising out of the sale of goods or services rendered at the
Premises or otherwise in connection with the Business on or after
August 1, 1996 (the "Effective Date");
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<PAGE>
1.1.8 any manufacturers' and vendors'
warranties and guarantees, except to the extent the same relate
solely to any Retained Assets or Retained Liabilities (the
"Claims"); and
1.1.9 any other properties and assets
of every kind and nature, real or personal, tangible or
intangible, relating in any way whatsoever to the Premises or the
Business, except to the extent the same relate solely to the
Retained Assets or Retained Liabilities.
1.2 Assets to be Retained by Seller. Anything herein
to the contrary notwithstanding, Seller shall not sell, and
Purchaser shall not acquire, the following assets of Seller (the
"Retained Assets"):
1.2.1 all trade accounts receivable
arising out of the sale of goods or services prior to the
Effective Date;
1.2.2 any rights of Seller with respect
to insurance policies owned by Seller or for which Seller is the
named insured;
1.2.3 all cash, funds in bank accounts
and cash equivalents existing as of the Closing Date hereof; and
- 4 -
<PAGE>
1.2.4 any patents, trademarks,
trademark registrations, copyrights, copyright registrations,
trade names and all registrations thereof and all applications for
any of the foregoing, whether issued or pending, if any, and all
goodwill associated with any of the foregoing (the "Intangible
Assets").
1.3 Assumption of Certain Liabilities. Purchaser
shall assume and agree to pay and discharge when due all
liabilities and obligations of Seller under the Contracts to the
extent the same arise from and after the Effective Date (the
"Assumed Liabilities"). Purchaser shall cause Parent (as
hereinafter defined) to guaranty payment of the Assumed Liability
represented by the Open-End Commercial Master Lease Agreement
between Seller as Lessee and FELCO Commercial Services Division of
Franklin Equity Leasing Company as Lessor.
1.4 Liabilities to be Retained by Purchaser. Seller
shall retain, and Purchaser shall not assume, perform, discharge
or pay, and shall not be responsible for, any and all liabilities
or obligations of any nature whatsoever in connection with or
relating to the Property, Seller or the Business or any
predecessor owner of the Property or the Business other than the
Assumed Liabilities (collectively, the "Retained Liabilities").
- 5 -
<PAGE>
2. Consideration.
2.1 In consideration for the Property, Purchaser
shall: (A) pay to Seller Three Million Three Hundred and Twenty
Five Thousand Dollars ($3,325,000.00), subject to adjustment as
hereinafter provided, payable on the date hereof in cash, or by
certified or bank check or by the wire transfer of funds; (B) pay
the sum of Twenty Five Thousand Dollars ($25,000.00) subject to
adjustment as hereinafter provided, payable in cash, certified or
bank check or wire transfer simultaneously herewith to be held and
dealt with as provided in the Escrow Agreement dated the date
hereof among Seller, Purchaser and Continental Stock Transfer &
Trust Company (the "Escrow Agent") (the "Escrow Agreement") and
(C) cause Family Golf Centers, Inc. (the "Parent") to grant to the
Seller an irrevocable option (the "Option") to purchase 5,000
shares of common stock, par value $.01 per share, of Parent (the
"Common Stock") at an exercise price of $40.00 per share, pursuant
to the Stock Option Agreement; dated as of even date herewith.
2.2 It is agreed that [__________] of the
consideration paid by Purchaser hereunder shall be allocated
toward items of personal property or any property other than the
Premises conveyed hereunder and all tax returns and reports filed
by Purchaser and Seller with respect to the transactions
- 6 -
<PAGE>
contemplated by this Agreement shall be consistent with such
allocation.
3. Title; Permitted Exceptions.
3.1 Seller will convey the Property to Purchaser, free
and clear of any and all liens, charges, encumbrances, mortgages,
pledges, security interests, easements, agreements and other
interests and adverse claims (collectively, "Encumbrances"), other
than the matters set forth in Exhibit D attached hereto and made
a part hereof (the "Permitted Exceptions").
4. Apportionments.
4.1 The parties hereto agree that (i) all operating
expenses of Seller relating to the Premises (i.e., real estate
taxes, utilities, cost of advertising, collections, fees, hired
services, insurance, miscellaneous expenses, postage, repairs and
maintenance, taxes and wages, but specifically not including
interest on indebtedness, professional fees and expenses, travel,
lodging, or depreciation), and (ii) all income of Seller, shall be
apportioned between Seller and Purchaser as of the Effective Date
based on the portion of each such expense or revenue attributable
to the period falling on or before the Effective Date on the one
hand, which Seller shall bear the responsibility and benefit of,
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and the portion of each such expense or revenue attributable to
the period falling after the Effective Date, on the other hand,
which Purchaser shall bear the responsibility and benefit of (the
"Adjustment"). The net Adjustment will be paid by the party owing
the same to the other in cash or by certified or official bank
check or wire transfer. The expenses and liabilities for which
Seller shall be liable pursuant to this Section shall be included
within the meaning of the term "Retained Liabilities". The Seller
and Purchaser shall make appropriate adjustments for unearned
membership fees, gift certificates and pre-booked events.
4.2 Immediately prior to the Closing, Seller and
Purchaser shall make a determination of the value of all inventory
included in the Property based on the cost thereof. Purchaser
shall pay to Seller at the Closing the amount so determined.
4.3 To the extent that any of the prorations made
pursuant to this Article are based upon estimates of payments to
be made and/or expenses to be incurred by Purchaser subsequent to
the Effective Date, or either party discovers any errors in or
omissions in respect of the Adjustment, Seller and Purchaser agree
to adjust such prorations promptly upon receipt by Seller or
Purchaser, as the case may be, of such payments or of bills or
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other documentation setting forth the actual amount of such
expenses.
4.4 Seller and Purchaser shall maintain and make
available to each other any books or records necessary for the
adjustment of any item pursuant to this Article. The provisions
of this Article shall survive the closing of the transactions
described herein (the "Closing").
5. The Closing.
5.1 The Closing of the transaction provided for in
this Agreement shall take place simultaneously with the execution
and delivery of this Agreement (the actual date of the Closing
being referred to herein as the "Closing Date").
5.2 At the Closing, Seller shall deliver or cause to
be delivered to Purchaser physical possession of the Property
(receipt of which may be actual or constructive) and the
following:
5.2.1 a special warranty deed with
covenants against grantor's acts, duly executed and acknowledged
by Seller, in proper statutory form for recording, so as to convey
to Purchaser fee simple title to the Premises, subject to and in
accordance with the provisions of this Agreement (the "Deed");
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5.2.2 a bill of sale conveying,
transferring and selling to Purchaser all right, title and
interest of Seller in and to all of the Personal Property, which
bill of sale shall contain a warranty that such property is free
and clear of all Encumbrances other than the Permitted Exceptions,
duly executed and acknowledged by Seller;
5.2.3 an assignment and assumption
agreement (the "Assignment and Assumption Agreement") assigning to
Purchaser all of Seller's right, title and interest in and to the
Contracts, the Permits and the Claims, duly executed and
acknowledged by Seller;
5.2.4 a settlement statement (the
"Settlement Statement") setting forth the amounts paid by or on
behalf of and/or credited to each of Purchaser and Seller pursuant
to this Agreement;
5.2.5 an owner's affidavit of title;
5.2.6 original counterparts of each of
the Contracts to the extent originals are available otherwise a
copy of such Contract certified by the Seller;
5.2.7 any transfer tax or other return
required by any applicable governmental authority in connection
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with the sale of the Property, duly executed and acknowledged by
Seller;
5.2.8 an affidavit (the "FIRPTA
Affidavit") duly executed and acknowledged by Seller pursuant to
Section 1445 (b)(2) of the Internal Revenue Code of 1986, as
amended, stating that Seller is not a foreign person within the
meaning of such provision;
5.2.9 keys to all locks relating to the
Property, appropriately labeled;
5.2.10 all other instruments and
documents to be executed, acknowledged where appropriate and/or
delivered by Seller to Purchaser pursuant to any of the other
provisions of this Agreement; and
5.2.11 such other documents as may be
reasonably required by Purchaser's counsel in connection with this
transaction.
5.3 At the Closing, Purchaser shall deliver or cause
to be delivered to Seller the following:
5.3.1 the cash consideration referred
to in Section 2 and Section 4.2 hereof;
5.3.2 the Stock Option Agreement
referred to in Section 2 hereof;
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5.3.3 the Assignment and Assumption
Agreement, duly executed and acknowledged by Purchaser;
5.3.4 the Settlement Statement, duly
executed and acknowledged by Purchaser;
5.3.5 all other instruments and
documents to be executed, acknowledged where appropriate and/or
delivered by Purchaser to Seller; and
5.3.6 such other documents as may be
reasonably required by Seller's counsel in connection with this
transaction.
6. Representations and Warranties.
6.1 Seller represents and warrants to Purchaser as
follows:
6.1.1 Organization; Power and
Authority. Seller is a partnership duly formed, validly existing
and in good standing under the laws of the State of Illinois, and
has all requisite power and authority to carry on its business as
it is now being conducted, to execute, deliver and perform its
obligations under this Agreement and to consummate the
transactions contemplated hereby.
6.1.2 Due Authorization and Execution;
Effect of Agreement. The execution, delivery and performance by
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Seller of this Agreement and the consummation by Seller of the
transactions contemplated hereby have been duly authorized by all
necessary partnership action required to be taken on the part of
Seller. This Agreement has been duly and validly executed and
delivered by Seller and constitutes the valid and binding
obligation of Seller, enforceable in accordance with its terms,
except to the extent that such enforceability (a) may be limited
by bankruptcy, insolvency, or other similar laws relating to
creditors' rights generally; and (b) is subject to general
principles of equity.
6.1.3 Consents. No consent, approval
or authorization of, exemption by, or filing with, any
governmental or regulatory authority or any third party is
required in connection with the execution, delivery and
performance by Seller of this Agreement, except for consents,
approvals, authorizations, exemptions and filings, if any, which
have been obtained.
6.1.4 Compliance with Applicable Laws.
To the best of Seller's knowledge and except as disclosed in the
Inspection Report of the Bureau of Environmental Health, Division
of Food Protection, South Carolina DHEC dated September 19, 1996,
Seller is not engaging in any activity or omitting to take any
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action as a result of which Seller is in violation of any law,
rule, regulation, ordinance, statute, order, injunction or decree,
or any other requirement of any court or governmental or
administrative body or agency, applicable to the Property or the
Business, and neither the execution and delivery by Seller of this
Agreement or of any of the other agreements and instruments to be
executed and delivered by it pursuant hereto, the performance by
Seller of its obligations hereunder or thereunder or the
consummation of the transactions contemplated hereby or thereby
will result in any such violation. To the best of Seller's
knowledge, Seller is in compliance with all material requirements
imposed in writing by any insurance carrier of Seller to the
extent such carrier is an insurer or indemnitor of the Property.
The Seller has not received any notice of violation of law,
municipal ordinance, orders or requirements issued by any building
department or other governmental agency or subdivision having
jurisdiction.
6.1.5 Permits. All of the Permits
possessed by the Seller in the conduct of the Business are set
forth on Exhibit D. To the best of Seller's knowledge there are
no other permits required by any federal, state, or local law,
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rule or regulation and necessary for the operation of the Property
and the Business as currently being conducted.
6.1.5.1 Title to Assets.
Seller has good and marketable title to the Property free and
clear of all Encumbrances other than the Permitted Exceptions.
6.1.6 Contracts. Except as set forth
on Exhibit C, Seller is not a party to any leases, contracts,
orders or agreements relating to the Property or the Business
(written or otherwise). Exhibit C sets forth a full and complete
description of the Contracts described therein, and none of such
Contracts have been amended or modified except as reflected on
said Exhibit. Seller is not holding any security deposits under
any of said Contracts. Each of the Contracts are in full force
and effect and no party under any such Contract, including Seller,
is in default in respect of any such Contract. The Seller has not
sent or received notice of default in any respect of any such
Contract.
6.1.7 Condition of the Improvements.
To the best of Seller's knowledge there are no material structural
or mechanical defects in the Improvements, and there are no leaks
in any roof on any Improvement.
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6.1.8 Condition of Personal Property.
To the best of Seller's knowledge, except as described on Exhibit
B as "Disabled Equipment" the Personal Property is in good
operating condition and repair, ordinary wear and tear excepted,
and is adequate, suitable and sufficient to meet the needs of and
to operate the Property as currently conducted.
6.1.9 Environmental Matters.
6.1.9.1 As used in this
Agreement "Hazardous Material" shall mean: (i) any "hazardous
substance" as now defined pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), 42 U.S.C. ss. 9601(33); (ii) any "pollutant or
contaminant" as defined in 42 U.S.C. ss. 9601(33); (iii) any
material now defined as "hazardous waste" pursuant to 40 C.F.R.
Part 261; (iv) any petroleum, including crude oil and any fraction
thereof; (v) natural or synthetic gas usable for fuel; (vi) any
"hazardous chemical" as defined pursuant to 29 C.F.R. Part 1910;
(vii) any asbestos, asbestos containing material, polychlorinated
biphenyl ("PCB"), or isomer of dioxin, or any material or thing
containing or composed of such substance or substances; and (viii)
any other pollutant, contaminant, chemical, or industrial or
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hazardous, toxic or dangerous waste, substance or material,
defined or regulated as such in (or for purposes of any
Environmental Law (as hereinafter defined) and any other toxic,
reactive or flammable chemicals.
6.1.9.2 The Seller has not
conducted the Business or operated the Premises in violation of
any Environmental Law.
6.1.9.3 To the best of
Seller's knowledge, Seller has no obligation or liability imposed
or based upon any provision under any foreign, federal, state or
local law, rule, or regulation or common law, or under any code,
order, decree, judgment or injunction applicable to Seller or the
Property or any notice, or request for information issued,
promulgated, approved or entered thereunder, or under the common
law, or any tort, nuisance or absolute liability theory, relating
to public health or safety, worker health or safety, or pollution,
damage to or protection to the environment, including without
limitation, laws relating to emissions, discharges, releases or
threatened releases of Hazardous Material into the environment
(including without limitation, ambient air, surface water,
groundwater, land surface or subsurface), or otherwise relating to
the manufacture, processing, distribution, use, treatment,
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storage, generation, disposal, transport or handling of
pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes (hereinafter collectively referred
to as "Environmental Laws").
6.1.9.4 Seller has not been
subject to any civil, criminal or administrative action, suit,
claim, hearing, notice of violation, investigation, inquiry or
proceeding for failure to comply with, or received notice of any
violation or potential liability under the Environmental Laws in
respect of the Premises.
6.1.9.5 At the time the
Premises were purchased by the Seller, the Premises were not (a)
listed or proposed for listing on the National Priority List or
(b) listed on the Comprehensive Environmental Response,
Compensation, Liability Information System List ("CERCLIS")
promulgated pursuant to CERCLA, 42 U.S.C. ss. 9601(9), or any
comparable list maintained by any foreign, state or local
government authority and the Seller has not received any notice
thereafter of any such listing.
6.1.9.6 There are no
underground storage tanks at the Premises and Seller further
warrants and represents that to the best of its knowledge any
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prior use and operation of underground storage tanks has been in
compliance with all Environmental Laws.
6.1.9.7 All of Seller's
warranties and representations concerning environmental matters
are qualified by (i) Seller's disclosure to Purchaser of an oil
line spill affecting property described in that certain Right of
Way and/or Easement Agreement and Grant of Option to Purchase by
Carolina Springs Golf & Country Club, Inc., to Seller dated June
8, 1992 and recorded June 8, 1992 in Book 1476, page 724 and (ii)
everything disclosed in that certain Phase I Environmental Site
Assessment for Carolina Springs Golf & Country Club, 1680
Scufflestown Road, Fountain Inn, South Carolina, dated June 8,
1991 and prepared by Environmental Technology Engineering, Inc.
6.1.10 Tax Proceedings. There are no
proceedings pending regarding the reduction of real estate taxes
or assessments in respect of the Premises.
6.1.11 Utilities. All water, storm and
sanitary sewer, gas, electricity, telephone and other utilities
adequately service the Premises to allow the conduct of business
as currently conducted, and the Premises are furnished by
facilities of public utilities and the cost of installation of
such utilities has been fully paid.
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6.1.12 Access. To the best of Seller's
knowledge, there are no federal, state, county, municipal or other
governmental plans to change the highway or road system in the
vicinity of the Premises which could materially restrict or change
access from any such highway or road to the Premises or any
pending or threatened condemnation or eminent domain proceedings
relating to or affecting the Premises.
6.1.13 Insurance Requirements. All
requirements or recommendations by any insurer or by any board of
fire underwriters or similar body in respect of the Property have
been satisfied.
6.1.14 Litigation. There is no action
or proceeding (zoning or otherwise) or governmental investigation
pending, or, to the best of Seller's knowledge, threatened
against, or relating to, Seller (insofar as it relates to the
Premises or the Business), the Premises, the Business or the
transactions contemplated by this Agreement, nor to the best of
Seller's knowledge, is there any reasonable basis for any such
action, proceeding or investigation.
6.1.15 Assessments. There are no
special or other assessments for public improvements or otherwise
now affecting the Premises nor does Seller know of (a) any pending
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or threatened special assessments affecting the Premises or (b)
any contemplated improvements affecting the Premises that may
result in special assessments affecting the Premises.
6.1.16 Employee Agreements. There are
no union or employment contracts or agreements (written or oral)
involving employees of Seller or its affiliates affecting the
Property or the Business which will survive the Closing. All
employees of Seller will have been terminated as of the date
hereof.
6.1.17 Work at the Premises. To the
best of Seller's knowledge no services, material or work have been
supplied to the Premises for which payment has not been made in
full.
6.1.18 Financial Condition. Seller has
delivered to Purchaser true and correct copies of audited
financial statements consisting of balance sheets and income
statements of Seller as of December 31, 1994 and December 31, 1995
and internal reports for the months ended January 31, 1996,
February 29, 1996, March 31, 1996, April 30, 1996, May 31, 1996,
June 30, 1996, July 31, 1996 and August 31, 1996, and for the
period commencing September 1, 1996 through the date immediately
prior to the date hereof. Each such balance sheet presents fairly
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the financial condition, assets and liabilities of Seller as of
its date; each such statement of income presents fairly the
results of operations of Seller for the period indicated. The
financial statements referred to in this Section are in accordance
with the books and records of Seller. Since December 31, 1995 and
since June 30, 1996: (a) there has at no time been a material
adverse change in the financial condition, results of operations,
businesses, properties, assets, liabilities of Seller, the
Property or Business; (b) the Business has been conducted in all
respects only in the ordinary course; and (c) Seller has not
suffered an extraordinary loss (whether or not covered by
insurance) or waived any right of substantial value.
6.1.19 Certificate of Occupancy. To
the best of Seller's knowledge, no Certificates of Occupancy are
required for any Improvements.
6.1.20 Real Estate Taxes. The last
annual amount assessed for real estate and similar taxes on the
Premises is $33,637.63.
6.1.21 Full Disclosure. To the best
knowledge of Seller, none of the information supplied by Seller
herein or in the exhibits hereto contains any untrue statement of
a material fact or omits to state a material fact required to be
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stated herein or necessary in order to make the statements herein,
in light of the circumstances under which they are made, not
misleading.
6.1.22 Seller's Knowledge. For
purposes of this Section 6.1 the expressions "to the best of
Seller's knowledge" and "to the best knowledge of Seller" shall
mean the actual knowledge of Robert L. Wallace, James R. Seeley or
Cary Ostendorff, without duty of further investigation.
6.2 Representations and Warranties of Purchaser.
Purchaser hereby represents and warrants to Seller as follows:
6.2.1 Organization; Power and
Authority. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware, and has all requisite power and authority to carry on
its business as it is now being conducted, to execute, deliver and
perform its obligations under this Agreement and to consummate the
transactions contemplated hereby.
6.2.2 Due Authorization and Execution;
Effect of Agreement. The execution, delivery and performance by
Purchaser of this Agreement and the consummation by Purchaser of
the transactions contemplated hereby have been duly authorized by
all necessary corporate action required to be taken on the part of
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Purchaser. This Agreement has been duly and validly executed and
delivered by Purchaser and constitutes the valid and binding
obligation of Purchaser, enforceable in accordance with its terms.
The execution, delivery and performance by Purchaser of this
Agreement and the consummation by Purchaser of the transactions
contemplated hereby will not, with or without the giving of notice
or the lapse of time, or both, (a) violate any provision of any
law, rule or regulation to which Purchaser is subject; (b) violate
any order, judgment or decree applicable to Purchaser; or (c)
conflict with or result in a breach of or a default under any term
or condition of Purchaser's Certificate of Incorporation or By-
Laws or any agreement or other instrument to which Purchaser is a
party or by which it or its assets may be bound, except in each
case, for violations, conflicts, breaches or defaults which in the
aggregate would not materially hinder or impair the consummation
of the transactions contemplated hereby.
6.3 Survival. The representations and warranties of
the parties made by the Seller in Sections 6.1.2, 6.1.3, 6.1.5.1,
6.1.9, 6.1.10 and 6.1.14 shall survive the Closing until the
expiration of the statute of limitations applicable to claims that
may be asserted against the Purchaser, the Property or Business in
respect of the matters covered thereby. All other representations
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and warranties of the parties made in Article 6 shall survive the
Closing for a period of six months.
7. Further Assurances. At any time and from time to time
after the Closing, each party shall, at the request of such other
party, execute and deliver any further instruments or documents
and take all such further action as such party may reasonably
request in order to transfer into the name of Purchaser any and
all Property contemplated to be sold pursuant to this Agreement
and to further consummate the transactions contemplated by this
Agreement. This Article shall survive the Closing.
8. Brokers. Seller and Purchaser warrant and represent
to each other that they dealt with no broker, finder or similar
agent or party who or which might be entitled to a commission or
compensation on account of introducing the parties, the
negotiation or execution of this Agreement and/or the closing of
the transaction provided for herein, other than The Greenwich
Group International LLC (the "Brokers"). Purchaser and Seller
hereby respectively agree to indemnify and hold harmless the other
party from and against all loss, liability, damage and expense
(including, without limitation, attorneys' fees) imposed upon or
incurred by the other party by reason of any claim for commissions
or other compensation for bringing about this transaction by any
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broker, finder or similar agent or party other than the Brokers
who claims to have dealt with the indemnifying party in connection
with this transaction. Seller agrees to pay Broker any
commissions due the Brokers in connection with this transaction
pursuant to a separate agreement or agreements between Seller and
the Brokers. The provisions of this Article shall survive the
Closing or any termination of this Agreement.
9. "As Is". Purchaser represents that it has inspected
the Property and is familiar with the physical condition thereof,
and that in reliance upon such inspection and the representations,
warranties, covenants and agreements of Seller contained herein,
it agrees to accept the Property "as is", in its condition at the
date of this Agreement.
10. Costs and Fees. Documentary stamps for the Deed, deed
transfer or conveyancing taxes, if any, shall be payable by
Seller, and in no event be payable by Purchaser. Purchaser shall
pay the expenses incurred in connection with (a) the examination
of title, (b) the issuance of a policy of title insurance for
Purchaser, and (c) a survey of the Property. Any other similar
costs not expressly provided for elsewhere in this Agreement shall
be divided and borne in accordance with the usual practices in the
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jurisdiction where the Premises are located. The provisions of
this Article shall survive the Closing.
11. Indemnification.
11.1 Subject to the further provisions of this
Article, Seller shall protect, defend, hold harmless and indemnify
Purchaser, its officers, directors, shareholders, employees,
agents and affiliates, and their respective successors and
assigns, from, against and in respect of any and all losses,
liabilities, deficiencies, penalties, fines, costs, damages and
expenses whatsoever (including without limitation, reasonable
professional fees and costs of investigation, litigation,
settlement, and judgment and interest) ("Losses") that may be
suffered or incurred by any of them arising from or by reason of
(i) any Retained Liability or other liability or obligation of
Seller which is not an Assumed Liability; (ii) the breach of any
representation, warranty, covenant or agreement of Seller
contained in this Agreement or in any document or other writing
delivered pursuant to this Agreement; and (iii) any and all
actions, suits, proceedings, claims, demands, assessments,
judgments, costs and expenses (including without limitation,
interest, penalties, reasonable legal fees and accounting fees)
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incident to the foregoing and the enforcement of the provisions of
this Section 11.1.
11.2 Subject to the further provisions of this
Article, Purchaser shall protect, defend, hold harmless and
indemnify Seller, its partners, employees and agents, and its
successors and assigns from, against and in respect of any and all
Losses that may be suffered or incurred by any of them arising
from or by reason of (i) any of the Assumed Liabilities on and
after the date hereof, (ii) the breach of any representation,
warranty, covenant or agreement of Purchaser contained in this
Agreement or in any document or other writing delivered pursuant
to this Agreement; and (iii) any and all actions, suits,
proceedings, claims, demands, assessments, judgments, costs and
expenses (including without limitation, interest, penalties,
reasonable legal fees and accounting fees) incident to the
foregoing and the enforcement of the provisions of this Section
11.2.
11.3 Whenever a party hereto (such party and each of
its affiliates which is entitled to indemnification pursuant to
any provision of this Agreement, an "Indemnified Party") shall
learn after the Closing of a claim that, if allowed (whether
voluntarily or by judicial or quasi-judicial tribunal or agency),
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would give rise to an obligation of another party (the
"Indemnifying Party") to indemnify the Indemnified Party under any
provision of this Agreement, before paying the same or agreeing
thereto, the Indemnified Party shall promptly notify the
Indemnifying Party in writing of all such facts within the
Indemnified Party's knowledge with respect to such claim and the
amount thereof (a "Notice of Claim"). If, prior to the expiration
of fifteen (15) days from the mailing of a Notice of Claim, the
Indemnifying Party shall request, in writing, that such claim not
be paid, the Indemnified Party shall not pay the same, provided
the Indemnifying Party proceeds promptly, at its or their own
expense (including employment of counsel reasonably satisfactory
to the Indemnified Party), to settle, compromise or litigate, in
good faith, such claim. After notice from the Indemnifying Party
requesting the Indemnified Party not to pay such claim and the
Indemnifying Party's assumption of the defense of such claim at
its or their expense, the Indemnifying Party shall not be liable
to the Indemnified Party for any legal or other expense
subsequently incurred by the Indemnified Party in connection with
the defense thereof. However, the Indemnified Party shall have
the right to participate at its expense and with counsel of its
choice in such settlement, compromise or litigation. The
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Indemnified Party shall not be required to refrain from paying any
claim which has matured by a court judgment or decree, unless an
appeal is duly taken therefrom and execution thereof has been
stayed, nor shall the Indemnified Party be required to refrain
from paying any claim where the delay in paying such claim would
result in the foreclosure of a lien upon any of the property or
assets then held by the Indemnified Party. The failure to provide
a timely Notice of Claim as provided in this Section 11.3 shall
not excuse the Indemnifying Party from its or their continuing
obligations hereunder; however, the Indemnified Party's claim
shall be reduced by any damages to the Indemnifying Party
resulting from the Indemnified Party's delay or failure to provide
a Notice of Claim as provided in this Section 11.3.
11.4 For purposes of this Article, any assertion of
fact and/or law by a third party that, if true, would constitute
a breach of a representation or warranty made by a party to this
Agreement or make operational an indemnification obligation
hereunder, shall, on the date that such assertion is made,
immediately invoke the Indemnifying Party's obligation to protect,
defend, hold harmless and indemnify the Indemnified Party pursuant
to this Article.
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11.5 Survival. The provisions of this Article 11
shall survive the Closing.
12. Bulk Sales. The parties agree to waive the
requirements, if any, of all applicable bulk sales laws. Seller
agrees to indemnify and hold Purchaser harmless from, and
reimburse Purchaser for, any loss, cost, expense, liability or
damage which Purchaser may suffer or incur by virtue of the
noncompliance by Seller or Purchaser with any laws pertaining to
fraudulent conveyance, bulk sales or any similar law which might
make the sale or transfer of any part of the Property or Business
ineffective as to creditors of, or claimants against, the Seller.
13. Notices. All notices, demands, requests, consents or
other communications ("Notices") which either party may desire or
be required to give to the other hereunder shall be in writing and
shall be delivered by hand, overnight express carrier, or sent by
registered or certified mail, return receipt requested, postage
prepaid, in either event, addressed to the parties at their
respective addresses first above set forth. A copy of any Notice
given by Seller to Purchaser shall simultaneously be given in
either manner provided above to Squadron, Ellenoff, Plesent &
Sheinfeld, LLP, 551 Fifth Avenue, New York, New York 10176,
Attention: Kenneth R. Koch, Esq. A copy of any Notice given by
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Purchaser to Seller shall simultaneously be given in either manner
provided above to D'Ancona & Pflaum, 30 North LaSalle Street,
Suite 2900, Chicago, Illinois 60602, Attention: Allan J. Reich,
Esq. or Michael D. Miselman, Esq. Notices given in the manner
aforesaid shall be deemed to have been given three (3) business
days after the day so mailed, the day after delivery to any
overnight express carrier and on the day so delivered by hand.
Either party shall have the right to change its address(es) for
the receipt of Notices by giving Notice to the other party in
either manner aforesaid. Any Notice required or permitted to be
given by either party may be given by that party's attorney.
14. Miscellaneous.
14.1 This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and
assigns. Each of the individuals comprising Seller shall be
jointly and severally liable for each and every covenant,
agreement, obligation, representation and warranty of Seller
hereunder.
14.2 This Agreement shall be governed by, interpreted
under and construed and enforced in accordance with, the laws of
the State of New York.
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14.3 The captions or article headings in this
Agreement are for convenience only and do not constitute part of
this Agreement.
14.4 This Agreement has been fully negotiated by the
parties and rules of construction construing ambiguities against
the party responsible for drafting agreements shall not apply.
14.5 It is agreed that, except where otherwise
expressly provided in particular Articles or Sections of this
Agreement, none of the provisions of this Agreement shall survive
the Closing.
14.6 This Agreement (including the Exhibits annexed
hereto) contains the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior
understandings, if any, with respect thereto.
14.7 This Agreement may not be modified, changed,
supplemented or terminated, nor may any obligations hereunder be
waived, except by written instrument signed by the party to be
charged or by its agent duly authorized in writing or as otherwise
expressly permitted herein.
14.8 No waiver of any breach of any agreement or
provision herein contained shall be deemed a waiver of any
preceding or succeeding breach thereof or of any other agreement
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or provision herein contained. No extension of the time for
performance of any obligations or acts shall be deemed an
extension of the time for performance of any other obligations or
acts.
14.9 This Agreement may be executed in one or more
counterparts, each of which when so executed and delivered shall
be deemed an original, but all of which taken together shall
constitute but one and the same original.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
KKL GOLF PARTNERSHIP
By: KEMPER SPORTS MANAGEMENT,INC.,
general partner
By:______________________
Name: Robert Wallace
Title: Chief Financial Officer
CAROLINA SPRINGS FAMILY
GOLF CENTERS, INC.
By: _____________________
Name:
Title:
CASH ESCROW AGREEMENT
CASH ESCROW AGREEMENT, dated as of September 30, 1996 (this
"AGREEMENT"), by and among KKL GOLF PARTNERSHIP, an Illinois general
partnership having as address at c/o Kemper Sports Management, 500 Skokie
Boulevard, Sutie 444, Northbrook, Illinois 60062 ("Seller"), CAROLINA SPRINGS
FAMILY GOLF CENTERS, INC., a Delaware corporation having an address at 225
Broadhollow Road, Suite 106E, Melville, New York 11747 ("PURCHASER"), and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, incorporated under the laws of the
United States of America with executive offices at 2 Broadway, New York, New
York 10004 (together with its successors, the "ESCROW AGENT").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution hereof, Seller and
Purchaser are consummating the transactions contemplated by the Purchase
Agreement, dated as of the date hereof (the "PURCHASE AGREEMENT"), between
Seller and Purchaser;
WHEREAS, pursuant to the Purchase Agreement, Purchaser is required to
deposit $25,000 into an escrow account to be maintained by Escrow Agent to be
held against any claims for indemnity under Article 11 of the Purchase
Agreement; and
WHEREAS, this is the Escrow Agreement referred to in the Purchase
Agreement. Capitalized terms used in this Escrow Agreement and not otherwise
defined herein shall have the respective meanings given to them in the Purchase
Agreement.
NOW, THEREFORE, it is agreed as follows:
<PAGE>
1. ESCROW.
1.01 APPOINTMENT OF ESCROW AGENT.
(a) Seller and Purchaser hereby appoint Escrow Agent, and Escrow Agent
hereby agrees to serve, as Escrow Agent in accordance with, and pursuant to,
this Agreement.
(b) Escrow Agent shall establish at Chemical Bank a separate Federally
insured, interest bearing account (the "ESCROW ACCOUNT") for any amounts
received by it hereunder.
(c) All monies, including interest thereon, held by Escrow Agent in
the Escrow Account pursuant to the terms hereof shall be hereinafter referred
to as the "ESCROWED FUNDS".
(d) Seller's federal indentification number is 36-3823702. Seller
shall be responsible for the payment of any income taxes payable in connection
with any interest earned in the Escrow Account.
1.02 OPERATION OF ESCROW ACCOUNT. The parties hereto agree that the
Escrow Account shall operate as follows:
(a) Simultaneously with the execution and delivery hereof,
Purchaser shall deliver or cause to be delivered to Escrow Agent $25,000.
Escrow Agent shall hold such amount as Escrowed Funds in the Escrow Account.
(b) At any time prior to the first anniversary of the Closing
Date, Purchaser
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<PAGE>
shall be entitled to give a notice to Escrow Agent, signed by Purchaser's
President or any Vice President (with a copy to Seller), to the effect that
there has been an event entitling Purchaser to indemnification from Seller
pursuant to the Purchase Agreement, which notice shall specify the amounts owed
by Seller pursuant to the Purchase Agreement, the calculation of such amounts
and the basis therefor.
(c) Twenty (20) days after Escrow Agent has received a notice
pursuant to Section 1.02(b) hereof (or, if not a business day, on the next
business day following such twentieth day) Escrow Agent shall deliver to
Purchaser such portion of the Escrowed Funds as is specified in such notice
unless Seller shall have notified Escrow Agent (with a copy to Purchaser) in
writing before such date that Seller disagrees with Purchaser's determination
that Purchaser is entitled to indemnification with respect to the Purchase
Agreement, which notice shall be set forth in reasonable detail the basis for
such disagreement.
(d) Should any dispute arise with respect to the delivery,
ownership, or right of possession of any of the Escrowed Funds, Escrow Agent,
as more fully set forth in Section 3.11 hereof, is authorized and directed to
retain in its possession without liability to anyone all or any part of the
Escrowed Funds until such dispute shall have been settled either by mutual
agreement by the parties concerned or by a final order, decree, or judgment of
a court of competent jurisdiction in the United States of America and time for
appeal has expired and no appeal has been perfected, but Escrow Agent shall be
under
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<PAGE>
no duty whatsoever to institute or defend any such proceedings, and may,
in its discretion, deposit such Escrowed Funds with a court of
competent jurisdiction in the United States of America and be relieved of any
and all liability to any of the parties hereto upon such deposit.
1.03 DISTRIBUTION OF ESCROWED FUNDS. Unless a notice under Section
1.02(b) hereof has been given and Escrowed Funds in satisfaction of such notice
have not been delivered to Purchaser, either because the 20-day period has not
yet run out or because a dispute relating to the claim made by such notice is
then pending, the Escrowed Funds or such portion of them as at the time remains
in escrow, together with all dividends and distributions received by Escrow
Agent with respect thereto, shall be returned to Seller on the first
anniversary of the Closing Date.
1.04 TERMINATION OF ESCROW ACCOUNT. This Agreement and the Escrow
Account will terminate at 5:00 P.M., New York City local time, on the date on
which all of the Escrowed Funds contained in the Escrow Account shall be
distributed as set forth above.
2. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be (a) delivered by hand, (b)
facsimile, or (c) over-night delivery with proper postage prepaid, and
addressed as follows:
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<PAGE>
If to Purchaser to:
225 Broadhollow Road
Melville, New York 11747
Attention: Dominic Chang, President
Telephone: (516) 694-1666
Facsimile: (516) 694-0918
If to Seller to:
KKL Golf Partnership, Inc.
c/o Kemper Sports Management
500 Skokie Boulevard
Suite 444
Northbrook,Illinois 60062
If to Escrow Agent, to:
2 Broadway
New York, New York 10004
Telephone: (212) 509-4000
Facsimile: (212) 509-5150
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. Except as
otherwise provided herein, no notice or communication shall be effective until
received.
3. CONCERNING ESCROW AGENT.
To induce Escrow Agent to act hereunder, it is further agreed by each
of Seller and Purchaser that:
3.01 Escrow Agent shall not be under any duty to give the Escrowed
Funds held by it hereunder any greater degree of care than it gives its own
similar property and shall not be required to invest any funds held hereunder
except as directed in this Agreement.
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<PAGE>
3.02 This Agreement expressly sets forth all the duties of Escrow
Agent with respect to any and all matters pertinent hereto. No implied duties
or obligations shall be read into this Agreement against Escrow Agent. Escrow
Agent shall not be bound by the provisions of any agreement among the other
parties hereto except this Agreement.
3.03 Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct, and, except with respect to claims based upon
such gross negligence or willful misconduct that are successfully asserted
against Escrow Agent, the other parties hereto shall jointly and severally
indemnify and hold harmless Escrow Agent (and any successor Escrow Agent) from
and against any and all losses, liabilities, claims, actions, damages, and
expenses, including reasonable attorneys' fees and disbursements, arising out
of, and in connection with, this Agreement. Without limiting the foregoing,
Escrow Agent shall in no event be liable in connection with its investment or
reinvestment of any cash held by it hereunder in good faith, in accordance with
the terms hereof, including, without limitation, any liability for any delays
(not resulting from gross negligence or willful misconduct) in the investment
or reinvestment of the Escrowed Funds, or any loss of interest incident to any
such delays. This Section 3.03 shall survive notwithstanding any termination of
this Agreement or the resignation of Escrow Agent.
3.04 Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument, or other writing delivered
to it hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the
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<PAGE>
propriety or validity of the service thereof. Escrow Agent may act in reliance
upon any instrument or signature believed by it in good faith to be genuine and
may assume, if in good faith, that any person purporting to give notice or
receipt or advice or make any statement or execute any document in connection
with the provisions hereof has been duly authorized to do so.
3.05 Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Escrow Agreement and shall not be liable
for any action taken or omitted in good faith and in accordance with such
advice.
3.06 Escrow Agent does not have any interest in the Escrowed Funds
deposited hereunder, but is serving as escrow holder only. Any payments of
income from the Escrow Account shall be subject to withholding regulations then
in force with respect to United States taxes. This Section 3.06 shall survive
notwithstanding any termination of this Agreement or the resignation of Escrow
Agent.
3.07 Escrow Agent makes no representation as to the validity, value,
genuineness, or the collectibility of any security or other documents or
instrument held by, or delivered to, it.
3.08 Escrow Agent shall not be called upon to advise any party as to
the wisdom in selling or retaining or taking or refraining from any action with
respect to any securities or other property deposited hereunder.
3.09 Escrow Agent (and any successor escrow agent) at any time may be
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<PAGE>
discharged from its duties and obligations hereunder by the delivery to it of
notice of termination signed by Purchaser and Seller or at any time may resign
by giving written notice to such effect to Purchaser and Seller. Upon any such
termination or resignation, Escrow Agent shall deliver the Escrowed Funds to
any successor escrow agent jointly designated by the other parties hereto in
writing, or to any court of competent jurisdiction if no such successor escrow
agent is agreed upon, whereupon Escrow Agent shall be discharged of and from
any and all further obligations arising in connection with this Escrow
Agreement. The termination or resignation of Escrow Agent shall take effect on
the earlier of (a) the appointment of a successor (including a court of
competent jurisdiction) or (b) the day that is thirty (30) days after the date
of delivery: (i) to Escrow Agent of the other parties' notice of termination or
(ii) to the other parties hereto of Escrow Agent's written notice of
resignation. If at that time Escrow Agent has not received a designation of a
successor escrow agent, Escrow Agent's sole responsibility after that time
shall be to keep the Escrowed Funds safe until receipt of a designation of
successor escrow agent or a joint written disposition instruction by the other
parties hereto or an enforceable order of a court of competent jurisdiction.
3.10 Escrow Agent shall have no responsibility for the contents of any
writing of any third party contemplated herein as a means to resolve disputes
and may rely without any liability upon the contents thereof.
3.11 In the event of any disagreement among or between the other
parties hereto
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<PAGE>
resulting in adverse claims or demands being made in connection with the
Escrowed Funds, or in the event that Escrow Agent in good faith is in doubt as
to what action it should take hereunder, Escrow Agent shall be entitled to
retain the Escrowed Funds until Escrow Agent shall have received (a) a final
and non-appealable order of a court of competent jurisdiction directing
delivery of the Escrowed Funds or (b) a written agreement executed by the other
parties hereto directing delivery of the Escrowed Funds, in which event Escrow
Agent shall disburse the Escrowed Funds in accordance with such order or
agreement. Any court order referred to in (a) above shall be accompanied by a
legal opinion by counsel for the presenting party satisfactory to Escrow Agent
to the effect that said court order is final and non-appealable. Escrow Agent
shall act on such court order and legal opinions without further question.
3.12 As consideration for its agreement to act as Escrow Agent as
herein described, Purchaser and Seller (on a 50/50 basis) shall pay the Escrow
Agent's fees determined in accordance with the terms set forth on Exhibit A
hereto (and made a part of this Escrow Agreement as if herein set forth). In
addition, Purchaser and Seller agree to reimburse Escrow Agent (on a 50/50
basis) for all reasonable expenses, disbursements, and advances incurred or
made by Escrow Agent in performance of its duties hereunder (including
reasonable fees, expenses, and disbursements of its counsel).
