<PAGE>
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
METROGOLF INCORPORATED
(NAME OF SUBJECT COMPANY)
FAMILY GOLF ACQUISITION, INC.
FAMILY GOLF CENTERS, INC.
(Bidders)
COMMON STOCK, NO PAR VALUE PER SHARE
(Title of Class of Securities)
59167410
(CUSIP Number of Class of Securities)
PAMELA S. CHARLES, ESQ.
FAMILY GOLF ACQUISITION, INC.
C/O FAMILY GOLF CENTERS, INC.
225 BROADHOLLOW ROAD
MELVILLE, NEW YORK 11747
TELEPHONE: 516-694-1666
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
------------------------------
COPIES TO:
KENNETH R. KOCH, ESQ.
SQUADRON, ELLENOFF, PLESENT & SHEINFELD, LLP
551 FIFTH AVENUE
NEW YORK, NEW YORK 10176
TELEPHONE: (212) 661-6500
------------------------
CALCULATION OF FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE
<S> <C>
$6,651,910.50 $1,929.05
</TABLE>
* Estimated for purposes of calculating the amount of filing fee only. The
amount assumes the purchase of 4,434,607 shares of common stock, no par value
per share, at a price per Share of $1.50 in cash. Such number of Shares
represents all of the Shares outstanding as of December 23, 1997.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously Paid: None.
Form or Registration No.: Not applicable.
Filing Party: Not applicable.
Date Filed: Not applicable.
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Page 1 of 8
Exhibit Index Begins on Page 8
<PAGE>
<TABLE>
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1) Names of Reporting Persons,
I.R.S. Identification Nos. of Above Persons (entities only)
Family Golf Acquisition, Inc. Employer Tax Id:
Applied for
2) Check the Appropriate Box if a Member of a Group (See Instructions)
(a) / /
(b) /X/
3) SEC Use Only
4) Sources of Funds (See Instructions)
AF
5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)
6) Citizenship or Place of Organization
Colorado
7) Aggregate Amount Beneficially Owned by Each Reporting Person
1,910,622 (represents shares underlying a convertible note and a warrant, and
shares owned by a stockholder who has given the reporting person a proxy and
an option with respect to his shares and shares underlying options he owns.)
8) Check if the Aggregate Amount in Row (7) Excludes Certain Shares (See
Instructions)
9) Percent of Class Represented by Amount in Row (7)
33.8%
10) Type of Reporting Person (See Instructions)
CO
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C>
1) Names of Reporting Persons,
I.R.S. Identification Nos. of Above Persons (entities only)
Family Golf Centers, Inc. Employer Tax Id:
11-3223246
2) Check the Appropriate Box if a Member of a Group (See Instructions)
(a) / /
(b) /X/
3) SEC Use Only
4) Sources of Funds (See Instructions)
WC
5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)
6) Citizenship or Place of Organization
Delaware
7) Aggregate Amount Beneficially Owned by Each Reporting Person
1,910,622 (represents shares underlying a convertible note and a warrant, and
shares owned by a stockholder who has given Family Golf Acquisition, Inc. a
proxy and an option with respect to his shares and shares underlying options
he owns.)
8) Check if the Aggregate Amount in Row (7) Excludes Certain Shares (See
Instructions)
9) Percent of Class Represented by Amount in Row (7)
33.8%
10) Type of Reporting Person (See Instructions)
CO
</TABLE>
3
<PAGE>
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 relates to the offer by Family
Golf Acquisition, Inc., a Colorado corporation ("Purchaser"), to purchase all
outstanding shares of common stock, no par value per share (collectively, the
"Shares"), of MetroGolf Incorporated, a Colorado corporation, at $1.50 per
Share, net to the seller in cash, on the terms and subject to the conditions set
forth in the Offer to Purchase dated December 30, 1997 (the "Offer to Purchase")
and in the related Letter of Transmittal, copies of which are attached hereto as
Exhibits (a) (1) and (a) (2), respectively (which, as amended or supplemented
from time to time, together constitute the "Offer"). The item numbers and
responses thereto below are in accordance with the requirements of Schedule
14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY
(a) The name of the subject company is MetroGolf Incorporated, a Colorado
corporation (the "Company"). The address of the Company's principal executive
offices is 1999 Broadway, Suite 2435, Denver, Colorado 80202.
(b) The information set forth in the Introduction of the Offer to Purchase
is incorporated herein by reference.
(c) The information set forth in Section 6 --"Price Range of Shares;
Dividends" of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND
(a)-(d), (g) This Statement is filed by Purchaser and Family Golf Centers,
Inc., a Delaware corporation ("Parent"). The information set forth in the
Introduction, in Section 8 --"Certain Information Concerning Purchaser and
Parent" and in Schedules I and II to the Offer to Purchase is incorporated
herein by reference.