3.13 No publicly distributed material or other matter in any
language (including, without limitation, notices and reports) which mentions
Escrow Agent's name or the rights,
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<PAGE>
powers, or duties of Escrow Agent shall be issued by the other parties hereto
or on such parties' behalf unless Escrow Agent shall first have given its
specific written consent thereto.
4. MISCELLANEOUS.
4.01 BINDING EFFECT. This Escrow Agreement shall be binding upon, and
inure solely to the benefit of, the parties hereto and their respective
successors and assigns, heirs, administrators, and representatives, and shall
not be enforceable by, or inure to the benefit of, any other third party,
except as provided in Section 3.09 hereof with respect to the termination of,
or resignation by, Escrow Agent. No party may assign any of its rights or
obligations under this Agreement without the written consent of the other
parties.
4.02 CHOICE OF LAW. This Agreement shall be construed in accordance
with, and governed by, the internal law of the State of New York (without
reference to its rules as to conflicts of law).
4.03 MODIFICATION. This Agreement may only be modified by a writing
signed by all of the parties hereto.
4.04 HEADINGS. The section headings herein are for convenience only
and shall not affect the construction thereof. Unless otherwise indicated,
references to Sections and Articles are to Sections and Articles, respectively,
contained herein.
4.05 COUNTERPARTS. This Agreement may be executed in one or more
counterparts but all such separate counterparts shall constitute but one and
the same instrument;
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<PAGE>
provided that, although executed in counterparts, the executed signature pages
of each such counterpart may be affixed to a single copy of this Agreement
which shall constitute an original.
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
By: __________________________________
Name: Robert Krause
Title: Vice President
KKL GOLF PARTNERSHIP
BY: KEMPER SPORTS MANAGEMENT, INC.,
GENERAL PARTNER
By: __________________________________
Name:
Title:
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
By: __________________________________
Name:
Title:
- 11 -
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of September 30, 1996, among FAMILY
GOLF CENTERS, INC., a Delaware corporation with executive offices at 225
Broadhollow Road, Melville, New York 11747 ("FGC") and KKL GOLF PARTNERSHIP.,
an Illinois general partnership with an address at c/o Kemper Sports
Management, 500 Skokie Boulevard, Suite 444, Northbrook, Illinois 60062 (the
"Seller").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution hereof, the Seller and
Carolina Springs Family Golf Centers, Inc., a wholly-owned Delaware subsidiary
of FGC ("Subsidiary"), are consummating the transactions contemplated by the
Purchase Agreement, dated as of September 30, 1996 (the "Purchase Agreement"),
among the Seller, and Subsidiary, pursuant to which, among other things,
Subsidiary shall purchase certain assets of Seller in exchange for (i)
$3,350,000.00 in cash and (ii) options to purchase up to 5,000 shares of the
common stock, par value $.01 per share, of FGC (the "Common Stock");
WHEREAS, this is the Stock Option Agreement referred to in Section 5
of the Purchase Agreement. Capitalized terms used in this Stock Option
Agreement and not otherwise defined herein shall have the respective meanings
given to
<PAGE>
them in the Purchase Agreement.
NOW, THEREFORE, it is agreed as follows:
I. GRANT OF OPTION. FGC hereby grants to the Seller the following
irrevocable option (the "Option") to purchase, upon the terms and conditions
hereinafter set forth, an aggregate of 5,000 shares of Common Stock of FGC
(subject to adjustment as hereinafter provided), at the exercise price of
$40.00 per share (the "Exercise Price").
II. EXERCISE OF OPTION. Seller may exercise the option, in whole or
in part, at any time from the date hereof until September 30, 2001 (the
"Exercise Period").
III. MANNER OF EXERCISE. In the event the Seller wishes to exercise
the Option, the Seller shall send a written notice (the "Notice") to the Board
of Directors of FGC specifying: (i) the number of shares of Common Stock the
Seller will purchase pursuant to such exercise; and (ii) the place and date for
the closing of such purchase, which date shall be not less than three, nor more
than twenty, business days from the date of the delivery of the Notice ( each a
"Closing"). Each Closing shall take place at the principal executive offices of
FGC. At the Closing FGC shall deliver to Seller a Registration Rights Agreement
substantially in the form attached hereto as Exhibit A.
IV. PAYMENT AND DELIVERY OF CERTIFICATES. At each Closing, (i) the
Seller will make payment to FGC of the aggregate Exercise Price per share for
2
<PAGE>
the shares of Common Stock being purchased upon exercise of any Option by bank
cashier's or certified check, and (ii) FGC shall deliver to the Seller a
certificate or certificates representing the number of shares of Common Stock
so purchased in the denominations designated by the Seller. At any such
Closing, the Seller shall deliver a letter to FGC agreeing that the Seller is
purchasing the shares of Common Stock for investment purposes and not with a
view to distribution otherwise than in compliance with the Securities Act of
1933, as amended (the "Securities Act"), and agreeing not to offer to sell,
sell or otherwise dispose of, any of such shares acquired by it pursuant to
this Agreement in violation of the Securities Act or any applicable state
securities laws.
V. CONVERSION RIGHT. In lieu of the payment of the Exercise Price, the
Holder shall have the right (but not the obligation), to require FGC to convert
this Option in whole into shares of Stock (the "Conversion Right") as provided
for in this Section V. Upon exercise of the Conversion Right, FGC shall deliver
to the Holder (without payment by the Holder of any of the Execrise Price) that
number of shares of Stock equal to the quotient obtained by dividing (x) the
value of the Option at the time the Conversion Right is exercised (determined
by subtracting the aggregate Exercise Price in effect immediately prior ro the
exercise of the Conversion Right from the aggregate
3
<PAGE>
Market Price (as hereinafter defined) for the shares of Stock issuable upon
exercise of the Option immediately prior to the exercise of the Conversion
Right) by (y) the Market Price of one share of Stock immediately prior to the
exercise of the Conversion Right. "Market Price" shall mean the Stock Price (as
defined below) obtained by taking the average over a period of thirty
consecutive trading days ending on the second trading day prior to the
date of determination. As used in this paragraph, the term Stock Price shall
mean (A) the mean, on each such trading day, between the high and low sale
price of a share of Stock or if no such sale takes place on any such trading
day, the mean of the closing bid and lowest closing asked prices therefor on
any such trading day, in each case as officially reported on all national
securities exchanges on which the Stock is then listed or admitted to trading,
or (B) if the Stock is not then listed or admitted to trading on any national
securities exchange, the closing price of the Stock on such date, or (C) if no
closing price is available on any such trading day, the mean between the
highest and lowest closing bid prices thereof on any such trading date, in the
over-the-counter market as reported by NASDAQ, (D) if the Stock is not then
quoted in such system, the mean between the highest and lowest bid prices
reported by the market makers and dealers for the Stock listed as such by the
National Quotation Bureau, Incorporated or any similar successor organization,
or (E)the higher of the last bona fide sale made by FGC and the fair market
value of the Stock as determined by the Board of Directors in its good faith
judgement.
4
<PAGE>
VI. EXERCISE OF CONVERSION RIGHT. The conversion rights provided under
Section V hereof may be exercised in whole at any time and from time to time
while any Option remains outstanding. In order to exercise the conversion
privilege, the Holder shall surrender to FGC, at its offices, this Stock Option
Agreement accompanied by a duly completed Notice of Conversion in the form
attached hereto as Exhibit B. The presentation and surrender shall be deemed a
waiver of the Holder's obligation to pay all or any portion of the aggregate
purchase price payable for the shares of Stock issuable upon exercise of this
Option. This Stock Option Agreement shall be deemed to have been converted
immediately prior to the close of business on the day of surrender of such
Stock Option Agreement for conversion in accordance with the foregoing
provisions. As promptly as practicable on or after the conversion date, FGC
shall issue and shall deliver to the Holder a certificate or certificates
representing the largest number of whole shares of Stock to which the Holder
shall be entitled as a result of the conversion. FGC shall not be required to
issue fractions of shares of Stock upon the exercise of the Conversion Right.
Any fractional shares to which the Seller shall be entitled shall be satisfied
by FGC in lawful money of the United States of America.
VII. ADJUSTMENTS. In case FGC shall (i) pay a dividend in Common
Stock of FGC or make a distribution in Common Stock, (ii) subdivide its
outstanding Common Stock, (iii) combine its outstanding Common Stock into a
smaller number of shares of Common stock, or (iv) issue by reclassification of
its Common
5
<PAGE>
Stock other securities of FGC, the number of shares of Common Stock purchasable
upon exercise of the Option shall be adjusted so that Seller shall be entitled
to receive the kind and number of shares or other securities of FGC which it
would have owned or would have been entitled to receive after the happening of
any of the events described above had the Option been exercised immediately
prior to the happening of such event or any record date with respect thereto
and the Exercise Price shall also be adjusted to reflect the happening of any
of the events described above.
VIII. LEGEND. The Seller consents to the placement of any legend
required by applicable state securities laws and of the following legend on
each certificate representing the Common Stock:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
TRANSFERRED, EXCHANGED OR OTHERWISE DISPOSED OF UNLESS (1) A
REGISTRATION STATEMENT UNDER SUCH ACT IS THEN IN EFFECT WITH RESPECT
THEREOF, (2) A WRITTEN OPINION FROM COUNSEL FOR THE ISSUER OF OTHER
COUNSEL FOR THE HOLDER REASONABLE ACCEPTABLE TO THE ISSUER HAS BEEN
OBTAINED TO THE EFFECT THAT NO SUCH REGISTRATION IS REQUIRED, OR (3) A
"NO ACTION" LETTER OR ITS THEN EQUIVALENT HAS BEEN ISSUED BY THE
SECURITIES EXCHANGE COMMISSION TO THE EFFECT THAT NO SUCH REGISTRATION
IS REQUIRED IN CONNECTION THEREWITH."
VII. TYPE OF OPTION. This Option is not an "incentive stock option",
as defined in Section 422A of the Internal Revenue Code of 1986, as amended,
and is not being issued pursuant to any plan of FGC. The Seller shall have no
rights as a stockholder of FGC with respect to shares of Common Stock covered
6
<PAGE>
by this Option until payment for such shares shall have been made in full and
until the date of the issuance of a stock certificate for such shares.
VIII. REPRESENTATIONS AND WARRANTIES OF FGC. FGC hereby represents
and warrants to the Seller as follows:
(a) FGC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. FGC is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the failure to so qualify would have a material adverse effect on its
business or properties.
(b) FGC has all requisite corporate power and authority to own the
properties owned by it and to carry on its business as now conducted and has
taken all necessary corporate action to enter into this Agreement. FGC has all
requisite corporate power to grant the Options and to carry out and perform its
obligations under the terms of this Agreement, and all transactions
contemplated hereby.
(c) When issued and paid for or converted in accordance with the terms
of this Agreement, the shares of Common Stock underlying the Option will be
duly authorized, validly issued, fully paid and non-assessable.
(d) Upon delivery of the shares of Common Stock to the Seller upon the
exercise of the Options, the Seller will receive good and marketable title to
7
<PAGE>
such shares free and clear of any pledge, lien, security interest, charge,
claim, equity or encumbrance of any kind arising by, through or under FGC,
other than any restrictions on resales imposed by federal or state securities
laws.
(e) The execution and delivery of this Agreement does not, and the
performance of this Agreement will not, with or without the giving of notice or
the lapse of time, or both, (i) violate the Certificate of Incorporation or
By-Laws of FGC, (ii) conflict with or result in a breach of any terms or
provisions of, or constitute a default or give rise to a right of acceleration
or termination under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of FGC under any indenture,
mortgage, loan agreement or other instrument to which FGC is a party or by
which any of its property is bound, or (iii) violate or require governmental,
judicial or regulatory consent under any existing applicable, law, rule,
regulation, judgment, order or decree of any governmental instrumentality or
court having jurisdiction over FGC or any of its property.
IX. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby
represents and warrants to the Seller as follows:
(a) Seller is a partnership duly formed, validly existing and in
good standing under the laws of the State of Illinois.
(b) Seller has all requisite power and authority to carry on its
8
<PAGE>
business as it is now being conducted and has taken all necessary partnership
action to enter into this Agreement. Seller has all requisite partnership power
to carry out and perform its obligations under the terms of this Agreement, and
all transactions contemplated hereby.
(c) The execution and delivery of this Agreement does not, and the
performance of this Agreement will not, with or without the giving of notice or
the lapse of time, or both, (i) violate any provision of any law, rule or
regulation to which Seller is subject; (ii) violate any order, judgment or
decree applicable to Seller; or (iii) conflict with or result in a breach of or
a default under any term or condition of Seller's certificate of limited
partnership or partnership agreement or any agreement or other instrument to
which Seller is a party or by which it or its assets may be bound.
X. NOTICES. All notices, demands, requests, consents or other
communications ("Notices") which either party may desire or be required to give
to the other hereunder shall be in writing and shall be delivered by hand,
overnight express carrier, or sent by registered or certified mail, return
receipt requested, postage prepaid, in either event, addressed to the parties
at their respective addresses first above set forth. A copy of any Notice given
by Seller to Purchaser shall simultaneously be given in either manner provided
above to Squadron, Ellenoff, Plesent & Sheinfeld, LLP, 551 Fifth Avenue, New
York, New York 10176, Attention: Kenneth R. Koch, Esq. A copy of
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<PAGE>
any Notice given by Purchaser to Seller shall simultaneously be given in
either manner provided above to D'Ancona & Pflaum, 30 North LaSalle Street,
Suite 2900, Chicago, Illinois 60602, Attention: Allan J. Reich, Esq. or
Michael D. Miselman, Esq. Notices given in the manner aforesaid shall be deemed
to have been given three (3) business days after the day so mailed, the day
after delivery to any overnight express carrier and on the day so delivered by
hand. Either party shall have the right to change its address(es) for the
receipt of Notices by giving Notice to the other party in either manner
aforesaid. Any Notice required or permitted to be given by either party may
be given by that party's attorney.
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XI. MISCELLANEOUS.
(a) BINDING EFFECT. This Agreement shall be binding upon, and inure
solely to the benefit of, the parties hereto and their respective successors
and assigns, heirs, administrators, and representatives, and shall not be
enforceable by, or inure to the benefit of, any other third party.
(b) NONTRANSFERABLE. The Option granted hereunder may not be
transferred, assigned or otherwise disposed of by the Seller (other than to a
partner of the Seller) and any such attempt to transfer the same shall be void
ab initio.
(c) CHOICE OF LAW. This Agreement shall be construed in accordance
with, and governed by, the internal law of the State of New York (without
reference to its rules as to conflicts of law).
(d) MODIFICATION. This Agreement may only be modified by a writing
signed by each of the parties hereto.
(e) HEADINGS. The section headings herein are for convenience only and
shall not affect the construction thereof. Unless otherwise indicated,
references to Sections and Articles are to Sections and Articles, respectively,
contained herein.
(f) COUNTERPARTS. This Agreement may be executed in one or more
counterparts but all such separate counterparts shall constitute but one and
the same instrument; provided that, although executed in counterparts, the
11
<PAGE>
executed signature pages of each such counterpart may be affixed to a single
copy of this Agreement which shall constitute an original.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Stock Option
Agreement to be executed as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
BY:________________________
NAME: DOMINIC CHANG
TITLE: PRESIDENT
KKL GOLF PARTNERSHIP
BY:____________________
NAME:
TITLE:
13
<PAGE>
EXHIBIT B
CASHLESS EXERCISE FORM
(To be executed upon exercise of Option pursuant to Section VI)
The undersigned hereby irrevocably elects to surrender its
Option for such shares of Stock pursuant to the cashless exercise provisions of
the within the Stock Option Agreement, as provided for in Section V of such
Stock Option Agreement.
Please issue a certificate or certificates for such Stock in
the name of, and pay cash for fractional shares pursuant to Section VI of the
Stock Option Agreement.
Name
---------------------------------
(Please Print Name, Address and
Social Security No.)
Address
-------------------------------
--------------------------------------
--------------------------------------
Social
Security No. -------------------------
Signature
---------------------------
NOTE: The above signature should correspond exactly
with the name on the first page of the Stock
Option Agreement.
14
PURCHASE AGREEMENT
PURCHASE AGREEMENT, made as of the 30 day of September, 1996
(this "Agreement"), by and between USA GOLF CENTERS, LTD. #2, a California
limited partnership having an address at 14800 Hoover Street, Westminster,
California, 92683 ("Assignor"), and WESTMINSTER FAMILY GOLF CENTERS, INC., a
Delaware corporation having an address at 225 Broadhollow Road, Suite 106E,
Melville, New York 11747 ("Assignee").
W I T N E S S E T H :
WHEREAS, by Ground Lease, dated August 1, 1992, as amended by the
Ground Lease Extension and Modification dated November 20, 1995 (as so amended,
the "Lease"), by and between Westminster Memorial Park, a California non-profit
corporation, as landlord ("Landlord"), and Assignor, as tenant, Assignor leased
approximately 17.4 acres located in the County of Orange, State of California,
as more particularly described in the Lease (the "Premises"), on which Assignor
now operates a driving range and related facilities; a copy of the Lease is
attached hereto as Exhibit A;
WHEREAS, Assignor desires to assign to Assignee its entire
interest as tenant under the Lease and Assignee desires to accept such
assignment and assume Assignor's obligations under the Lease on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of TEN ($10.00) DOLLARS, the
terms and conditions set forth herein, and other good and valuable
consideration, the mutual receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree to the foregoing and as follows:
1. Agreement to Sell and Purchase. Simultaneously with the
execution and delivery of this Agreement and the payment by Assignee to
Assignor of the "Purchase Price" as defined and provided in Section 5 below
(the "Closing"), pursuant to separate agreements of assignment and assumption,
Assignor shall assign, set over and transfer to Assignee all right, title and
interest of Assignor in and to the Premises and the Lease, and Assignee shall
assume and agree to perform any and all of the obligations to be performed by
the tenant under the Lease (as if Assignee executed the Lease originally as
tenant thereunder) accruing from and after July 15, 1996 (the "Effective
Date"). Assignee shall further agree to be bound by and fully responsible for
all of the covenants, agreements, terms, provisions, and conditions of Assignor
or tenant under the Lease to be performed by Assignor from and after the
Effective Date. At the Closing, Assignor shall deliver possession of the
Premises to Assignee, broom clean and free of all tenancies or rights of
possession.
2. Transfer of Other Property. Simultaneously with the execution
and delivery of this Agreement, pursuant to a separate bill of sale and
agreement of assignment and assumption, Assignor shall sell, assign, transfer
and convey to Assignee,
<PAGE>
and Assignee shall purchase and acquire from Assignor, all of Assignor's right,
title and interest in and to the following property (collectively, the
"Property"):
2.1 all furnishings, fixtures, machinery, equipment,
vehicles and personalty attached or appurtenant to or used in connection with
the Premises that are owned by Assignor, and all inventories, supplies, sales,
marketing and instructional materials of every kind and description owned by
Assignor and relating to the business conducted at the Premises (the
"Business"), wherever located, including without limitation, the items
described on Exhibit B attached hereto and made a part hereof (the "Personal
Property");
2.2 the files, books, notices and other correspondence
from any governmental agencies, and other records used or employed by Assignor
or its affiliates in connection with the ownership and/or operation of the
Premises (collectively, the "Records");
2.3 any consents, authorizations, variances, waivers,
licenses, certificates, permits and approvals held by or granted to Assignor in
connection with the ownership of the Premises (collectively, the "Permits");
2.4 the contracts, leases and other agreements of or
relating to the operation of the Business described on Exhibit C attached
hereto and made a part hereof (the "Contracts");
2.5 all accounts receivable of Assignor arising out of
the sale of goods or services rendered at the Premises or otherwise in
connection with the Business on or after the Effective Date;
2.6 any manufacturers' and vendors' warranties and
guarantees, except to the extent the same relate solely to any Retained Assets
or Retained Liabilities (as hereinafter defined) (the "Claims"); and
2.7 any other properties and assets of every kind and
nature, real or personal, tangible or intangible, owned by Assignor and
relating in any way whatsoever to the Premises or the Business, except to the
extent the same relate solely to the Retained Assets or Retained Liabilities.
3. Assets to be Retained by Assignor. Anything herein to
the contrary notwithstanding, Assignor shall not sell, and Assignee shall not
acquire, the following assets of Assignor (the "Retained Assets"):
3.1 any rights of Assignor with respect to
insurance policies owned by Assignor or for which Assignor is the named insured;
3.2 all cash, funds in bank accounts and cash
equivalents existing as
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<PAGE>
of the Closing; and
3.3 any patents, trademarks, trademark
registrations, copyrights, copyright registrations, trade names and all
registrations thereof and all applications for any of the foregoing, whether
issued or pending, if any, and all goodwill associated with any of the
foregoing (the "Intangible Assets").
4. Assumption of Certain Liabilities. Assignee shall
assume and agree to pay and discharge when due all liabilities and obligations
of Assignor under the Lease and the Contracts to the extent the same arise from
and after the Effective Date (the "Assumed Liabilities"). Assignor shall
retain, and Assignee shall not assume, perform, discharge or pay, and shall not
be responsible for, any and all liabilities or obligations of any nature
whatsoever in connection with or relating to the Premises or the Property,
Assignor or the Business or any predecessor owner of the Lease, the Property or
the Business other than the Assumed Liabilities (collectively, the "Retained
Liabilities").
5. Consideration. In consideration for the assignment of
the Lease and the sale of the other Property, Purchaser shall pay the sum of
$1,500,000.00 (the "Purchase Price") subject to adjustment as hereinafter
provided, payable in cash, certified or bank check or wire transfer
simultaneously herewith, $50,000 of such sum to be held and dealt with as
provided in the Escrow Agreement dated the date hereof among Assignee, Assignor
and Continental Stock Transfer & Trust Company (the "Escrow Agent") (the
"Escrow Agreement").
6. Apportionments.
6. 1 The parties hereto agree that (i) rent
under the Lease and all other operating expenses of Assignor relating to the
Premises (i.e., Contract payments, advertising, collections, fees, hired
services, insurance, miscellaneous expenses, postage, repairs and maintenance,
supplies, taxes, utilities and wages, but specifically not including interest
on indebtedness, professional fees and expenses, travel , lodging, depreciation
or the cost of inventories), and (ii) all Business income of Assignor, shall be
apportioned (on a 30-day month and 360-day year basis) between Assignor and
Assignee as of Effective Date based on the portion of each such expense or
revenue attributable to the period falling on or before the Effective Date on
the one hand, which Assignor shall bear the responsibility and benefit of, and
the portion of each such expense or revenue attributable to the period falling
after the Effective Date, on the other hand, which Assignee shall bear the
responsibility and benefit of (the "Adjustment"). The net Adjustment will be
paid by the party owing the same to the other in cash or by certified or
official bank check or wire transfer. The expenses and liabilities for which
Assignor shall be liable pursuant to this Section shall be included within the
meaning of the term "Retained Liabilities". The expenses and liabilities for
which Assignee shall be liable pursuant to this Section shall be included in
the meaning of the term "Assumed Liabilities".
6.2 To the extent that any of the prorations
made pursuant to this
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<PAGE>
Article are based upon estimates of payments to be made
and/or expenses to be incurred by Assignee subsequent to the Effective Date, or
either party discovers any errors in or omissions in respect of the Adjustment,
Assignor and Assignee agree to adjust such prorations promptly upon receipt by
Assignor or Assignee, as the case may be, of such payments or of bills or other
documentation setting forth the actual amount of such expenses.
6.3 Assignor and Assignee shall maintain and
make available to each other any books or records necessary for the adjustment
of any item pursuant to this Article. The provisions of this Article shall
survive the Closing.
7. Representations and Warranties of Assignor. Assignor
hereby represents and warrants to Assignee as follows:
7.1 Organization; Power and Authority.
7.1.1 Assignor is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
California, and has all requisite power and authority to carry on its business
as it is now being conducted, to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby.
7.1.2 The sole general partner of Assignor is
Hackett Management Corporation ("General Partner"), a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, and has all requisite power and authority to carry on its business
as it is now being conducted, to execute, deliver and perform the obligations
of Assignor under this Agreement on behalf of Assignor and to consummate the
transactions contemplated hereby on behalf of Assignor.
7.2 Due Authorization and Execution; Effect of
Agreement.
7.2.1 This Agreement has been duly and validly
executed and delivered by Assignor and constitutes the valid and binding
obligation of Assignor, enforceable in accordance with its terms (subject to
bankruptcy, insolvency or other laws regarding rights of creditors). The
execution, delivery and performance by Assignor of this Agreement and the
consummation by Assignor of the transactions contemplated hereby and subject to
the terms hereof will not, with or without the giving of notice or the lapse of
time, or both, (a) violate any provision of any law, rule or regulation to
which Assignor is subject; (b) violate any order, judgment or decree applicable
to Assignor; or (c) conflict with or result in a breach of or a default under
any term or condition of any agreement or other instrument to which Assignor is
a party or by which it or its assets may be bound, except in each case, for
violations, conflicts, breaches or defaults which in the aggregate would not
materially hinder or impair the consummation of the transactions contemplated
hereby.
7.2.2 This Agreement has been duly and validly
executed and
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<PAGE>
delivered by General Partner on behalf of Assignor. The execution, delivery and
performance by General Partner on behalf of Assignor of this Agreement and the
consummation by General Partner on behalf of Assignor of the transactions
contemplated hereby and subject to the terms hereof will not, with or without
the giving of notice or the lapse of time, or both, (a) violate any provision
of any law, rule or regulation to which General Partner is subject; (b) violate
any order, judgment or decree applicable to General Partner; or (c) conflict
with or result in a breach of or a default under any term or condition of any
agreement or other instrument to which General Partner is a party or by which
it or its assets may be bound, except in each case, for violations, conflicts,
breaches or defaults which in the aggregate would not materially hinder or
impair the consummation of the transactions contemplated hereby.
7.3 Consents. No consent, approval or authorization
of, exemption by, or filing with, any governmental or regulatory authority or
any third party is required in connection with the execution, delivery and
performance by Assignor of this Agreement, except for consents, approvals,
authorizations, exemptions and filings, if any, which have been obtained as of
the Closing.
7.4 Compliance with Applicable Laws. To the best of
Assignor's knowledge, Assignor is not engaging in any activity or omitting to
take any action as a result of which Assignor is in violation of any law, rule,
regulation, ordinance, statute, order, injunction or decree, or any other
requirement of any court or governmental or administrative body or agency,
applicable to the Premises or the Business. Assignor has not received (i) any
notice that it is not in compliance with all material requirements imposed in
writing by any insurance carrier of Assignor to the extent such carrier is an
insurer or indemnitor of the Premises or (ii) any notice of violation of law,
municipal ordinance, orders or requirements issued by any building department
or other governmental agency or subdivision having jurisdiction.
7.5 Permits. To the best of Assignor's knowledge, all
Permits required by any federal, state, or local law, rule or regulation and
necessary for the operation of the Premises and the Business as currently being
conducted have been obtained and are currently in effect. No registrations,
filings, applications, notices, transfers, consents, approvals, orders,
qualifications, waivers or other actions of any kind are required by virtue of
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby to avoid the loss of any Permit or the
violation of any law, regulation, order or other requirement of law. Assignor
has not received any notice that the current use and occupation of any portion
of the Premises violates any of, and, where applicable, is not in material
compliance with, the Permits, any applicable deed restrictions or other
covenants, restrictions or agreements including without limitation, any of the
Permitted Exceptions, site plan approvals, zoning or subdivision regulations or
urban redevelopment plans applicable to the Premises.
7.6 The Lease. Attached hereto as Exhibit A is a
true and correct copy of the Lease. The Lease is in full force and effect, has
not been modified or amended in
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<PAGE>
any way except as stated above and neither Landlord (to the best of Assignor's
knowledge) nor Assignor is in default, or sent or received any notice of
default, in respect of the Lease. No event has occurred or circumstance exists
which, with the giving of notice or the passage of time, or both, would
constitute a default by Assignor under the Lease. Neither Assignor nor Landlord
has (to the best of Assignor's knowledge) exercised any right or option, or
stated its intent, to terminate or cancel the Lease. Assignor has not assigned,
transferred or conveyed the Lease or any interest therein, or granted any right
or option with respect thereto, to any party other than Assignee.
7.7 Title to the Lease and Property. Assignor's
title to the Lease and the Property are free and clear of any and all liens,
charges, encumbrances, mortgages, pledges, security interests, easements,
agreements and other interests and adverse claims (collectively,
"Encumbrances"), other than the matters set forth in Exhibit D attached hereto
and made a part hereof (the "Permitted Exceptions").
7.8 Contracts. Except for the Lease and as set
forth on Exhibit C, Seller is not a party to any Contracts. Exhibit C sets
forth a full and complete description of the Contracts described therein, and
none of such Contracts have been amended or modified except as reflected on
said Exhibits. Assignor is not holding any security deposits under any of said
Contracts. Each of the Contracts are in full force and effect and no party
under any such Contract, including Assignor, is in default, or has sent or
received notice of default, in any respect of any such Contract.
7.9 Condition of the Improvements. To the best of
Assignor's knowledge, there are no material structural or mechanical defects in
the Improvements, and there are no leaks in any roof on any Improvement
designed for human habitation.
7.10 Condition of Personal Property. The Personal
Property is in good operating condition and repair, ordinary wear and tear
excepted, and is adequate, suitable and sufficient to meet the needs of and to
operate the Premises and the Property as presently conducted by Assignor.
7.11 Environmental Matters.
7.11.1 As used in this Agreement "Hazardous
Material" shall mean (i) any "hazardous substance" as now defined pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), 42 U.S.C. ss. 9601(33); (ii) any "pollutant or contaminant" as
defined in 42 U.S.C. ss. 9601(33); (iii) any material now defined as "hazardous
waste" pursuant to 40 C.F.R. Part 261; (iv) any petroleum, including crude oil
and any fraction thereof; (v) natural or synthetic gas usable for fuel; (vi) any
"hazardous chemical" as defined pursuant to 29 C.F.R. Part 1910; (vii) any
asbestos, asbestos containing material, polychlorinated biphenyl ("PCB"), or
isomer of dioxin, or any material or thing containing or composed of such
substance or substances; and (viii) any other pollutant, contaminant, chemical,
or industrial or hazardous, toxic or dangerous waste, substance or material,
defined or regulated as such in (or for purposes
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<PAGE>
of any Environmental Law (as hereinafter defined) and any other toxic, reactive
or flammable chemicals.
7.11.2 To the best of Assignor's knowledge,
there is no Hazardous Material in excess of permissible limits under applicable
law, rule, regulation, etc. at, under or on the Premises and there is no
ambient air, surface water, groundwater or land contamination within, under,
originating from or relating to the Premises except as may be identified or
referenced in the Phase I Preliminary Environmental Site Investigation prepared
by AES Inc. and dated September 1996. To the best of Assignor's knowledge,
Assignor has not, and has not caused to be, manufactured, processed,
distributed, used, treated, stored, disposed of, transported or handled any
Hazardous Material at, on or under the Premises.
7.11.3 To the best of Assignor's knowledge,
Assignor has no obligation or liability incurred with respect to the Premises
imposed or based upon any provision under any foreign, federal, state or local
law, rule, or regulation or common law, or under any code, order, decree,
judgment or injunction applicable to Assignor or the Premises or any notice, or
request for information issued, promulgated, approved or entered thereunder, or
under the common law, or any tort, nuisance or absolute liability theory,
relating to public health or safety, worker health or safety, or pollution,
damage to or protection to the environment, including without limitation, laws
relating to emissions, discharges, releases or threatened releases of Hazardous
Material into the environment (including without limitation, ambient air,
surface water, groundwater, land surface or subsurface), or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
generation, disposal, transport or handling of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes (hereinafter
collectively referred to as "Environmental Laws").
7.11.4 Assignor has not been subject to any
civil, criminal or administrative action, suit, claim, hearing, notice of
violation, investigation, inquiry or proceeding for failure to comply with, or
received notice of any violation or potential liability under the Environmental
Laws in respect of the Premises.
7.11.5 To the best of Assignor's knowledge,
the Premises are not (a) listed or proposed for listing on the National
Priority List or (b) listed on the Comprehensive Environmental Response,
Compensation, Liability Information System List ("CERCLIS") promulgated
pursuant to CERCLA, 42 U.S.C. ss. 9601(9), or any comparable list maintained by
any foreign, state or local government authority.
7.11.6 To the best of Assignor's knowledge,
there are no underground storage tanks at the Premises and Assignor further
warrants and represents that Assignor is not aware of any prior use and
operation of underground storage tanks at the Premises.
7.12 Tax Proceedings. Assignor is not aware of any
proceedings
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<PAGE>
pending regarding the reduction of real estate taxes or assessments
in respect of the Premises.
7.13 Utilities. All water, storm and sanitary sewer,
gas, electricity, telephone and other utilities adequately service the Premises
as the business is currently conducted, enter the Premises through lands as to
which valid public or private easements exist that will inure to the benefit of
Assignee, the Premises are furnished by facilities of public or quasi-public
utilities and, to the best of the Assignors knowledge, the cost of installation
of such utilities has been fully paid.
7.14 Access. To the best of Assignor's knowledge,
there are no federal, state, county, municipal or other governmental plans to
change the highway or road system in the vicinity of the Premises which could
materially restrict or change access from any such highway or road to the
Premises, or any pending or threatened condemnation or eminent domain
proceedings relating to or affecting the Premises.
7.15 Insurance Requirements. All requirements or
recommendations delivered to Assignor by any insurer or by any board of fire
underwriters or similar body in respect of the Premises have been satisfied.
7.16 Litigation. To the best of Assignor's knowledge,
there is no action or proceeding (zoning or otherwise) or governmental
investigation pending, or, threatened against, or relating to, Assignor,
General Partner, the Premises, the Business or the transactions contemplated by
this Agreement, nor is there any basis for any such action, proceeding or
investigation, except as otherwise disclosed in writing to Assignee with
respect to Thomas Utman.
7.17 Assessments. There are no special or other
assessments for public improvements or otherwise now affecting the Premises
(except as may be shown of record) nor does Assignor know of (a) any pending or
threatened special assessments affecting the Premises or (b) any contemplated
improvements affecting the Premises that may result in special assessments
affecting the Premises.
7.18 Employee Agreements. There are no union or
employment contracts or agreements (written or oral) entered into by Assignor
involving employees of Assignor or its affiliates affecting the Premises or the
Business which will survive the Closing. All employees of Assignor will have
been terminated by Assignor as of the Closing.
7.19 Work at the Premises. No services, material or
work have been supplied to the Premises for which payment has not been made in
full.
7.20 Financial Condition. Assignor has delivered to
Assignee true and correct copies of financial statements consisting of audited
balance sheets and income statements of Assignor as of December 31, 1995 and
unaudited income statements for the
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period from January 1, 1996 through the date hereof. Each such balance sheets
present fairly the financial condition, assets and liabilities of Assignor as
of its date; each such statement of income presents fairly the results of
operations of Assignor for the period indicated. The financial statements
referred to in this Section are in accordance with the books and records of
Assignor. Since December 31, 1995: (a) there has at no time been a material
adverse change in the financial condition, results of operations, businesses,
properties, assets, liabilities or future prospects of Assignor, the Premises,
the Property or Business; (b) the Business has been conducted in all respects
only in the ordinary course; and (c) Assignor has not suffered an extraordinary
loss (whether or not covered by insurance) or waived any right of substantial
value.
7.21 Full Disclosure. To the best knowledge of Assignor,
none of the information supplied by Assignor herein or in the exhibits hereto
contains any untrue statement of a material fact or omits to state a material
fact required to be stated herein or necessary in order to make the statements
herein, in light of the circumstances under which they are made, not
misleading; provided, however, Assignor has not undertaken (not will it
undertake) any investigation of public records, the Premises or otherwise
except as is specifically stated herein.
8. Representations and Warranties of Assignee. Assignee
hereby represents and warrants to Assignor as follows:
8.1 Organization; Power and Authority. Assignee
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has all requisite power and authority to
carry on its business as it is now being conducted, to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby.
8.2 Due Authorization and Execution; Effect of
Agreement. The execution, delivery and performance by Assignee of this
Agreement and the consummation by Assignee of the transactions contemplated
hereby have been duly authorized by all necessary corporate action required to
be taken on the part of Assignee. This Agreement has been duly and validly
executed and delivered by Assignee and constitutes the valid and binding
obligation of Assignee, enforceable in accordance with its terms. The
execution, delivery and performance by Assignee of this Agreement and the
consummation by Assignee of the transactions contemplated hereby will not, with
or without the giving of notice or the lapse of time, or both, (a) violate any
provision of any law, rule or regulation to which Assignee is subject; (b)
violate any order, judgment or decree applicable to Assignee; or (c) conflict
with or result in a breach of or a default under any term or condition of
Assignee's Certificate of Incorporation or By-Laws or any agreement or other
instrument to which Assignee is a party or by which it or its assets may be
bound, except in each case, for violations, conflicts, breaches or defaults
which in the aggregate would not materially hinder or impair the consummation
of the transactions contemplated hereby.
9. Survival. The representations and warranties of the
parties made in
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Articles 7 and 8 shall survive the Closing.
10. Further Assurances. At any time and from time to
time after the date hereof, either party shall, at the request of the other
party, execute and deliver any further instruments or documents and take all
such further action as the requesting party may reasonably request in order to
transfer into the name of Assignee the Lease and any and all Property
contemplated to be sold pursuant to this Agreement and to further consummate
the transactions contemplated by this Agreement. This Article shall survive the
Closing.
11. Brokers. Assignor and Assignee warrant and represent
to each other that they dealt with no broker, finder or similar agent or party
who or which might be entitled to a commission or compensation on account of
introducing the parties, the negotiation or execution of this Agreement and/or
the closing of the transaction provided for herein other than the Broker.
Assignee and Assignor hereby respectively agree to indemnify and hold harmless
the other party from and against all loss, liability, damage and expense
(including, without limitation, attorneys' fees) imposed upon or incurred by
the other party by reason of any claim for commissions or other compensation
for bringing about this transaction by any broker, finder or similar agent or
party other than the Broker who claims to have dealt with the indemnifying
party in connection with this transaction. Assignor shall pay the Broker all
commissions due to the Broker by reason of this transaction pursuant to a
separate agreement between Assignor and the Broker. The provisions of this
Article shall survive the Closing or any termination of this Agreement.
12. "As Is". Assignee represents that it has inspected
the Premises and the Property and is familiar with the physical condition
thereof, and that, in reliance upon such inspection, it agrees to accept the
Premises and the Property "as is", in its condition at the date of this
Agreement. Except as otherwise expressly stated in this Agreement (i) Assignor
makes no representations or warranties as to the physical condition of the
Premises or the value, fitness or viability of the Business and (ii) Assignee
waives its right to recover from Assignor and its partners (including any
officers, directors, partners or trustees of such partners), employees, agents,
assignees and successors, any and all damages, losses, liabilities, costs or
expenses whatsoever (including reasonable attorneys' fees and costs) and claims
therefor, whether direct or indirect, known or unknown, foreseen or unforeseen,
which arise on account of or in any way grow out of or are connected with the
physical condition of the Premises or the value, fitness or viability of the
Business. Assignee expressly waives the benefits of Section 1542 of the
California Civil Code, which provides as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR EXPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN TO HIM
MUST HAVE MATERIALLY AFFECTED THE SETTLEMENT WITH THE
DEBTOR."
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------------------------------
Assignee's Initials
13. Costs and Fees.
13.1 Assignor shall pay (a) 50% of the costs and
expenses incurred in connection with the preparation of the audited financial
statements referred to in Section 7.20 hereof, (b) transfer or conveyancing
taxes, if any, and (c) the costs and expenses incurred in connection with the
preparation of a survey of the Premises.
13.2 Assignee shall pay for (a) the examination of
title, (b) the issuance of a policy of title insurance for Assignee and (c) an
ASTM Phase I environmental survey of the Premises.
13.3 Each party shall pay for its own legal costs and
expenses. Any other costs not expressly provided for elsewhere in this
Agreement shall be divided and borne in accordance with the usual practices in
the jurisdiction where the Premises are located.
13.4 The provisions of this Article shall survive the
Closing.
14. Indemnification.
14.1 Subject to the further provisions of this
Article, Assignor shall protect, defend, hold harmless and indemnify Assignee,
its officers, directors, shareholders, employees and agents, and their
respective successors and assigns, from, against and in respect of any and all
losses, liabilities, deficiencies, penalties, fines, costs, damages and
expenses whatsoever (including without limitation, reasonable professional fees
and costs of investigation, litigation, settlement, and judgment and interest)
("Losses") that may be suffered or incurred by any of them arising from or by
reason of (i) any Retained Liability or other liability or obligation of
Assignor which is not an Assumed Liability; (ii) the breach by Assignor of any
representation, warranty, covenant or agreement of Assignor contained in this
Agreement or in any document or other writing delivered pursuant to this
Agreement; and (iii) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses (including without limitation,
interest, penalties, reasonable legal fees and accounting fees) incident to the
foregoing and the enforcement of the provisions of this Section 14.1.
14.2 Subject to the further provisions of this
Article, Assignee shall protect, defend, hold harmless and indemnify Assignor,
its partners (and any partners, officers, directors or trustees of a partner),
employees and agents, and its successors and assigns from, against and in
respect of any and all Losses that may be suffered or incurred by any of them
arising from or by reason of (i) any of the Assumed Liabilities on and after
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<PAGE>
the date hereof, (ii) the breach of any representation, warranty, covenant or
agreement of Assignee contained in this Agreement or in any document or other
writing delivered pursuant to this Agreement; and (iii) any and all actions,
suits, proceedings, claims, demands, assessments, judgments, costs and expenses
(including without limitation, interest, penalties, reasonable legal fees and
accounting fees) incident to the foregoing and the enforcement of the
provisions of this Section 14.2.
14.3 Whenever a party hereto (such party and each
of its affiliates which is entitled to indemnification pursuant to any
provision of this Agreement, an "Indemnified Party") shall learn after the
Closing of a claim that, if allowed (whether voluntarily or by judicial or
quasi-judicial tribunal or agency), would give rise to an obligation of another
party (the "Indemnifying Party") to indemnify the Indemnified Party under any
provision of this Agreement, before paying the same or agreeing thereto, the
Indemnified Party shall promptly notify the Indemnifying Party in writing of
all such facts within the Indemnified Party's knowledge with respect to such
claim and the amount thereof (a "Notice of Claim"). If, prior to the expiration
of fifteen (15) days from the mailing of a Notice of Claim, the Indemnifying
Party shall request, in writing, that such claim not be paid, the Indemnified
Party shall not pay the same, provided the Indemnifying Party proceeds
promptly, at its or their own expense (including employment of counsel
reasonably satisfactory to the Indemnified Party), to settle, compromise or
litigate, in good faith, such claim. After notice from the Indemnifying Party
requesting the Indemnified Party not to pay such claim and the Indemnifying
Party's assumption of the defense of such claim at its or their expense, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal
or other expense subsequently incurred by the Indemnified Party in connection
with the defense thereof. However, the Indemnified Party shall have the right
to participate at its expense and with counsel of its choice in such
settlement, compromise or litigation. The Indemnified Party shall not be
required to refrain from paying any claim which has matured by a court judgment
or decree, unless an appeal is duly taken therefrom and execution thereof has
been stayed, nor shall the Indemnified Party be required to refrain from paying
any claim where the delay in paying such claim would result in the foreclosure
of a lien upon any of the property or assets then held by the Indemnified
Party. The failure to provide a timely Notice of Claim as provided in this
Section 14.3 shall not excuse the Indemnifying Party from its or their
continuing obligations hereunder; however, the Indemnified Party's claim shall
be reduced by any damages to the Indemnifying Party resulting from the
Indemnified Party's delay or failure to provide a Notice of Claim as provided
in this Section 14.3.
14.4 For purposes of this Article, any assertion
of fact and/or law by a third party that, if true, would constitute a breach of
a representation or warranty made by a party to this Agreement or make
operational an indemnification obligation hereunder, shall, on the date that
such assertion is made, immediately invoke the Indemnifying Party's obligation
to protect, defend, hold harmless and indemnify the Indemnified Party pursuant
to this Article.
14.5 The obligation of the Assignor under Section 14.1
hereof shall be
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<PAGE>
satisfied first from the Escrowed Funds (as defined in the Escrow Agreement),
and, if the Escrowed Funds are inadequate to provide indemnification to
Purchaser, then from Assignor directly.
15. Notices. All notices, demands, requests, consents or
other communications ("Notices") which either party may desire or be required
to give to the other hereunder shall be in writing and shall be delivered by
hand, overnight express carrier, or sent by registered or certified mail,
return receipt requested, postage prepaid, in either event, addressed to the
parties at their respective addresses first above set forth. A copy of any
Notice given by Assignor to Assignee shall simultaneously be given in either
manner provided above to Squadron, Ellenoff, Plesent & Sheinfeld, LLP, 551
Fifth Avenue, New York, New York 10176, Attention: Daniel Laifer, Esq. A copy
of any Notice given by Assignee to Assignor shall simultaneously be given in
either manner provided above to Heffernan & Boortz, 610 Newport Center Drive,
Suite 700, Newport Beach, California 92660, Attention: Don Boortz, Esq. Notices
given in the manner aforesaid shall be deemed to have been given three (3)
business days after the day so mailed, the day after delivery to any overnight
express carrier and on the day so delivered by hand. Either party shall have
the right to change its address(es) for the receipt of Notices by giving Notice
to the other party in either manner aforesaid. Any Notice required or permitted
to be given by either party may be given by that party's attorney.
16. Miscellaneous.
16.1 This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.
16.2 This Agreement shall be governed by,
interpreted under and construed and enforced in accordance with, the laws of
the State of California. The initial defendant in any action shall have the
right to choose the venue of such action.
16.3 The captions or article headings in this
Agreement are for convenience only and do not constitute part of this Agreement.
16.4 It is agreed that, except where otherwise
expressly provided in particular Articles or Sections of this Agreement, none
of the provisions of this Agreement shall survive the Closing.
16.5 This Agreement (including the Exhibits
annexed hereto) contains the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior understandings, if any,
with respect thereto.
16.6 This Agreement may not be modified, changed,
supplemented or terminated, nor may any obligations hereunder be waived, except
by written instrument signed by the party to be charged or by its agent duly
authorized in writing or as otherwise expressly permitted herein.
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<PAGE>
16.7 No waiver of any breach of any agreement or
provision herein contained shall be deemed a waiver of any preceding or
succeeding breach thereof or of any other agreement or provision herein
contained. No extension of the time for performance of any obligations or acts
shall be deemed an extension of the time for performance of any other
obligations or acts.
16.8 This Agreement may be executed in one or
more counterparts, each of which when so executed and delivered shall be deemed
an original, but all of which taken together shall constitute but one and the
same original. If this Agreement is so executed by one (1) or more parties in
counterpart, the pages bearing the signatures of such parties may be
transmitted to the other parties by way of facsimile, which transmission shall
be deemed the same as delivery hereunder of original signatures.
16.9 Should any dispute arise between the
parties hereto or their legal representatives, successors and assigns
concerning any provision of this Agreement or the rights and duties of any
person in relation thereto, the party prevailing in such dispute shall be
entitled, in addition to such other relief that may be granted, to a reasonable
sum as and for their or his or its attorneys fees and legal costs in connection
with such dispute.
16.10 Neither party may cause this Agreement
to be recorded in any public office. Either party may cause a copy of the
assignment and assumption of the Lease to be recorded in the appropriate public
office.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
USA GOLF CENTERS, LTD. #2
By: Hackett Management
Corporation, a California
corporation as its General Partner
By: ______________________
Name: Terry C. Hackett
Title: President
WESTMINSTER FAMILY GOLF
CENTERS, INC.
By: ____________________________
Name:
Title:
-14 -
<PAGE>
STATE OF CALIFORNIA )
)ss.:
COUNTY OF ORANGE )
On __________________, 1996, before me, _____________________, Notary
Public, personally appeared TERRY C. HACKETT, personally known to me (or proven
to me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the instrument
the person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
Signature______________________________
[SEAL]
STATE OF )
)ss.:
COUNTY OF )
On the ___ day of September, 1996, before me personally came
________________, to me known, who being by me duly sworn, did depose and say
that he is the _______________________________ of WESTMINSTER FAMILY GOLF
CENTERS, INC., the corporation described in and which executed the foregoing
instrument, and that he signed his name thereto by order of the Board of
Directors of said corporation.
- ------------------------------------
Notary Public
- 15 -
CASH ESCROW AGREEMENT
CASH ESCROW AGREEMENT, dated as of September 30, 1996 (this
"AGREEMENT"), by and among USA GOLF CENTERS, LTD. #2, having an address at c/o
Hackett Management Corporation, #3 Upper Newport Plaza Drive, Newport Beach,
California 92660 ("SELLER"), WESTMINSTER FAMILY GOLF CENTERS, INC., a Delaware
corporation having an address at 225 Broadhollow Road, Suite 106E, Melville,
New York 11747 ("PURCHASER"), and CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
incorporated under the laws of the United States of America with executive
offices at 2 Broadway, New York, New York 10004 (together with its successors,
the "ESCROW AGENT").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution hereof, Seller and
Purchaser are consummating the transactions contemplated by the Purchase
Agreement, dated as of the date hereof (the "PURCHASE AGREEMENT"), between
Seller and Purchaser;
WHEREAS, pursuant to the Purchase Agreement, Seller is required to
deposit $50,000 into an escrow account to be maintained by Escrow Agent to be
held against any claims for indemnity under Article 14 of the Purchase
Agreement; and
WHEREAS, this is the Escrow Agreement referred to in the Purchase
Agreement. Capitalized terms used in this Escrow Agreement and not otherwise
defined herein shall have the respective meanings given to them in the Purchase
Agreement.
NOW, THEREFORE, it is agreed as follows:
<PAGE>
1. ESCROW.
1.01 APPOINTMENT OF ESCROW AGENT.
(a) Seller and Purchaser hereby appoint Escrow Agent, and Escrow Agent
hereby agrees to serve, as Escrow Agent in accordance with, and pursuant to,
this Agreement.
(b) Escrow Agent shall establish at Chemical Bank a separate Federally
insured, interest bearing account (the "ESCROW ACCOUNT") for any amounts
received by it hereunder.
(c) All monies, including interest thereon, held by Escrow Agent in
the Escrow Account pursuant to the terms hereof shall be hereinafter referred
to as the "ESCROWED FUNDS".
(d) Seller shall be responsible for the payment of any income taxes
payable in connection with any interest earned in the Escrow Account except
with respect to any interest on Escrowed Funds paid to or for the benefit of
Purchaser.
1.02 OPERATION OF ESCROW ACCOUNT. The parties hereto agree that the
Escrow Account shall operate as follows:
(a) At the Closing, Seller shall deliver or cause to be
delivered to Escrow Agent $50,000. Escrow Agent shall hold such amount as
Escrowed Funds in the Escrow Account.
(b) At any time prior to the six-month anniversary of
the Closing Date,
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<PAGE>
Purchaser shall be entitled to give a notice to Escrow Agent, signed by
Purchaser's President or any Vice President (with a copy to Seller), to the
effect that there has been an event entitling Purchaser to indemnification from
Seller pursuant to Section 14.1 of the Purchase Agreement, which notice shall
specify the amounts owed by Seller pursuant to the Purchase Agreement, the
calculation of such amounts and the basis therefore.
(c) Twenty (20) days after Escrow Agent has received a notice
pursuant to Section 1.02(b) hereof (or, if not a business day, on the next
business day following such twentieth day) Escrow Agent shall deliver to
Purchaser such portion of the Escrowed Funds as is specified in such notice
unless Seller shall have notified Escrow Agent (with a copy to Purchaser) in
writing before such date that Seller disagrees with Purchaser's determination
that Purchaser is entitled to indemnification with respect to the Purchase
Agreement, which notice shall be set forth in reasonable detail the basis for
such disagreement.
(d) Should any dispute arise with respect to the delivery,
ownership, or right of possession of any of the Escrowed Funds, Escrow Agent,
as more fully set forth in Section 3.11 hereof, is authorized and directed to
retain in its possession without liability to anyone all or any part of the
Escrowed Funds until such dispute shall have been settled either by mutual
agreement by the parties concerned or by a final order, decree, or judgment of
a court of competent jurisdiction in the United States of America and time for
appeal has expired and no appeal has been perfected, but Escrow Agent shall be
under
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<PAGE>
no duty whatsoever to institute or defend any such proceedings, and may, in its
discretion, deposit such Escrowed Funds with a court of competent jurisdiction
in the United States of America and be relieved of any and all liability to any
of the parties hereto upon such deposit.
1.03 DISTRIBUTION OF ESCROWED FUNDS. Unless a notice under Section
1.02(b) hereof has been given and Escrowed Funds in satisfaction of such notice
have not been delivered to Purchaser, either because the 20-day period has not
yet run out or because a dispute relating to the claim made by such notice is
then pending, the Escrowed Funds or such portion of them as at the time remains
in escrow, together with all dividends and distributions received by Escrow
Agent with respect thereto, shall be returned to Seller on the six month
anniversary of the Closing Date.
1.04 TERMINATION OF ESCROW ACCOUNT. This Agreement and the Escrow
Account will terminate at 5:00 P.M., New York City local time, on the date on
which all of the Escrowed Funds contained in the Escrow Account shall be
distributed as set forth above.
2. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be (a) delivered by hand, (b)
facsimile, or (c) over-night delivery with proper postage prepaid, and
addressed as follows:
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<PAGE>
If to Purchaser to:
225 Broadhollow Road
Melville, New York 11747
Attention: Dominic Chang, President
Telephone: (516) 694-1666
Facsimile: (516) 694-0918
If to Seller to:
Hackett Management Corporation
#3 Upper Newport Plaza Drive
Newport Beach, California 92660
Telephone: (714) 851-1611
Facsimile: (714) 955-1454
with a copy to:
Heffernan & Boortz
610 Newport Center Drive
Newport Beach, California 92660
Attention: Don Boortz, Esq.
Telephone: (714) 640-4300
Facsimile: (714) 721-1140
If to Escrow Agent, to:
2 Broadway
New York, New York 10004
Telephone: (212) 509-4000
Facsimile: (212) 509-5150
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. Except as
otherwise provided herein, no notice or communication shall be effective until
received.
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<PAGE>
3. CONCERNING ESCROW AGENT.
To induce Escrow Agent to act hereunder, it is further agreed by each
of Seller and Purchaser that:
3.01 Escrow Agent shall not be under any duty to give the Escrowed
Funds held by it hereunder any greater degree of care than it gives its own
similar property and shall not be required to invest any funds held hereunder
except as directed in this Agreement.
3.02 This Agreement expressly sets forth all the duties of Escrow
Agent with respect to any and all matters pertinent hereto. No implied duties
or obligations shall be read into this Agreement against Escrow Agent. Escrow
Agent shall not be bound by the provisions of any agreement among the other
parties hereto except this Agreement.
3.03 Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct, and, except with respect to claims based upon
such gross negligence or willful misconduct that are successfully asserted
against Escrow Agent, the other parties hereto shall jointly and severally
indemnify and hold harmless Escrow Agent (and any successor Escrow Agent) from
and against any and all losses, liabilities, claims, actions, damages, and
expenses, including reasonable attorneys' fees and disbursements, arising out
of, and in connection with, this Agreement. Without limiting the foregoing,
Escrow Agent shall in no event be liable in connection with its investment or
reinvestment of any cash held by it hereunder in good faith, in accordance with
the terms hereof, including, without limitation, any liability for any delays
(not resulting from gross negligence or willful misconduct) in the
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<PAGE>
investment or reinvestment of the Escrowed Funds, or any loss of interest
incident to any such delays. This Section 3.03 shall survive notwithstanding
any termination of this Agreement or the resignation of Escrow Agent.
3.04 Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument, or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. Escrow Agent may act in reliance upon any instrument or
signature believed by it in good faith to be genuine and may assume, if in good
faith, that any person purporting to give notice or receipt or advice or make
any statement or execute any document in connection with the provisions hereof
has been duly authorized to do so.
3.05 Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Escrow Agreement and shall not be liable
for any action taken or omitted in good faith and in accordance with such
advice.
3.06 Escrow Agent does not have any interest in the Escrowed Funds
deposited hereunder, but is serving as escrow holder only. Any payments of
income from the Escrow Account shall be subject to withholding regulations then
in force with respect to United States taxes. This Section 3.06 shall survive
notwithstanding any termination of this Agreement or the resignation of Escrow
Agent.
3.07 Escrow Agent makes no representation as to the validity,
value, genuineness,
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<PAGE>
or the collectibility of any security or other documents or instrument held
by, or delivered to, it.
3.08 Escrow Agent shall not be called upon to advise any party as to
the wisdom in selling or retaining or taking or refraining from any action with
respect to any securities or other property deposited hereunder.
3.09 Escrow Agent (and any successor escrow agent) at any time may be
discharged from its duties and obligations hereunder by the delivery to it of
notice of termination signed by Purchaser and Seller or at any time may resign
by giving written notice to such effect to Purchaser and Seller. Upon any such
termination or resignation, Escrow Agent shall deliver the Escrowed Funds to
any successor escrow agent jointly designated by the other parties hereto in
writing, or to any court of competent jurisdiction if no such successor escrow
agent is agreed upon, whereupon Escrow Agent shall be discharged of and from
any and all further obligations arising in connection with this Escrow
Agreement. The termination or resignation of Escrow Agent shall take effect on
the earlier of (a) the appointment of a successor (including a court of
competent jurisdiction) or (b) the day that is thirty (30) days after the date
of delivery: (i) to Escrow Agent of the other parties' notice of termination or
(ii) to the other parties hereto of Escrow Agent's written notice of
resignation. If at that time Escrow Agent has not received a designation of a
successor escrow agent, Escrow Agent's sole responsibility after that time
shall be to keep the Escrowed Funds safe until receipt of a designation of
successor
- 8 -
<PAGE>
escrow agent or a joint written disposition instruction by the other
parties hereto or an enforceable order of a court of competent jurisdiction.
3.10 Escrow Agent shall have no responsibility for the contents of any
writing of any third party contemplated herein as a means to resolve disputes
and may rely without any liability upon the contents thereof.
3.11 In the event of any disagreement among or between the other
parties hereto resulting in adverse claims or demands being made in connection
with the Escrowed Funds, or in the event that Escrow Agent in good faith is in
doubt as to what action it should take hereunder, Escrow Agent shall be
entitled to retain the Escrowed Funds until Escrow Agent shall have received
(a) a final and non-appealable order of a court of competent jurisdiction
directing delivery of the Escrowed Funds or (b) a written agreement executed by
the other parties hereto directing delivery of the Escrowed Funds, in which
event Escrow Agent shall disburse the Escrowed Funds in accordance with such
order or agreement. Any court order referred to in (a) above shall be
accompanied by a legal opinion by counsel for the presenting party satisfactory
to Escrow Agent to the effect that said court order is final and
non-appealable. Escrow Agent shall act on such court order and legal opinions
without further question.
3.12 As consideration for its agreement to act as Escrow Agent as
herein described, Purchaser, on the one hand, and Seller, on the other hand,
agrees to share equally Escrow Agent's fees determined in accordance with the
terms set forth on Exhibit
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<PAGE>
A hereto (and made a part of this Escrow Agreement as if herein set forth). In
addition, Purchaser and Seller agree to reimburse Escrow Agent (on a 50/50
basis) for all reasonable expenses, disbursements, and advances incurred or
made by Escrow Agent in performance of its duties hereunder (including
reasonable fees, expenses, and disbursements of its counsel).
3.13 No publicly distributed material or other matter in any language
(including, without limitation, notices and reports) which mentions Escrow
Agent's name or the rights, powers, or duties of Escrow Agent shall be issued
by the other parties hereto or on such parties' behalf unless Escrow Agent
shall first have given its specific written consent thereto.
4. MISCELLANEOUS.
4.01 BINDING EFFECT. This Escrow Agreement shall be binding upon, and
inure solely to the benefit of, the parties hereto and their respective
successors and assigns, heirs, administrators, and representatives, and shall
not be enforceable by, or inure to the benefit of, any other third party,
except as provided in Section 3.09 hereof with respect to the termination of,
or resignation by, Escrow Agent. No party may assign any of its rights or
obligations under this Agreement without the written consent of the other
parties.
4.02 CHOICE OF LAW. This Agreement shall be construed in accordance
with, and governed by, the internal law of the State of New York (without
reference to its rules as to conflicts of law).
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<PAGE>
4.03 MODIFICATION. This Agreement may only be modified by a writing
signed by all of the parties hereto.
4.04 HEADINGS. The section headings herein are for convenience only
and shall not affect the construction thereof. Unless otherwise indicated,
references to Sections and Articles are to Sections and Articles, respectively,
contained herein.
4.05 COUNTERPARTS. This Agreement may be executed in one or more
counterparts but all such separate counterparts shall constitute but one and
the same instrument; provided that, although executed in counterparts, the
executed signature pages of each such counterpart may be affixed to a single
copy of this Agreement which shall constitute an original.
- 11 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
WESTMINSTER FAMILY GOLF CENTERS,
INC.
By: __________________________________
Name:
Title:
USA GOLF CENTERS, LTD. #2
By: Hackett Management Corporation, a
California corporation as its General
Partner
By: ___________________________________
Name: Terry C. Hackett
Title: President
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
By: __________________________________
Name:
Title:
- 12 -
GROUND LEASE EXTENSION AND MODIFICATION
This Ground Lease Extension and Modification is entered into as of
this day of November, 1995 by and between the parties set forth below.
RECITALS
A. On August 1, 1992, Westminster Memorial Park, a California
non-profit corporation ("Lessor") and USA Golf Centers, Ltd. #2, a California
limited partnership ("Lessee") entered into a certain Ground:Lease relating to
17.4 gross acres of unimproved property located in the City of Westminster,
County of Orange, California (the "Lease") for the purpose of a golf driving
range (the "Range").
B. Lessor has subsequently assigned the Lease to the current Lessor as
set forth below.
C. It is the desire of Lessor to make certain improvements to
the property immediately south of the Range, which improvements will require
certain storm drain improvements to the Range. In addition, Lessor requests
certain other improvements to be made to the Range.
D. It is the desire of the parties to complete such improvements,
extend the term of the Lease and make certain other modifications set forth
herein below.
NOW, THEREFORE, in consideration of the foregoing Recitals and the
covenants and conditions contained herein, the parties do hereby agree as
follows:
1. Storm Drain Improvements. Lessee will cooperate with
Lessor in the installation of a storm drain system through the currently
existing parking lot of the Range. Lessee has approved the design and working
drawings
- 1 -
<PAGE>
relating to such improvements and will allow access to Lessor to accomplish
such works of improvement, which shall be accomplished at the sole expense of
Lessor.
2. Golf Fencing. Lessee hereby agrees at its sole cost and
expense, to install additional protective netting on the south side of the
Range to protect clients of the Lessor entering and utilizing the new Memorial
Park facilities to be improved thereon.
3. Lease Extension. The Lease currently terminates as of the
last day of February, 2003. The parties do hereby extend the term of the Lease
and the rights, duties and obligations set forth therein through the last day
of February, 2008.
4. Option. Provided that Lessee is not then in material
default under the Lease and provided, further, that Lessor does not intend to
utilize the Range as an expansion of its Memorial Park during the option
period, Lessee shall have the right and option to extend the term of the Lease
for an additional five (5) year period through the last day of February, 2013
on the terms and conditions set forth herein (the "Option"). The exercise of
said Option shall be delivered to Lessor no less than six (6) months prior to
the end of the term of the Lease.
It is further agreed between the parties that the right of
Lessee to exercise the Option is further conditioned upon a review by Lessor of
the then existing General Partner or party managing the golf facility prior to
the Option date. Specifically, the Lessor shall have the right in its sole
discretion to approve the financial and operating capabilities of the General
Partner or entity controlling the business decisions of Lessee as a condition
to the exercise of said Option.
- 2 -
<PAGE>
5. Rents. During the extended term of the Lease and the
Option, if exercised, the base rent set forth in the Lease will continue to
increase on an annual basis as set forth therein.
6. Entire Agreement. Subject to the modifications and
provisions set forth herein, the Lease remains in full force and effect
pursuant to the terms thereof.
LESSOR: LESSEE:
SCI, California Funeral Services, Inc. USA Golf Centers, Ltd. #2
A California limited partnership
By: Hackett Management
Corporation, it's General
Partner
By:___________________________________ By:____________________________
David Anderson, President Terry C. Hackett, President
- 3 -
<PAGE>
LEASE
between
WESTMINSTER MEMORIAL PARK/McWHINNEY & VAN DE WATER
and
USA GOLF CENTERS LTD 2
<PAGE>
TABLE OF CONTENTS
Page
RECITALS
TERMS AND PROVISIONS
1. PROPERTY LEASED: USE.................................
2. TERM OF LEASE........................................
3. RENTS................................................
4. SECURITY DEPOSIT.....................................
5. UTILITIES. TAXES AND IMPOSITIONS.....................
6. MAINTENANCE AND REPAIRS..............................
7. LESSEE'S DUTY TO CONSTRUCT NEW IMPROVEMENTS..........
8. PUBLIC LIABILITY AND LIABILITY INSURANCE.............
9. SURRENDER OF PREMISES OR TERMINATION.................
10. ALTERATIONS AND IMPROVEMENTS.........................
11. INDEMNIFICATION OF LESSOR............................
12. MECHANIC'S AND OTHER LIENS...........................
13. DEFAULT..............................................
14. CONDEMNATION.........................................
15. LESSOR'S RIGHT OF ENTRY..............................
16. BROKERS..............................................
17. ESTOPPEL CERTIFICATE.................................
18. RECORDATION OF ABSTRACT ONLY.........................
19. ASSIGNMENT AND SUBLETTING............................
20. NO PARTNERSHIP.......................................
21. NON-DISTURBANCE AND SUBORDINATION....................
22. CONSENTS AND APPROVALS...............................
23. MISCELLANEOUS........................................
UNCONDITIONAL GUARANTEE OF LESSEE'S OBLIGATIONS UNDER LEASE
EXHIBIT A
<PAGE>
GROUND LEASE
This Ground Lease made as of this 1st day of August, 1992 by and
between WESTMINSTER MEMORIAL PARK, a California non-profit corporation, which
shall assign its rights and delegate its duties to Roderick C. McWhinney, Emily
McWhinney, Sean McWhinney (as successor to Derek C. McWhinney), Eric R. Van de
Water, Eric R. Van de Water as custodian for Anne F. Van de Water, Eric R. Van
de Water as custodian for Brooke E. Van de Water, Jan Pollard, and Jan Pollard
as custodian for Lewis C. Pollard III ("Lessor") and USA GOLF CENTERS LTD. 2, a
California Limited Partnership ("Lessee") affecting that certain real property
consisting of approximately 17.4 gross acres located in the City of
Westminster, County of Orange, California, the location of which is depicted in
Exhibit "A" hereto, and incorporated herein by this reference (the "Property-).
Any reference to Lessor with respect to insurance, indemnities or other
protections of Lessor shall apply to: (i) Westminster Memorial Park, (ii) the
McWhinney & Van de Water Tenants-in-Common (as herein referred to) and, (iii)
the McWhinney & Van de Water real estate manager for the Property, if any.
RECITALS
A. The Property is unimproved real estate. It is the desire of Lessor
and Lessee to enter into this Ground Lease (the "Lease") subject to the terms
thereof.
B. Upon entering into the Lease it is the desire of Lessor and Lessee,
that Lessee build and improve the Property with a golf practice facility (the
"Improvements") and operate same pursuant to the terms hereof.
C. The obligations of Lessee under this Lease are unconditionally
guaranteed by Thomas L. Utman, as set forth in the UNCONDITIONAL GUARANTEE OF
LESSEE'S OBLIGATIONS UNDER LEASE attached hereto.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual
benefit to the parties hereto and the covenants and conditions contained
herein, it is agreed as follows:
TERMS AND PROVISIONS
1. PROPERTY LEASED; USE. In this Lease, Lessor does hereby lease to
Lessee and Lessee does hereby lease from Lessor the Property, subject to the
terms and conditions set forth herein and all applicable governmental
regulations, requirements and limitations.
The Property is leased "AS IS" without any representations or
warranties about its condition or usability, specifically including the
availability of utilities or services and compliance with any governmental
regulations affecting the leasing or use of the Property.
Lessee shelf make all necessary arrangements with the existing
strawberry farm tenant for the use of or relocation of any water lines on the
Property, and shall hold Lessor harmless from and shall indemnify Lessor
(including reasonable attorneys' fees) against any claims by such strawberry
farm tenant in connection therewith or in connection with any claims of damage
by reason of Lessee's activities in improving or operating the Property and or
the improvements. Lessee shall improve and use the Property as a golf practice
facility and uses ancillary thereto including, but not limited to, the sale of
food, beverage, and other sports related activities; provided, however, that
any non-golf related sports activities shall require prior written consent of
Lessor.
The McWhinney & Van de Water Tenants-in-Common agree to cooperate with
Lessee with respect to the placing of off-Property signs to advertise the
project.
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<PAGE>
2. TERM OF LEASE. The term of the Lease shall commence as of August 1,
1992. The term of the Lease shall end ten (10) years after Lessee has obtained
a Certificate of Occupancy from the City of Westminster, but in no event later
than ten years six months from the August 1, 1992 commencement date. Upon
determination of the termination date, the same shall be inserted and initialed
by the parties.
Termination Date: February 28, 2003
------------------- -----------------
Initial Initial
If the Certificate of Occupancy has not been issued on or before July
1, 1993, then either party may, within ten (10) days thereafter, terminate this
Lease by written notice to the other.
At the request of either party, a memorandum of the actual expiration
of the Lease term shall be executed so that the same may be recorded.
In the event Lessor wishes to lease the Property to a third party for
a golf practice facility at the expiration of the term, then it shall give
Lessee notice of its intention to do so not later than ninety (90) days prior
to the expiration of the term. Lessee shall have the exclusive right, for a
period of sixty (60) days following receipt of such notice, to negotiate with
Lessor for an extension of the Lease on such terms as the parties may propose.
The foregoing shall not obligate either party to accept any terms proposed by
the other, but is merely a procedure for the parties to negotiate prior to the
Property being offered by Lessor to third parties for the operation of a golf
practice facility.
3. RENTS. Lessee shall pay to Lessor without abatement, deduction or
offset during the term of this Lease, rents as follows:
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(a) During the first year of this Lease, Lessee shall pay to
Lessor a minimum annual rental of $64,532 ("minimum annual rental"), which
shall be payable $36,100 on execution of this Lease and the balance of $28,432
on August 21, 1992 if there has been no appeal of the approvals by the Planning
Commission of the City of Westminster (C-816/DR-1489). If there has been an
appeal to the Planning Commission approval, then the balance of the first
year's rent shall be payable within three (3) days following the denial of the
appeal and the upholding of the Planning Commission's action. If the project is
ultimately denied by the City of Westminster, then Lessee shall not be
obligated to pay the balance of $28,432 and the parties may exercise the
termination rights under Section 2.
(b) Commencing August 1, 1993, the minimum annual rental
shall be paid in equal monthly increments, in advance, on the first day of each
month. On August 1, 1993 and on the first day of August of each year for the
balance of the term, the minimum annual rental shall be subject to adjustment
as follows: the base for computing the adjustment shall be the Consumer Price
Index ("CPI") For All Urban Consumers, Los Angeles-Anaheim-Riverside area
(1982-84 = 100), published by the United States Department of Labor, Bureau of
Labor Statistics ("Index"). If the Index for the month of May for any year
during the term commencing with May, 1993 ("Extension Index") has increased
over the Index for the month of May during the prior year ("Prior Index"), the
rent for the period commencing August 1, 1993 and each year thereafter shall be
established by multiplying the prior minimum annual rental by a fraction, the
numerator of which is the Extension Index and the denominator of which is the
Prior Index; provided, that notwithstanding the actual change in the Index, the
minimum annual rental shall be increased annually by a minimum of 104 percent
and a maximum of 108 percent of the minimum annual rental payable for the year
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<PAGE>
immediately prior to such adjustment. For example, on August 1, 1993, the
minimum annual rental shall be increased by an amount not less than $2,581.28
(4% of $64,532) and not more than $5,162.56 (8% of $64,532).
If the Index is changed so that the base year differs from that used
as of the date hereof, the Index shall be converted in accordance with the
conversion factor published by the United States Department of Labor, Bureau of
Labor Statistics. If the Index is discontinued or revised during the term, such
other government index or computation with which it is replaced shall be used
in order to obtain substantially the same result as would be obtained if the
Index had not been discontinued or revised.
On any adjustment of the rent, as herein provided, the parties shall,
at Lessor's or Lessee's request, execute an amendment to this Lease stating the
new rent.
(c) All rental as provided for herein shall be absolutely net
to Lessor. All costs, expenses, and obligations relating to the Property and
its operations by Lessee shall be the obligations of and paid for by Lessee.
(d) In addition to the minimum annual rental to be paid by
Lessee to Lessor, Lessee shall pay to Lessor (commencing with the second lease
year) at the times and in the manner hereinafter specifically set forth,
additional rent in an amount equal to the difference between the minimum annual
rental payable for each calendar quarter (after applying the CPI adjustments as
set forth above) and 11 1/2% of Lessee's gross sales (as defined below)
received by Lessee in such calendar quarter. For the purpose of the calculation
of percentage rent, the first calendar quarter of the second year of the Lease
term shall be deemed to include 61 days (August 1, 1993 to September 30, 1993).
The calendar quarters for the Lease shall end March 31, June 30, September 30
and December 31. On or before the 30th day (except for the last payment under
3.f.
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<PAGE>
below) immediately following each calendar quarter (commencing with the fifth
calendar quarter of the Lease term, which is September 30, 1993), Lessee shall
pay to Lessor the amount by which the sum computed as a percentage of Lessee's
gross sales during the prior calendar quarter exceeds the minimum annual rent
which Lessee has paid during such prior calendar quarter. Such payments of
percentage rent shall be adjusted and reconciled on a cumulative, annualized,
year-to-date basis for such calendar year, i.e., the percentage rent for the
first calendar quarter shall be based on actual gross sales; the percentage
rent for the second calendar quarter shall be based on the gross sales for the
first and second calendar quarters divided by two; the percentage rent for the
third calendar quarter shall be based on the gross sales for the first, second
and third calendar quarters divided by three, and the percentage rent for the
fourth calendar quarter shall be based on the gross sales for all four prior
calendar quarters, adjusted so that the rent payment following such fourth
calendar quarter, when added to the three prior percentage rent payments shall
total 11 1/2% of gross sales for the prior four calendar quarters less the
minimum annual rent.
Lessee recognizes that the potential for receiving percentage rent is
of significant importance to Lessor, and agrees to use reasonable efforts to
generate gross sales consistent with similar operations in the Orange County
area. In connection therewith, Lessee agrees to continually operate the
premises during its normal business hours except for a reasonable period of
time following a casualty and for periods when Lessee is making renovations or
improvements at the Property.
(e) "Gross sales" of Lessee means the gross selling price of
all merchandise or services sold, leased, licensed or delivered in or from the
Property by Lessee (including the amount of any consideration received by
Lessee
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<PAGE>
from any of its permitted subtenants, licensees and/or concessionaires),
whether on cash or credit, including the gross amount received by reason of
orders taken on the Property although filled elsewhere, excepting therefrom:
(i) any rebates and refunds to customers; (ii) proceeds from cigarette vending
machines, pay telephones, and other candy vending machines; (iii) interest,
service or sales carrying charges (including, but not limited to, credit card
service charges) or other charges, however denominated, paid by customers of
Lessee for extension of credit on sales, which were not included in the sales
price; (iv) gift certificates or vouchers not yet redeemed; (v) bulk transfer
or sale of products or merchandise; (vi) any federal, state, municipal or other
sales, "value-added," retail, excise or similar taxes paid or incurred by
Lessee, whether such taxes are collected from customers or absorbed by Lessee;
(vii) tips or gratuities; (x) proceeds of insurance policies received by
Lessee; (x) condemnation awards; and (x) sales or transfers of Lessee's trade
fixtures and equipment, leasehold estate, and/or goodwill relating thereto.
(f) Within thirty (30) days after the end of each calendar
quarter of the Lease Term, commencing with the calendar quarter ending
September 30, 1993, Lessee shall furnish to Lessor a statement in writing
showing the total "gross sales" (as such term is defined in 3.e.) made during
the preceding calendar quarter and any other calendar quarter(s) applicable to
the cumulative annualized basis with all adjustments reconciled on a
cumulative, annualized, year-to-date basis, shall accompany each such
statement, if appropriate, with a tentative payment to Lessor of the percentage
rent then due. Within sixty (60) days after the end of each four quarter
period, Lessee shall furnish to Lessor a statement showing the total gross
sales made during the preceding four-quarter period at which time a final shall
be made between Lessor and Lessee such that the total percentage rent paid for
each such four-quarter period shall be
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<PAGE>
computed and adjusted on an annual basis, and within thirty (30) days
thereafter either Lessee shall remit to Lessor any percentage rent owed by
Lessee or Lessor shall remit to Lessee any excess percentage rent paid by
Lessee, as applicable. Lessor shall have the right, upon written demand
delivered to Lessee after receipt of said annual statement, and at Lessor's
sole cost and expense, to have Lessee's records of gross sales for said four
calendar quarters inspected at Lessee's general offices during normal business
hours by a representative of Lessor's choice. If the audit shows that there is
a deficiency in the payment of any percentage rent, the deficiency shall become
immediately due and payable. The costs of the audit shall be paid by Lessor
unless the audit shows that Lessee understated gross sales by more than three
percent (2%), in which case Lessee shall pay all Lessor's costs of the audit.
For the purposes of calculating percentage rent, the last year of the Lease
Term shall be deemed to contain only the number of days between the last
succeeding calendar quarter and the date upon which the Lease term terminates.
(g) Said rentals, and all other sums which are to be paid or
repaid by the Lessee to Lessor, according to the provisions of this Lease,
shall be paid in lawful money to the United States of America to "McWhinney &
Van de Water" care of The Carlson Company, Attn: Ms. Rhonda Price, 14752 Beach
Boulevard, Suite 207, La Mirada, CA 90638, or at such other places as Lessor
may from time to time designate.
(h) Lesser shall maintain full and accurate books of account,
records, cash receipts, and other pertinent data showing its gross sales.
Lessee shall install and maintain accurate receipt-printing cash registers and
shall record on the cash registers every sale and other transaction made from
the Property. Lessee shall also furnish to Lessor copies of its quarterly
California sales and use tax returns at the time each is filed with the State
of
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<PAGE>
California. Lessee shall also furnish to Lessor copies of annual partnership
tax returns, both federal and state, which shall be held in strictest
confidence by Lessor. Such books of account, records, cash receipts, and other
pertinent data shall be kept for a period of three (3) years after the end of
each lease year. The receipt by Lessor of any statement, or any payment of
percentage rent for any period, shall not bind Lessor as to the correctness of
the statement or the payment.
(i) Lessor shall be entitled during the term pursuant to (i)
above and within three (3) years after expiration or termination of this Lease
to inspect and examine all Lessee's books of account, records, cash receipts,
and other pertinent data, so Lessor can ascertain Lessee's gross sales. Lessee
shall cooperate fully with Lessor in making the inspection. Lessor shall also
be entitled, once during each lease year and once after expiration or
termination of this Lease, to an independent audit of Lessee's books of
account, records, cash receipts, and other pertinent data to determine Lessee's
gross sales, by a representative to be designated by Lessor. The audit shall be
limited to the determination of gross sales and shall be conducted during usual
business hours. The cost of the audit shall be paid in accordance with the
terms of Paragraph 3.f. above.
(j) Lessor shall keep any information gained from such
statements, inspection, or audit confidential and shall not disclose it other
than to carry out the purposes of this Lease, except that Lessor shall be
permitted to divulge the contents of any statements in connection with any
financing arrangements or sale of Lessor's interest in the Property.
(k) Should any rental payment, including percentage rent, to
be made pursuant to this paragraph 3 above be more than five (5) days late in
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<PAGE>
payment after written notice, Lessee shall pay an additional amount of six
percent (6%) per annum on such amount from the date due until paid.
4. SECURITY DEPOSIT. At the time it deposits the balance of the first
year's rent under Section 3.a., Lessee shall also deposit an additional
$24,000.00 as a security deposit. If Lessee is in default, Lessor can, after
expiration of Lessee's period to cure the default, use the security deposit, or
any portion of it, to cure the default or to compensate Lessor for all damage
sustained by Lessor resulting from Lessee's default. Lessee shall immediately
on demand pay to Lessor a sum equal to the portion of the security deposit
expended or applied by Lessor as provided in this paragraph so as to maintain
the security deposit in the sum initially deposited with Lessor. If Lessee is
not in default at the expiration or termination of this Lease, Lessor shall
return the security deposit to Lessee. Lessor's obligations with respect to the
security deposit are those of a debtor and not a trustee. Lessor can maintain
the security deposit separate and apart from Lessor's general funds or can
commingle the security deposit with Lessor's general and other funds. Lessor
shall not be required to pay Lessee interest on the security deposit.
5. UTILITIES, TAXES AND IMPOSITIONS.
(a) Lessee agrees to pay, before the same become delinquent,
all charges for gas, electricity, heat, light, power, sewage, water, telephone,
trash removal, and other similar public services or commodities furnished to
the Property during the term of this Lease, including all installation,
connection and disconnection charges.
Lessee shall make arrangements for all utilities, including
water service, and no water shall be provided by Lessor or the adjacent
strawberry farm tenant. Lessor makes no representations about the availability
or adequacy of utilities or services. Lessee shall hold Lessor harmless from
and shall
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<PAGE>
indemnify Lessor against any claims (including attorney's fees) by the
strawberry farm tenant against Lessor in connection with acts or omissions by
Lessee impacting the existing irrigation system, a portion of which is located
on the Property.
(b) Lessee further agrees to pay before the same become
delinquent, all taxes and assessments of whatsoever kind or nature which may be
imposed during the term of this Lease upon the Property or any facilities or
personal property therein, including all so-called special assessments, and
possessory interest taxes, and every other charge, lien or expense accruing or
payable during the term of this Lease in connection with the Property, and also
all taxes, licenses, fees or charges on account of any use which may be made of
the Property or any activity conducted by Lessee thereon during the term
hereof. If at any time during the term of this Lease any new tax or excise on
rents or other new tax, however described, is levied or assessed by any
governmental agency against Lessor on account of rent reserved hereunder,
Lessee likewise shall pay and discharge such new tax or excise to the extent
that it is assessed or imposed as a direct result of Lessor's ownership of the
Property, or of rentals accruing to Lessor under this Lease; but this provision
shall not be construed in such manner as to require Lessee to pay any income
tax, franchise, estate or gift tax of Lessor.
(c) All taxes, assessments and utility charges for any
fraction of a year as of the beginning or end of the term of this Lease shall
be appropriately prorated between the parties.
(d) In the event any special tax or assessment is levied or
assessed on the Property after rent commences and which becomes due and payable
during the lease term and the delinquency date for which is prior to the
expiration of the term of the Lease (or any extension hereof) which tax or
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<PAGE>
assessment may be legally paid in installments (whether by subjecting the
Property to bond or otherwise), Lessee shall have the option to pay such tax or
assessment in installments. In the event of such election, Lessee shall be
liable only for those installments of such tax or assessment which become due
and payable during the lease term and the delinquency date for which is prior
to the expiration of the term of this Lease (or any extension hereof). Lessor
agrees to execute or join with Lessee in the execution of any application or
other instrument that may be necessary to permit the payment of such special
tax pr assessment in installments.