(e)-(f) During the last five years, neither Parent nor Purchaser nor, to
their knowledge, any of the persons listed in Schedules I and II to the Offer to
Purchase (i) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY
(a)-(b) The information set forth in Section 10 --"Background of the Offer,
Contacts with the Company" and in Section 11 --"The Offer and Merger; Merger
Agreement and Related Agreements" of the Offer to Purchase is incorporated
herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a) The information set forth in Section 9 --"Sources and Amounts of Funds"
of the Offer to Purchase is incorporated herein by reference.
(b)-(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER
(a)-(g) The information set forth in the Introduction, in Section 11 --"The
Offer and Merger; Merger Agreement and Related Agreements," in Section 12 --
"Purpose of the Offer and Merger; Plans for the Company" and in Section 13
- --"Effect of the Offer on the Market for the Shares; Exchange Act Registration;
Margin Regulations" of the Offer to Purchase is incorporated herein by
reference.
4
<PAGE>
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
(a)-(b) The information set forth in the Introduction, in Section 8
- --"Certain Information Concerning Purchaser and Parent," and in Section 11
- --"The Offer and Merger; Merger Agreement and Related Agreements" of the Offer
to Purchase is incorporated herein by reference. There have been no other
transactions in the past 60 days in Shares by Parent, Purchaser or, to their
knowledge, any of the persons listed in Schedules I and II of the Offer to
Purchase.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE SUBJECT COMPANY'S SECURITIES
The information set forth in the Introduction, in Section 8 --"Certain
Information Concerning Purchaser and Parent," in Section 10 --"Background of the
Offer, Contacts with the Company," in Section 11 --"The Offer and Merger; Merger
Agreement and Related Agreements," and in Section 14 -- "Extension of Tender
Period; Amendment; Termination" of the Offer to Purchase is incorporated herein
by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The information set forth in the Introduction and in Section 17 --"Fees and
Expenses" of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS
The information set forth in Section 8 --"Certain Information Concerning
Purchaser and Parent" of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION
(a) The information set forth in the Introduction, in Section 10
- --"Background of the Offer; Contacts with the Company," in Section 11 --"The
Offer and Merger; Merger Agreement and Related Agreements" and in Section 12
- --"Purpose of the Offer and Merger; Plans for the Company" of the Offer to
Purchase is incorporated herein by reference.
(b)-(c) The information set forth in Section 16 --"Certain Legal Matters;
Regulatory Approvals" and in Section 18 --"Miscellaneous" of the Offer to
Purchase is incorporated herein by reference.
(d) The information set forth in Section 13 --"Effect of the Offer on the
Market for the Shares; Exchange Act Registration; Margin Regulations" of the
Offer to Purchase is incorporated herein by reference.
(e) There are no material pending legal proceedings relating to the tender
offer.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a) (l) and (a)
(2), respectively, is incorporated herein by reference.
5
<PAGE>
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<S> <C>
(a) (1) Offer to Purchase, dated December 31, 1997.
(a) (2) Letter of Transmittal.
(a) (3) Notice of Guaranteed Delivery.
(a) (4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(a) (5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a) (6) Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.
(a) (7) Text of press release issued by the Company dated December 24, 1997.
(a) (8) Text of press release issued by Parent, dated December 31, 1997.
(b) Not applicable.
(c) (1) Agreement and Plan of Merger dated as of December 23, 1997 by and among
Parent, Purchaser and the Company.
(c) (2) Stockholders Agreement dated as of December 23, 1997 among Charles D.
Tourtellotte, Parent and Purchaser.
(c) (3) Option Agreement dated December 23, 1997 among the Company, Parent and
Purchaser.
(c) (4) Consolidated Secured Convertible Promissory Note dated as of December 23, 1997
by the Company in the amount of $500,000.
(c) (5) First Amended Pledge and Security Agreement dated as of December 23, 1997, by
the Company and Parent.
(c) (6) Share Purchase Warrant to purchase 500,000 Shares.
(c) (7) Letter, dated December 23, 1997, between Parent and Charles D. Tourtellotte,
regarding certain personal guarantees by him.
(c) (8) Form of letters, from Parent agreeing to retain certain employees of the
Company.
(c) (9) Letter, dated December 23, 1997, between Parent and Charles D. Tourtellotte,
regarding certain of his options to acquire Shares.
(c) (10) Letter, dated December 23, 1997, between Parent and J.D. Finley, regarding
certain of his options to acquire Shares.
(c) (11) Form of Agreement between Parent and certain employees of the Company
regarding certain options to acquire Shares.
(c) (12) Amendment Agreement, dated as of December 23, 1997, by and among Parent,
Purchaser and the Company.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
</TABLE>
6
<PAGE>
SIGNATURES
After due inquiry and to the best of its knowledge and belief, each of the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: December 31, 1997
<TABLE>
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FAMILY GOLF ACQUISITION, INC.
By: /s/ ROBERT J. KRAUSE
---------------------------------------
Name: Robert J. Krause
Title: Chief Executive Officer
FAMILY GOLF CENTERS, INC.