(e) Notwithstanding the foregoing, Lessee shall have the
right at its own cost and expense to dispute in good faith the legality or
amount of any tax or assessment by appropriate legal proceedings, provided that
Lessee shall pay such tax or assessment promptly upon a final determination of
the legality or amount thereof, shall protect Lessor and the Property against
any sale for non-payments thereof, and shall provide to Lessor on demand such
bond or other security as Lessor may reasonably require in an amount not
exceeding one and one-half times the total amount of the tax or assessment in
dispute.
(f) If, except as provided in subparagraph (e) above, Lessee
shall fail to pay when due any amount required hereby to be paid by Lessee,
Lessor may, but shall not be required to, pay the same together with any and
all interest and penalties, in which case the amount so paid by Lessor together
with interest thereon at the rate of ten percent (10%) per annum shall be due
and payable by Lessee to Lessor as additional rent hereunder on the first day
of the month next following.
6. MAINTENANCE AND REPAIRS. Throughout the term, Lessee shall, at
Lessee's sole cost and expense, maintain the Property and all improvements in
good condition and repair, ordinary wear and tear excepted, and in accordance
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<PAGE>
with all applicable laws, rules, ordinances, order and regulations of (1)
federal, state, county, municipal, and other governmental agencies and bodies
having or claiming jurisdiction and all their respective departments, bureaus
and officials; (2) the insurance underwriting board or insurance inspection
bureau having or claiming jurisdiction; and (3) all insurance companies
insuring all or any part of the Property or improvements or both. Lessee shall
promptly and diligently repair, restore, and replace as required to maintain or
comply as above, or to remedy all damage to or destruction of all or any part
of the improvements. Notwithstanding the foregoing, if the improvements are
substantially damaged or destroyed in the last two years of the Lease term, and
if Lessee elects not to repair, restore or replace the same, then either party
may terminate this Lease within ten (10) business days of such election not to
do so. Lessee shall make such election within thirty (30) days of the event
causing the damage or destruction. The completed work of maintenance,
compliance, repair, restoration, or replacement shall be equal in quality to
the condition of the improvements before the event giving rise to the work,
except as expressly provided to the contrary in this Lease. Lessor shall not be
required to furnish any services or facilities or to make any repairs or
alterations of any kind in or on the Property. Lessor's election to perform any
obligation of Lessee under this provision or Lessee's failure or refusal to do
so shall not constitute a waiver of any right or remedy for Lessee's default,
and Lessee shall promptly reimburse, defend, and indemnify Lessor against all
liability, loss, cost and expense arising from it.
Nothing in this provision defining the duty of maintenance shall be
construed as limiting any right given elsewhere in this Lease to alter, modify,
demolish, remove or replace any improvement, or as limited provisions relating
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<PAGE>
to condemnation or to damage or destruction during the final year or years of
the term.
No deprivation, impairment, or limitation of use resulting from any
event or work contemplated by this paragraph shall entitle Lessee to any
offset, abatement, or reduction in rent nor to any termination or extension of
the term.
Lessee has the right to contest by appropriate judicial or
administrative proceedings, without cost or expense to Lessor, the validity or
application of any law, ordinance, order, rule, regulation, or requirement
(hereafter called law) that Lessee repair, maintain, alter, or replace the
improvements in whole or in part, and Lessee shall not be in default for
failing to do such work until a reasonable time following final determination
of Lessee's contest. If Lessor gives notice of request to Lessee for compliance
with the law, Lessee shall first furnish Lessor a reasonably satisfactory
security to Lessor during any contest in form and amounts, reasonably
guaranteeing compliance by Lessee with the contested law and indemnifying
Lessor against all liability that Lessor may sustain by reason of Lessee's
failure or delay in complying with the law. Lessor may, but is not required to,
contest any such law independently of Lessee. Lessor may, and on Lessee's
notice of request shall, join in Lessee's contest. With the exception of normal
items used for turf grass and fuel for vehicles, Lessee agrees not to store any
toxic substances at the Property. Any fuel used for vehicles shall be stored
off the Property.
7. LESSEE'S DUTY TO CONSTRUCT NEW IMPROVEMENTS. Subject to delays
beyond reasonable control of Lessee and provided Lessee notifies Lessor of such
delay, within 180 days after execution of the Lease Lessee shall commence
construction of a golf practice facility and uses ancillary thereto. Such
construction shall be completed in a workmanlike manner thereafter. Lessor
shall have the right to approve the general plans for the golf course practice
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facility within ten (10) business days following submission thereof to The
Carlson Company.
At any time and from time to time during the term, Lessee
may, but is not obligated to, construct or otherwise make new improvements on
any part or all of the Property and to demolish, remove, replace, alter,
relocate, reconstruct, or add to any existing improvements in whole or in part,
and to modify or change the contour or grade, or both, of the land, provided
Lessee is not then in default after applicable cure period under any condition
or provision of this Lease and provided the improvements following the work are
at least equal in quality to any improvements as they were before being
demolished, removed, replaced, altered, relocated, reconstructed, modified or
changed. Notwithstanding the foregoing, Lessor shall have the right to approve
the general plans for any significant demolition, removal, replacement,
alteration, relocation, reconstruction, modification or change. All salvage
shall belong to Lessee.
Before any major work of construction, alteration, or repair
is commenced on the Property, and before any building materials have been
delivered to the Property by Lessee or under Lessee's authority Lessee shall:
Notify Lessor of Lessee's intention to commence a work of
improvement at least fifteen (15) days before commencement of any such work or
delivery of any materials; provided, however, such time frame shall be less
with respect to the initial construction of the Improvements. The notice shall
specify the approximate location and nature of the intended improvements.
Lessor shall have the right to post and maintain on the Property any notices of
non-responsibility provided for under applicable law, and to inspect the
Property in relation to the construction at all reasonable times.
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Lessee shall pay or cause to be paid the total cost and
expense of all works of improvement, as that phrase is defined in the
California Mechanics' Lien Law. No such payment shall be construed as rent.
Lessee shall not suffer or permit to be enforced against the Property or any
part of it any mechanic's, materialman's, contractor's or subcontractor's lien
arising from any work of improvement, however it may arise. However, Lessee may
in good faith and at Lessee's own expense contest the validity of any such
asserted lien, claim, or demand, provided Lessee has furnished the bond
required in California Civil Code Section 3143 (or any comparable statute
hereafter enacted for providing a bond freeing the Property from the effect of
such a lien claim).
Lessee shall defend and indemnify Lessor against all
liability and loss of any type arising out of work performed on the Property by
Lessee, together with reasonable attorney's fees and all costs and expenses
incurred by Lessor in negotiating, settling, defending or otherwise protecting
against such claims.
If Lessee does not cause to be recorded the bond described in
California Civil Code Section 3143 or otherwise protect the property under any
alternative or successor statute, and a final judgment has been rendered
against Lessee by a court of competent jurisdiction for the foreclosure of a
mechanic's, materialman's, contractor's or subcontractor's lien claim and if
Lessee fails to stay the execution of the judgment by lawful means or to pay
the judgment, Lessor shall have the right, but not the duty, to pay or
otherwise discharge, stay or prevent the execution of any such judgment or lien
or both. Lessee shall reimburse Lessor for all sums paid by Lessor under this
paragraph, together with all Lessor's reasonable attorney's fees and costs,
plus interest on those sums, fees, and costs at the rate of ten percent per
year from the date Lessor pays such lien amount.
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On completion of any substantial work of improvement during
the term, Lessee shall file or cause to be filed a notice of completion. If,
ten (10) days after written notice has been given to Lessee to file such
notice, Lessee fails to do so, then in that event Lessee hereby appoints Lessor
as Lessee's attorney-in-fact to file the notice of completion on Lessee's
failure to do so after the work of improvement has been substantially
completed. All improvements constructed on the Property by Lessee as permitted
by this Lease shall be owned by Lessee until expiration of the term or sooner
termination of this Lease. Lessee shall not, however, remove any improvements
from the Property, except as permitted by this Lease. The parties covenant for
themselves and all persons claiming under them that the improvements are real
property.
Except as set forth herein, all improvements on the Property
at the expiration of the term or sooner termination of this Lease shall without
compensation to Lessee, then become Lessor's property free and clear of all
claims to or against them by Lessee or any third person. Lessee shall have the
right to remove the modular building, all trade fixtures and all personal
property within said building except in the event Lessee is then in default
under the terms of this Lease.
At the expiration or earlier termination of the Lease, Lessee
shall, at the request of Lessor, remove the modular building, trade fixtures
and personal property and restore the Property to the condition it was in prior
to the commencement date.
8. PUBLIC LIABILITY AND LIABILITY INSURANCE.
(a) Lessee shall hold Lessor free and harmless from all
expenses, liability and claims for damages including attorneys' fees, by reason
of any injury to any person or persons (including Lessee) or property of any
kind
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whatsoever and to whomsoever belonging (including Lessee's property), from any
cause or causes whatsoever, in, upon or in any way connected with the Property
or the use of occupancy thereof during the term of this Lease other than such
claims, damages or injuries arising out of the negligence or willful misconduct
of Lessor.
(b) During the term of this Lease, Lessee shall carry
comprehensive public liability insurance in the name of Lessee, naming Lessor
as an additional insured, against any liability for injury to or the death of
persons resulting from any occurrence in or about the Property and for damage
to property, in such amounts as may from time to time be customary with respect
to similar properties in the same area, but in no event less than $2,000,000
for any one person killed or injured, or less than $2,000,000 for any one
accident or $2,000,000 for damage or injury to property. Lessee shall increase
the liability insurance coverage required under this Lease to take account of
increases in the cost of living. True copies of said policy or policies or
certificates thereof showing the premium thereon to have been paid shall be
delivered to Lessor upon request, provided that the certificates will be
provided without request. Such policies shall not be cancelable, nor shall
coverage be reduced by the insurer without first giving at least thirty (30)
days prior written notice to Lessor. In the event Lessee fails to procure and
keep in force such insurance, Lessor may procure such insurance and the cost
thereof, together with interest at ten percent (10%) per annum, shall be
payable immediately by Lessee to Lessor as additional rent on the first day of
the month next following the month in which Lessor makes such payment. Such
insurance may be provided by a so-called blanket insurance policy or policies
covering the Property so long as the coverage on the Property is at all times
at least as great as required by this subparagraph (b).
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(c) Westminster Memorial Park, a non-profit corporation, the
McWhinney & Van de Water Tenants-in-Common and The Carlson Company or successor
Property manager shall be named as insureds or additional insureds on all
policies required to be carried by Lessee.
9. SURRENDER OF PREMISES OR TERMINATION. At the expiration or earlier
termination of the term, Lessee shall surrender to Lessor possession of the
Property. Surrender or removal of improvements, fixtures, trade fixtures, and
improvements shall be as provided in Paragraph 7 hereinabove.
10. ALTERATIONS AND IMPROVEMENTS.
(a) Notwithstanding any other provisions contained in this
Lease to the contrary, Lessee may, upon written consent of Lessor being
obtained and at its sole cost and expense, construct or otherwise make
improvements on any part or all of the Property and replace, alter,
reconstruct, or add to any Improvement in whole or in part, during the term of
this Lease, provided that Lessee is not in default of the terms hereof and the
use is consistent herewith.
(b) Lessee shall give Lessor notice of commencement of the
Improvements prior thereto. All work shall be completed promptly and in a good
workmanlike manner and in compliance with the plans and specifications which
shall be delivered to Lessor, and in compliance with all applicable permits and
authorizations and building and zoning laws and with all of the laws,
ordinances and regulations of all government authorities having or asserting
jurisdiction over the construction of the Improvements. Lessee shall pay
promptly the costs of such work, so that the Property and the Improvements
located thereon shall at all times be free of liens for services performed,
labor and materials supplied or claimed to have been supplied.
11. INDEMNIFICATION OF LESSOR. Lessee shall hold and save Lessor
harmless during the full term of this lease hereof from any and all loss or
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damage in or to the Property. Lessee shall also hold and save Lessor harmless
from any and all loss or damage for personal injuries received by any person or
persons, howsoever caused or arising, in or upon the Property or any
Improvements situated thereon, or the appurtenances thereto, together with
reasonable attorneys' fees and expenses and court costs, if any, incurred by
Lessor, advisor to Lessor, with respect to any and all such claims for loss,
damages or injury to persons or property.
12. MECHANIC'S AND OTHER LIENS. Lessee shall not suffer or permit to
be enforced against Lessor's title to the Property, or any portion thereof, any
lien, claim or demand arising from any work of construction, repair,
restoration, maintenance or removal as herein provided, or otherwise arising,
and Lessee shall pay all such liens, claims and demands before any action is
brought to enforce the same against said land; and Lessee agrees to hold Lessor
and said land free and harmless from all liability for any and all liens,
claims or demands, together with all costs and expenses, including, but not
limited to, reasonable attorneys' fees and court costs incurred by Lessor in
connection therewith. Lessor shall have the right at any time to post and
maintain on the Property such notices as may be necessary to protect Lessor
against liability for all such liens. Notwithstanding anything to the contrary
contained herein, if Lessee shall in good faith contest the validity of any
such lien, claim or demand, then Lessee shall, at its expense, defend itself
and Lessor against the same and shall pay and satisfy any adverse judgment that
may be rendered thereon before the enforcement thereof against Lessor or the
Property. Lessee shall procure and record a bond freeing the Property from the
effect of any such lien or claim or action thereon.
13. DEFAULT. If (a) Lessee defaults hereunder in the payment of rent
or any other sums due hereunder, and such default continues for a period of ten
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(10) days after written notice has been given by Lessor to Lessee, or if (b)
Lessee defaults in the faithful performance of any other agreement or condition
herein to be performed by Lessee, and if such default continues for a period of
thirty (30) days after written notice has been given by Lessor to Lessee
specifying the default complained of (unless the default, by its notice, will
require more than thirty (30) days to cure and Lessee has commenced actions
necessary to cure within said thirty (30) day period and is diligently pursuing
same to completion), of if (c) any proceedings are filed or action taken by or
against Lessee to declare Lessee a bankrupt or to appoint a receiver or trustee
for Lessee or to reorganize Lessee or to make an assignment for the benefit of
the creditors of Lessee or to do any other act of a similar nature or purpose
under any state or federal bankruptcy or insolvency laws, and if such
proceedings or actions shall not have been discharged within ninety (90) days
thereafter, then, in any of the above listed events, Lessor may declare a
breach of this Lease by written notice to Lessee, and Lessor may, at Lessor's
option, exercise any one or more of the rights available to a landlord under
the laws of the State of California, consecutively, cumulatively, or
concurrently, including, without limitation, the right to the remedies as set
forth below.
If any default by Lessee shall continue uncured, following notice of
default as required by this Lease, for the period applicable to the default
under the applicable provision of this Lease, Lessor has the following remedies
in addition to all other rights and remedies provided by laws or equity, to
which Lessor may resort cumulatively or in the alternative:
A. Termination. Lessor may at Lessor's election terminate
this Lease by giving Lessee notice of termination. On the giving of the notice,
all Lessee's rights in the Property and in all improvements shall terminate.
Promptly after notice of termination, Lessee shall surrender and vacate the
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Property and Lessor may reenter and take possession of the Property and all
remaining improvements and eject all parties in possession or eject some and
not others or eject none. Termination under this paragraph shall not relieve
Lessee from the payment of any sum then due to Lessor or from any claim from
damages previously accrued or then accruing against Lessee.
B. Re-entry Without Termination. Lessor may at Lessor's
election reenter the Property, and, without terminating this Lease, at any time
and from time to time relet the Property and improvements or any part or parts
of them for the account and in the name of Lessee or otherwise. Lessor may at
Lessor's election eject all persons or eject some and not others or eject none.
Lessor shall apply all rents from reletting as in the provision on assignment
of subrents. Any reletting may be for the remainder of the term or for a longer
or shorter period. Lessor may execute any leases made under this provision
either in Lessor's name or in Lessee's name and shall be entitled to all rents
from the use, operation, or occupancy of the property or improvements or both.
Lessee shall nevertheless pay to Lessor on the due dates specified in this
Lease the equivalent of all sums required of Lessee under this Lease, plus
Lessor's expenses, less the avails of any reletting or attornment. No act by or
on behalf of Lessor under this provision shall constitute a termination of this
Lease unless Lessor gives Lessee notice of termination in writing.
C. Recovery of Rent. Lessor shall be entitled at Lessor's
election to each installment of rent or to any combination of installments for
any period before termination, plus interest at the rate of 10 percent per year
from the due date of each installment. Avails of reletting or attorned subrents
shall be applied, when received, as follows: (1) to Lessor to the extent that
the avails for the period covered do not exceed the amount due from and charged
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to Lessee for the same period, and (2) the balance to Lessee. Lessor shall make
reasonable efforts to mitigate Lessee's liability under this provision.
D. Damages. Lessor shall be entitled at Lessor's election to
damages in the following sums: (1 ) all amounts that would have fallen due as
rent between the time of termination of this Lease and the time of the claim,
judgment, or other award, less the avails of all relettings and attornments and
less all amounts by which Lessor should reasonably have mitigated those rental
losses plus interest on the balance at the rate of 10 percent per year; and (2)
the "worth" at the time of the claim, judgment, or other award, of the amount
by which the unpaid rent for the balance of the term exceeds the then fair
rental value of the Property at the lower of the fair rental value as then
encumbered by the Lease and improvements and the fair rental value unencumbered
by the Lease and improvements. "Worth," as used in this provision, is computed
by discounting the total at the discount rate of the Federal Reserve Bank of
San Francisco at the time of the claim, judgment, or award, plus one percent.
E. Lessor's Right to Cure Lessee's Default. After expiration
of the applicable time for curing a particular default, or before the
expiration of that time in the event of emergency, Lessor may at Lessor's
election, but is not obligated to, make any payment required of Lessee under
this Lease or under any note or other document pertaining to the financing of
improvements or fixtures on the Property, or perform or comply with any
covenant or condition imposed on Lessee under this Lease or any such note of
document, and the amount so paid plus the reasonable cost of any such
performance or compliance, plus interest on such sum at the rate of 10 percent
per year from the date of payment, performance, or compliance (herein called
act), shall be deemed to be additional rent payable by Lessee with the next
succeeding installment of rent.
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No such act shall constitute a waiver of default or of any remedy for default
or render Lessor liable for any loss or damage resulting from any such act.
14. CONDEMNATION. The following definitions apply in construing
provisions of this Lease relating to a taking of or damage to all or any part
of the Property or improvements or any interest in them by eminent domain or
inverse condemnation:
(a) Taking means the taking or damaging, including severance
damage, by eminent domain or-by inverse condemnation or for any public or
quasi-public use under any statute. The transfer of title may be either a
transfer or conveyance to the condemning agency or entity under threat of
condemnation, in avoidance of an exercise of eminent domain, or while
condemnation proceedings are pending. The taking shall be considered to take
place as of the later of (i) the date actual physical possession is taken by
the condemnor or (ii) the date on which the right to compensation and damages
accrues under the law applicable to the Property.
(b) Total taking means the taking of the fee title to all the
Property and the improvements on the Property, which shall be considered to
include any off-site improvements effected by Lessee to serve the Property or
the improvements on the Property.
(c) Substantial taking means the taking of so much of the
Property or improvements or both that one or more of the following conditions
results: The remaining Property would not be economically and reasonably usable
by Lessee; the parking area is reduced to a level that severely impacts
Lessee's business; Lessee's business on the Property could not be operated at a
level of profit reasonably close to that existing before the taking
constituting the causative event; the portion of the Property not so taken
cannot be so repaired or reconstructed, taking into consideration the amount of
the award available
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for repair or reconstruction, as to constitute a complete, rentable structure,
capable of producing a proportionately fair and reasonable net annual income
after payment of all operating expenses, the fixed rent (as reduced as a result
of the taking), additional rent, and all other charges payable under this
Lease, and after performance of all covenants and conditions required of Lessee
by law and under this Lease.
(d) Partial taking means any taking of the fee title that is
not either a total or a substantial taking.
(e) Improvements means all products of skill, artifice, plan,
or design for construction on, modification of, or planned use of existing
structures, natural or cultivated, or earth contours on the Property, including
but not limited to: buildings, structures, fixtures, fences, swimming pools,
golf courses, utility installations, excavations, surfacing, water banks or
channels, and grading; fruit, nut-bearing, and ornamental trees, bushes, and
vines whether occurring on the Property naturally or emplaced by human design
or effort, and whether coming into being on the Property before or after
commencement of the term; landscaping, ground cover, crops, planting and earth
contours forming part of a landscaping design; and artistic and ornamental
components of any of the above.
(f) Notice of intended taking means any notice or
notification on which a reasonably prudent man would rely and which he would
interpret as expressing an existing intention of taking as distinguished from a
mere preliminary inquiry or proposal. It includes but is not limited to the
service of a condemnation summons and complaint on a party to this Lease
received from the condemning agency or entity a notice of intent to take, in
writing, containing a description or map of the taking reasonably defining the
extent of the taking.
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<PAGE>
(g) Award. means compensation paid for the taking whether
pursuant to judgment or by agreement or otherwise.
(h) Notice to Other Party. The party receiving any notice of
the kinds specified below shall promptly give the other party notice of the
receipt, contents, and date of the notice received:
(i) Notice of intended taking;
(ii) Service of any legal process relating to condemnation
of the Property or improvements;
(iii) Notice in connection with any proceedings or
negotiations with respect to such a condemnation; or
(iv) Notice of intent or willingness to make or negotiate a
private purchase, sale, or transfer in lieu of condemnation.
(i) Lessor, Lessee, and all persons and entities holding
under Lessee shall each have the right-to represent his or its respective
interest in each proceeding or negotiation with respect to a taking or intended
taking and to make full proof of his or its claims. No agreement, settlement,
sale, or transfer to or with the condemning authority shall be made without the
consent of Lessor and Lessee. Lessor and Lessee each agrees to execute and
deliver to the other any instruments that may be required to effectuate or
facilitate the provisions of this Lease relating to condemnation.
A. Total or Substantial Taking. On a total taking, Lessee's
obligation to pay rent shall terminate on, and Lessee's interest in the
leasehold shall continue until, the date of taking.
B. Substantial Taking. If the taking is substantial under the
definition appearing above, Lessee may, by notice to Lessor given within 30
days after Lessee receives notice of intended taking, elect to treat the taking
as a substantial taking. If Lessee does not so notify Lessor, the taking shall
be
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deemed a partial taking. If Lessee gives such notice and Lessor gives Lessee
notice disputing Lessee's contention within 15 days following Lessee's notice,
the dispute shall be promptly determined by arbitration. If Lessor gives no
such notice, the taking shall be considered a substantial taking. A substantial
taking shall be treated as a total taking if (1 ) Lessee delivers possession to
Lessor within 30 days after determination that the taking was a substantial
taking, and (2) Lessee is not in default under the Lease and has complied with
all Lease provisions concerning apportionment of the award. If these conditions
are not met, the taking shall be treated as a partial taking.
Lessee may continue to occupy the Property and improvements
until the condemnor takes physical possession. However, at anytime following
notice of intended total taking, or within the time limited specified for
delivering possession in the provision on substantial taking, Lessee may elect
to deliver possession of the Property to Lessor before the actual taking. The
election shall be made by notice declaring the election and covenanting to pay
all rents required under this Lease to the date of taking. Lessee's right to
apportionment of or compensation from the award shall then accrue as of the
date that Lessee goes out of possession.
On a total taking, all sums, including damages and interested
awarded for the fee or the leasehold or both shall be deposited promptly with
First American Title Insurance Company, Santa Ana, California, as escrow agent
and shall be distributed and disbursed in the following order of priority:
First, all real and personal property taxes constituting a
lien on the Property or improvements.
Second, the balance due under any notice and leasehold
mortgage to which the fee is not subordinated.
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Third, the balance due under any note and mortgage
encumbering the fee but not having priority over the Lease, provided that the
amount so paid shall be deducted from any amounts otherwise due to Lessor.
Fourth, to Lessor a sum equal to the value of the Property
taken, valued as unimproved land exclusive of improvements and unburdened by
all leases and subleases.
Fifth, to Lessor any expenses or disbursements reasonably
paid or incurred by or on behalf of Lessor for or in connection with the
condemnation proceedings.
Sixth, to Lessee the balance of the award.
In the event of a partial taking, this Lease shall remain in
full force and effect, covering the remaining portion of the Property, and the
minimum annual rental shall be equitably adjusted downward in proportion to the
extent to which Tenant's business has been adversely affected as a result of
such taking. In the event the parties are unable to agree on the equitable
adjustment, such matter shall be submitted to arbitration.
Promptly after a partial taking, at Lessee's expense and in
the manner specified in provisions of this Lease relating to maintenance,
repairs, and alterations, Lessee shall repair, alter, modify, or reconstruct
the improvements (hereafter referred to as restoring) so as to make them a
practical whole.
Lessee is relieved of the duty to, but may, repair, alter,
modify, or reconstruct the improvements if a partial taking occurs during the
final five years of the term. The conditions for relief are:
(1) The work of repair, alteration, modification, or
reconstruction would constitute a "major" repair or alteration as defined in the
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provisions of this Lease relating to maintenance, repair, and alteration of
improvements;
(2) Within 60 days after Lessee receives notice of
intended taking, Lessee gives Lessor notice of election to claim the relief
described in this provision;
(3) Lessee complies with all conditions described as
conditions in the provisions of this Lease relating to damage or destruction
during the final years of the term as provided in paragraph C below. If the
conditions described in this provision are met, the award shall be apportioned
as for a substantial taking, applying the requirements of this provision
relating to Lessee's obligations; provided Lessee's right, title, and interest
in the land, improvements, and leasehold estate shall continue until the taking
is completed by deed, contract, or final order of condemnation.
If all the foregoing conditions for relief are satisfied, the
cost of such repair, alteration, modification, or reconstruction shall be
deducted from Lessee's share of the award and paid to any leasehold mortgagee
demanding it by notice within 30 days after Lessee's notice of election, and
otherwise to Lessor.
On a partial taking, all sums, including damages and
interest, awarded for the fee title or the leasehold or both, shall be
distributed and disbursed in the following order or priority:
First, to the cost of restoring the leasehold improvements,
plus any amount assessed, awarded, paid, or incurred to remove or relocate
subtenants, plus any amount awarded for detriment to business.
Second, to Lessor a sum equal to the total award less the sum
of:
(a) Any award that may be made for the taking of
or injury to Lessee's improvements; and
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(b) Any award on account of any cost or loss that Lessee
may sustain in the removal and relocation of Lessee's chattels and trade
fixtures; and
(c) Any portion of the award to Lessee for anticipated or
lost profits or damages because of detriment to Lessee's business or any
special damages of Lessee; if no portion of the damages contained in this
subparagraph c are included in the total award for taking the fee title, Lessee
shall have the absolute right to prosecute Lessee's own claim for damages as
permitted by law and to receive and keep all proceeds from any claim of Lessor;
and
(d) The market value of any option to buy and of any option
to renew or extend the term contained in the Lease shall be retained by Lessee.
On the taking, other than a temporary taking, of less than a
fee title interest in the Property or improvements or both, the question
whether the taking is total, substantial, or partial, and the effects on term,
rent, and apportionment of award shall be deter,pined by arbitration if the
parties cannot otherwise agree in writing.
On any taking of the temporary use of all or any part or
parts of the Property or improvements or both for a period, or of any estate
less than a fee, ending on or before the expiration date of the term, neither
the term nor the rent shall be reduced or affected in any way, and Lessee shall
be entitled to any award for the use or estate taken. If a result of the taking
is to necessitate expenditures for changes, repairs, alterations,
modifications, or reconstruction of the improvements to make them economically
viable and a practical whole Lessee shall receive, hold, and disburse the award
in trust for such work. At the completion of the work and the discharge of the
Property and improvements from all liens and claims, Lessee shall be entitled
to any surplus and shall be liable for any deficit.
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If any such taking is for a period extending beyond the
expiration date of the term, the taking is for a period extending beyond the
expiration date of the term, the taking shall be treated under the foregoing
provisions for total, substantial, and partial takings.
C. Lessee must comply with the following conditions to be
relieved of duty to repair, alter, modify or reconstruct the improvements if
partial taking occurs during final five years of the term.
(a) Give notice to Lessor of its intention to be relieved
of its duty to repair, alter, modify or reconstruct the improvements.
(b) Is not in default after lapse of applicable cure
periods under any provision or condition of this Lease.
(c) Continues to make all payments when due as required by
the provisions of this Lease, provided that Lessor may, by notice given at any
time after Lessee's notice of the damage or destruction, elect to terminate the
Lease at a date stated in Lessor's notice and to forgive all rent for the
period following that date.
(d) Pays in full, or has paid in full, any outstanding
indebtedness incurred by Lessee and secured by an encumbrance or encumbrances
on the leasehold.
(e) Delivers possession of the Premises to Lessor and
quitclaim s all right, title, end interest in the land and improvements if, and
promptly after, ceasing to do business on the property.
(f) Causes to be discharged all liens and encumbrances
resulting from any act or omission of Lessee.
(g) Removes or deposits the cost of removing all fixtures
and improvements.
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D. All references in this Section to the value of the
Property shall be the value of the Property for its highest and best use.
15. LESSOR'S RIGHT OF ENTRY. Upon reasonable prior notice from Lessor
to Lessee, Lessee shall permit Lessor and its agents to enter upon and into the
Property and Improvements at all reasonable times for purposes of inspection of
the Property and Improvements and posting notices of non-responsibility or
non-liability for repairs, alterations, replacements or improvements.
16. BROKERS. Lessor and Lessee warrant to each other that there are no
brokers who are due a fee as a result of this Lease other than The Carlson
Company. Lessor agrees to indemnify Lessee against any claims by The Carlson
Company, and Lessee agrees to indemnify Lessor against any claims for a
commission by any other broker.
17. ESTOPPEL CERTIFICATE. Lessor and Lessee at any time, or from time
to time, at the request of the other will execute, acknowledge and deliver to
the requesting party a certificate in recordable form certifying (i) whether
this Lease is unmodified and in full force and effect (or, if there have been
modifications, whether the same is in full force and effect as modified and
stating the modifications), (ii) whether or not there are then existing any
defaults, offsets or defenses known to Lessor or Lessee or which Lessor or
Lessee has reason to know or which in the exercise or reasonable care Lessor or
Lessee should know, against the enforcement of any provision of this Lease,
(and, if so, specifying the same) and (iii) the dates, if any, to which the
rental or other charges have been paid in advance.
18. RECORDATION OF ABSTRACT ONLY. This Lease shall not be recorded;
only a memorandum of this Lease shall be recorded. The parties shall execute
the memorandum in form and substance as required by a title insurance company
insuring Lessee's leasehold estate or the interest of any leasehold mortgagee
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or fee mortgagee, and sufficient to give constructive notice of the Lease to
subsequent purchasers and mortgages.
19. ASSIGNMENT AND SUBLETTING.
a. Lessee may not sublease the Property or any portion
thereof, but Lessee shall have the absolute right to assign as set forth below.
Except as otherwise provided herein, Lessee shall not assign Lessee's rights or
interest under this Lease without the prior written consent of Lessor. It shall
not be deemed to be unreasonable for Lessor to withhold or delay Lessor's
consent to an assignment where the proposed assignee does not have the
financial capability of fulfilling Lessee's obligations under this Lease or the
experience in operating a golf practice facility in a successful manner. Any
other reason shall be deemed to be unreasonable.
b. Notwithstanding the provisions of Section (a) hereof, none
of the following circumstances shall constitute an assignment of this Lease
requiring the consent of Lessor: (a) if Lessee or any of its assignees is a
limited partnership, a transfer of any limited partnership interests therein,
(b) an assignment of this Lease to another limited partnership or general
partnership with one or more of the same general partners, or (c) an assignment
of this Lease to a legal entity which is either (i) the successor by merger,
restructure or otherwise, to all or substantially all of Lessee's rights and
liabilities, or (ii) controlling, controlled by or under common control with
Lessee.
c. In the event Lessee contemplates making an assignment for
which Lessor's consent is required, Lessee shall give fifteen (15) days prior
written notice thereof to Lessor, and shall furnish to Lessor such pertinent
information as to the financial condition and quality of operations of the
proposed assignee
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as Lessee believes justifies consent in accordance with the provisions of
paragraph 19.a.
20. NO PARTNERSHIP. Anything contained herein to the contrary
notwithstanding, Lessor does not in any way or for any purpose become a partner
of Lessee in the conduct of its business, or otherwise, or a joint venturer or
member of a joint enterprise with Lessee hereunder.
21. NON-DISTURBANCE AND SUBORDINATION. Lessor hereby covenants that
Lessee shall have the right of quiet possession and non-disturbance of the
Property so long as Lessee shall pay the rent payable under this Lease and
substantially observe and perform all of the material provisions of this Lease.
This Lease has and shall continue to have priority over any encumbrance
affecting the Property and recorded after the date of this Lease. If, however,
a lender requires that this Lease be subordinate to any encumbrance, this Lease
shall be subordinate to that encumbrance if Lessor first obtains from such
lender ("Lender") a written agreement known as a non-disturbance agreement, in
recordable form, that provides substantially the following:
a. In the event of foreclosure of said deed of trust, Lender
will not join Lessee in any such foreclosure proceeding so long as Lessee is
not in default beyond applicable cure periods under any of the material terms,
covenants and conditions of the Lease;
b. It is the express intent of the parties hereto that
neither (i) a foreclosure of said deed of trust, (ii) the exercise of the power
of sale or the exercise of any other remedies provided therein, or provided in
any other instruments securing the indebtedness secure$3 by said deed of trust,
nor (iii) the delivery of a deed in lieu of foreclosure, shall, in and of
itself, or by operation of law, result in termination of or otherwise affect
the Lease, but lender and any purchaser or other grantee upon foreclosure of
said deed of trust
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or conveyance in lieu of foreclosure shall thereby automatically succeed to the
position of Lessor under the Lease;
c. If, by dispossession, foreclosure, exercise of power of
sale, or by any other means whatsoever, Lender, its successors or assigns, or
any purchaser at a foreclosure sale or otherwise, shall come into possession of
or become the owner of the Property demised by this Lease, then such person
shall succeed to the interest of Lessor under the lease and, if Lessee is not
then in default beyond applicable cure periods under the material terms,
conditions and provisions of the Lease, the Lease shall remain in effect as a
lease of the Property, together with all of the rights and privileges therein
contained, between such person and Lessee for the balance of the term of the
Lease between Lessor and lessee, plus any unexercised extension or renewal
options, if Lessee so elects, Lessee agrees to attorn to and accept such person
as Lessor under the lease, and to be bound by and to perform all of the
obligations imposed by the Lease upon Lessee herein, and Lenders, its
successors and assigns, or any purchaser at a foreclosure or trustee's sale or
otherwise shall not disturb the possession of Lessee, and shall be bound by all
of the obligations imposed by the Lease upon Lessor herein;
d. Upon the written request of either Lessee or Lender given
to the other at the time of a foreclosure of said deed of trust or sale under
power of sale therein contained or conveyance in lieu of foreclosure, and if no
default beyond applicable cure periods then exists under the material terms,
conditions and provisions of this lease, Lessee and Lender agree to execute a
new lease of the Property upon the same terms and conditions as this Lease,
which new lease shall cover any unexpired term of this Lease existing prior to
such foreclosure, trustee's sale or conveyance in lieu of foreclosure, plus an
unexercised extension or renewal options, if Lessee so elects.
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22. CONSENTS AND APPROVALS. In all cases where a party's consent or
approval is required, such party agrees not to unreasonably or untimely
withhold such consent or approval, and if a period of time for such consent is
specified, the same shall be deemed given if not specifically denied within
such time period.
23. MISCELLANEOUS.
a. The captions and paragraph headings of this Lease are
inserted only as a matter of convenience and for reference, and are not a part
of this Lease and in no way define, limit or describe the scope of this lease
of the intent of any provision thereof.
b. The neuter gender includes the feminine and masculine, the
masculine includes the feminine and neuter, and the feminine includes the
neuter, and each include corporation, partnership, or other legal entity when
the context so requires. The singular number includes the plural whenever the
context so requires.
c. Time is of the essence of the obligations of the parties
hereto.
d. The invalidity of any provision of this Lease as
determined by a court of competent jurisdiction shall in no way affect the
validity of any other provision hereof.
e. Should any dispute arise between the parties hereto or
their legal representatives, successors or assigns concerning any provision of
this Agreement or the rights and duties of any person in relation thereto, the
party prevailing in such dispute shall be entitled, in addition to such other
relief that may be granted, to a reasonable sum as and for their or his or its
attorneys fees and legal costs in connection with such dispute.
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f. The parties agree that this Lease shall be construed and
enforced in accordance with the laws of the State of California.
g. If Lessee remains in possession of the Property or any
part thereof after the expiration of the term hereof without the express
written consent of Lessor, such occupancy shall be a tenancy from month to
month rental in the amount of the last monthly rental plus all other charges
payable hereunder, and upon all the terms thereof applicable to a
month-to-month tenancy.
h. The provisions of this Agreement have been negotiated by
all of the parties hereto and said Agreements shall be deemed to have been
drafted by all such parties.
i. The failure of Lessor or Lessee to seek redress for
violation of, or to insist upon, the strict performance of, any covenant or
condition- of this Lease, shall not be deemed a waiver thereof or prevent a
subsequent act, which would have originally constituted a violation, from
having all the force and effect of an original violation.
j. This Lease contains the entire agreement between Lessor
and Lessee and any agreement hereafter made shall be ineffective to change,
modify, discharge or effect an abandonment of it in whole or in part unless
such agreement is in writing and signed by the party against whom enforcement
of the change, modification, discharge or abandonment is sought. This Lease
supersedes all prior negotiations, understandings, representations, and
agreements.
k. As used in this Lease, notice includes but is not limited
to the communication of notice, request, demand, approval, statement, report,
acceptance, consent, waiver and appointment. No notice of the exercise of any
option or election is required unless the provision giving the election or
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<PAGE>
option expressly requires notice. Unless the provisions of this Lease on rent
direct otherwise, rent shall be sent in the manner provided for giving notice.
l. This Agreement shall inure to the benefit of, and shall be
binding upon, the parties hereto and their respective legal representatives,
successors and assigns.
m. The remedies set forth herein are cumulative, and by the
exercise of a particular remedy, a party is not foreclosed or limited in any
fashion to exercise the remedies set forth in this Lease or in law.
n. Should, for any reason Lessor accept the rental payment or
other sums from a party other than Lessee, that act of tendering and accepting
such rent or other amount shall not act to create a position with respect to
the Lease or the Property on behalf of such tendering person or entity, other
than the position specifically set forth in this Lease.
o. The interests of Lessor and Lessee shall not merge unless
agreed to in writing by the then affected parties.
p. Lessee acknowledges that Lessor has made not
representations or warranties with respect to the Property or its current or
future use and Lessee acknowledges that it has relied upon its independent
investigation and knowledge of real estate transactions as the sole basis for
entering into this Lease.
q. Lessee shall, at Lessee's sole costs and expense, comply
with all of the requirements, laws and ordinances of all municipal, county,
state and federal or other authorities now in force or which may hereafter be
in force pertaining to Lessees' use of said Property or any portion hereof and
shall faithfully observe in the use of the Property, all municipal, and count
laws and ordinances and state and federal statutes and laws now in force or
which may hereafter be in force with respect to such use. The judgment of any
court of
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<PAGE>
competent jurisdiction of the admission of Lessee in any action or proceeding
against Lessee, whether Lessee be a party thereto or not, that Lessee has
violated any such ordinance, law or statute in the use of the Property, shall
be conclusive of that fact as between Lessor and Lessee.
r. With the exception of the notice requirements under
Section 15 of this Lease, all notices must be in writing; provided that no
writing other than the check or other instrument representing the rent payment
itself need accompany the payment of rent.
s. Notice is considered given either (a) when delivered in
person to the recipient named as below, or (b) when deposited in the United
States mail in a sealed envelope or container, either registered or certified
mail, return receipt requested, postage and postal charges prepaid, addressed
by name and address to the party or person intended as follows:
To Lessor: Eric R. Van de Water, Esq.
GRIFFITH & THORNBURGH 8 East Figueroa
Street - 3rd Floor Post Office Box 9 Santa
Barbara, CA 93102-0009
and
Sean McWhinney
Post Office Box 2526
Huntington Beach, CA 92647
With a copy to:
The Carlson Company
Attn: Ms. Rhonda Price
14752 Beach Boulevard, Suite 207
La Mirada, CA 90638
To Lessee: c/o USA GOLF CENTERS, INC.
3501 Jamboree, South Tower, Suite 602
Newport Beach, CA 92660
Attention: Thomas Utman
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<PAGE>
t. Either party may, by notice given at any time or from time
to time, require subsequent notices to be given to another individual person,
whether a party or an officer or representative, or to a different address, or
both. Notices given before actual receipt of notice of change shall not be
invalidated by the change.
u. If none of the recipients named in the latest designation
of recipient is available for delivery in person, and if the notice addressed
by mail to each recipient named in the latest designation of recipient is
returned to the sender undelivered, notice shall be sufficient if sent by mail
as above to the party as named in this Lease, unless the name or identity of
the party has changed as permitted in this Lease and proper notice of the
change has been given, in which event the notice shall be sufficient if sent by
mail as above to the party named in the latest notice designating the party,
and the notice is considered given when the first attempt to give notice was
property made.
v. This Lease may be executed in counterparts, and all
counterparts together shall be construed as one document.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the date set forth above.
"LESSOR":
WESTMINSTER MEMORIAL PARK, a
California non-profit corporation
DATED: August __, 1992 By:_______________________________________
Stephen T. Conley, President
DATED: August __, 1992 By:_______________________________________
RODERICK C. McWHINNEY
DATED: August __, 1992 By:_______________________________________
EMILY McWHINNEY
DATED: August __, 1992 By:_______________________________________
SEAN McWHINNEY, Successor in
Interest to Derek C. McWhinney
DATED: August __, 1992 By:_______________________________________
DEREK C. McWHINNEY (with respect to
all of his right, title and interest)
DATED: August __, 1992 By:_______________________________________
ERIC R. VAN DE WATER
DATED: August __, 1992 By:_______________________________________
ERIC R. VAN DE WATER as custodian for
Anne F. Van de Water
DATED: August __, 1992 By:_______________________________________
ERIC R. VAN DE WATER as custodian for
Brooke E. Van de Water
DATED: August __, 1992 By:_______________________________________
JAN POLLARD
DATED: August __, 1992 By:_______________________________________
RODERICK C. McWHINNEY
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<PAGE>
DATED: August __. 1992 By:_______________________________________
EMILY McWHINNEY
DATED: August __, 1992 By:_______________________________________
SEAN McWHINNEY, Successor in
Interest to Derek C. McWhinney
DATED: August __, 1992 By:_______________________________________
DEREK C. McWHINNEY (with respect to
all of his right, title and interest)
DATED: August __, 1992 By:_______________________________________
ERIC R. VAN DE WATER
DATED: August __, 1992 By:_______________________________________
ERIC R. VAN DE WATER as custodian for
Anne F. Van de Water
DATED: August __, 1992 By:_______________________________________
ERIC R. VAN DE WATER as custodian for
Brooke E. Van de Water
DATED: August __, 1992 By:_______________________________________
JAN POLLARD
DATED: August __, 1992 By:_______________________________________
JAN POLLARD as custodian for
Lewis C. Pollard III
LESSEE":
USA GOLF CENTERS LTD. 2, a California
Limited Partnership
By: USA Golf Centers, a California
corporation, General Partner
DATED: August_, 1992 By:_______________________________________
Thomas L. Utman
President
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<PAGE>
UNCONDITIONAL GUARANTEE
OF LESSEE'S OBLIGATIONS UNDER LEASE
For good and adequate consideration, the receipt of which is
acknowledged, THOMAS L. UTMAN ("Guarantor") hereby unconditionally guarantees
the full and punctual performance of all of the obligations of the Lessee and
any subtenants or assignees (collectively "Lessee") under the foregoing Lease.
Upon failure by Lessee to make any payment or to perform any
obligation under the Lease, Guarantor shall forthwith on demand pay the amount
or perform the obligation in the manner specified in the Lease.
The obligations of Guarantor hereunder shall be unconditional and
absolute, and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:
1. Any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of the Lessee, by operation of law or otherwise;
2. Any modification or amendment or supplement to the Lease;
3. Any limitation on the liability of, or lack of recourse to, the
Lessee in respect to any obligation under the Lease;
4. Any neglect, delay, omission, failure or refusal of the Lessor to
enforce any obligation of the Lessee under the Lease or any direct or indirect
security for or other guarantee of the Lessee's obligation under the Lease;
5. The existence of, or any non-perfection, invalidity,
unenforceability, release, subordination or loss of, or direct or indirect
security for or other guarantee of, any obligation of the Lessee under the
Lease;
6. Any change in the existence, structure or ownership of the Lessee,
or any insolvency, bankruptcy, reorganization or other similar proceedings
affecting the Lessee or its assets, or any resulting release or discharge of
any obligation of the Lessee under the Lease;
7. The existence of any claim, setoff or any other right which the
Guarantor may have at any time against the Lessee, or any other person, whether
in connection herewith or with any unrelated transaction; provided that nothing
herein shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
8. Any invalidity or unenforceability relating to or against the
Lessee for any reason under the Lease, or any provision of applicable law or
regulation purporting to prohibit or postpone the payment by or performance of
obligation by the Lessee under the Lease; or
9. Any other act, omission or delay of any kind by the Lessee or any
other person or any other circumstance whatsoever which might, but for the
provisions of this paragraph, constitute a legal or equitable discharge or
postponement of the Guarantor's obligations hereunder.
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<PAGE>
The Guarantor's obligations hereunder shall remain in full force and
effect until the performance of all of the obligations under the Lease. If at
any time any payment or the performance of any obligation by the Lessee is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of the Lessee or otherwise, the Guarantor's
obligation hereunder with respect to such payment or obligation shall be
reinstated as though such payment had been due but not made at such time.
The Guarantor irrevocably waives any requirement that any action be
taken by any person against the Lessee or any other person. This is a guarantee
of payment and performance and not of collection. The Guarantor waives any
right to require that any action be brought against the Lessee or any other
person or to require that resort be had to any security, or any other guarantee
as a condition precedent to the Guarantor's obligation to make payments or
performance hereunder.
Upon making any payments or performing any obligations hereunder, the
Guarantor shall be subrogated to the rights of the Lessor against the Lessee
with respect thereto; provided, that the Guarantor shall not enforce any
payment or performance by way of subrogation until there has been full
performance under the Lease.
Any indebtedness of the Lessee to the Guarantor now or hereafter
existing (including without limitation, any right to subrogation which the
Guarantor may have as a result of any payment or performance by the Guarantor
hereunder) shall be and is hereby deferred, postponed and subordinated to the
prior payment and performance of all obligations under the Lease. Until such
performance, the Guarantor agrees not to accept any payment or satisfaction of
any indebtedness of the Lessee to the Guarantor, and hereby assigns such
indebtedness to the Lessor.
If acceleration of the time for payment of any amount payable by the
Lessee under the Lease is stayed upon the insolvency, bankruptcy or
reorganization of the Lessee, all such amounts otherwise subject to
acceleration under the terms of this guarantee shall nonetheless be payable by
the Guarantor forthwith on demand of the Lessor.
If any obligations under the Lease are stayed upon the insolvency,
bankruptcy or reorganization of the Lessee, all such obligations otherwise
performable under the terms of the Lease shall nevertheless be performable by
Guarantor forthwith on demand of Lessor.
DATED: August __, 1992 ____________________________________
THOMAS L. UTMAN
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<PAGE>
EXHIBIT A
Legal Description
That portion of the south one-half of the southeast quarter of Section 11,
Township 5 South range 11 west S.B.B.81 M., as depicted below:
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PURCHASE AGREEMENT
------------------
PURCHASE AGREEMENT, made as of the 29 day of August, 1996 (this
"Agreement"), by and between SWINGMASTER GOLF AT CENTENNIAL, L.P., a Colorado
limited partnership having an address at 6901 South Peoria Street, Englewood,
Colorado 80112 ("Assignor"), and DENVER FAMILY GOLF CENTERS, INC., a Delaware
corporation having an address at 225 Broadhollow Road, Suite 106E, Melville,
New York 11747 ("Assignee").
W I T N E S S E T H :
---------------------
WHEREAS, by Ground Lease and Agreement, dated November 1, 1994, as amended
by First Amendment to Ground Lease and Agreement dated March 9, 1995 and Second
Amendment to Ground Lease Agreement, dated June 8, 1995 (as so amended, the
"Lease"), by and between The Arapahoe County Public Airport Authority, as
landlord ("Landlord"), and Pinecrest Enterprises, Ltd. (predecessor-in-interest
to Assignor), as tenant, Assignor leased approximately 36.1 acres located in
the County of Arapahoe, State of Colorado, as more particularly described in
the Lease (the "Premises"), on which Assignor now operates a driving range and
related facilities; a copy of the Lease is attached hereto as Exhibit A;
WHEREAS, Assignor is about to enter into an Option to Lease Agreement with
Landlord substantially in the form of Exhibit B attached hereto and made a part
hereof (the "Option"), pursuant to which Landlord will grant to Assignor the
option to lease approximately 36.5 additional acres adjacent to the Premises
pursuant to a lease in the form attached to the Option;
WHEREAS, Assignor desires to assign to Assignee its entire interest as
tenant under the Lease and the Option and Assignee desires to accept such
assignment and assume Assignor's obligations under the Lease on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of TEN ($10.00) DOLLARS, the terms and
conditions set forth herein, and other good and valuable consideration, the
mutual receipt and sufficiency of which are hereby acknowledged, the parties
hereby agree to the foregoing and as follows:
1. Agreement to Sell and Purchase.
1.1 Simultaneously with the execution and delivery of this Agreement,
pursuant to separate agreements of assignment and assumption, Assignor shall
assign, set over and transfer to Assignee all right, title and interest of
Assignor in and to the Premises and the Lease and Assignee shall assume and
agree to perform any and all of the obligations to be performed by the tenant
under the Lease (as if Assignee executed the Lease originally as tenant
thereunder) accruing from and after the July 1, 1996 (the "Effective Date").
Assignee shall further agree to be bound by and fully responsible for
all of the covenants, agreements, terms, provisions, and conditions of Assignor
or tenant
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<PAGE>
under the Lease to be performed by Assignor from and after the
Effective Date. Upon the full execution and delivery of this Agreement,
Assignor shall deliver possession of the Premises to Assignee, broom clean and
free of all tenancies or rights of possession.
1.2 Immediately upon the execution and delivery of the Option by
Assignor and Landlord, Assignor shall execute, acknowledge and deliver to
Assignee an Assignment of Option to Lease in the form attached hereto as
Exhibit F.
2. Transfer of Other Property. Simultaneously with the execution and
delivery of this Agreement, pursuant to a separate bill of sale and agreement
of assignment and assumption, Assignor shall sell, assign, transfer and convey
to Assignee, and Assignee shall purchase and acquire from Assignor, all of
Assignor's right, title and interest in and to the following property
(collectively, the "Property"):
2.1 all furnishings, fixtures, machinery, equipment, vehicles and
personalty attached or appurtenant to or used in connection with the Premises
that are owned by Assignor, and all inventories, supplies, sales, marketing and
instructional materials of every kind and description relating to the business
conducted at the Premises (the "Business"), wherever located, including without
limitation, the items described on Exhibit C attached hereto and made a part
hereof (the "Personal Property");
2.2 the files, books, notices and other correspondence from any
governmental agencies, and other records used or employed by Assignor or its
affiliates in connection with the ownership and/or operation of the Premises
(collectively, the "Records");
2.3 any consents, authorizations, variances, waivers, licenses,
certificates, permits and approvals held by or granted to Assignor in
connection with the ownership of the Premises (collectively, the "Permits");
2.4 the contracts, leases and other agreements of or relating to the
operation of the Business described on Exhibit D attached hereto and made a
part hereof (the "Contracts");
2.5 all accounts receivable of Assignor arising out of the sale of
goods or services rendered at the Premises or otherwise in connection with the
Business on or after July 1, 1996 (the "Effective Date");
2.6 any manufacturers' and vendors' warranties and guarantees, except
to the extent the same relate solely to any Retained Assets or Retained
Liabilities (as hereinafter defined) (the "Claims"); and
2.7 any other properties and assets of every kind and nature, real or
personal, tangible or intangible, relating in any way whatsoever to the
Premises or the
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Business, except to the extent the same relate solely to the Retained Assets or
Retained Liabilities.
3. Assets to be Retained by Assignor. Anything herein to the contrary
notwithstanding, Assignor shall not sell, and Assignee shall not acquire, the
following assets of Assignor (the "Retained Assets"):
3.1 any rights of Assignor with respect to insurance policies owned by
Assignor or for which Assignor is the named insured;
3.2 all cash, funds in bank accounts and cash equivalents existing as
of the the date hereof; and
3.3 any patents, trademarks, trademark registrations, copyrights,
copyright registrations, trade names and all registrations thereof and all
applications for any of the foregoing, whether issued or pending, if any, and
all goodwill associated with any of the foregoing (the "Intangible Assets").
4. Assumption of Certain Liabilities. Assignee shall assume and agree to
pay and discharge when due all liabilities and obligations of Assignor under
the Lease, the Option and the Contracts to the extent the same arise from and
after the Effective Date (the "Assumed Liabilities"). Assignor shall retain,
and Assignee shall not assume, perform, discharge or pay, and shall not be
responsible for, any and all liabilities or obligations of any nature
whatsoever in connection with or relating to the Premises or the Property,
Assignor or the Business or any predecessor owner of the Lease, the Property or
the Business other than the Assumed Liabilities (collectively, the "Retained
Liabilities").
5. Consideration. In consideration for the assignment of the Lease and the
Option and the sale of the other Property, Purchaser shall:
5.1 pay the sum of $800,000.00 subject to adjustment as hereinafter
provided, payable in cash, certified or bank check or wire transfer
simultaneously herewith to be held and dealt with as provided in (a) the Escrow
Agreement dated the date hereof among Parent, Assignor, Assignee and
Continental Stock Transfer & Trust Company (the "Escrow Agent") (the "Escrow
Agreement") and (b) the Escrow Agreement among Assignor, Assignee and First
American Heritage Title Company;
5.2 cause Family Golf Centers, Inc. ("Parent") to issue 40,000 validly
issued, fully paid and non-assessable shares of common stock, par value $.01
per share, of Parent (the "Common Stock") and to deliver at Closing, free and
clear of all liens, claims and encumbrances, (a) a certificate naming Assignor
as the beneficial owner thereof representing 31,519 shares of Common Stock to
the Escrow Agent, (b) a certificate naming Assignor as the beneficial owner
thereof representing 5,000 shares of Common Stock to the Escrow Agent, and (c)
certificates naming Joseph J. Graham and Andrew Price, respectively (together,
the "Broker") as the beneficial owners thereof
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<PAGE>
representing in the aggregate 3,481 shares of Common Stock to the Escrow Agent,
such certificates to be held and dealt with by the Escrow Agent as provided in
the Escrow Agreement.
6. Apportionments.
6.1 The parties hereto agree that (i) rent under the Lease and all
other operating expenses of Assignor relating to the Premises (i.e.,
advertising, collections, fees, hired services, insurance, miscellaneous
expenses, postage, repairs and maintenance, supplies, taxes, utilities and
wages, but specifically not including interest on indebtedness, professional
fees and expenses, travel , lodging, depreciation or the cost of inventories),
and (ii) all income of Assignor, shall be apportioned between Assignor and
Assignee as of Effective Date based on the portion of each such expense or
revenue attributable to the period falling on or before the Effective Date on
the one hand, which Assignor shall bear the responsibility and benefit of, and
the portion of each such expense or revenue attributable to the period falling
after the Effective Date, on the other hand, which Assignee shall bear the
responsibility and benefit of (the "Adjustment"). The net Adjustment will be
paid by the party owing the same to the other in cash or by certified or
official bank check or wire transfer. The expenses and liabilities for which
Assignor shall be liable pursuant to this Section shall be included within the
meaning of the term "Retained Liabilities".
6.2 Immediately prior to the Closing, Assignor and Assignee shall make
a determination of the value of all inventory included in the Property based on
the cost thereof. Assignee shall pay to Assignor at the Closing the amount so
determined.
6.3 To the extent that any of the prorations made pursuant to this
Article are based upon estimates of payments to be made and/or expenses to be
incurred by Assignee subsequent to the Effective Date, or either party
discovers any errors in or omissions in respect of the Adjustment, Assignor and
Assignee agree to adjust such prorations promptly upon receipt by Assignor or
Assignee, as the case may be, of such payments or of bills or other
documentation setting forth the actual amount of such expenses.
6.4 Assignor and Assignee shall maintain and make available to each
other any books or records necessary for the adjustment of any item pursuant to
this Article. The provisions of this Article shall survive the closing of the
transactions described herein (the "Closing").
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<PAGE>
7. Representations and Warranties of Assignor. Assignor hereby represents
and warrants to Assignee as follows:
7.1 Organization; Power and Authority.
7.1.1 Assignor is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Colorado, and has
all requisite power and authority to carry on its business as it is now being
conducted, to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby.
7.1.2 The sole general partner of Assignor is Pinecrest
Enterprises Ltd. ("General Partner"), a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado, and has
all requisite power and authority to carry on its business as it is now being
conducted, to execute, deliver and perform the obligations of Assignor under
this Agreement on behalf of Assignor and to consummate the transactions
contemplated hereby on behalf of Assignor.
7.2 Due Authorization and Execution; Effect of Agreement.
7.2.1 This Agreement has been duly and validly executed and
delivered by Assignor and constitutes the valid and binding obligation of
Assignor, enforceable in accordance with its terms. The execution, delivery and
performance by Assignor of this Agreement and the consummation by Assignor of
the transactions contemplated hereby will not, with or without the giving of
notice or the lapse of time, or both, (a) violate any provision of any law,
rule or regulation to which Assignor is subject; (b) violate any order,
judgment or decree applicable to Assignor; or (c) conflict with or result in a
breach of or a default under any term or condition of any agreement or other
instrument to which Assignor is a party or by which it or its assets may be
bound, except in each case, for violations, conflicts, breaches or defaults
which in the aggregate would not materially hinder or impair the consummation
of the transactions contemplated hereby.
7.2.2 This Agreement has been duly and validly executed and
delivered by General Partner on behalf of Assignor. The execution, delivery and
performance by General Partner on behalf of Assignor of this Agreement and the
consummation by General Partner on behalf of Assignor of the transactions
contemplated hereby will not, with or without the giving of notice or the lapse
of time, or both, (a) violate any provision of any law, rule or regulation to
which General Partner is subject; (b) violate any order, judgment or decree
applicable to General Partner; or (c) conflict with or result in a breach of or
a default under any term or condition of any agreement or other instrument to
which General Partner is a party or by which it or its assets may be bound,
except in each case, for violations, conflicts, breaches or defaults which in
the aggregate would not materially hinder or impair the consummation of the
transactions contemplated hereby.
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<PAGE>
7.3 Consents. No consent, approval or authorization of, exemption by,
or filing with, any governmental or regulatory authority or any third party is
required in connection with the execution, delivery and performance by Assignor
of this Agreement, except for consents, approvals, authorizations, exemptions
and filings, if any, which have been obtained.
7.4 Compliance with Applicable Laws. Assignor is not engaging in any
activity or omitting to take any action as a result of which Assignor is in
violation of any law, rule, regulation, ordinance, statute, order, injunction
or decree, or any other requirement of any court or governmental or
administrative body or agency, applicable to the Premises or the Business, and
neither the execution and delivery by Assignor of this Agreement or of any of
the other agreements and instruments to be executed and delivered by it
pursuant hereto, the performance by Assignor of its obligations hereunder or
thereunder or the consummation of the transactions contemplated hereby or
thereby will result in any such violation. Assignor is in compliance with all
material requirements imposed in writing by any insurance carrier of Assignor
to the extent such carrier is an insurer or indemnitor of the Premises. The
Premises are not subject to any notice of violation of law, municipal
ordinance, orders or requirements issued by any building department or other
governmental agency or subdivision having jurisdiction.
7.5 Permits. All Permits required by any federal, state, or local law,
rule or regulation and necessary for the operation of the Premises and the
Business as currently being conducted have been obtained and are currently in
effect. No registrations, filings, applications, notices, transfers, consents,
approvals, orders, qualifications, waivers or other actions of any kind are
required by virtue of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby (a) to avoid the loss of
any Permit or the violation of any law, regulation, order or other requirement
of law, or (b) to enable Assignee to continue the operation of the Premises as
presently conducted after the Closing. The current use and occupation of any
portion of the Premises does not violate any of, and, where applicable, is in
material compliance with, the Permits, any applicable deed restrictions or
other covenants, restrictions or agreements including without limitation, any
of the Permitted Exceptions, site plan approvals, zoning or subdivision
regulations or urban redevelopment plans applicable to the Premises.
7.6 The Lease and the Option. Attached hereto as Exhibit A is a true
and correct copy of the Lease. Attached as Exhibit B hereto is a true and
correct copy of the Option and all Exhibits thereto. Each of the Lease and the
Option is in full force and effect, has not been modified or amended in any way
except as stated above and neither Landlord nor Assignor is in default, or sent
or received any notice of default, in respect of the Lease. No event has
occurred or circumstance exists which, with the giving of notice or the passage
of time, or both, would constitute a default under the Lease or the Option.
Neither Assignor nor Landlord has exercised any right or option, or stated its
intent, to terminate or cancel the Lease. Assignor has not assigned,
transferred or conveyed the Lease or any interest therein, or granted any right
or option with respect
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thereto, to any party other than Assignee. There is no security deposit being
held under the Lease.
7.7 Title to the Lease and Property. The Lease and the Property
are free and clear of any and all liens, charges, encumbrances, mortgages,
pledges, security interests, easements, agreements and other interests and
adverse claims (collectively, "Encumbrances"), other than the matters set forth
in Exhibit E attached hereto and made a part hereof (the "Permitted
Exceptions").
7.8 Contracts. Except for the Lease and as set forth on Exhibit D,
Seller is not a party to any Contracts. Exhibit D sets forth a full and
complete description of the Contracts described therein, and none of such
Contracts have been amended or modified except as reflected on said Exhibits.
Seller is not holding any security deposits under any of said Contracts. Each
of the Contracts are in full force and effect and no party under any such
Contract, including Seller, is in default, or has sent or received notice of
default, in any respect of any such Contract.
7.9 Condition of the Improvements. There are no material structural or
mechanical defects in the Improvements, and there are no leaks in any roof on
any Improvement.
7.10 Condition of Personal Property. The Personal Property is in good
operating condition and repair, ordinary wear and tear excepted, and is
adequate, suitable and sufficient to meet the needs of and to operate the
Premises and the Property as currently conducted.
7.11 Environmental Matters.
7.11.1 As used in this Agreement "Hazardous Material" shall mean:
(i) any "hazardous substance" as now defined pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42
U.S.C. ss. 9601(33); (ii) any "pollutant or contaminant" as defined in 42
U.S.C. ss. 9601(33); (iii) any material now defined as "hazardous waste"
pursuant to 40 C.F.R. Part 261; (iv) any petroleum, including crude oil and any
fraction thereof; (v) natural or synthetic gas usable for fuel; (vi) any
"hazardous chemical" as defined pursuant to 29 C.F.R. Part 1910; (vii) any
asbestos, asbestos containing material, polychlorinated biphenyl ("PCB"), or
isomer of dioxin, or any material or thing containing or composed of such
substance or substances; and (viii) any other pollutant, contaminant, chemical,
or industrial or hazardous, toxic or dangerous waste, substance or material,
defined or regulated as such in (or for purposes of any Environmental Law (as
hereinafter defined) and any other toxic, reactive or flammable chemicals.
7.11.2 There is no Hazardous Material at, under or on the Premises
and there is no ambient air, surface water, groundwater or land contamination
within, under, originating from or relating to the Premises. Assignor has not,
and has not
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caused to be, manufactured, processed, distributed, used, treated, stored,
disposed of, transported or handled any Hazardous Material at, on or under the
Premises.
7.11.3 Assignor has no obligation or liability imposed or based upon
any provision under any foreign, federal, state or local law, rule, or
regulation or common law, or under any code, order, decree, judgment or
injunction applicable to Assignor or the Premises or any notice, or request for
information issued, promulgated, approved or entered thereunder, or under the
common law, or any tort, nuisance or absolute liability theory, relating to
public health or safety, worker health or safety, or pollution, damage to or
protection to the environment, including without limitation, laws relating to
emissions, discharges, releases or threatened releases of Hazardous Material
into the environment (including without limitation, ambient air, surface water,
groundwater, land surface or subsurface), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, generation,
disposal, transport or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes (hereinafter collectively
referred to as "Environmental Laws").
7.11.4 Assignor has not been subject to any civil, criminal or
administrative action, suit, claim, hearing, notice of violation,
investigation, inquiry or proceeding for failure to comply with, or received
notice of any violation or potential liability under the Environmental Laws in
respect of the Premises.
7.11.5 The Premises are not (a) listed or proposed for listing on the
National Priority List or (b) listed on the Comprehensive Environmental
Response, Compensation, Liability Information System List ("CERCLIS")
promulgated pursuant to CERCLA, 42 U.S.C. ss. 9601(9), or any comparable list
maintained by any foreign, state or local government authority.
7.11.6 There are no underground storage tanks at the Premises and
Assignor further warrants and represents that any prior use and operation of
underground storage tanks has been in compliance with all Environmental Laws.
7.12 Tax Proceedings. There are no proceedings pending regarding the
reduction of real estate taxes or assessments in respect of the Premises.
7.13 Utilities. All water, storm and sanitary sewer, gas, electricity,
telephone and other utilities adequately service the Premises, enter the
Premises through lands as to which valid public or private easements exist that
will inure to the benefit of Assignee and the Premises are furnished by
facilities of public utilities and the cost of installation of such utilities
has been fully paid.
7.14 Access. To the best of Assignor's knowledge, there are no
federal, state, county, municipal or other governmental plans to change the
highway or road system in the vicinity of the Premises which could materially
restrict or change
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access from any such highway or road to the Premises, or any pending or
threatened condemnation or eminent domain proceedings relating to or affecting
the Premises.
7.15 Insurance Requirements. All requirements or recommendations by
any insurer or by any board of fire underwriters or similar body in respect of
the Premises have been satisfied.
7.16 Litigation. There is no action or proceeding (zoning or
otherwise) or governmental investigation pending, or, to the best of Assignor's
knowledge, threatened against, or relating to, Assignor, General Partner, the
Premises, the Business or the transactions contemplated by this Agreement, nor
is there any basis for any such action, proceeding or investigation.
7.17 Assessments. There are no special or other assessments for public
improvements or otherwise now affecting the Premises nor does Assignor know of
(a) any pending or threatened special assessments affecting the Premises or (b)
any contemplated improvements affecting the Premises that may result in special
assessments affecting the Premises.
7.18 Employee Agreements. There are no union or employment contracts
or agreements (written or oral) involving employees of Assignor or its
affiliates affecting the Premises or the Business which will survive the
Closing. All employees of Assignor have been terminated by Assignor as of the
date hereof.
7.19 Work at the Premises. No services, material or work have been
supplied to the Premises for which payment has not been made in full.
7.20 Financial Condition. Assignor has delivered to Assignee true and
correct copies of financial statements consisting of audited balance sheets and
income statements of Assignor as of December 31, 1995 and June 30, 1996 and
unaudited income statements for the periods from July 1, 1996 through the date
prior to the date hereof. Each such balance sheets present fairly the financial
condition, assets and liabilities of Assignor as of its date; each such
statement of income presents fairly the results of operations of Assignor for
the period indicated. The financial statements referred to in this Section are
in accordance with the books and records of Assignor. Since December 31, 1995:
(a) there has at no time been a material adverse change in the financial
condition, results of operations, businesses, properties, assets, liabilities
or future prospects of Assignor, the Premises, the Property or Business; (b)
the Business has been conducted in all respects only in the ordinary course;
and (c) Assignor has not suffered an extraordinary loss (whether or not covered
by insurance) or waived any right of substantial value.
7.21 Common Stock. Assignor understands that the Common Stock is and
will be deemed to be "restricted securities" as such term is defined in Rule
144 ("Rule 144") promulgated under the Securities Act of 1933 (as amended, the
"Act") and can only
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be sold (a) in accordance with the provisions of the Rule or such other duly
available exemption from the registration requirements of the Act or (b)
pursuant to an effective registration statement as set forth in the
Registration Rights Agreement. Assignor is acquiring the Common Stock for its
own account (and not for the account of others) and not with a view to the
distribution or resale thereof. Upon any subsequent transfer or disposition of
the Common Stock made in reliance on an exemption from the registration
provisions of the Act, Assignor agrees to deliver to Parent either an opinion
of counsel satisfactory to Parent to the effect that such transfer or
disposition may be made without registration of such Common Stock under the Act
and/or such other documents or certificates as Parent may require; provided,
however, that Assignor shall not be required to deliver an opinion of counsel
with respect to a transfer made pursuant to Rule 144, provided that Assignor
provides Parent's counsel with such certificates as it may require in order to
give any customary opinion required by the transfer agent in connection with
such transfer.
7.22 Full Disclosure. To the best knowledge of Assignor, none of the
information supplied by Assignor herein or in the exhibits hereto contains any
untrue statement of a material fact or omits to state a material fact required
to be stated herein or necessary in order to make the statements herein, in
light of the circumstances under which they are made, not misleading.
8. Representations and Warranties of Assignee. Assignee hereby represents
and warrants to Assignor as follows:
8.1 Organization; Power and Authority. Assignee is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite power and authority to carry on its business as
it is now being conducted, to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby.
8.2 Due Authorization and Execution; Effect of Agreement. The
execution, delivery and performance by Assignee of this Agreement and the
consummation by Assignee of the transactions contemplated hereby have been duly
authorized by all necessary corporate action required to be taken on the part
of Assignee. This Agreement has been duly and validly executed and delivered by
Assignee and constitutes the valid and binding obligation of Assignee,
enforceable in accordance with its terms. The execution, delivery and
performance by Assignee of this Agreement and the consummation by Assignee of
the transactions contemplated hereby will not, with or without the giving of
notice or the lapse of time, or both, (a) violate any provision of any law,
rule or regulation to which Assignee is subject; (b) violate any order,
judgment or decree applicable to Assignee; or (c) conflict with or result in a
breach of or a default under any term or condition of Assignee's Certificate of
Incorporation or By-Laws or any agreement or other instrument to which Assignee
is a party or by which it or its assets may be bound, except in each case, for
violations, conflicts, breaches or defaults which
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in the aggregate would not materially hinder or impair the consummation of the
transactions contemplated hereby.
9. Survival. The representations and warranties of the parties made in
Articles 7 and 8 shall survive the Closing.
10. Further Assurances. At any time and from time to time after the date
hereof, either party shall, at the request of the other party, execute and
deliver any further instruments or documents and take all such further action
as the requesting party may reasonably request in order to transfer into the
name of Assignee the Lease and any and all Property contemplated to be sold
pursuant to this Agreement and to further consummate the transactions
contemplated by this Agreement. This Article shall survive the Closing.
11. Brokers. Assignor and Assignee warrant and represent to each other
that they dealt with no broker, finder or similar agent or party who or which
might be entitled to a commission or compensation on account of introducing the
parties, the negotiation or execution of this Agreement and/or the closing of
the transaction provided for herein other than the Broker. Assignee and
Assignor hereby respectively agree to indemnify and hold harmless the other
party from and against all loss, liability, damage and expense (including,
without limitation, attorneys' fees) imposed upon or incurred by the other
party by reason of any claim for commissions or other compensation for bringing
about this transaction by any broker, finder or similar agent or party other
than the Broker who claims to have dealt with the indemnifying party in
connection with this transaction. Assignor shall pay the Broker all commissions
due to the Broker by reason of this transaction pursuant to a separate
agreement between Assignor and the Broker. The provisions of this Article shall
survive the Closing or any termination of this Agreement.
12. "As Is". Assignee represents that it has inspected the Premises and
the Property and is familiar with the physical condition thereof, and that, in
reliance upon such inspection and the representations, warranties, covenants
and agreements of Assignor contained herein, it agrees to accept the Premises
and the Property "as is", in its condition at the date of this Agreement.
13. Costs and Fees.
13.1 Assignor shall pay (a) 50% of the costs and expenses incurred in
connection with the preparation of the audited financial statements referred to
in Section 7.20 hereof, (b) transfer or conveyancing taxes, if any, and (c) the
costs and expenses incurred in connection with the preparation of a survey of
the Premises.
13.2 Assignee shall pay for (a) the examination of title, (b) the
issuance of a policy of title insurance for Assignee and (c) an ASTM Phase I
environmental survey of the Premises.
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<PAGE>
13.3 Each party shall pay for its own legal costs and expenses. Any
other costs not expressly provided for elsewhere in this Agreement shall be
divided and borne in accordance with the usual practices in the jurisdiction
where the Premises are located.
13.4 The provisions of this Article shall survive the Closing.
14. Indemnification.
14.1 Subject to the further provisions of this Article, Assignor shall
protect, defend, hold harmless and indemnify Assignee, its officers, directors,
shareholders, employees, agents and affiliates, and their respective successors
and assigns, from, against and in respect of any and all losses, liabilities,
deficiencies, penalties, fines, costs, damages and expenses whatsoever
(including without limitation, reasonable professional fees and costs of
investigation, litigation, settlement, and judgment and interest) ("Losses")
that may be suffered or incurred by any of them arising from or by reason of
(i) any Retained Liability or other liability or obligation of Assignor which
is not an Assumed Liability; (ii) the breach of any representation, warranty,
covenant or agreement of Assignor contained in this Agreement or in any
document or other writing delivered pursuant to this Agreement; and (iii) any
and all actions, suits, proceedings, claims, demands, assessments, judgments,
costs and expenses (including without limitation, interest, penalties,
reasonable legal fees and accounting fees) incident to the foregoing and the
enforcement of the provisions of this Section 14.1.
14.2 Subject to the further provisions of this Article, Assignee shall
protect, defend, hold harmless and indemnify Assignor, its partners, employees
and agents, and its successors and assigns from, against and in respect of any
and all Losses (as defined in Section 14.1 hereof) that may be suffered or
incurred by any of them arising from or by reason of (i) any of the Assumed
Liabilities on and after the date hereof, (ii) the breach of any
representation, warranty, covenant or agreement of Assignee contained in this
Agreement or in any document or other writing delivered pursuant to this
Agreement; and (iii) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses (including without limitation,
interest, penalties, reasonable legal fees and accounting fees) incident to the
foregoing and the enforcement of the provisions of this Section 14.2.
14.3 Whenever a party hereto (such party and each of its affiliates
which is entitled to indemnification pursuant to any provision of this
Agreement, an "Indemnified Party") shall learn after the Closing of a claim
that, if allowed (whether voluntarily or by judicial or quasi-judicial tribunal
or agency), would give rise to an obligation of another party (the
"Indemnifying Party") to indemnify the Indemnified Party under any provision of
this Agreement, before paying the same or agreeing thereto, the Indemnified
Party shall promptly notify the Indemnifying Party in writing of all such facts
within the Indemnified Party's knowledge with respect to such claim and the
amount thereof (a "Notice of Claim"). If, prior to the expiration of fifteen
(15) days from the mailing
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of a Notice of Claim, the Indemnifying Party shall request, in writing, that
such claim not be paid, the Indemnified Party shall not pay the same, provided
the Indemnifying Party proceeds promptly, at its or their own expense
(including employment of counsel reasonably satisfactory to the Indemnified
Party), to settle, compromise or litigate, in good faith, such claim. After
notice from the Indemnifying Party requesting the Indemnified Party not to pay
such claim and the Indemnifying Party's assumption of the defense of such claim
at its or their expense, the Indemnifying Party shall not be liable to the
Indemnified Party for any legal or other expense subsequently incurred by the
Indemnified Party in connection with the defense thereof. However, the
Indemnified Party shall have the right to participate at its expense and with
counsel of its choice in such settlement, compromise or litigation. The
Indemnified Party shall not be required to refrain from paying any claim which
has matured by a court judgment or decree, unless an appeal is duly taken
therefrom and execution thereof has been stayed, nor shall the Indemnified
Party be required to refrain from paying any claim where the delay in paying
such claim would result in the foreclosure of a lien upon any of the property
or assets then held by the Indemnified Party. The failure to provide a timely
Notice of Claim as provided in this Section 14.3 shall not excuse the
Indemnifying Party from its or their continuing obligations hereunder; however,
the Indemnified Party's claim shall be reduced by any damages to the
Indemnifying Party resulting from the Indemnified Party's delay or failure to
provide a Notice of Claim as provided in this Section 14.3.
14.4 For purposes of this Article, any assertion of fact and/or law by
a third party that, if true, would constitute a breach of a representation or
warranty made by a party to this Agreement or make operational an
indemnification obligation hereunder, shall, on the date that such assertion is
made, immediately invoke the Indemnifying Party's obligation to protect,
defend, hold harmless and indemnify the Indemnified Party pursuant to this
Article.
14.5 The obligation of the Assignor under Section 14.1 hereof shall be
satisfied first from the Escrowed Shares (as defined in the Escrow Agreement),
and, if the Escrowed Shares are inadequate to provide indemnification to
Purchaser, then from Assignor directly.
15. Notices. All notices, demands, requests, consents or other
communications ("Notices") which either party may desire or be required to give
to the other hereunder shall be in writing and shall be delivered by hand,
overnight express carrier, or sent by registered or certified mail, return
receipt requested, postage prepaid, in either event, addressed to the parties
at their respective addresses first above set forth. A copy of any Notice given
by Assignor to Assignee shall simultaneously be given in either manner provided
above to Squadron, Ellenoff, Plesent & Sheinfeld, LLP, 551 Fifth Avenue, New
York, New York 10176, Attention: Alan Schacter, Esq. A copy of any Notice given
by Assignee to Assignor shall simultaneously be given in either manner provided
above to Underwood & Associates, P.C., Parker Place, Suite 6-161, 2600 South
Parker Road, Aurora, Colorado 80014, Attention: Arthur Underwood, Esq. Notices
given in the manner aforesaid shall be deemed to have been given three (3)
business days after the
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<PAGE>
day so mailed, the day after delivery to any overnight express carrier and on
the day so delivered by hand. Either party shall have the right to change its
address(es) for the receipt of Notices by giving Notice to the other party in
either manner aforesaid. Any Notice required or permitted to be given by either
party may be given by that party's attorney.
16. Miscellaneous.
16.1 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns.
16.2 This Agreement shall be governed by, interpreted under and
construed and enforced in accordance with, the laws of the State of Colorado.
16.3 The captions or article headings in this Agreement are for
convenience only and do not constitute part of this Agreement.
16.4 This Agreement has been fully negotiated by the parties and rules
of construction construing ambiguities against the party responsible for
drafting agreements shall not apply.
16.5 It is agreed that, except where otherwise expressly provided in
particular Articles or Sections of this Agreement, none of the provisions of
this Agreement shall survive the Closing.
16.6 This Agreement (including the Exhibits annexed hereto) contains
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior understandings, if any, with respect thereto.
16.7 This Agreement may not be modified, changed, supplemented or
terminated, nor may any obligations hereunder be waived, except by written
instrument signed by the party to be charged or by its agent duly authorized in
writing or as otherwise expressly permitted herein.
16.8 No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof or of any other agreement or provision herein contained. No extension
of the time for performance of any obligations or acts shall be deemed an
extension of the time for performance of any other obligations or acts.
16.9 This Agreement may be executed in one or more counterparts, each
of which when so executed and delivered shall be deemed an original, but all of
which taken together shall constitute but one and the same original.
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16.10 Neither party may cause this Agreement to be recorded in any
public office. Either party may cause a copy of the assignment and assumption
of the Lease and the Option to be recorde in the appropriate public office.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
SWINGMASTER GOLF AT
CENTENNIAL, L.P.
By: Pinecrest Enterprises, Ltd.,
General Partner
By: ______________________
Name:
Title:
DENVER FAMILY GOLF CENTERS,
INC.
By: ____________________________
Name:
Title:
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<PAGE>
STATE OF )
)ss.:
COUNTY OF )
On the ___ day of August, 1996, personally came __________________, to
me known, who being by me duly sworn, did depose and say that he is the
________________ of Pinecrest Enterprises, Ltd., the corporation described in
and which executed the foregoing instrument as the general partner of
Swingmaster Golf at Centennial, L.P., a limited partnership, and that he signed
his name thereto by order of the Board of Directors of said corporation on
behalf of said limited partnership.
- ------------------------------------
Notary Public
STATE OF )
)ss.:
COUNTY OF )
On the ___ day of August, 1996, before me personally came
________________, to me known, who being by me duly sworn, did depose and say
that he is the _______________________________ of DENVER FAMILY GOLF CENTERS,
INC., the corporation described in and which executed the foregoing instrument,
and that he signed his name thereto by order of the Board of Directors of said
corporation.
- ------------------------------------
Notary Public
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of August 29, 1996, between
SWINGMASTER GOLF AT CENTENNIAL, L.P., with an address at 6901 South Peoria
Street, Englewood, California 80112 (the "Holder") and FAMILY GOLF CENTERS,
INC., with an address at 225 Broadhollow Road, Melville, New York 11747 (the
"Company").
W I T N E S S E T H :
WHEREAS, the Holder is the beneficial owner of 36,519 shares (the
"Shares") of the common stock, par value $.01 per share, of the Company
("Common Stock");
WHEREAS, the Holder desires to have certain registration rights under
the securities laws, and the Company desires that the Holder have such
registration rights;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the parties hereby agree as
follows:
1. If, at any time during the period commencing six (6) months from
the date hereof and terminating on the date on which the Shares become
saleable under Rule 144 promulgated under the Act (as defined below), the
Company shall determine to file any registration statement, or any
post-effective amendment to a registration statement, under the Securities Act
of 1933, as amended (the "Act"), covering equity securities of the Company
(other than registration statements on Form S-8 or S-4 or any other form not
generally available for the registration of securities for sale to the public)
for its own account or for the account of others, the Company shall advise the
Holder, by written notice at least ten (10) business days prior to any filing,
and shall, upon the request of the Holder, and at the expense of the Company,
include in any such registration statement, or any such post-effective
amendment to a registration statement, all of the Registrable
<PAGE>
Securities (as hereinafter defined) that the Holder has requested
in writing to be registered, provided that such written request is delivered
to the Company within seven (7) business days of the Holder's receipt of
notice from the Company. As used in this Agreement, "Registrable Securities"
shall mean (i) the Shares, and (ii) any Common Stock of the Company issued as
(or issuable upon the conversion or exercise of any convertible security,
option, warrant right or other security which is issued as) a dividend or
other distribution with respect to, or in exchange for or in replacement of
the Shares. All costs and expenses of such registration statement shall be
borne by the Company, except underwriting discounts or commissions applicable
to any of the Registrable Securities sold by the Holder and any counsel to the
Holder. The Company shall not be required to register securities of the Holder
on more than two (2) occasions; provided that if the Holder has been prevented
from selling all of the Registrable Securities Holder wished to sell because
of limitations imposed under paragraph (c) of this Section 1, then the Holder
shall be entitled to include the Registrable Securities in one or more
additional registration statements under the terms of this Section 1 until the
Holder has been able to sell all of the Registrable Securities the Holder
wishes to sell.
(a) The Company shall supply prospectuses and such other
documents as the Holder may reasonably request in order to facilitate the
public sale or other disposition of the Registrable Securities, use its
reasonable best efforts to register and qualify any of the Registrable
Securities for sale in a reasonable number of states and do any and all other
acts and things which may be necessary or desirable to enable the
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<PAGE>
Holder to consummate the public sale or other disposition of the Registrable
Securities subject to the rights of others with similar rights.
(b) The Company shall also furnish indemnification in the
manner provided in Section 2 hereof, except that the maximum amount of such
indemnification shall be limited to the amount of proceeds received by the
Holder from the sale of the Registrable Securities. The Holder shall furnish
information and indemnification as set forth in Section 2 hereof, except that
the maximum amount which may be recovered from the Holder shall be limited to
the amount of proceeds received by the Holder from the sale of the Registrable
Securities.
(c) In connection with any offering involving an
underwriting of shares of the Company's Common Stock, the Company shall not be
required under this Section 1 to include any of the Holder's Registrable
Securities in such underwriting unless the Holder accepts the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by it (or by other persons entitled to select the underwriters), and then only
in such quantity as the underwriters determine in their sole discretion will
not jeopardize or limit the success of the offering by the Company. If the
total amount of securities, including Registrable Securities, requested by
selling stockholders to be included in such offering exceeds the amount of
securities that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be
required to include in the offering only that number of such securities,
including Registrable Securities, which the underwriters determine in their
sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro
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<PAGE>
rata (subject to the registration rights set forth on Schedule I attached
hereto and made a part hereof) among the selling stockholders (whether such
selling stockholders acquire or have acquired such Common Stock before, on or
after the date hereof) according to the total amount of securities entitled to
be included therein owned by each selling stockholder or in such other
proportions as shall mutually be agreed to by such selling stockholders).
(d) The Holder acknowledges and agrees that any Shares which
are held in escrow pursuant to that certain Escrow Agreement, dated as of even
date herewith, among the Company, the Holder and the Escrow Agent (as therein
defined) (the "Escrow Agreement") may not be sold while so held in escrow,
notwithstanding any registration of such Shares pursuant to this Agreement.
2. (a) Whenever pursuant to Section 1 hereof, a registration
statement relating to any of the Registrable Securities is filed under the
Act, amended or supplemented, the Company shall, to the extent permitted by
law, indemnify and hold harmless Holder, and each person, if any, who controls
(within the meaning of the Act) Holder, and each underwriter (within the
meaning of the Act) of such securities and each person, if any, who controls
(within the meaning of the Act) any such underwriter, against such losses,
claims, damages, liabilities or actions, joint or several, to which Holder,
any such controlling person or any such underwriter may become subject, under
the Act or otherwise, insofar as such losses, claims, damages, liabilities or
actions in respect thereof, arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
such registration statement or any preliminary
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<PAGE>
prospectus or final prospectus constituting a part thereof or any amendment or
supplement thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse Holder and each such
controlling person and underwriter for any legal or other expenses reasonably
incurred by Holder or such controlling person or underwriter in connection
with investigating or defending any such losses, claims, damages, liabilities
or actions; provided, however, that the Company will not be liable in any such
case to the extent that any such losses, claims, damages, liabilities or
actions arise out of or are based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
said preliminary prospectus, said final prospectus or said amendment or
supplement in reliance upon and in conformity with written information
furnished by Holder or any other underwriter, for use in the preparation
thereof.
(b) The Holder shall indemnify and hold harmless the
Company, each of its directors, each of its officers and each person, if any,
who controls the Company within the meaning of the Act against any losses,
claims, damages, liabilities or actions, to which the Company or any such
director, officer or controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue or alleged untrue statement of any
preliminary prospectus, said final prospectus, or said amendment or
supplement, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein not
- 5 -
<PAGE>
misleading in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in said registration statement, said preliminary prospectus, said
final prospectus or said amendment or supplement in reliance upon and in
conformity with written information furnished by such Holder for use in the
preparation thereof; and shall reimburse the Company or any such director,
officer or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
losses, claims, damages, liabilities or actions.
(c) Promptly after receipt by an indemnified party under
this Section 2 of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party, give the indemnifying party notice of the commencement
thereof; but the omission to so notify the indemnifying party shall not
relieve it from any liability which it may have to an indemnified party
otherwise than under this Section 2.
(d) In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in, and, to
the extent that it may 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, the indemnifying party shall not be liable to
such indemnified party under this Section 2 for any legal or other expenses
subsequently
- 6 -
<PAGE>
incurred by such indemnified party in connection with the defense thereof,
other than reasonable costs of investigation.
(e) To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make
the maximum contribution with respect to any amounts for which it would
otherwise be liable under this Section 2 to the extent permitted by law,
provided that (i) no contribution shall be made under circumstances where the
indemnifying party would not have been liable for indemnification under the
fault standards set forth in this Section 2, (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of such fraudulent misrepresentation
and (iii) contribution by the Holder shall be limited in amount to the net
amount of proceeds received by him from the sale of the Registrable Securities
pursuant to such Registration Statement or prospectus.
3. All notices, requests, consents or other communications
("Notices") which either party may desire or be required to give to the other
hereunder shall be in writing and shall be delivered by hand, overnight
express carrier, or sent by registered or certified mail, return receipt
requested, postage prepaid, in any event, addressed to the parties at their
respective addresses first above set forth. A copy of any Notice given by the
Holder to the Company shall simultaneously be given in any manner provided
above to Squadron, Ellenoff, Plesent & Sheinfeld, LLP, 551 Fifth Avenue, New
York, New York 10176, Attention: Kenneth R. Koch, Esq. A copy of any Notice
given by the Company to
- 7 -
<PAGE>
the Holder shall simultaneously be given in either manner provided above to
Underwood & Associates, P.C., Parker Place, Suite 6-161, South Parker Road,
Aurora, Colorado 80014, Attention: Arthur Underwood, Esq. Notices given in the
manner aforesaid shall be deemed to have been given three (3) business days
after the day so mailed, the following business day after delivery to any
overnight express carrier and on the day so delivered by hand (if delivered on
a business day prior to 5 p.m., or if not, then on the next business day).
Either party shall have the right to change its address(es) for the receipt of
Notices by giving Notice to the other party in either manner aforesaid. Any
Notice required or permitted to be given by either party may be given by that
party's attorney.
4. (a) This Agreement shall bind and inure to the benefit
of the parties hereto and their respective successors.
(b) This Agreement shall be governed by, interpreted under
and construed and enforced in accordance with, the laws of the State of New
York.
(c) This Agreement has been fully negotiated by the parties
and rules of construction construing ambiguities against the party responsible
for drafting agreements shall not apply.
(d) This Agreement contains the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
understandings, if any, with respect thereto.
(e) This Agreement may not be modified, changed,
supplemented or terminated, nor may any obligations hereunder be waived,
except by written instrument
- 8 -
<PAGE>
signed by the party to be charged or by its agent duly authorized in writing
or as otherwise expressly permitted herein.
(f) Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, will not operate as a waiver thereof. No waiver will be
effective unless and until it is in writing and signed by the party giving the
waiver.
(g) This Agreement may be executed in one or more
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which taken together shall constitute but one and the
same original.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
FAMILY GOLF CENTERS, INC.
By:
--------------------------
Name: Robert Krause
Title: Vice President
SWINGMASTER GOLF AT
CENTENNIAL, L.P.
By: Pinecrest Enterprises Ltd.,
By:
-------------------------
Name:
Title:
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<PAGE>
Schedule I
1. The registration rights attaching to the 300,000 shares to be
issued upon exercise of the Warrants for such shares (not yet exercised)
issued in connection with a public offering in December 1995, (See Exhibit
10.28 of the Registration Statement dated October 3, 1995 (Registration Number
33-97686)).
2. Any registration rights in respect of the Common Stock or any
other class of capital stock of the Company, except those registration rights
in respect of shares of Common Stock issued in connection with the acquisition
by the Company of a golf center.
- 10 -
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of August 29, 1996, between
JOSEPH J. GRAHAM, with an address at 67 Valley Road, Katonah, New York 10536
(the "Holder") and FAMILY GOLF CENTERS, INC., with an address at 225
Broadhollow Road, Melville, New York 11747 (the "Company").
W I T N E S S E T H :
WHEREAS, the Holder is the beneficial owner of 1,832 shares (the
"Shares") of the common stock, par value $.01 per share, of the Company
("Common Stock");
WHEREAS, the Holder desires to have certain registration rights under
the securities laws, and the Company desires that the Holder have such
registration rights;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the parties hereby agree as
follows:
1. If, at any time during the period commencing six (6) months from
the date hereof and terminating on the date on which the Shares become saleable
under Rule 144 promulgated under the Act (as defined below), the Company shall
determine to file any registration statement, or any post-effective amendment
to a registration statement, under the Securities Act of 1933, as amended (the
"Act"), covering equity securities of the Company (other than registration
statements on Form S-8 or S-4 or any other form not generally available for the
registration of securities for sale to the public) for its own account or for
the account of others, the Company shall advise the Holder, by written notice
at least ten (10) business days prior to any filing, and shall, upon the
request of the Holder, and at the expense of the Company, include in any such
registration statement, or any such post-effective amendment to a registration
statement, all of the Registrable
<PAGE>
Securities (as hereinafter defined) that the Holder has requested in writing to
be registered, provided that such written request is delivered to the Company
within seven (7) business days of the Holder's receipt of notice from the
Company. As used in this Agreement, "Registrable Securities" shall mean (i) the
Shares, and (ii) any Common Stock of the Company issued as (or issuable upon
the conversion or exercise of any convertible security, option, warrant right
or other security which is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of the Shares. All costs and
expenses of such registration statement shall be borne by the Company, except
underwriting discounts or commissions applicable to any of the Registrable
Securities sold by the Holder and any counsel to the Holder. The Company shall
not be required to register securities of the Holder on more than one occasion;
provided that if the Holder has been prevented from selling all of the
Registrable Securities Holder wished to sell because of limitations imposed
under paragraph (c) of this Section 1, then the Holder shall be entitled to
include the Registrable Securities in one or more additional registration
statements under the terms of this Section 1 until the Holder has been able to
sell all of the Registrable Securities the Holder wishes to sell.
(a) The Company shall supply prospectuses and such other
documents as the Holder may reasonably request in order to facilitate the
public sale or other disposition of the Registrable Securities, use its
reasonable best efforts to register and qualify any of the Registrable
Securities for sale in a reasonable number of states and do any and all other
acts and things which may be necessary or desirable to enable the
- 2 -
<PAGE>
Holder to consummate the public sale or other disposition of the Registrable
Securities subject to the rights of others with similar rights.
(b) The Company shall also furnish indemnification in the
manner provided in Section 3 hereof, except that the maximum amount of such
indemnification shall be limited to the amount of proceeds received by the
Holder from the sale of the Registrable Securities. The Holder shall furnish
information and indemnification as set forth in Section 3 hereof, except that
the maximum amount which may be recovered from the Holder shall be limited to
the amount of proceeds received by the Holder from the sale of the Registrable
Securities.
(c) In connection with any offering involving an underwriting
of shares of the Company's Common Stock, the Company shall not be required
under this Section 1 to include any of the Holder's Registrable Securities in
such underwriting unless the Holder accepts the terms of the underwriting as
agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize or limit the success of the offering by the Company. If the total
amount of securities, including Registrable Securities, requested by selling
stockholders to be included in such offering exceeds the amount of securities
that the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
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<PAGE>
rata (subject to the registration rights set forth on Schedule I attached
hereto and made a part hereof) among the selling stockholders (whether such
selling stockholders acquire or have acquired such Common Stock before, on or
after the date hereof) according to the total amount of securities entitled to
be included therein owned by each selling stockholder or in such other
proportions as shall mutually be agreed to by such selling stockholders).
(d) The Holder acknowledges and agrees that any Shares which
are held in escrow pursuant to that certain Escrow Agreement, dated as of even
date herewith, among the Company, the Holder and the Escrow Agent (as therein
defined) (the "Escrow Agreement") may not be sold while so held in escrow,
notwithstanding any registration of such Shares pursuant to this Agreement.
2. Representations by the Holder. The Holder understands that the
Registrable Securities are and will be deemed to be "restricted securities" as
such term is defined in Rule 144 and can only be sold (a) in accordance with
the provisions of the Rule or such other duly available exemption from the
registration requirements of the Act or (b) pursuant to an effective
registration statement as set forth in this Agreement. The Holder is acquiring
the Shares for its own account (and not for the account of others) and not with
a view to the distribution or resale thereof. Upon any subsequent transfer or
disposition of any Registrable Securities made in reliance on an exemption from
the registration provisions of the Act, the Holder agrees to deliver to the
Company either an opinion of counsel satisfactory to the Company to the effect
that such transfer or
- 4 -
<PAGE>
disposition may be made without registration of such Registragble Securities
under the Act and/or such other documents or certificates as the Company may
require.
3. (a) Whenever pursuant to Section 1 hereof, a
registration statement relating to any of the Registrable Securities is filed
under the Act, amended or supplemented, the Company shall, to the extent
permitted by law, indemnify and hold harmless Holder, and each person, if any,
who controls (within the meaning of the Act) Holder, and each underwriter
(within the meaning of the Act) of such securities and each person, if any, who
controls (within the meaning of the Act) any such underwriter, against such
losses, claims, damages, liabilities or actions, joint or several, to which
Holder, any such controlling person or any such underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages,
liabilities or actions in respect thereof, arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any such registration statement or any preliminary prospectus or final
prospectus constituting a part thereof or any amendment or supplement thereto,
or arise out of or are based upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and shall reimburse Holder and each such controlling person and
underwriter for any legal or other expenses reasonably incurred by Holder or
such controlling person or underwriter in connection with investigating or
defending any such losses, claims, damages, liabilities or actions; provided,
however, that the Company will not be liable in any such case to the extent
that any such losses, claims, damages, liabilities or actions arise out of or
are based upon an untrue statement or alleged untrue
- 5 -
<PAGE>
statement or omission or alleged omission made in said registration statement,
said preliminary prospectus, said final prospectus or said amendment or
supplement in reliance upon and in conformity with written information
furnished by Holder or any other underwriter, for use in the preparation
thereof.
(b) The Holder shall indemnify and hold harmless the Company,
each of its directors, each of its officers and each person, if any, who
controls the Company within the meaning of the Act against any losses, claims,
damages, liabilities or actions, to which the Company or any such director,
officer or controlling person may become subject, under the Act or otherwise,
insofar as such losses, claims, damages, liabilities or actions arise out of or
are based upon any untrue or alleged untrue statement of any preliminary
prospectus, said final prospectus, or said amendment or supplement, or arise
out of or are based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statement therein not misleading in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in said registration statement, said preliminary
prospectus, said final prospectus or said amendment or supplement in reliance
upon and in conformity with written information furnished by such Holder for
use in the preparation thereof; and shall reimburse the Company or any such
director, officer or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such losses, claims, damages, liabilities or actions.
- 6 -
<PAGE>
(c) Promptly after receipt by an indemnified party under this
Section 3 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof; but the
omission to so notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 3.
(d) In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in, and, to
the extent that it may 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, the indemnifying party shall not be liable to
such indemnified party under this Section 3 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof, other than reasonable costs of investigation.
(e) To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make
the maximum contribution with respect to any amounts for which it would
otherwise be liable under this Section 2 to the extent permitted by law,
provided that (i) no contribution shall be made under circumstances where the
indemnifying party would not have been liable for indemnification under the
fault standards set forth in this Section 3, (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of
- 7 -
<PAGE>
Section 11(f) of the Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of such fraudulent misrepresentation
and (iii) contribution by the Holder shall be limited in amount to the net
amount of proceeds received by him from the sale of the Registrable Securities
pursuant to such Registration Statement or prospectus.
4. All notices, requests, consents or other communications
("Notices") which either party may desire or be required to give to the other
hereunder shall be in writing and shall be delivered by hand, overnight express
carrier, or sent by registered or certified mail, return receipt requested,
postage prepaid, in any event, addressed to the parties at their respective
addresses first above set forth. A copy of any Notice given by the Holder to
the Company shall simultaneously be given in any manner provided above to
Squadron, Ellenoff, Plesent & Sheinfeld, LLP, 551 Fifth Avenue, New York, New
York 10176, Attention: Kenneth R. Koch, Esq. Notices given in the manner
aforesaid shall be deemed to have been given three (3) business days after the
day so mailed, the following business day after delivery to any overnight
express carrier and on the day so delivered by hand (if delivered on a business
day prior to 5 p.m., or if not, then on the next business day). Either party
shall have the right to change its address(es) for the receipt of Notices by
giving Notice to the other party in either manner aforesaid. Any Notice
required or permitted to be given by either party may be given by that party's
attorney.
5. (a) This Agreement shall bind and inure to the benefit
of the parties hereto and their respective successors.
- 8 -
<PAGE>
(b) This Agreement shall be governed by, interpreted under
and construed and enforced in accordance with, the laws of the State of New
York.
(c) This Agreement has been fully negotiated by the parties
and rules of construction construing ambiguities against the party responsible
for drafting agreements shall not apply.
(d) This Agreement contains the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
understandings, if any, with respect thereto.
(e) This Agreement may not be modified, changed, supplemented
or terminated, nor may any obligations hereunder be waived, except by written
instrument signed by the party to be charged or by its agent duly authorized in
writing or as otherwise expressly permitted herein.
(f) Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, will not operate as a waiver thereof. No waiver will be effective
unless and until it is in writing and signed by the party giving the waiver.
(g) This Agreement may be executed in one or more
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which taken together shall constitute but one and the same
original.
- 9 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
FAMILY GOLF CENTERS, INC.
By:
------------------------
Name: Robert Krause
Title: Vice President
----------------------------
JOSEPH J. GRAHAM
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<PAGE>
Schedule I
1. The registration rights attaching to the 300,000 shares to be
issued upon exercise of the Warrants for such shares (not yet exercised) issued
in connection with a public offering in December 1995, (See Exhibit 10.28 of
the Registration Statement dated October 3, 1995 (Registration Number
33-97686)).
2. Any registration rights in respect of the Common Stock or any other
class of capital stock of the Company, except those registration rights in
respect of shares of Common Stock issued in connection with the acquisition by
the Company of a golf center.
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of August 29, 1996, between
ANDREW PRICE, with an address c/o Charles Hudson, Paine Webber, 7700 Wisconsin
Avenue, Bethesda, Maryland (the "Holder") and FAMILY GOLF CENTERS, INC., with
an address at 225 Broadhollow Road, Melville, New York 11747 (the "Company").
WITNESSETH:
WHEREAS, the Holder is the beneficial owner of 1,649 shares (the
"Shares") of the common stock, par value $.01 per share, of the Company
("Common Stock");
WHEREAS, the Holder desires to have certain registration rights under
the securities laws, and the Company desires that the Holder have such
registration rights;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the parties hereby agree as
follows:
1. If, at any time during the period commencing six (6) months from
the date hereof and terminating on the date on which the Shares become
saleable under Rule 144 promulgated under the Act (as defined below), the
Company shall determine to file any registration statement, or any
post-effective amendment to a registration statement, under the Securities Act
of 1933, as amended (the "Act"), covering equity securities of the Company
(other than registration statements on Form S-8 or S-4 or any other form not
generally available for the registration of securities for sale to the public)
for its own account or for the account of others, the Company shall advise the
Holder, by written notice at least ten (10) business days prior to any filing,
and shall, upon the request of the Holder, and at the expense of the Company,
include in any such registration statement, or any such post-effective
amendment to a registration statement, all of the Registrable
<PAGE>
Securities (as hereinafter defined) that the Holder has requested
in writing to be registered, provided that such written request is delivered
to the Company within seven (7) business days of the Holder's receipt of
notice from the Company. As used in this Agreement, "Registrable Securities"
shall mean (i) the Shares, and (ii) any Common Stock of the Company issued as
(or issuable upon the conversion or exercise of any convertible security,
option, warrant right or other security which is issued as) a dividend or
other distribution with respect to, or in exchange for or in replacement of
the Shares. All costs and expenses of such registration statement shall be
borne by the Company, except underwriting discounts or commissions applicable
to any of the Registrable Securities sold by the Holder and any counsel to the
Holder. The Company shall not be required to register securities of the Holder
on more than one occasion; provided that if the Holder has been prevented from
selling all of the Registrable Securities Holder wished to sell because of
limitations imposed under paragraph (c) of this Section 1, then the Holder
shall be entitled to include the Registrable Securities in one or more
additional registration statements under the terms of this Section 1 until the
Holder has been able to sell all of the Registrable Securities the Holder
wishes to sell.
(a) The Company shall supply prospectuses and such other
documents as the Holder may reasonably request in order to facilitate the
public sale or other disposition of the Registrable Securities, use its
reasonable best efforts to register and qualify any of the Registrable
Securities for sale in a reasonable number of states and do any and all other
acts and things which may be necessary or desirable to enable the
- 2 -
<PAGE>
the Holder to consummate the public sale or other disposition of the Registrable
Securities subject to the rights of others with similar rights.
(b) The Company shall also furnish indemnification in the
manner provided in Section 3 hereof, except that the maximum amount of such
indemnification shall be limited to the amount of proceeds received by the
Holder from the sale of the Registrable Securities. The Holder shall furnish
information and indemnification as set forth in Section 3 hereof, except that
the maximum amount which may be recovered from the Holder shall be limited to
the amount of proceeds received by the Holder from the sale of the Registrable
Securities.
(c) In connection with any offering involving an
underwriting of shares of the Company's Common Stock, the Company shall not be
required under this Section 1 to include any of the Holder's Registrable
Securities in such underwriting unless the Holder accepts the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by it (or by other persons entitled to select the underwriters), and then only
in such quantity as the underwriters determine in their sole discretion will
not jeopardize or limit the success of the offering by the Company. If the
total amount of securities, including Registrable Securities, requested by
selling stockholders to be included in such offering exceeds the amount of
securities that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be
required to include in the offering only that number of such securities,
including Registrable Securities, which the underwriters determine in their
sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro
- 3 -
<PAGE>
rata (subject to the registration rights set forth on Schedule I attached
hereto and made a part hereof) among the selling stockholders (whether such
selling stockholders acquire or have acquired such Common Stock before, on or
after the date hereof) according to the total amount of securities entitled to
be included therein owned by each selling stockholder or in such other
proportions as shall mutually be agreed to by such selling stockholders).
(d) The Holder acknowledges and agrees that any Shares which
are held in escrow pursuant to that certain Escrow Agreement, dated as of even
date herewith, among the Company, the Holder and the Escrow Agent (as therein
defined) (the "Escrow Agreement") may not be sold while so held in escrow,
notwithstanding any registration of such Shares pursuant to this Agreement.
2. Representations by the Holder. The Holder understands that the
Registrable Securities are and will be deemed to be "restricted securities" as
such term is defined in Rule 144 and can only be sold (a) in accordance with
the provisions of the Rule or such other duly available exemption from the
registration requirements of the Act or (b) pursuant to an effective
registration statement as set forth in this Agreement. The Holder is acquiring
the Shares for its own account (and not for the account of others) and not
with a view to the distribution or resale thereof. Upon any subsequent
transfer or disposition of any Registrable Securities made in reliance on an
exemption from the registration provisions of the Act, the Holder agrees to
deliver to the Company either an opinion of counsel satisfactory to the
Company to the effect that such transfer or
- 4 -
<PAGE>
disposition may be made without registration of such Registragble Securities
under the Act and/or such other documents or certificates as the Company may
require.
3. (a) Whenever pursuant to Section 1 hereof, a registration
statement relating to any of the Registrable Securities is filed under the
Act, amended or supplemented, the Company shall, to the extent permitted by
law, indemnify and hold harmless Holder, and each person, if any, who controls
(within the meaning of the Act) Holder, and each underwriter (within the
meaning of the Act) of such securities and each person, if any, who controls
(within the meaning of the Act) any such underwriter, against such losses,
claims, damages, liabilities or actions, joint or several, to which Holder,
any such controlling person or any such underwriter may become subject, under
the Act or otherwise, insofar as such losses, claims, damages, liabilities or
actions in respect thereof, arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
such registration statement or any preliminary prospectus or final prospectus
constituting a part thereof or any amendment or supplement thereto, or arise
out of or are based upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and shall reimburse Holder and each such controlling person and
underwriter for any legal or other expenses reasonably incurred by Holder or
such controlling person or underwriter in connection with investigating or
defending any such losses, claims, damages, liabilities or actions; provided,
however, that the Company will not be liable in any such case to the extent
that any such losses, claims, damages, liabilities or actions arise out of or
are based upon an untrue statement or alleged untrue
- 5 -
<PAGE>
statement or omission or alleged omission made in said registration statement,
said preliminary prospectus, said final prospectus or said amendment or
supplement in reliance upon and in conformity with written information
furnished by Holder or any other underwriter, for use in the preparation
thereof.
(b) The Holder shall indemnify and hold harmless the
Company, each of its directors, each of its officers and each person, if any,
who controls the Company within the meaning of the Act against any losses,
claims, damages, liabilities or actions, to which the Company or any such
director, officer or controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue or alleged untrue statement of any
preliminary prospectus, said final prospectus, or said amendment or
supplement, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in said registration
statement, said preliminary prospectus, said final prospectus or said
amendment or supplement in reliance upon and in conformity with written
information furnished by such Holder for use in the preparation thereof; and
shall reimburse the Company or any such director, officer or controlling
person for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such losses, claims, damages,
liabilities or actions.
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<PAGE>
(c) Promptly after receipt by an indemnified party under
this Section 3 of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party, give the indemnifying party notice of the commencement
thereof; but the omission to so notify the indemnifying party shall not
relieve it from any liability which it may have to an indemnified party
otherwise than under this Section 3.
(d) In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in, and, to
the extent that it may 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, the indemnifying party shall not be liable to
such indemnified party under this Section 3 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof, other than reasonable costs of investigation.
(e) To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make
the maximum contribution with respect to any amounts for which it would
otherwise be liable under this Section 2 to the extent permitted by law,
provided that (i) no contribution shall be made under circumstances where the
indemnifying party would not have been liable for indemnification under the
fault standards set forth in this Section 3, (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of
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<PAGE>
Section 11(f) of the Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of such fraudulent misrepresentation
and (iii) contribution by the Holder shall be limited in amount to the net
amount of proceeds received by him from the sale of the Registrable Securities
pursuant to such Registration Statement or prospectus.
4. All notices, requests, consents or other communications ("Notices")
which either party may desire or be required to give to the other hereunder
shall be in writing and shall be delivered by hand, overnight express carrier,
or sent by registered or certified mail, return receipt requested, postage
prepaid, in any event, addressed to the parties at their respective addresses
first above set forth. A copy of any Notice given by the Holder to the Company
shall simultaneously be given in any manner provided above to Squadron,
Ellenoff, Plesent & Sheinfeld, LLP, 551 Fifth Avenue, New York, New York 10176,
Attention: Kenneth R. Koch, Esq. Notices given in the manner aforesaid shall be
deemed to have been given three (3) business days after the day so mailed, the
following business day after delivery to any overnight express carrier and on
the day so delivered by hand (if delivered on a business day prior to 5 p.m., or
if not, then on the next business day). Either party shall have the right to
change its address(es) for the receipt of Notices by giving Notice to the other
party in either manner aforesaid. Any Notice required or permitted to be given
by either party may be given by that party's attorney.
5. (a) This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors.
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<PAGE>
(b) This Agreement shall be governed by, interpreted under
and construed and enforced in accordance with, the laws of the State of New
York.
(c) This Agreement has been fully negotiated by the parties
and rules of construction construing ambiguities against the party responsible
for drafting agreements shall not apply.
(d) This Agreement contains the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
understandings, if any, with respect thereto.
(e) This Agreement may not be modified, changed,
supplemented or terminated, nor may any obligations hereunder be waived,
except by written instrument signed by the party to be charged or by its agent
duly authorized in writing or as otherwise expressly permitted herein.
(f) Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, will not operate as a waiver thereof. No waiver will be
effective unless and until it is in writing and signed by the party giving the
waiver.
(g) This Agreement may be executed in one or more
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which taken together shall constitute but one and the
same original.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
FAMILY GOLF CENTERS, INC.
By: ____________________
Name: Robert Krause
Title: Vice President
________________________
ANDREW PRICE
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<PAGE>
Schedule I
1. The registration rights attaching to the 300,000 shares to be
issued upon exercise of the Warrants for such shares (not yet exercised)
issued in connection with a public offering in December 1995, (See Exhibit
10.28 of the Registration Statement dated October 3, 1995 (Registration Number
33-97686)).
2. Any registration rights in respect of the Common Stock or any
other class of capital stock of the Company, except those registration rights
in respect of shares of Common Stock issued in connection with the acquisition
by the Company of a golf center.
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<PAGE>
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of August 29, 1995, among FAMILY GOLF
CENTERS, INC., a Delaware corporation with executive offices at 225
Broadhollow Road, Melville, New York 11747 ("FGC"), DENVER FAMILY GOLF
CENTERS, INC., a Delaware corporation with executive offices at 225
Broadhollow Road, Melville, New York 11747 ("Subsidiary"), SWINGMASTER GOLF AT
CENTENNIAL, L.P., a Colorado limited partnership with executive offices at
6901 South Peoria Street, Englewood, Colorado 80112 ("Swingmaster"), JOSEPH J.
GRAHAM, having an adress at 67 Valley Road, Katonah, New York 10536
("Graham"), ANDREW PRICE, having an address c/o Paine Webber, 7700 Wisconsin
Avenue, Bethesda, Maryland, Attn: Charles Hudson ("Price") and CONTINENTAL
STOCK TRANSFER & TRUST COMPANY incorporated under the laws of the United
States of America with executive offices at 2 Broadway, New York, New York
10004 (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution hereof, Swingmaster and
Denver Family Golf Centers, Inc., a wholly-owned Delaware subsidiary of FGC
("Subsidiary"), are consummating the transactions contemplated by the Purchase
Agreement, dated as of the date hereof (the "Purchase Agreement"), among
Swingmaster and Subsidiary, pursuant to which, among other things, Subsidiary
shall purchase certain assets of Swingmaster in exchange for (i) 40,000 shares
of common stock, par value $.01 per share (the "FGC Common Stock") and (ii)
$800,000 in cash, as adjusted as set forth in the Purchase Agreement;
WHEREAS, Swingmaster has agreed to pay Graham and Price a brokerage
commission for procuring the Purchase Agreement equal to 1,852 shares of FGC
Common Stock to Graham (the "Graham Shares") and 1,629 shares of FGC Common
Stock to Price (the "Price Shares"), leaving Swingmaster with 36,519 shares of
FGC Common Stock in the aggregate (the "Swingmaster Shares");
WHEREAS, pursuant to the Purchase Agreement, the total shares payable
thereunder and a portion of the cash consideration payable thereunder are
required to be placed into an escrow account (the "Escrow Account") to be
maintained by the Escrow Agent; and
WHEREAS, this is the Escrow Agreement referred to in the Purchase
Agreement. Capitalized terms used in this Escrow Agreement and not otherwise
defined herein shall have the respective meanings given to them in the
Purchase Agreement.
<PAGE>
NOW, THEREFORE, it is agreed as follows:
1. ESCROW.
1.01 APPOINTMENT OF ESCROW AGENT. Swingmaster, Graham, Price,
Subsidiary and FGC hereby appoint the Escrow Agent, and the Escrow Agent
hereby agrees to serve, as Escrow Agent in accordance with, and pursuant to,
this Agreement. Simultaneously with the execution and delivery of this
Agreement, FGC shall deposit into the Escrow Account (a) an aggregate of
40,000 shares of FGC Common Stock (the "Escrowed Shares"), (b) $329,282.49 in
cash by wire transfer (the "Escrowed Cash") and (c) four (4) fully executed
and acknowledged counterparts of an Assignment and Assumption of Lease between
Subsidiary, as assignor, and Swingmaster, as assignee. Escrow Agent shall hold
all Escrowed Shares and all dividends and distributions in respect thereof and
all Escrowed Cash (collectively, the "Escrowed Property") in the Escrow
Account as set forth herein.
1.02 OPERATION OF ESCROW ACCOUNT.
(a) At any time on or after September 13, 1996, Swingmaster
or Subsidiary shall be entitled to give a notice to the Escrow Agent (with a
copy to the other party), to the effect that it has elected to unwind the
Purchase Agreement because the Arapahoe County Public Airport Authority
("Landlord") did not unconditionally execute and deliver to Subsidiary a
Landlord's Consent and Estoppel Certificate (the "Consent and Estoppel"),
substantially in the form of Exhibit A attached hereto.
(b) Twenty days after the Escrow Agent has received a notice
pursuant to Section 1.02(a) hereof (or, if not a business day, on the next
business day following such twentieth day), or within two (2) business days
after the Escrow Agent receives any notice to such effect given jointly by
Swingmaster and Subsidiary, the Escrow Agent shall deliver (i) to Swingmaster,
two (2) copies of the Assignment and Assumption of Lease, and (ii) to
Subsidiary, the remainder of the Escrowed Property (provided, however, that
FGC may instruct the Escrow Agent to cancel, rather than deliver, the FGC
Common Stock constituting the Escrowed Property), unless the other party
(i.e., Swingmaster, if Subsidiary was the notifying party, or Subsidiary, if
Swingmaster was the notifying party) shall have notified the Escrow Agent
(with a copy to the party who gave the notice pursuant to Section 1.02(a)) in
writing before such date that such party disagrees with the notifying party's
determination that it is entitled to so unwind the Purchase Agreement, which
notice must be accompanied by a copy of the Consent and Estoppel signed by
Landlord.
2
<PAGE>
(c) At any time on or after September 13, 1996, Swingmaster
or Subsidiary shall be entitled to give a notice to the Escrow Agent (with a
copy to the other party), to the effect that Landlord has executed and
unconditional delivered the Consent and Estoppel, which notice must be
accompanied by a copy of the Consent and Estoppel signed by Landlord.
(d) Twenty days after the Escrow Agent has received a notice
pursuant to Section 1.02(c) hereof (or, if not a business day, on the next
business day following such twentieth day), or within two (2) business days
after the Escrow Agent receives any notice to such effect given jointly by
Swingmaster and Subsidiary, the Escrow Agent shall deliver (i) to Swingmaster,
(x) 31,519 shares of the Swingmaster Shares and (y) the Escrowed Cash, and
(ii) to Graham and Price, the Graham Shares and the Price Shares,
respectively, unless the other party (i.e., Swingmaster, if Subsidiary was the
notifying party, or Subsidiary, if Swingmaster was the notifying party) shall
have notified the Escrow Agent (with a copy to the party who gave the notice
pursuant to Section 1.02(c)) in writing before such date that such party
disagrees with the notifying party's determination that Landlord
unconditionally executed and delivered the Consent and Estoppel.
(e) At any time prior to the first anniversary of the date
of this Agreement, Subsidiary shall be entitled to give a notice to the Escrow
Agent (with a copy to Swingmaster), to the effect that there has been an event
entitling Subsidiary to indemnification from Swingmaster pursuant to the
Purchase Agreement, which notice shall specify the amounts owed by Swingmaster
pursuant to the Purchase Agreement, the calculation of such amounts and the
basis therefore.
(f) Twenty days after the Escrow Agent has received a notice
pursuant to Section 1.02(e) hereof (or, if not a business day, on the next
business day following such twentieth day), or within two (2) business days
after the Escrow Agent receives any notice to such effect given jointly by
Swingmaster and Subsidiary, the Escrow Agent shall deliver to FGC the Escrowed
Property (with the Escrowed Shares being valued as set forth in Section
1.02(d) hereof) in the amounts specified in such notice unless Swingmaster
shall have notified the Escrow Agent (with a copy to Subsidiary) in writing
before such date that Swingmaster disagrees with Subsidiary's determination
that it is entitled to indemnification with respect to the Purchase Agreement,
which notice shall set forth in reasonable detail the basis for such
disagreement.
(g) Should any dispute arise with respect to the delivery,
ownership, or right of possession of the Escrowed Property, the Escrow Agent,
as more fully set forth in Section 3.11 hereof, is authorized and directed to
retain in its possession without liability to anyone all or any part of the
Escrowed Property until such dispute shall have been settled either by mutual
agreement by the parties concerned or by a final order, decree,
3
<PAGE>
or judgment of a court of competent jurisdiction in the United States of
America and time for appeal has expired and no appeal has been perfected, but
the Escrow Agent shall be under no duty whatsoever to institute or defend any
such proceedings, and may, in its discretion, deposit such Escrowed Property
with a court of competent jurisdiction in the United States of America which
is hearing such dispute.
(h) For purposes of this Agreement, the value of each share
of FGC Common Stock which is part of the Escrowed Property shall be deemed
equal to the Current Market Price (as hereinafter defined). The "Current
Market Price" per share of FGC Common Stock shall mean the average of the
daily closing sales price as reported on the NASDAQ Stock Market for the five
consecutive trading days immediately preceding the date of determination.
1.03 DISTRIBUTION OF ESCROWED PROPERTY. Unless a notice under Section
1.02(a), (c) or (e) hereof has been given and Escrowed Property in
satisfaction of such notice has not been delivered in accordance therewith,
either because the 20-day period has not yet run out or because a dispute
relating to the claim made by such notice is then pending (and then only to
the extent such Escrowed Property is in dispute or subject to such notice),
the Escrowed Property or such portion of it as at the time remains in escrow,
shall be returned to Swingmaster on the first anniversary of the date of this
Agreement.
1.04 TERMINATION OF ESCROW ACCOUNT. This Agreement and the Escrow
Account will terminate at 5:00 P.M., New York City local time, on the date on
which all of the Escrowed Property shall be distributed as set forth above.
1.05 VOTING. The Swingmaster Shares held in the Escrow Account shall
be voted by Swingmaster. The Graham Shares held in the Escrow Account shall be
voted by Graham. The Price Shares held in the Escrow Account shall be voted by
Price.
2. NOTICES. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be (a) delivered by hand, (b)
facsimile, or (c) overnight delivery with proper postage prepaid, and
addressed as follows:
If to FGC or Subsidiary to:
225 Broadhollow Road
Melville, New York 11747
4
GROUND LEASE AND AGREEMENT
Between
ARAPAHOE COUNTY PUBLIC AIRPORT AUTHORITY
and
PINECREST ENTERPRISES,LTD.
Date: November 1, 1994
<PAGE>
TABLE OF CONTENTS
I. DESCRIPTION OF PREMISES..................................... 5
II. TERM........................................................ 5
III. RENT........................................................ 5
A. Calculation......................................... 5
B. Gross income........................................ 7
C. Additional Rent..................................... 7
D. Payment............................................. 8
E. Net Return.......................................... 8
F. Delinquency......................................... 8
G. Place and Manner of Payments........................ 8
IV. IMPROVEMENTS................................................ 9
A. Development Plans................................... 9
B. Building Permit..................................... 9
C. Construction Time................................... 9
D. Construction Standards.............................. 9
E. Use Restrictions................................... 10
F. Mechanic's and Other Liens......................... 10
V. MAINTENANCE AND CONSTRUCTION OBLIGATIONS .................. 11
A. Maintenance........................................ 11
B. Removal of Waste................................... 11
VI. RAZE, REMOVE, REBUILD...................................... 11
A. Consent............................................ 11
B. Timing............................................. 12
C. Interior Improvements.............................. 12
VII. DIVISION................................................... 12
VIII. RIGHT OF ENTRY..................................................... 12
IX. PAYMENT OF TAXES AND OTHER CHARGES......................... 13
A. Payment............................................ 13
B. Proration, Installments............................ 13
C. Direct Payment..................................... 14
D. Apportionment...................................... 14
E. Contest............................................ 14
X. INDEMNIFICATION............................................ 15
A. Lessee's Indemnification........................... 15
B. Authority's Indemnification........................ 15
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<PAGE>
XI. INSURANCE................................................... 15
A. Public Liability and Property Damage................ 15
B. All Risk............................................ 16
C. Rent Insurance...................................... 16
D. Construction Insurance.............................. 16
E. Policies............................................ 16
F. Mutual Subrogation.................................. 17
XII. HAZARDOUS MATERIAL.......................................... 17
A. Lessee Obligations.................................. 17
B. Defined............................................. 18
XIII. DAMAGE OR DESTRUCTION ...................................... 18
A. Notice.............................................. 18
B. Trust............................................... 19
C. Proceeds............................................ 19
D. Payment to Authority................................ 19
E. Option.............................................. 20
F. Lessee Liability.................................... 20
XIV. WAIVER...................................................... 21
XV. REMOVAL OF EQUIPMENT........................................ 21
XVI. SURRENDER AND HOLDING OVER.................................. 21
XVII. INCONVENIENCE DURING CONSTRUCTION........................... 21
XVIII. SUBLETTING, ASSIGNMENT AND MORTGAGE......................... 22
A. Sublet.............................................. 22
B. Assignment.......................................... 23
C. Mortgage............................................ 23
D. New Lease........................................... 24
XIX. AUTHORITY'S REMEDIES AND BREACH............................. 24
A. Remedies............................................ 24
B. Event of Default.................................... 25
C. Mortgagee Notice.................................... 26
XX. ASSIGNMENT OF RENTS ........................................ 27
A. Assignment of Rents................................. 27
B. Right of Entry...................................... 27
XXI. AUTHORITY'S RIGHT TO PERFORM LESSEE'S COVENANTS............. 27
XXII. ESTOPPEL CERTIFICATES....................................... 28
A. Lessee Certificates................................. 28
B. Authority Certificate............................... 28
XXIII. NOTICES.................................................... 28
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<PAGE>
XXIV. ACCEPTANCE OF Premises..................................... 29
XXV. WARRANTY OF TITLE . ....................................... 29
XXVI. CONDEMNATION............................................... 29
A. Termination........................................ 29
B. Amendment of Lease................................. 30
C. Award.............................................. 30
D. Arbitration........................................ 30
E. Sublease........................................... 30
XXVII. EASEMENTS.................................................. 30
XXVIII. ARBITRATION................................................ 31
XXIX. ATTORNEYS' FEES............................................ 31
XXX. ADDITIONAL LEASE PROVISIONS................................ 32
A. Observance of laws................................. 32
B. Codes.............................................. 32
C. Airport Development................................ 32
D. Authority's Rights................................. 32
E. Subordination...................................... 32
F. Representations and Warranties..................... 32
G. Exclusive Right.................................... 32
H. Executive Order.................................... 33
I. Affirmative Action Program......................... 33
J. Impossibility...................................... 34
XXXI. QUIET POSSESSION........................................... 34
XXXII. GENERAL.................................................... 34
A. Captions........................................... 34
B. Executed Leases.................................... 34
C. Time of Essence.................................... 34
D. Invalidity......................................... 35
E. Mortgage........................................... 35
F. Fair Meaning....................................... 35
G. Construction....................................... 35
H. Modification and Merger............................ 35
I. Memorandum......................................... 35
J. Binding Effect..................................... 35
K. Remedies........................................... 36
L. Good Faith......................................... 36
M. Consent............................................ 36
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<PAGE>
GROUND LEASE AND AGREEMENT
This Lease, made and entered into effective this 1st day of November,
1994, by and between ARAPAHOE COUNTY PUBLIC AIRPORT AUTHORITY, hereinafter
referred to as "Authority", and PINECREST ENTERPRISES, LTD., hereinafter
referred to as "Lessee."
W I T N E S S E T H:
I. DESCRIPTION OF PREMISES
Upon and subject to the terms and conditions hereinafter set forth,
Authority leases to Lessee and Lessee rents from Authority that certain real
property located in the County of Arapahoe, State of Colorado, described more
particularly on Exhibit A all attached hereto, made a part hereof and
incorporated herein by reference, together with all rights of way, licenses, or
easements now or hereafter belonging or pertaining to any of the foregoing, and
all right, title and interest of Authority, and all buildings and other
improvements now located on the Premises (all of the foregoing are sometimes
hereinafter referred to as "demised premises" or "leased premises").
II. TERM.
The term of this Lease shall be for a period of twenty (20) years,
commencing on the 1st day of November, 1994, ("Lease Commencement Date"), and
terminating on the 31st day of October, 2014. At the option of Lessee the term
may be extended twice for an additional ten (10) years each time until the 31st
day of October, 2034, approved by the Federal Aviation Administration.
Possession of the demised premises shall be delivered by Authority to Lessee on
the date of the commencement of the lease term as specified aforesaid.
III. RENT
A. Calculation. As consideration for Authority's entering into this Lease,
Lessee shall pay to Authority, without notice or demand, a net annual rent
determined as follows:
(1) Five hundred and no/100 Dollars ($500.00) per month,
commencing from the date that Authority's Board of Commissioners has approved
this Lease, the Federal Aviation Administration has set forth in writing that
it has no objection, subject to conditions, to the development plan and the
lighting plan, and the Arapahoe County Planning Commission has given its
approval pursuant to a Location and Extent Hearing through and including the
day prior to the pre-construction meeting.
(2) Fifteen hundred and no/100 dollars ($1,500.00) per month
effective from date of pre-construction meeting through and including the day
prior to initial opening which is the date that Lessee first receives any Gross
Income as hereinafter defined.
(3) Fifteen hundred and no/100 Dollars ($1,500.00) per month
plus three percent (3%) of the Gross Income received by Lessee during the
period commencing the date of the initial opening and through and including May
31, 1995 ("Initial Gross Income").
(4) Notwithstanding the foregoing, commencing the date either
the teeing areas, practice greens, or putting course open or June 1, 1995,
whichever occurs first, ten cents ($.10) per
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<PAGE>
square foot per year for Lot 22 K, (which consists of 225,291 square feet) plus
two hundred and no/100 dollars ($200.00) per acre per year for the Venues
(which consists of 30.94 acres) to be prorated and payable monthly on the first
(1st) day of each month in advance commencing June 1, 1995, through and
including September 30, 1995. Further, three percent (3%) of the Gross Income
received by Lessee during the period commencing June 1, 1995 and terminating
September 30, 1995 ("Interim Gross Income") shall be payable by Lessee on or
before December 31, 1995. On or before June 1, 1996, Lessee shall furnish to
Authority a true, correct and complete statement of all Initial Gross Income
and Interim Gross Income received by Lessee, certified to Authority by an
officer of the Lessee and accompanied by Lessee's federal income tax return.
Upon Authority's written request Lessee shall make available to Authority at
Lessee's office in Parker, Colorado, Lessee's books and records which provided
the basis for computation of the Interim Gross Income. If no such request for
confirmation of, and examination of the Lessee's books and records pertaining
to, Initial Gross Income and Interim Gross Income is made by Authority on or
before June 1, 1997, Authority shall be deemed to have conclusively accepted
Lessee's statement of Initial Gross Income and Interim Gross Income. If
Authority makes an independent audit of Lessee's books and records and it is
determined that the amount of Initial Gross Income and Interim Gross Income
varies to Authority's detriment by more than five percent (5%) from that
reflected in Lessee's statement, Lessee shall pay the total cost of such
independent audit, otherwise the cost of such audit shall be borne by
Authority. If such independent audit shows a deficiency in the payment of
Initial Gross Income and Interim Gross Income, Lessee shall forthwith pay such
deficiency. If such independent audit shows an overpayment of Initial Gross
Income and interim Gross Income, Authority shall forthwith return to Lessee
such overpayment.
(5) Commencing October 1, 1995, ten cents ($.10) per square
foot per year for Lot 22K, with an increase at the compounded rate of three
percent (3%) per annum, effective October 1 of each Lease Year, commencing
October 1, 1996, and two hundred and no/100 dollars ($200.00) per acre per year
for the Venues with an increase at the compounded rate of three percent (3%)
per annum effective October 1 of each Lease Year, commencing October 1, 1996
("Basic Rent"), all as shown on Exhibit B attached hereto, plus a minimum of
fifteen thousand and no/100 ($15,000.00) if the Gross Income, measured from
October 1 to September 30 of each year until the lease term expires ("Annual
Gross Income") is up to five hundred thousand and no/100 dollars ($500,000.00),
plus four percent (4%) of the Annual Gross Income greater than five hundred
thousand and no/100 dollars ($500,000.00) and up to one million and no/100
dollars ($1,000.000.00) and plus five percent (5%) of the Annual Gross Income
greater than one million and no/100 dollars ($1,000,00.00) (collectively
defined as "Percentage Rent"). The Basic Rent shall be payable quarterly in
advance, i.e. on or before October 1, January 1, April 1, and July 1 of each
lease year. The lease year commences October 1 and ends September 30 ("Lease
Year"). Percentage Rent is payable within sixty (60) days after the end of each
Lease Year. By the 1st of June following the end of each Lease Year, Lessee
shall furnish to Authority a true, correct and complete statement of all Annual
Gross Income received by Lessee for the immediately preceding Lease Year
certified to Authority by an officer of the Lessee and accompanied by Lessee's
federal income tax return (the "Year End Financial Statement"). Upon
Authority's written request, Lessee shall make available to Authority, at
Lessee's offices in Parker, Colorado Lessee's books and records which provided
the basis for such computation of Percentage Rent. If no such request for
confirmation and examination of Lessee's books and records is made by Authority
within three (3) years following any such annual payment, Authority shall be
deemed to have conclusively accepted Lessee's statement thereof. If Authority
makes an independent audit of Lessee's books and records and it is determined
that the amount of Annual Gross Income varies, to Authority's detriment, by
more than five percent (5%) from that reflected in any such Year End Financial
Statement submitted by Lessee, then Lessee shall pay the total cost of such
independent audit, otherwise, the cost of such audit shall be borne by
Authority. If such independent audit shows a deficiency in the payment of
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<PAGE>
Percentage Rent, Lessee shall forthwith pay such deficiency. If such independent
audit shows an overpayment of Percentage Rent, Authority shall forthwith return
to Lessee such overpayment.
B. Gross income. "Gross Income" shall include Initial Gross Income.
Interim Gross Income and Annual Gross Income and as used herein shall be
computed on a cash basis and shall mean all income, rents, profits, revenue and
all other amounts received by Lessee during the Lease Year to which such
payment pertains and which are in any way attributable to or arise out of the
leased premises and any improvements now or hereafter existing thereon less any
amounts received by Lessee during the year in question which pertain to a
subsequent period.
C. Additional Rent. Lessee shall also pay, from time to time, as
provided in this Lease as additional rent ("Additional Rent") all other
amounts, liabilities and obligations which Lessee herein assumes or agrees to
pay. In the event of any failure on the part of the Lessee to pay any
Additional Rent, Authority shall have the rights, powers and remedies provided
for in this Lease. In case any person to whom the Lessee endeavors to pay
Additional Rent refuses to accept the same, Lessee shall thereupon give written
notice of said act to Authority, and shall pay such Additional Rent directly to
Authority at the place where the Basic Rent is then payable, and such payment
shall operate as a complete discharge of Lessee's obligation to make such
payment. Authority agrees with respect to any such payment to pay the same over
to the person or party for whom it was intended.
D. Payment. The Basic Rent shall be payable in advance at the times
set forth above. The Percentage Rent shall be payable at the times set forth
above. The Basic Rent, Percentage Rent and all other sums payable to Authority
hereunder shall be payable in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public debts, and shall be paid to Authority at Authority's address set forth
hereinafter, or at such other address as Authority may. from time to time,
designate by written notice to Lessee in accordance with the provisions hereof.
E. Net Return. It is intended that all Basic Rent and Percentage Rent
provided for in this Lease shall be an absolute net return to Authority, and
shall be paid to Authority without set off, counterclaim, abatement or
reduction. Accordingly, all costs, charges, expenses, impositions, taxes and
obligations relating to either the demised premises or any buildings, equipment
or improvements hereafter situated on the demised premises, including, but not
limited to, costs of maintenance, repairs, replacements, renovation,
remodeling, razing, removal, alterations, insurance, taxes, assessments and all
other costs, charges, expenses and obligations of any kind, now or at any time
imposed upon or related to the demised premises or buildings, equipment, or
improvements at any time on the demised premises, shall, during the term
hereof, be paid for by Lessee exclusively.
F. Delinquency. The payments set forth in paragraphs A, B and C of
this paragraph III must be kept current. Interest shall be charged on any
payment overdue one (1) to thirty (30) days at the rate of one percent (1%) per
month prorated for the number of days late and on any payment overdue more than
thirty (30) days at the rate of one and one-half percent (1 1/2%) per month
prorated for the number of days late. Such proration shall be based on the date
of receipt of payments by Authority.
G. Place and Manner of Payments. In all cases where Lessee is required
by this Lease to pay any rentals, rates fees or other charges or to make other
payments to Authority, such payments shall be made at the office of the
Executive Director or at such other place as Authority may hereafter designate
by notice in writing to Lessee and shall be made in legal tender of the United
States and any
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check shall be received by Authority subject to collection. Lessee agrees to pay
any bank charges made for collection of such checks.
IV. IMPROVEMENTS
A. Development Plans. Development Plans will be prepared and processed
in accordance with Authority's Development Guidelines.
B. Building Permit. Lessee shall apply for the necessary building
permits prior to any construction of improvements.
C. Construction Time. Lessee shall fully complete the construction of
at least one improvement, which improvement will generate Gross Income, not
better than two (2) years from the Lease Commencement Date.
D. Construction Standards.
(1) The improvements to be constructed on the leased premises
shall be accomplished in a good and workman like manner, in accordance with the
approved Location and Extent drawings and in accordance with the Arapahoe
County Building Code "Pursuant to a Building Permit to be obtained from the
Arapahoe County Building Department) and according to the customary terms and
conditions thereof and, in a manner consistent with State and Federal
requirements and subject to the reasonable requirements of Authority which are
of general applicability.
(2) The Lessee shall include in all construction contracts
entered into by it in connection with the construction work aforesaid, a
provision requiring the contractor to indemnify, release and save harmless
Authority, its Commissioners, officers, representatives, agents and employees
from and against any and all loss of or damage to property, or injuries to, or
death of, any person or persons, and from any and all claims, costs, damages,
suits, causes of action, and judgments, including Workmen's Compensation
Claims, in any way resulting from, or arising out of, directly or indirectly,
such contractor's operations in connection herewith, and the contractor's use
or occupancy of the leased premises, and of any portion of Centennial Airport,
and including acts and omissions of officers, employees, representatives,
agents, servants, invitees, patrons, customers, contractors, subcontractors,
successors, assigns, sublessees and suppliers of the contractor, as well as all
other persons doing business with the contractor; provided, however, that
Authority shall give the contractor prompt and timely notice of any claim made
against Authority which may result in a judgment against Authority because of
such injuries or damages, and shall deliver to the contractor all papers,
notices, documents, summonses and other legal process served upon Authority or
its agents provided further, that the contractor and its insurer, or either of
them shall have the right.to compromise and defend all claims, actions, suits
and proceedings to the extent of the contractor's interest therein; and,
provided further, contractor need not indemnify, release and save harmless
Authority against loss of property, or injury to or death of persons, caused by
the negligence of Authority, its directors, agents and employees. The Lessee
shall require the contractor to furnish liability insurance in such amounts as
may be required by Authority. The Lessee shall also include in any construction
contract such reasonable provisions as may be generally required by Authority
relating to the operations of the contractor on Centennial Airport. Lessee
shall provide to Authority a copy of all construction contracts let in
connection with the leased premises.
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(3) When the improvements have been completed, the Lessee
shall deliver to Authority a certificate of an architect or structural engineer
licensed to practice in the State of Colorado not regularly employed by either
party hereto, and familiar with the construction of said improvements,
certifying that the improvements have been constructed in accordance with the
approved Location and Extent drawings and certifying that in the engineer's or
architect's opinion such improvements have an expected useful life of a
duration which is customary for such improvements under similar conditions and
circumstances. As Built Drawings will be submitted pursuant to Authority's
Development Guidelines.
(4) Lessee shall provide to Authority for each improvement to
be constructed upon the leased Premises payment and performance bonds for that
improvement. generally in the forms required by a construction lender.
E. Use Restrictions. The leased premises and the improvements to be
constructed thereon shall be utilized for golf range related activities
consistent with those uses specifically allowed by the approved Location and
Extent drawings.
F. Mechanic's and Other Liens.
(1) Lessee covenants and agrees to keep the leased premises
free and clear of and from any and all mechanics and other liens and to at ail
times promptly and fully pay and discharge any and all lawful claims upon which
any such liens may or could be based, and to save and hold Authority and the
leased premises free and harmless of and from any and all such liens and
claims. Lessee covenants and agrees to give Authority written notice not less
than ten (10) days in advance of the commencement of any construction,
alteration, addition, improvements or repair to the leased premises costing in
excess of Fifty Thousand Dollars ($50,000.00) in order that Authority may post
appropriate notices of Authority's non-responsibility.
(2) If Lessee desires to contest any lien of the nature set
forth herein, Lessee shall notify Authority of its intention so to do within
twenty (20) days after the filing of such lien. In the event of any such
contest, Lessee shall protect and indemnify Authority against all loss, cost,
expense and damage resulting therefrom. Lessee shall also cause such lien to be
released by obtaining and furnishing a bond in accordance with applicable
Colorado Revised Statutes, 1973, as amended, or depositing with Authority such
other security as Authority may reasonably require to insure payment of the
amount of the claim, together with interest, costs (including attorneys' fees),
and penalties thereon. In the event Lessee contests any such lien and sustains
an adverse determination, the Lessee shall nevertheless not be in default under
the terms of the Lease if the amount it has deposited with Authority is
sufficient to satisfy the indebtedness or if it has satisfied the indebtedness
(together with interest, penalties and costs) within ten (10) days after actual
final determination of the court involved.
V. MAINTENANCE AND CONSTRUCTION OBLIGATIONS
A. Maintenance. Lessee, at its expense shall keep the improvements,
including water, sewer and waste water drain lines, fences, auto/pedestrian
access ways, trench drains and utilities. upon and within the leased premises
in good repair and maintenance, and in a safe, sanitary, orderly and sightly
condition. Such improvements shall be at all times maintained in compliance
with the Arapahoe County Building Code and other reasonable and generally
applicable regulations of Authority, as may be adopted, amended or modified
from time to time. If Lessee fails to keep the leased premises as required
herein to the satisfaction of Authority, Authority shall notify Lessee of the
requirement for such repairs
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and if such repairs are not made within a reasonable time, then Authority may
make such repairs and maintenance without liability to Lessee for any loss or
damage that may accrue to Lessee's property or business by reason thereof, and
upon completion thereof. Lessee shall pay to Authority the cost of said repairs
and maintenance within ten (10) days from receipt of written demand therefor.
B. Removal of Waste. Lessee shall not permit rubbish, debris, waste
materials or anything obnoxious or detrimental to safety or health or likely to
create objectionable odors, a fire hazard, or conducive to deterioration, to
remain on any part of the leased premises or to be disposed of improperly.
VI. RAZE, REMOVE, REBUILD
A. Consent. Lessee may, after first obtaining Authority's prior
written consent, raze and remove all or portions of the improvements situated
upon the leased premises for the purpose of constructing or reconstructing
replacement improvements on the leased premises provided that the use to which
such replacement improvements are intended to be put is consistent with the
provisions of paragraph IV E limiting Lessee's use of the leased premises; and
further provided, that in no event shall Authority be required to grant such
approval until Lessee shall have submitted to Authority development plans
pursuant to paragraph IV A and the Authority's Development Guidelines.
B. Timing. In the event that Lessee, after having obtained necessary
prior written approvals of Authority pursuant to paragraph VI A, shall raze all
or any portion of the improvements presently existing or subsequently
constructed on the leased premises, and Lessee shall fail to commence the
reconstruction of said improvements within twelve (12) months from the dab
razing was completed, Authority shall have the option to terminate this Lease
upon sixty (60) days' prior written notice to Lessee. Said option may be
exercised at any time by Authority from and after the expiration of said twelve
(12) month period until the date on which Lessee shall have actually commenced
construction of said replacement improvements. If said option is exercised in
accordance with this paragraph, this Lease shall terminate on the date set
forth in said written notice of termination (which date shall not be less than
sixty (60) days from the case of such notice) unless Lessee shall have
commenced the construction of said replacement improvements and thereafter be
continuously pursuing the completion of same, prior to the date set for
termination in said notice.
C. Interior Improvements. The provisions of paragraphs VI A and B
above notwithstanding, Lessee reserves the right, without having first obtained
the written consent of Authority to remove, replace and modify interior
improvements as Lessee may deem necessary for purposes of renewing, extending
and/or modifying the terms of an existing occupancy sublease or performing
required covenants under an existing occupancy sublease, or for the purpose of
re-leasing the based premises or portions thereof to Occupancy Tenants,
provided that, and only if, such removal, replacement or modification does not
alter or otherwise affect the basic structural integrity of the improvements.
VII. DIVISION
Notwithstanding anything in this Lease to the contrary, Lessee may
divide the property on Exhibit A into two (2) or more parcels for purposes of
development, assignment, or mortgage. In conjunction with such division, and
upon the written request of Lessee, Lessee and Authority shall execute new
leases identical in terms to this Lease. Said new leases shall correspond in
number to the number of parcels into which the property described on Exhibit A
is divided, each new lease for one (1) parcel.
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VIII. RIGHT OF ENTRY
Authority and its authorized agents may enter upon the leased premises
at any reasonable time and for any purpose necessary, incidental to, or
connected with the performance of the Lessee's obligation under this Lease or
in the exercise of its function as Authority pursuant to this Lease or any
federal, state or local law, regulations, or directive, including but not
limited to entry for the purpose of ensuring Authority's and Lessee's
compliance with the FAA's letter of August 2, 1994, a copy of which is attached
hereto as Exhibit C and incorporated herein by reference.
IX. PAYMENT OF TAXES AND OTHER CHARGES
A. Payment. Commencing on the Lease Commencement Date and continuing
for the entire term of this Lease as part of the consideration of this Lease
and as additional rent hereunder, Lessee covenants and agrees to pay and
discharge or cause to be paid and discharged promptly as the same becomes due
and before delinquency, all taxes, assessments, charges, license fees, levies,
excise tax or imposts, whether general or special, ordinary or extraordinary,
imposed by any governmental or quasi-governmental authority pursuant to law
directly as a result of the ownership of the leased premises o- the
improvements located thereon which may be levied, assessed, charged or imposed,
or may be or become a lien or charge upon the leased premises, or any part
thereof or upon the leasehold estate hereby created, or upon Authority solely
by reason of its ownership of the leased premises, including without
limitation, any license or privilege tax or fee measured solely by the rentals
received by Authority hereunder (heretofore and hereinafter termed an
"Imposition"). If at any time during the term of this Lease or any extension
thereof, the methods of taxation prevailing at the commencement of the term
hereof shall be so altered so that in lieu of any Imposition described in this
paragraph there shalt be levied, assessed or imposed an alternate tax, however
designated, such alternate tax shall be deemed an Imposition for the purposes
of this Article and Lessee shall pay and discharge such Imposition as provided
by this paragraph.
B. Proration, Installments. Any Impositions above required to be paid
by Lessee, which shall relate to a fiscal year during which the term of this
Lease shall commence or terminate, shall be prorated between Authority and
Lessee as of the date of such commencement or termination. Lessee shall pay all
assessments whether general, special, ordinary or extraordinary, which are
assessed against the leased premises during the term of this Lease or any
extension thereof. If the law expressly permits the payment of such assessment
in installments, Lessee may utilize the permitted installment method, but shall
pay each installment coming due during the term hereof with any interest
thereon before delinquency. If Lessee shall have been permitted or elected to
have such assessments made payable in installments over a period of time which
extends beyond the date this Lease expires or otherwise terminates the entire
unpaid balance of such assessments assessed against the leased premises during
the term hereof shall be paid by Lessee at least one (1) year prior to the
expiration of the term hereof or prior to any earlier termination of this Lease
by depositing such unpaid balance in cash with Authority. However, where an
assessment is not assessed against the leased premises until the last five (5)
years of the term set forth in paragraph 11 above, then Lessee may elect to
have such assessments made payable in installments which extend beyond the date
this Lease expires, and Authority shall be responsible for all installments due
following the expiration of this Lease.
C. Direct Payment. Lessee shall make all payments of all Impositions
directly to the charging governmental entity before delinquency and before any
fine, interest or penalty shall become due or be imposed by operation of law
for their nonpayment. If the law expressly permits the payment
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of any Imposition in installments, Lessee may, at Lessee's option, utilize the
permitted installment payment method, but shall pay each installment with any
interest before delinquency.
D. Apportionment. In the event that the leased premises are not
separately taxed or assessed, then, in that event, the Imposition as levied
shall be apportioned between the leased premises and such other areas with
which it is assessed in such manner that Lessee shall pay only an equitable
proportion of any Imposition.
E. Contest. Lessee shall have the right to contest or review by
appropriate legal or administrative proceedings, or in such other manner as
Lessee may desire, any tax, lien, assessment, imposition or other charge or
levy which Lessee is required to pay as additional rental pursuant to the
provisions of this Article IX. Any such contest or other proceeding shall be
conducted solely at Lessee's expense and free of expense to Authority. Lessee
shall protect and indemnify Authority against any and all loss, cost, expense
or damage resulting from such contest or other proceeding and shall obtain and
furnish Authority with a bond to protect Authority's interest as may be
permitted under the laws of the State of Colorado or the governmental agency
involved in an amount satisfactory to Authority, but not more than the amount
contested and all penalties. interest and costs in connection therewith and
shall protect and indemnify Authority as herein required. At the request of
Lessee, Authority shall join in any contest or other proceedings which Lessee
may desire to bring pursuant to this paragraph provided, however, Lessee shall
pay all of Authority's costs and expenses arising out of such joinder. Within
ten (10) days after the final determination of the amount due from Lessee for
such tax, assessment, charge or other levy, Lessee shall pay the amount so
determined to be due, together with all costs, expenses and interest. In the
event that Lessee shall desire to contest or otherwise review by appropriate
proceedings any tax, assessment, charge or other levy which Lessee is required
to pay as additional rental pursuant to the provisions of this Article IX prior
to the payment thereof. Lessee shall. at least ten (10) days prior to the
delinquency of such tax, assessment, charge or buy, give to Authority written
notice of its intention to contest; and after such notice Lessee shall not be
in default hereunder and Authority shall not satisfy and discharge such tax,
assessment, charge or other levy until Lessee's failure to satisfy same after
ten (10) days from the final determination of such contest so long as Lessee
has obtained the bond as required by this paragraph to protect Authority's
interest.
X. INDEMNIFICATION
A. Lessee's Indemnification. Lessee agrees that it will indemnify arid
hold harmless Authority and its commissioners, directors, officers,
representatives, agents, assigns, and employees from and against any and all
liability, cost and expense, including reasonable attorney's fees, in
connection with any suits, claims, demands, actions and/or causes of action of
any kind or nature arising or resulting directly or indirectly from any
negligent or intentional acts of Lessee or its activities, or the tenancy or
activities of its contractors, agents, employees, invitees, servants,
subtenants or assigns, on the leased premises or the improvements thereon, or
any part thereof, or from any negligent or intentional act or omission of
Lessee or its contractors, agents, employees, invitees, servants, subtenants or
assigns in connection therewith. Lessee's indemnification also extends to any
injuries or damages claimed by any person, which injuries or damages arise out
of or related to noise generated by operations at Centennial Airport. The
Lessee acknowledges that the golf range is within the 65 Ldn noise contour.
B. Authority's Indemnification. Authority shall indemnify, defend and
hold Lessee harmless from and against any and all claims arising from any
breach or default in the performance of any obligation on Authority's part to
be performed under the provisions of this Lease or arising from any
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negligent or intentional acts or omissions of Authority or any of Authority's
agents. contractors, employees or invitees and from and against any and all
costs, attorneys' fees, expenses and liabilities incurred in the defense of any
such claim or any action or proceeding brought thereon.
XI. INSURANCE
A. Public Liability and Property Damage. Lessee shall, at its sole
expense, procure and maintain during the term of this Lease and any extensions
thereof comprehensive public liability and property damage insurance covering
liability relating to the condition or use of the leased premises and any
injury or damage occurring in, on or about the leased premises with combined
single limit coverage of not less than One Million Dollars ($1,000,000.00). All
such public liability insurance and property damage insurance shall insure
performance by Lessee of the indemnity provisions of Article it. Authority
shall be named as an additional insured.
B. All-Risk. Lessee shall, at its sole expense, procure and maintain
during the term of this lease and any extensions thereof a policy of standard
fire and all-risk coverage casualty insurance, to be in an amount equal to the
full replacement value of the improvements, together with a so-called inflation
endorsement. The full replacement value of improvements to be insured shall be
determined by the company issuing such casualty loss policy at the time the
policy is initially obtained. Not more frequently than once every year, either
Authority or Lessee shall have the right to notify the other party that it
elects to have the full replacement value redetermined by the insurance company
then carrying the policy. The redetermination shall be made promptly and in
accordance with the rules and practices of the Board of Fire Underwriters. or a
like board recognized and generally accepted by such insurance company, and
each party shall be promptly notified of the results by the company. The
insurance policy shall be adjusted according to the redetermination, and Lessee
shall pay any increase in the premiums. Whenever any alterations or additional
improvements are in the course of construction, the casualty insurance required
by this paragraph, to the extent appropriate, shall be carried by Lessee in
builder's risk form written on a completed value basis insuring against loss to
the extent of the full replacement value of that which is being covered.
C. Rent Insurance. Lessee shall, at its sole cost, procure and
maintain during the term hereof rent or rent value insurance covering any of
the risks against which the Lessee is required to obtain insurance pursuant to
Paragraph B above naming Authority as insured, in an amount equal to not less
than the aggregate of the following for a period of not less than twelve (12)
months: (i) the Basic Rent due Authority hereunder. (ii) the amount of annual
Percentage Rent due Authority hereunder (based upon the actual amount of
Percentage Rent paid Authority for last Preceding Lease Year), if reasonably
obtainable.
D. Construction Insurance. Lessee shall, at its sole expense, procure
and maintain during the course of the construction of any improvement or
alterations on the leased premises constructed during the term of this Lease or
any extensions thereof, owner's contingent or protective liability insurance
naming Authority as an additional insured covering claims not covered by or
under the terms of the above mentioned comprehensive public liability
insurance, and Lessee shall also carry during such period of construction
Worker's Compensation Insurance covering all persons employed by Lessee on or
in connection with such construction.
E. Policies. The aforementioned minimum limits of policies shall in no
event limit the liability of Lessee hereunder. All policies provided for herein
shall be with companies approved by Authority, which approval Authority agrees
not to unreasonably withhold. Insurance companies
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authorized to do business in the State of Colorado with a rating of A-XI or
better as rated in the most recent edition of Best's Insurance Reports shall be
deemed acceptable to Authority. Each such policy shall provide that the policy
cannot be canceled or altered without thirty (30) days' prior written notice to
Authority. Originals of the policies provided for herein or certificates of
insurance evidencing these policies shall be delivered to Authority prior to the
Lease Commencement Date. except that Rent Insurance and Construction Insurance
shall be delivered prior to the issuance of any building permit for
improvements. Lessee shall, at least ten (10) days prior to the expiration of
such policies, furnish Authority with renewals or binders. Lessee agrees that if
Lessee does not take out and maintain such insurance, Authority may (but shall
not be required to) procure said insurance on Lessee's behalf and charge Lessee
the premium, together with a reasonable handling charge, payable upon demand as
additional rent.
F. Mutual Subrogation. Authority and Lessee each hereby waive any and
all rights of recovery against the other or against the Commissioners,
officers, employees, agents and representatives of the other, on account of
loss ar damage occasioned to such waiving party or its property or the property
of others under its control to the extent that such loss or damage is insured
against under any insurance policies which either may have in force at the time
of such loss or damage. Lessee shall, upon obtaining policies of insurance
required hereunder, give notice to the insurance carrier or carriers that the
foregoing mutual waiver of subrogation is contained in this Lease. and Lessee
and Authority shall each cause each insurance policy obtained by it to provide
that the insurance company waives all right of recovery by way of subrogation
against either Authority or Lessee in connection with any damage covered by any
such policy.
XII. HAZARDOUS MATERIAL
A. Lessee Obligations.
(1) Lessee shall not cause or permit any Hazardous Material
to be brought upon, kept or used in or about the based premises by Lessee, its
agents, employees, contractors or invitees, without the prior written consent
of Authority (which consent Authority shall not unreasonably withhold as long
as Lessee demonstrates to Authority's reasonable satisfaction that such
Hazardous Material is necessary or useful to lessee's business and will be
used, kept and stored in a manner that complies with all laws regulating any
such Hazardous Material). If Lessee breaches the obligations stated in the
preceding sentence, or if the presence of Hazardous Material on the leased
premises caused or permitted by Lessee results in contamination of the based
premises or if contamination of the leased premises by Hazardous Material
otherwise occurs for which Lessee is legally liable to Authority for damage
resulting therefrom, then Lessee shall indemnify, defend and hold Authority
harmless from any and all claims, judgments, damages, penalties, fines, costs,
liabilities or leases (including, without limitation, diminution in value of
the leased premises, damages for the loss or restriction on rentable or useable
space or of any amenity of the leased premises, damages arising from adverse
marketing of space and sums paid in settlement of claims, attorneys' fees,
consultant fees and expert fees), which arise during or after the lease term as
the result of such contamination. This indemnification of Authority by Lessee
includes, without limitation, cost incurred in connection with any
investigation of site conditions or any cleanup, remedial, removal or
restoration work required by any federal, state, or local governmental agency
or political subdivision because of Hazardous Material present in the soil or
ground water on or under the based premises. Without limiting the foregoing, if
the presence of any Hazardous Material on the leased premises caused or
permitted by Lessee results in any contamination of the based premises, Lessee
shall promptly take all actions at its sole expense as are necessary to return
the based premises to the condition existing prior to the introduction of any
such Hazardous Material to the leased premises;
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provided that Authority's approval of such action should first be obtained,
which approval shall not be unreasonably withheld so long as such actions would
not potentially have any material adverse effect on the leased premises.
B. Defined. As used herein the term "Hazardous Material" means any
hazardous or toxic substance, material or waste which is or becomes regulated
by any local governmental authority, the State of Colorado or the United States
Government. The term "Hazardous Material" includes, without limitation, any
material or substance that is (i) defined as a "hazardous substance" under
appropriate state law provisions (ii) petroleum; (iii) asbestos; (iv)
designated as a "hazardous substance" pursuant to Section 311 of the Federal
Water Pollution Control Act (33 U.S.C. 1321); (v) defined as a "hazardous
waste" pursuant to Section 1004 of the Federal Resource Conservation and
Recovery Act (42 U.S.C. 6903); (vi) defined as a "hazardous substance" pursuant
to Section 101 of the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. 9601); or (vii) defined as a "regulated substance"
pursuant to Subchapter IX Solid Waste Disposal Act (Regulation of Underground
Storage Tanks) (42 U.S.C. 6991).
XIII. DAMAGE OR DESTRUCTION
A. Notice. In case of any damage to or destruction of the leased
premises or any part thereof resulting from any cause whatsoever, Lessee shall
give immediate notice thereto to Authority if the cost of restoration on
account thereof equals or exceeds Fifty Thousand Dollars ($50,000.00), and
Lessee shall, unless this Lease is terminated pursuant to paragraph XIII E
below, whether or not any insurance proceeds are available s or adequate for
such purpose and regardless of the dollar amount of such damage or loss, with
reasonable diligence and at Lessee's expense, promptly commence and complete
restoration as nearly as possible to the value, and substantially to the
condition and character the leased premises was in immediately prior to such
damage or destruction, all in accordance with the original Location and Extent
Drawings or in accordance with Location and Extent Drawings thereafter
submitted and approved by Authority in accordance with Article IV above.
B. Trust. Insurance proceeds payable as a result of such damage or
destruction shall be paid to a bank or trust company designated by Authority
having assets of not less than Ten Million Dollars ($10,000.000.00) and having
its main office in the State of Colorado (the "Insurance Trustee"), or H a
mortgage exists, by the Lessee's mortgagee. If no such bank, trust company, or
mortgagee is willing to act as the Insurance Trustee, then Authority shall be
the Insurance Trustee and shall hold all funds paid to it in trust for the
purposes specified herein.
C. Proceeds. Insurance proceeds (less the costs, fees and expenses
incurred by the Insurance Trustee, Authority and Lessee in the collection
thereof, which shall be paid out of such proceeds) received by the Insurance
Trustee on account of any damage to or destruction of the leased premises or
any part thereof shall be paid to Lessee or as Lessee may direct, from time to
time as me restoration of the leased premises progresses, to pay or reimburse
Lessee for the cost of such restoration, upon written request of Lessee
accompanied by evidence satisfactory to Authority and the Insurance Trustee
that (i) an amount equal to the amount requested is then due and payable or has
been paid and is properly a part of such cost, and (ii) that the net insurance
proceeds not yet advanced wilt be sufFicient for the completion of the
restoration. If at any time during the period of restoration and/or
reconstruction, Authority or Insurance Trustee shall reasonably determine that
the insurance proceeds are insufficient to fully pay for such restoration, then
upon notice to Lessee by Authority or insurance Trustee, Lessee shall deposit
in trust with the Insurance Trustee such sums as may be required, in addition
to the net insurance proceeds men held by the Insurance Trustee, for the
completion of the
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restoration of the leased premises. Upon receipt by Authority and the insurance
Trustee of evidence satisfactory to them that (i) the restoration of the based
premises has been completed, (ii) the cost thereof has been paid in full, and
(iii) there are no mechanics' or similar liens for labor or materials supplied
in connection therewith, the balance, if any, of such insurance proceeds shall
be paid to Lessee or as me Lessee may direct.
D. Payment to Authority. Except as otherwise provided in paragraph
XIII E below, if this Lease shall be terminated by reason of Lessee's failure
to promptly commence and complete the reconstruction or restoration of the
improvements so damaged or destroyed with reasonable diligence then in such
event any insurance proceeds held by the Insurance Trustee and not theretofore
applied to the cost of the restoration of the leased premises pursuant to this
Article XIII shall be paid to Authority.
E. Option. If, within five (5) years prior to the expiration of the
term of this Lease, the improvements shall be damaged or destroyed to any
extent greater than thirty percent (30%) of the then replacement value thereof,
Lessee shall have the option within sixty (60) days from the date of such
damage or destruction to terminate this Lease by giving not less than thirty
(30) days written notice to Authority of its election to so terminate this
Lease. Upon the termination date set forth in said notice, this Lease shall
expire and terminate and Lessee shall thereupon make payment of all rent and
other sums and charges payable by Lessee hereunder as justly apportioned to the
date of such termination; provided, however, that the total unpaid balance of
any Imposition assessed or in:posed during the term of the Lease that Lessee
has elected to pay in installments shall be paid in full to Authority or the
applicable taxing authority prior to such termination. In the event of such
termination Lessee shall not be required to repair the damage but shall, at the
request of Authority raze the damaged or destroyed improvements and return the
leased premises to proper grade and compaction and to a neat and clean
condition and all net insurance monies payable as a result of such E damage or
destruction shall, after payment therefrom of the cost of such razing, grading
and compacting, subject to the claims of any approved Mortgagee, belong and be
paid to Authority. Notwithstanding the foregoing. Lessee shall not be entitled
to exercise the aforesaid option (and any purported exercise thereof shall be
void) H at the time such notice of termination is delivered to Authority (i) an
Event of Default shall exist under this Lease, other than the duty to rebuild,
or would exist with the giving of notice or the passage of time, or both such
notice and passage of time, or (ii) there is or are in force any subleases
under this Lease previously agreed to in writing by Authority, as hereinafter
provided, which will not expire upon or prior to the termination of this Lease
pursuant to this Article XIII, or (iii) a Mortgage approved by Authority will
be in effect on the date of termination.
F. Lessee Liability. Except as otherwise expressly provided in this
Article XIII, no destruction of or damage to the leased premises or any part
thereof, whether such damage or destruction be partial or total or otherwise,
or be covered by insurance or not, shall entitle or permit Lessee to surrender
or terminate this Lease or shall relieve Lessee from liability to pay in full
the rents and other sums and charges payable by Lessee hereunder, or from any
of its obligations under this Lease, arid Lessee hereby waives any rights now
or hereafter conferred upon it by statute or other law to surrender this Lease
or to quit or surrender the leased premises or any part thereof, or to receive
any suspension, diminution, abatement or reduction of the rent or other sums
and charges payable by Lessee hereunder on account of any such destruction or
damage.
XIV. WAIVER.
No waiver of default by Authority of any of the terms, covenants, or
conditions hereof to be performed, kept and observed by Lessee shall be
construed as, or operate as, a waiver by Authority of
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any of the terms, covenants or conditions herein contained, to be performed,
kept and observed by Lessee.
XV. REMOVAL OF EQUIPMENT
All equipment and personal property placed by Lessee at its expense
in, on. or about the 'eased premises, other than fixtures, shall remain the
property of Lessee and Lessee shall have the right at any time during the term
hereof, when not in default hereunder, to remove all such equipment and
property; provided, however, that ali property placed by Lessee at its expense,
in, on, or about said based premises and affixed to the realty so that same may
not be removed without material damage to the improvements thereto, shall not
be removed by Lessee at any time, but shall become a part of such improvements
and become the property of Authority upon the cancellation, expiration, or
termination of this Lease as herein provided.
XVI. SURRENDER AND HOLDING OVER
Lessee covenants that at the expiration of the lease term, it will
quit and surrender the leased premises in good state and condition, reasonable
wear and tear excepted. Lessee further covenants and agrees that the based
premises and all fixtures, improvements, equipment and other property brought,
installed, erected, attached, or placed by Lessee in, on, or about the based
premises and which by and under the terms of this Lease are provided to then
remain on the leased premises as the property of Authority shall be in good,
usable condition, reasonable wear and tear excepted. and Authority shall have
the right on such termination to enter upon and take possession of said leased
premises, with or without process of law, without liability for trespass.
Should Lessee hold over the use of or continue to occupy said leased premises
after the termination or cancellation of this Lease such holding over shall be
deemed merely a tenancy from month to month at 150% of the rental due for the
last quarter of the term hereof, determined on a pro rata basis from the prior
Lease Year's Basic Rent and Percentage Rent and shall otherwise be on the terms
and conditions herein specified insofar as applicable.
XVII. INCONVENIENCE DURING CONSTRUCTION
Lessee recognizes that from time to time during the term of this Lease
it may be necessary for Authority to initiate and carry for yard extensive
program of construction, reconstruction, expansion, relocation, maintenance and
repair in order that the Centennial Airport and its facilities may be suitable
for the volume and character of air traffic and flight activity which will
require accommodation and that such construction, reconstruction, expansion,
relocation, maintenance, and repair may inconvenience Lessee in its operation
at the Centennial Airport. Lessee agrees that no liability shall attach to
Authority, its officers, agents, employees, contractors, subcontractors and
representatives by reason of such inconvenience or interruption, and for and in
further consideration of the premises, Lessee waives any right to claim damages
or other consideration therefor, other than to the extent Authority requests
Lessee to cease operations, then Lessee is entitled to offset against any Basic
Rent or Percentage Rent owed to Authority, the Gross Income lost while
operations ceased. The amount of Gross Income which may be offset is limited to
the amount of Basic Rent and Percentage Rent owed by Lessee to Authority for
the balance of the Lease Year in which operations ceased. This paragraph does
not apply to Lessee ceasing operations pursuant to Exhibit C. Lessee
acknowledges that it has a duty to comply with Exhibit C and it has no rights
or remedies against Authority associated with or arising out of such
compliance.
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XVIII. SUBLETTING, ASSIGNMENT AND MORTGAGE
A. Sublet. Lessee may sublet portions of the leased premises during
the harm of this Lease only to persons or entities who will occupy a portion of
the leased premises for the conduct of business consistent with the uses
permitted herein and for no other purposes or uses (herein referred to as
"Occupancy Tenants"). Each sublease of any portion of the leased premises shall
be in writing and shall provide as follows: (1) That the sublease is subject
and subordinate to this Lease and to any extension, modifications or amendments
thereof; and (2) Subject to the assignment of rents to any mortgagee, that
rents due Lessee under said sublease have been assigned to Authority as
security for the performance of Lessee's covenants under this Lease, which
assignment is effective upon the occurrence any Event of Default. Upon receipt
of written notification from Authority that an Event of Default has occurred,
the Occupancy Tenant shall pay rent under the sublease directly to Authority
until the Occupancy Tenant receives written notice from Authority that Lessee
has cured the default or is in the process of curing the default in a manner
satisfactory to Authority, and that such payment by the Occupancy Tenant shall
be applied to the rents and obligations of the Lessee hereunder; and (3) That
in the event of the cancellation or termination of this Lease prior to the
expiration of the term hereof Authority agrees to automatically recognize any
sublease which (i) is for not more than five thousand (5,000) square feet of
space within the leased premises; (ii) such sublease is in a written form
previously approved by Authority; (iii) the term of such sublease is not in
excess of five (5) years, including any options to extend; and (iv) the
sublease is at a rental rate consistent with market rates. For any such
sublease not so automatically recognized, Authority agrees to execute a
non-disturbance and attornment agreement provided the sublease is an arms
length transaction at market rental rates and reasonable lease conditions. For
all subleases other than those authorized, Authority shall have the option to
terminate or cancel each such sublease. For any sublease not terminated or
cancelled, the Occupancy Tenant under each such sublease shall make full and
complete attornment to Authority for the balance of the term of such sublease
with the same force and effect as though said sublease were originally made
directly from Authority to the Occupancy Tenant.
B. Assignment. Lessee shall have the right to assign this Lease in
whole or in part with Authority's consent, which consent will not be
unreasonably withheld or delayed. In the event of an assignment of Lessee's
interest hereunder, the Lessee shall, from and after the effective date of such
assignment, be relieved of all of its obligations hereunder, accruing
subsequently to the date thereof, provided that such assignee assumes Lessee's
obligations hereunder.
C. Mortgage. Lessee may, at any time, or from time to time, mortgage
the leased premises provided written notice thereof is given to Authority
within thirty (30) days after the consummation of any such mortgage, which
right, so long as Lessee is in compliance with all of the terms, conditions and
provisions of this Lease shall be a continuing right and shall not be deemed to
be exhausted by the exercise thereof on one or more occasions. However, it
shall be a further condition of Lessee's right to mortgage the based premises
that the mortgage agrees to make all insurance proceeds available to Lessee to
repair any building(s) located on the based premises as provided in Article
XIII above. In addition, any mortgagee of the leased premises shall be deemed
to have agreed that in the event of any default by Lessee under this Lease
which is not cured as provided herein by Lessee or such mortgagee that such
mortgagee shall not thereafter have any rights whatsoever in this Lease (o::her
than its rights under paragraph XVIII D to enter into a new lease), or in any
building(s) or improvements situated on the leased premises. In the event of
such termination, said mortgagee, upon request of Authority will be obligated
to execute any release of its mortgage which may be reasonably required. In the
event of any defaults under this Lease, Authority shall give to any mortgagee
of the leased premises of which Authority has been apprised in writing, in the
manner hereinafter set forth (either by Lessee or by the
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mortgagee), notice of any defaults of Lessee, concurrently with giving notice
thereof to Lessee and an opportunity to cure said default, as provided in
paragraph XIX C hereinafter, including time to obtain possession of the leased
premises by foreclosure if this should be necessary to effect a cure. Such
notice shall be sent by registered or certified mail, return receipt requested,
to any address designated by such mortgagee.
D. New Lease. Notwithstanding anything contained in this Lease to the
contrary, if Authority terminates this Lease pursuant to the provisions of
Article XIX Authority agrees to enter into a new lease for the leased premises
with any mortgagee of the leasehold estate or its designee for the remainder of
this Lease. effective as of the date of such termination at the same Basic Rent
and Percentage Rent, and upon the same terms, covenants and conditions
contained herein, provided that (i) such mortgagee shall make written request
for such new lease within thirty (30) days after the date of such termination,
(ii) such mortgagee will pay or cause to be paid to Authority on the
commencement date of the term of the new lease all sums then due and payable
hereunder which Lessee would have been required to pay in the event Lessee's
Lease had not been terminated, together with interest thereon as herein
provided, and shall cure all defaults of Lessee under this Lease which remain
uncured as of such date and (iii) such mortgagee shall pay or cause to be paid
to Authority on that dab all expenses. including reasonable attorney's fees,
court costs and disbursements reasonably incurred by Authority in connection
with any such default and termination as well as in connection with the
execution and delivery of such new base. If more than one mortgagee (or
designee) of any portion of the leased premises shall desire to enter into such
new lease under the circumstances as outlined hereinabove in this paragraph D,
the mortgagees of leased premises in the order of the priority of their
mortgages (i.e., first mortgage, second mortgage) shall have the first
opportunity to do so. However, and irrespective of any other provisions in this
Lease h the contrary, if a mortgagee does not exercise its right to enter into
a new lease with Authority within the time periods and in accordance with the
provisions set forth hereinabove in this paragraph D, such mortgagee shall not
thereafter have any rights whatsoever in this Lease or in any building(s) or
improvements situated on the leased premises, or in any equipment, machinery or
personal property necessary for the operation of said building(s) or
improvements, all interest therein having reverted to Authority as the result
of the termination of this Lease.
XIX. AUTHORITY'S REMEDIES AND BREACH
A. Remedies. Upon an "Event of Default" (as defined herein), Authority
shall have the following remedy:
(1) Authority may, at Authority's election, terminate this
Lease by giving Lessee written notice of termination. On the giving of the
notice, in accordance with the terms of this Lease, all of Lessee's right in
the leased premises shall terminate. Promptly after notice of termination,
Lessee shall surrender and vacate the leased premises in broom-clean condition,
and Authority may re-enter and take possession of the leased premises and eject
Lessee or any of Lessee's subtenants, assignees, or other person or persons
claiming any right under or through Lessee or eject some and not others or
eject none; provided, however, that Authority shall not eject any Occupancy
Tenants who Authority is required to recognize or has recognized pursuant to
Article XVIII. This Lease may also be terminated by a court judgment
specifically providing for termination or by written agreement. Any termination
under this paragraph shall not relieve Lessee from the payment of any rent or
other sums then due to Authority or from any claim for damages accrued against
Lessee. In no event shall any one or more of the following actions by
Authority, in the absence of a written election by Authority to terminate this
Lease, constitute a termination of this Lease.
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(a) Appointment of a receiver in order to protect
Authority's interest hereunder:
(b) Consent to any subletting of the leased premises or
assignment of this Lease by Lessee, whether pursuant to the provisions hereof
with relation to assignment or subletting, or otherwise;
(c) Any other action by Authority or Authority's agents
intended to mitigate the adverse effects of any breach of this Lease by Lessee,
including without limitation, action to maintain and preserve the leased
premises or any action taken to relet the leased premises, or any portions
thereof, for the account of Lessee and in the name of Lessee.
(2) No personal liability shall exist against Lessee or
Lessee's partners, except with regard to the payment and performance bonds for
any particular building during the time between the issuance of a building
permit and of the issuance of a temporary or permanent certificate of occupancy
for that building, and except with regard to the payment of rent or other sums
due to Authority, and from any claim for damages accrued against Lessee, as of
the date of termination of the Lease pursuant to subparagraph (1) above.
B. Event of Default. A breach of this Lease shall exist if any of the
following events (severally "Event of Default" and collectively "Events of
Default") shall occur:
(1) Lessee shall have failed to pay the Basic Rent, together
with interest thereon as aforesaid, Percentage Rent, Additional Rent, or any
other charge, Imposition or any other obligation of Lessee requiring the
payment of money under the terms of this Lease, and such failure shall continue
for a period of thirty (30) days following notice from Authority; or
(2) Lessee shall have failed to perform any term, covenant or
condition of this Lease, to be performed by Lessee, except those requiring the
payment of money, and Lessee shall have failed to cure same within thirty (30)
days after written notice from Authority, delivered in accordance with the
provisions of this Lease, where such failure could reasonably be cured within
said thirty (30) day period, provided, however, that where such failure could
not reasonably be cured within said thirty (30) day period, Lessee shall not be
in default unless it has failed to promptly commence and thereafter be
continuing to make diligent and reasonable efforts to cure such failure as soon
as practicable; or
(3) Lessee shall have made a general assignment of its assets
for the benefit of its creditors; or
(4) A court shall have made or entered any decree or order:
(i) adjudging Lessee to be bankrupt or insolvent; (ii) approving as properly
filed a petition seeking reorganization of Lessee or an arrangement under the
bankruptcy laws or any other applicable debtor's relief law or statute of the
United States or any such thereof; (iii) appointing a receiver, trustee or
assignee of Lessee in bankruptcy or insolvency or for its property; (iv)
directing the winding up or liquidation of Lessee and such decree or order
shall have continued for a period of thirty (30) days; or (v) Lessee shall have
voluntarily submitted to or filed a petition seeking any such decree or order;
or
(5) The sequestration or attachment of or execution or other
levy on Lessee's interest in this Lease or the Leased Premises or any
improvements located thereon shall have occurred
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and Lessee shall have failed to obtain a return or release of such property
within thirty (30) days thereafter, or prior to sale pursuant to such buy,
whichever first occurs.
C. Mortgagee Notice. If at any time Authority gives notice of default
under this Article to the Lessee, and the Lessee's interest in the leased
premises shall be subject to the lien of any mortgage as set out in paragraph
XVIII C, and of Authority has been furnished with the names and addresses of
said mortgagees, Authority shall at the same time as Authority gives notice of
default to Lessee, give like written notice to said mortgagees. All such
mortgagees shall have the same periods of time herein granted Lessee within
which to remedy such defaults; provided, however, such mortgagees shall have
such longer period to correct any such defaults as are required to complete any
mortgage foreclosure proceedings or other remedial action which such mortgagee
elects to pursue to obtain possession of the demised premises so long as during
such longer period the mortgagee causes all Basic Rent, Percentage Rent and
Additional Rent and other amounts to be paid by Lessee hereunder, including
past due payments, to be paid to Authority as herein provided, and otherwise
performs the covenants of Lessee hereunder to the extent the same can be
performed without having possession of the demised premises. In order to assist
the mortgagee of the leased premises in curing any such defaults, Authority
hereby confers upon the mortgagee or any agents, receiver or trustee appointed
by such mortgagee, the right in the event of a default under the terms of this
Lease or any such mortgage to forthwith enter into and upon the based premises
and take possession thereof provided that such right is granted in any such
mortgage and further provided that said mortgagee causes all Basic Rent,
Percentage Rent and Additional Rent and other amounts to be paid by Lessee
hereunder, including past due payments to be paid to Authority as herein
provided, and otherwise performs the covenants of Lessee hereunder as
aforesaid.
XX. ASSIGNMENT OF RENTS
A. Assignment of Rents. Subject to the assignment of rents by Lessee
to any mortgagee, Lessee hereby assigns and transfers to Authority as
additional security for the obligations hereunder, all the rents, issues and
profits of the leased premises, and hereby gives to and confers upon Authority
the right, power and authority to collect such rents, issues and profits and
apply the same to the obligations of Lessee hereunder; provided, Lessee shall
have the right to collect such rents, issues and profits prior to any Event of
Default hereunder.
B. Right of Entry. Upon any Event of Default hereunder, Authority may,
at any time and without notice, either in person, by agent or by a receiver to
be appointed by a Court, and without regard to the adequacy of any security for
the obligations hereunder, enter upon and take possession of the leased
premises, eject subtenants who are in default and relet the leased premises, or
any part thereof, in its own name sue for or otherwise collect such rents,
issues and profits, including those past due and unpaid, and apply the same,
less costs and expenses of operation and collection, including reasonable
attorney's fees, toward the payment of the Lessee's obligations hereunder, and
in such order as Authority may determine. The collection of such rents, issues
and profits, or the entering upon and taking possession of the leased premises,
or the application thereof as aforesaid, shall not cure or waive any default
hereunder or invalidate any act done pursuant to such default.
XXI. AUTHORITY'S RIGHT TO PERFORM LESSEE'S COVENANTS
If Lessee shall at any time fail to make any payment or perform any
other act on its part to be made or performed under this Lease, then Authority
may, at its option, after first giving Lessee thirty (30) day's written notice
to make such payment or perform such other act, but shall not be obligated
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to, and without waiving or relieving Lessee from any obligation of Lessee under
this Lease, make such payment or perform such other act to the extent Authority
may deem desirable, and in connection therewith, pay expenses and employ
counsel. All sums so paid by Authority and all penalties, interest and costs in
connection therewith, shall be due and payable by Lessee to Authority within
ten (10) days of written notice (itemizing such sums so advanced and date of
such advance) for payment of same. Authority shall have the same rights and
remedies for the non-payment thereof as in the case of default in the payment
of rent.
XXII. ESTOPPEL CERTIFICATES
A. Lessee Certificates. Lessee agrees promptly following request by
Authority to execute and deliver to Authority any documents, including estoppel
certificates (1) certifying that this Lease is unmodified and in full force and
effect, or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect and the date to
which the rent and other charges are paid in advance, if any, and (2)
acknowledging that there are not, to lessee's knowledge, any uncured defaults
on the part of Authority hereunder, or if such uncured defaults exist, stating
the nature of such uncured defaults on the part of Authority. Lessee's failure
to deliver an estoppel certificate promptly following such request (and in no
event later than 10 days following such request) shall be conclusive upon
Lessee (a) that this Lease is in full force and effect, without modification
except as may be represented by Authority, (b) that there are now no uncured
defaults in Authority's performance, and (c) that no rent has been paid in
advance.
B. Authority Certificate. Authority covenants and agrees to furnish
Lessee, any mortgages of all or any part of the leased premises, and any sub
lessees or occupants of all or any portion of the demised premises, from time
to time,within fifteen (15) days after written request therefor, a statement
wherein Authority shall acknowledge to the best of its knowledge that, as of
the date of such statement, Lessee has performed and observed all of the
covenants and conditions herein stated to be performed and observed by Lessee,
and that, as of said date, the leased premises is free of all defaults
hereunder, if such be the fact, or if the Lessee shall then be in default
hereunder, such statement shall specify the nature of such default.
XXIII. NOTICES
Any notice required or desired to be given pursuant to this Lease
shall be in writing with copies directed as indicated and shall be personally
served in the manner provided for personal service by the Colorado Rules of
Civil Procedure in effect at the time of such service, or in lieu of personal
service, by depositing same in the United States mail, postage prepaid,
certified or registered, in which later event such notice shall be deemed
delivered seventy-two (72) hours after same shall have been so deposited in the
United States mail and if such notice shall be addressed to Authority, the
address of Authority is:
Arapahoe County Public Airport Authority
7800 So. Peoria St.
Englewood, Colorado 80112
Attention: Donald C. Crandall
Executive Director
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with copy to:
Brega & Winters P.C.
1700 Lincoln Street, #2222
Denver, Colorado 80203
Attention: Ronald S. Loser
and if addressed to Lessee, the address of Lessee is:
Pinecrest Enterprises, L.d.
6260 Northstar Ridge Lane
Parker, Colorado 80134
Attention: Greg Blaydes
XXIV. ACCEPTANCE OF PREMISES
Lessee's acceptance of possession of the leased premises shall be
deemed to be acceptance of the leased premises in their condition existing as
of the date of such acceptance of possession thereof, subject to all applicable
zoning, municipal, county, state and federal laws, ordinances and regulations
that may govern and relate to the use of the leased premises and subject to all
then matters of record. Lessee acknowledges that neither Authority nor
Authority's agent has made any representation or warranty as to the suitability
of the leased premises for the conduct of Lessee's business or the construction
of any improvements. Any agreements, warranties or representations not
expressly contained herein shall in no way bind either Authority or Lessee, and
Authority and Lessee expressly waive all claims for damages by reason of any
statement, representation, warranty, promise or agreement, if any, not
contained in this Lease.
XXV. WARRANTY OF TITLE
Authority covenants and agrees that it has the right and authority to
lease its interest herein and that Lessee by paying rent herein reserved, and
performing all covenants and conditions herein contained on Lessee is part to
be performed and observed, shall and will have and hold peaceful possession and
enjoyment of its interest in the demised premises during the term hereof,
subject, however, to the terms of this Lease. Subject to the provisions of this
Lease, Authority shall have the right from time to time to mortgage or
otherwise encumber all or any portion of its fee simple interest in the demised
premises.
XXVI. CONDEMNATION
A. Termination. If, during the term of this Lease, title to the whole
or substantially all of the demised premises shall be taken as the result of
the exercise of the power of eminent domain (hereinafter referred to as
"proceeding"), this Lease shall at the election of Lessee, with the written
consent of the holders of any first mortgages on the leased premises, terminate
as of the date of vesting of title pursuant to such proceeding. For the
purposes of this Article XXVI, "substantially all of the demised premises"
shall be deemed to have been taken if a taking under any such proceeding shall
involve such an area, whether the area be improved with a building(s) or be
utilized for a parking area or otherwise (including a deprivation of access to
all streets and highways abutting the demised premises), that Lessee cannot
reasonably operate in the remainder of the demised premises the business being
conducted on the demised premises at the time of such taking.
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B. Amendment of Lease. If, during the term of this Lease, title to
less than the whole or substantially all of the demised premises shall be taken
in any such proceeding, this Lease shall not terminate, the description of the
demised premises shall be amended to reflect the elimination of the parcel so
taken; the Basic Rent thereafter due and payable by Lessee shall continue to be
computed in the manner set forth in Article III above.
C. Award. The award made in any proceeding shall be divided between
Authority and Lessee as follows The amount of any such award attributable to
the improvements for the balance of the lease term shall belong to Lessee, and
the remainder of such award shall belong to Authority; provided, however, in
the event title to the whole or substantially all of the demised premises is
taken, or any mortgagee so requires, Lessee shall be obligated to use so much
or all of its award as shall be necessary to pay off any permanent mortgage of
Lessee. To the extent Lessee's share of such amount is insufficient for this
purpose, Lessee shall pay any additional amount necessary to pay off such
mortgage.
D. Arbitration. If Authority and Lessee shall be unable to agree as to
whether "substantially all of the demised premises" shall have been taken, as
provided in paragraph XXVI A, or the amount by which the rent shall be reduced
under paragraph XXVI B, or the attribution and division of the award as
provided in paragraph XXVI C, such question shall be submitted to arbitration
as provided in the Lease.
E. Sublease. Notwithstanding anything contained herein to the
contrary, if pursuant to the provisions of any sublease of fifty percent (50%)
or more of the improvements, the subtenant thereunder is permitted to and
terminates such sublease as a result of any proceeding, it shall be considered
that substantially all of the demised premises has been taken in such
proceeding pursuant to paragraph XXVI A above, and this Lease shall at the
option of Lessee also thereupon termination.
XXVII. EASEMENTS
Lessee's leasehold interest is subject to and burdened by all existing
easements whether filed for public record or not. These easements include, but
are not limited to, a Well Site Exclusive Easement Deed dated December 20,
1985, an Easement and Right-of-Way Agreement dated December 20, 1985, and
Easement and Right-of-Way Agreement recorded April 19, 1985, at Book 4418, Page
747 through 752, of the records of the Arapahoe County Clerk and Recorder.
XXVIII. ARBITRATION
It is hereby agreed that if, at any time hereafter, any dispute,
difference or question shall arise between the parties hereto regarding the
construction, meaning or effect of these presents or of-any act or omission to
act of either of the parties or of the rights or liabilities of either of the
parties under this Lease, every such dispute, difference or question, except
where provision is expressly made herein for the settlement of any such
question in some other manner, shall be expeditiously submitted to the American
Arbitration Association for arbitration in accordance with its then applicable
rules and regulations and the determination of the arbitrators appointed
pursuant thereto shall be binding upon the parties. In the event the American
Arbitration Association shall cease to exist or fail or refuse to act, then
either party may appoint an arbitrator and, upon making such appointment, shall
serve a written notice upon the other party; said second party shall then
appoint an arbitrator and the two arbitrators so appointed shall appoint a
third arbitrator. In the event that said second party does not, within a period
of fifteen (15) days after receiving notice from said first mentioned party,
appoint an arbitrator and serve
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written notice thereof upon said first mentioned party, then the arbitrator
appointed by said first mentioned party shall have the power to proceed to
arbitrate and determine the question as if he were an arbitrator appointed by
both parties for this purpose and his award in writing shall be final and
binding upon both parties. In the event that both parties appoint arbitrators
as aforesaid, the two arbitrators so appointed shall, within fifteen (15) days
after the appointment of the second arbitrator, proceed to appoint a third
arbitrator. In the event that said arbitrators are unable to agree upon a third
arbitrator, such third arbitrator shall, upon the application of either party,
be appointed by the senior district court judge for the judicial district in
which the County of Arapahoe is located. The three arbitrators appointed in the
manner aforesaid shall proceed with all reasonable dispatch to hear and
determine the matter in dispute and the decision or award in writing of said
arbitrators or a majority of them shall be final and binding upon both parties.
The arbitrators are authorized to enter said decision or award in any court
having jurisdiction.
XXIX. ATTORNEYS' FEES
In the event either party shall bring any action for damages for an
alleged breach of any provisions of this Lease, to recover rent, to terminate
the tenancy of the leased premises, or to enforce, protect, determine or
establish any term or covenant of this Lease or right of either party, the
prevailing party shall be entitled to K cover from the non-prevailing party as
a part of such action or proceedings, or in a separate action brought for that
purpose, reasonable attorneys' fees and costs as may be fixed by the court or
arbitrators.
XXX. ADDITIONAL LEASE PROVISIONS
A. Observance of laws. Lessee shall observe and obey all laws,
ordinances. rules and regulations of the United States. including but not
limited to Exhibit C. the State of Colorado, Arapahoe County, and Authority
which may be applicable to its operations upon the leased premises, and shall
make no unlawful or offensive use of the leased premises.
B. Codes. Lessee shall conform to all applicable safety, health, and
sanitary codes and agrees to cooperate with Authority in its fire prevention
efforts.
C. Airport Development. Authority reserves the right to further
develop or improve the landing area of Centennial Airport as it sees fit, and
without unreasonable interference or hindrance.
D. Authority's Rights. Authority reserves the right (but shall not be
obligated to the Lessee) to maintain and keep in repair the landing area of
Centennial Airport and all publicly-owned facilities of Centennial Airport
together with the right to direct and control all activities in this regard.
E. Subordination. This Lease shall be subordinate to the provisions of
any existing or future agreement between Authority and the United States,
relative to the operation or maintenance of Centennial Airport, the execution
of which has been or may be required as a condition precedent to the
expenditure of Federal funds for the development of Centennial Airport so long
as there is no material affect on Lessee's rights under this Lease. This
subordination includes, but is not limited to, the right of Authority, during
time of war or national emergency, to lease the tending area, or any part
thereof, to the United States for military or naval use, and if any such base
is made, the provisions of any contracts or leases with Lessee shall be
suspended.
- 25 -
<PAGE>
F. Representations and Warranties. All terms and conditions with
respect to this Lease are expressly contained herein, and the Lessee agrees
that no representative or agent of Authority has made any representation or
promise with respect to this Lease not expressly contained herein.
G. Exclusive Right. It is understood and agreed that nothing herein
shall be construed to grant or authorize the granting of an exclusive right
within the meaning of 9 Section 308 (a) of the Federal Aviation Act of 1958, as
amended, for the development of commercial, office, and retail uses at the
Centennial Airport.
H. Executive Order. In performance of its obligations under this Lease
and with reference solely to the property covered by this Lease, Lessee shall
comply with the requirements of any Executive Order barring discrimination;
further, in accordance with t : these requirements. Lessee shall not
discriminate in any manner against any employee or applicant for employment
because of political or religious opinion or affiliation, sex. race, creed,
color, or national origin and further, Lessee shall include a similar clause in
ali subcontracts, except subcontracts for standard commercial supplies or raw
materials. Lessee understands and acknowledges that Authority has given to the
United States of America, acting by and through the Federal Aviation
Administration, certain assurances in respect to non-discrimination which have
been required by Title VI of the Civil Rights Act of 1964, and by or pursuant
to Title 49, Code of Federal Regulations, Department of Transportation,
Subtitle A, Office of the Secretary, Part 21, Non-discrimination in
Federally-Assisted Programs of the Department of Transportation, as a condition
precedent to the Government making grants in aid to Authority, for certain
Airport programs and activities, and that Authority is required under said
regulations to include in every agreement or concession pursuant to which any
person or persons other than Authority operates or has the right to operate any
facility on Centennial Airport providing services to the public, the following
covenant, to which Lessee agrees:
"Lessee, in its operation at and use of the Airport, covenants that
it will not on the grounds of sex, race, color, or national origin:
discriminate or permit discrimination against any person or group
of persons in any manner prohibited by Title 49, Code of Federal
Regulations, Department of Transportation, Subtitle A, Office of
the Secretary, Part 21; and in the event of such discrimination,
Lessee agrees that Authority has the right to take such action,
against Lessee as me Government may direct to enforce this
covenant."
I. Affirmative Action Program. In performance of its obligations under
this Lease and with reference solely to the property covered by this Lease,
Lessee assures that it will undertake an affirmative action program as required
by 14 CFR Part 152, Subpart E, to ensure that no person shall on me grounds of
race, creed, color, national origin, or sex be excluded from participating in
any employment activities covered in 14 CFR Part 152. Subpart E. The Lessee
assures that no person shall be excluded-on these grounds from participating in
or receiving the services or benefit of any program or activity covered by this
subpart. The Lessee assures that it will require that its covered sub
organizations provide assurances to the Lessee that they will require
assurances from their sub organizations, as required by 14 CFR Part 152,
Subpart E, to the same effect.
J. Impossibility. If the obligations and duties of Lessee are
incapable of being performed by Lessee by insurrection, war, calamity, natural
catastrophe, or other act of God beyond the control of Lessee, then for such
time period as the rights sod ; obligations are incapable of being performed
this Lease shall be suspended and the time of such suspension shall not be
counted against Lessee, anything to the contrary in this Lease notwithstanding.
- 26 -
<PAGE>
XXXI. QUIET POSSESSION
Authority covenants that Lessee, upon payment of the rent reserved
herein and the performance of each of the covenants, agreements and conditions
on the part of Lessee to be observed and performed, shall and may, peaceable
and quietly, have, hold and enjoy the leased premises for the term hereof, free
from molestation, eviction or disturbance by Authority, subject to the terms
and conditions of this Lease and to the following:
(i) Authority hereby reserves, for the use and benefit of the public,
a right of flight for the passage of aircraft in the navigable airspace above
the surface of the leased premises, as determined by the regulations and
technical standards promulgated by the Federal Aviation Administration,
together with the right to cause in said airspace such noise as may be inherent
in the operation of aircraft, now known or hereafter used for navigation of or
flights in air, using said airspace for landing at, taking off from, or
operating on the Airport.
(ii) Authority reserves from this Lease all water, gas, oil,
hydrocarbon and mineral rights in and under the surface of the based premises;
provided, however, that Authority shall not conduct any operations on the
surface of the leased premises for the exploration, development or recovery of
the rights and substances reserved which would interfere with Lessee's use and
occupancy of the leased premises, and Authority agrees to indemnify and hold
harmless Lessee with regard to any loss, damage, or expense occurred as a
result of such exploration, development or recovery.
XXXII. GENERAL
A. Captions. The captions used in this Lease are for the purpose of
convenience only and shall not be construed to limit or extend the meaning of
any part of this Lease. .
B. Executed Leases. Any executed copy of this Lease shall be deemed an
original .for all purposes.
C. Time of Essence. Time is of the essence for the performance of each
covenant and term of this Lease.
D. Invalidity. In case any one or more of the provisions contained
herein, except for the payment or rent, shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Lease, but
this Lease shall be construed as if such invalid, illegal or unenforceable
provision had not been contained herein. This Lease shall be construed and
enforced in accordance with the laws of the State of Colorado.
E. Mortgage. Whenever the word "mortgage" is used herein, it shall be
deemed to include a deed of trust. Whenever the word "mortgagor" is used
herein, it shall be deemed to include a trust or grantor of a deed of trust.
Whenever the word "mortgagee" is used herein, it shall be deemed to include the
holder and beneficiary of a deed of trust, and the holder of a certificate of
purchase pursuant to foreclosure.
F. Fair Meaning. The language in all parts of this Lease shall in all
cases be construed as a whole according to its fair meaning, and not strictly
for or against either Authority or Lessee. When the context of this Lease
requires, the neuter gender includes the masculine, the feminine, a partnership
or corporation or joint venture, and the singular includes the plural.
- 27 -
<PAGE>
G. Construction. Each term and provision of this Lease performable by
Lessee shall be construed to be both a covenant and a condition, conferring
upon Authority, in the event of breach of any such term or condition, the right
to terminate this Lease.
H. Modification and Merger. This Lease may not be amended, modified
cancelled or surrendered except in writing signed by both parties and any
mortgagee of any portion of the leasehold estate, and no claimed oral agreement
shall be binding or admitted in evidence in any action. In addition to the
above, there shall not be any merger of the leasehold estate and the fee simple
estate of Authority if both such estates shall become owned by the same party
without the written consent of all mortgagees of the leasehold estate.
I. Memorandum. Authority and Lessee agree upon request of either of
them to execute a memorandum of this Lease in recordable form. Alteratively,
this Lease may be recorded by either Authority or Lessee. In either event, if
this Lease shall terminate, Authority shall be entitled to record an affidavit
(such affidavit to be executed by the Chairman of the Authority Board of
Commissioners), stating that this Lease has terminated and the recording of
such affidavit shall be conclusive evidence that this Lease has in fact
terminated.
J. Binding Effect. The covenants and agreements contained in this
Lease shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, successors, and assigns (to the extent this
Lease is assignable).
K. Remedies. All remedies herein conferred upon Authority or Lessee
shall be deemed cumulative and no one remedy shall be exclusive of any other
remedy herein conferred or created by laws.
L. Good Faith. Each party hereto agrees to act reasonably and in good
faith with respect to the performance and fulfillment of the terms of each and
every covenant and condition contained in this Lease.
M. Consent. Wherever the consent or approval of Authority ia required,
Authority hereby agrees that such consent or approval shall not be unreasonably
withheld.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed as of the day and year first above written.
AUTHORITY:
ARAPAHOE COUNTY PUBLIC AIRPORT
AUTHORITY
ATTEST:
By_________________________________
Chairman
By_________________________
- 28 -
<PAGE>
LESSEE:
PINECREST ENTERPRISES, LTD.
ATTEST:
By_________________________________
President
By_________________________
APPROVED AS TO FORM:
- ---------------------------
Attorney for Authority
- 29 -
<PAGE>
FIRST AMENDMENT TO
GROUND LEASE AND AGREEMENT
This First Amendment to Ground Lease and Agreement is made and entered
into by and among the Arapahoe County Pubic Airport Authority (the
"Authority"), Pinecrest Enterprises, Ltd. (present Lessee"), and Swingmaster
Golf at Centennial, Ltd. ("new Lessee").
WITNESSETH:
WHEREAS, a Ground Lease and Agreement was entered into between
Authority and present Lessee dated November 1, 1994 ("Lease"); and
WHEREAS, the new Lessee is a limited partnership and the present
Lessee is a general partner of the new Lessee; and
WHEREAS, the present Lessee and the new Lessee have established that
the new, Lessee will be the operating entity under the Lease; and
WHEREAS, as a condition of financing for the project contemplated in
the Lease, the Small Business Administration ("SBA") is requiring the new
Lessee to substitute for the present Lessee under the Lease.
NOW, THEREFORE, in consideration of the premises and the covenants
herein contained, it is hereby agreed among the Authority, the present Lessee,
and the new Lessee as follows:
1. The new Lessee shall be substituted hr the present Lessee under the
Lease effective March 9, 1995. As of March 9, 1995 and thereafter, all
references on and in Lease the Lessee Pinecrest Enterprises, Ltd. shall be
deemed to mean Swingmaster Golf at Centennial, Ltd.
2. Effective March 9, 1995, the new Lessee assumes all the obligations
of the present Lessee under the Lease.
DATED this 9th day of March, 1995.
THE ARAPAHOE COUNTY PUBLIC AIRPORT
AUTHORITY
ATTEST:
By_________________________________
Chairman Pro-Tem
- ---------------------------
Clerk
- 30 -
<PAGE>
ATTEST: PINECREST ENTERPRISES, LTD., a
Colorado Corporation
- ---------------------------
Secretary
By_________________________________
President
SWINGMASTER GOLF AT CENTENNIAL, LTD.,
a Colorado limited partnership
By: PINECREST ENTERPRISES, LTD., a Colorado
Corporation, General Partner
ATTEST:
- ---------------------------
Secretary
By_________________________________
Gregory Blaydes, President
- 31 -
<PAGE>
FIRST AMENDMENT TO
GROUND LEASE AND AGREEMENT
This First Amendment to Ground Lease and Agreement is made and entered
into by and among the Arapahoe County Pubic Airport Authority (the
"Authority"), Pinecrest Enterprises, Ltd. (present Lessee"), and Swingmaster
Golf at Centennial, Ltd. ("new Lessee").
WITNESSETH:
WHEREAS, a Ground Lease and Agreement was entered into between
Authority and present Lessee dated November 1, 1994 ("Lease"); and
WHEREAS, the new Lessee is a limited partnership and the present
Lessee is a general partner of the new Lessee; and
WHEREAS, the present Lessee and the new Lessee have established that
the new, Lessee will be the operating entity under the Lease; and
WHEREAS, as a condition of financing for the project contemplated in
the Lease, the Small Business Administration ("SBA") is requiring the new
Lessee to substitute for the present Lessee under the Lease.
NOW, THEREFORE, in consideration of the premises and the covenants
herein contained, it is hereby agreed among the Authority, the present Lessee,
and the new Lessee as follows:
1. The new Lessee shall be substituted hr the present Lessee under the
Lease effective March 9, 1995. As of March 9, 1995 and thereafter, all
references on and in Lease the Lessee Pinecrest Enterprises, Ltd. shall be
deemed to mean Swingmaster Golf at Centennial, Ltd.
2. Effective March 9, 1995, the new Lessee assumes all the obligations
of the present Lessee under the Lease.
DATED this 9th day of March, 1995.
THE ARAPAHOE COUNTY PUBLIC
AIRPORT AUTHORITY
ATTEST:
By_________________________________
Chairman
- ---------------------------
- 32 -
<PAGE>
ATTEST: PINECREST ENTERPRISES, LTD., a
Colorado Corporation, General Partner
- ---------------------------
By_________________________________
General Partner
ATTEST: SWINGMASTER GOLF AT CENTENNIAL,
LTD., a Colorado limited partnership
- ---------------------------
By_________________________________
Pinecrest Enterprises, Ltd., a Colorado
limited partnership, General Partner
- 33 -
<PAGE>
SECOND AMENDMENT TO
GROUND LEASE AND AGREEMENT
This Second Amendment to Ground Lease and Agreement is made and
entered into by and between the Arapahoe County Pubic Airport Authority (the
"Authority"), and Swingmaster Golf at Centennial, Ltd. ("Lessee")
WITNESSETH:
WHEREAS, a Ground Lease and Agreement was entered into between
Authority and present Lessee dated November 1, 1994 and subsequently amended on
March 9, 1995 (collectively the o Lease.); and
WHEREAS, as a condition of financing for the project contemplated in
the Lease the First National Bank of Parker has requested certain amendments to
the Lease.
NOW, THEREFORE, in consideration of the premises and the covenants
herein contained, it is hereby agreed between the Authority and the Lessee as
follows:
1. Amend paragraph E on page 6 to read as follows:
E. Use Restrictions. The leased premises and the improvements
to be constructed thereon shall be utilized as a driving range/golf center
facility as conditionally approved at the Location and Extent hearing held by
the Arapahoe County Planning Commission on July 12, 1994.
2. Amend paragraph C on page 22 to read as follows:
C. Mortgagee Notice. If at any time Authority gives notice of
default under this Article to the Lessee and the Lessee's interest in the
leased premises shall be subject to the lien of any mortgage as set out in
paragraph XVIII C, and if Authority has been furnished with the names and
addresses of said mortgagees, Authority shall at the same time as Authority
gives notice of default to Lessee, give like written notice to said mortgagees.
All such mortgagees shall have sixty (60) days within which to remedy such
defaults; provided, however, such mortgagees shall have such longer period to
correct any such defaults as are required to complete any mortgage foreclosure
proceedings or other remedial action which such mortgagee elects to pursue to
obtain possession of the demised premises so long as during such longer period
the mortgagee causes all Basic Rent, Percentage Rent and Additional Rent and
other amounts to be paid by Lessee hereunder, including past due payments, to
be paid to Authority as herein provided, and otherwise performs the covenants
of Lessee hereunder to the extent the same can be peformed without having
possession of the demised premises. In order to assist the mortgagee of the
leased premises in curing any such defaults, Authority hereby confers upon the
mortgagee or any agents, receiver or trustee appointed by such mortgagee, the
right in the event of a default under the terms of this Lease or any such
mortgage to forthwith enter into and upon the leased premises and take
possession thereof provided that such right is granted n any such mortgage, and
further provided that said mortgagee causes all Basic Rent, Percentage Rent and
Additional Rent and other amounts to be paid by Lessee hereunder, including
past due payments to be paid to Authority as herein provided, and otherwise
performs the covenants of Lessee hereunder as aforesaid.
- 34 -
<PAGE>
3. In all other respects the terms and conditions of the Lease remain
as stated therein.
DATED this 8th day of June, 1995.
THE ARAPAHOE COUNTY PUBLIC
AIRPORT AUTHORITY
ATTEST:
By_________________________________
Chairman Pro-Tem
- ---------------------------
Clerk
SWINGMASTER GOLF AT CENTENNIAL,
LTD., a Colorado limited partnership
ATTEST: PINECREST ENTERPRISES, LTD., a
Colorado Corporation, General Partner
- ---------------------------
Secretary
By_________________________________
Gregory Blaydes, President
LESSEE:
PINECREST ENTERPRISES, LTD.
ATTEST:
By_________________________________
President
By_________________________
APPROVED AS TO FORM:
- ---------------------------
Attorney for Authority
- 35 -
OPTION TO LEASE AGREEMENT
This Option to Lease Agreement ("Agreement") is made and entered into
this 8th day of August, 1996, by and between the ARAPAHOE COUNTY PUBLIC AIRPORT
AUTHORITY ("Authority") and SWINGMASTER GOLF AT CENTENNIAL, LTD. ("Lessee").
"W I T N E S S E T H
WHEREAS, the Authority owns fee simple title to the real property
described in Exhibit A attached hereto and incorporated herein by reference
(the "Property"); and
WHEREAS, the Authority desires to lease the Property to Lessee and
Lessee desires to lease the Property from Authority for the purpose of a golf
course in accordance with Development Plans [Scott] prepared and processed in
accordance with Authority's Development Guidelines [Scott] ("Project"); and
WHEREAS, Lessee desires to have an option to lease the
Property until February 7, 1997; and
WHEREAS, the Authority is willing to enter into a option to lease the
Property in accordance with the terms and conditions set forth below.
1. Option Payment. Lessee shall pay to Authority, contemporaneous with
the execution of this Agreement an option payment of $1,825 representing $100
per acre per year for Lots N15 and N17, which consists of approximately 36.5
acres. In return for the payment, Lessee shall have the option to lease the
Property pursuant to the terms of the Ground Lease and Agreement, which is
attached hereto as Exhibit 1, commencing the date of this Agreement, and
terminating on February 7, 1997.
2. Commencement of Construction Activities. Lessee may not commence
any construction activities of any nature on the Property, including the
movement of soil, without the execution by Authority and Lessee, of the Ground
Lease and Agreement, attached hereto as Exhibit 1, or without the express
written authorization of the Authority's Executive Director.
DATED this 8th day of August, 1996.
<PAGE>
THE ARAPAHOE COUNTY PUBLIC AIRPORT
AUTHORITY
ATTEST:
By ________________________________2
__________________________ Chairman Pro-Term
SWINGMASTER GOLF AT CENTENNIAL, LTD., a
Colorado limited partnership
ATTEST:
BY PINECREST ENTERPRISES, LTD., a Colorado
___________________________ corporation, General Partner
Secretary
By _________________________________
Gregory Blaydes, President
- 2 -
FOR: FAMILY GOLF CENTERS, INC.
FROM: L.B. STAUFFER
COMPANY
CONTACT: KRISHNAN P. THAMPI
(516) 694-1666
FOR IMMEDIATE RELEASE
FAMILY GOLF CENTERS ACQUIRES FIVE CENTERS IN FIVE STATES;
ADDS ITS FIRST SITES IN COLORADO, MARYLAND, MASSACHUSETTS
MELVILLE, NY, OCT. 4 -- Family Golf Centers, Inc. (NASDAQ, NM: FGCI),
which owns, operates and manages golf-related facilities, announced today that
it has acquired five additional centers in five states, increasing the number
of company centers to 30 facilities in 13 states. The purchase included centers
in Colorado, Maryland and Massachusetts, marking the company's initial entry
into those states.
Terms of the transaction were not disclosed.
The facilities being acquired are Swing Master Golf Center, Denver,
CO; Glen Burnie Golf Center, in the Baltimore suburb of Glen Burnie; Dixie Golf
Center in Easton MA, close to Boston; Westminster Golf Center in Westminster,
CA, near Los Angeles; and the Carolina Springs Golf Club in Greenville, SC.
Carolina Springs is a 27-hole, semi-private golf course with a driving range,
putting green and clubhouse.
Together, the acquired centers offer 287 practice tees, as well as
miniature golf courses, batting cages, pro shops and short game practice areas.
#######
1996