By: /s/ ROBERT J. KRAUSE
---------------------------------------
Name: Robert J. Krause
Title: Senior Vice President
</TABLE>
7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ---------- ------------------------------------------------------------------------------------------------------
<S> <C>
(a) (1) Offer to Purchase, dated December 31, 1997.
(a) (2) Letter of Transmittal.
(a) (3) Notice of Guaranteed Delivery.
(a) (4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a) (5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a) (6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(a) (7) Text of press release issued by the Company dated December 24, 1997.
(a) (8) Text of press release issued by Parent, dated December 31, 1997.
(b) Not applicable.
(c) (1) Agreement and Plan of Merger dated as of December 23, 1997 by and among Parent, Purchaser and the
Company.
(c) (2) Stockholders Agreement dated as of December 23, 1997 among Charles D. Tourtellotte, Parent and
Purchaser.
(c) (3) Option Agreement dated December 23, 1997 among the Company, Parent and Purchaser.
(c) (4) Consolidated Secured Convertible Promissory Note dated as of December 23, 1997 by the Company in the
amount of $500,000.
(c) (5) First Amended Pledge and Security Agreement dated as of December 23, 1997, by the Company and Parent.
(c) (6) Share Purchase Warrant to purchase 500,000 Shares.
(c) (7) Letter, dated December 23, 1997, between Parent and Charles D. Tourtellotte, regarding certain
personal guarantees by him.
(c) (8) Form of letters, from Parent agreeing to retain certain employees of the Company.
(c) (9) Letter, dated December 23, 1997, between Parent and Charles D. Tourtellotte, regarding certain of his
options to acquire Shares.
(c) (10) Letter, dated December 23, 1997, between Parent and J.D. Finley, regarding certain of his options to
acquire Shares.
(c) (11) Form of Agreement between Parent and certain employees of the Company regarding certain options to
acquire Shares.
(c) (12) Amendment Agreement, dated as of December 23, 1997, by and among Parent, Purchaser and the Company.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
</TABLE>
8
<PAGE>
EXHIBIT (A)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
METROGOLF INCORPORATED
AT
$1.50 NET PER SHARE
BY
FAMILY GOLF ACQUISITION, INC.
A WHOLLY-OWNED SUBSIDIARY
OF
FAMILY GOLF CENTERS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 PM, NEW YORK CITY TIME, ON
JANUARY 30, 1998, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF MERGER
(THE "MERGER AGREEMENT") DATED DECEMBER 23, 1997 BY AND AMONG FAMILY GOLF
CENTERS, INC. ("PARENT"), FAMILY GOLF ACQUISITION, INC. ("PURCHASER") AND
METROGOLF INCORPORATED (THE "COMPANY" OR "MGI"). THE BOARD OF DIRECTORS OF THE
COMPANY HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER,
DETERMINED THAT THE OFFER AND MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF
THE STOCKHOLDERS OF THE COMPANY, AND RECOMMENDS ACCEPTANCE OF THE OFFER AND
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER BY THE STOCKHOLDERS
OF THE COMPANY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED HEREIN), A
NUMBER OF SHARES OF COMMON STOCK OF THE COMPANY, NO PAR VALUE PER SHARE
(COLLECTIVELY, THE "SHARES"), WHICH, WHEN ADDED TO THE SHARES THEN BENEFICIALLY
OWNED BY PARENT, PURCHASER OR THEIR AFFILIATES, CONSTITUTES AT LEAST A MAJORITY
OF THE TOTAL NUMBER OF SHARES OUTSTANDING, ON A FULLY DILUTED BASIS, AS ADJUSTED
(THE "ADJUSTED FULLY DILUTED BASIS") TO EXCLUDE SHARES UNDERLYING CERTAIN
OPTIONS, WARRANTS, CONVERTIBLE NOTES AND CONTRACT RIGHTS (THE "MINIMUM TENDER
CONDITION"); (II) EXPIRATION OR TERMINATION OF THE APPLICABLE WAITING PERIOD, IF
ANY, UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED;
AND (III) SATISFACTION OF THE OTHER CONDITIONS SPECIFIED IN SECTION 15 HEREOF.
SEE SECTION 15.
--------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such holder's
Shares should either (a) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, have such stockholder's signature guaranteed, if required by
Instruction 1 to the Letter of Transmittal, and mail or deliver it together with
the certificate(s) evidencing the tendered Shares and all other required
documents to the Depositary (as defined herein), or tender such Shares pursuant
to the procedure for book-entry transfer set forth in Section 3 of this Offer to
Purchase or (b) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such stockholder. A
stockholder whose Shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if such stockholder
desires to tender such Shares.
Any stockholder who desires to tender Shares and whose certificates
evidencing such Shares are not immediately available or who cannot comply with
the procedures for book-entry transfer on a timely basis may tender such Shares
by following the procedures for guaranteed delivery set forth in Section 3 of
this Offer to Purchase.
Questions and requests for assistance and for additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery
and other related materials may be directed to the Information Agent (as defined
herein) at its respective addresses and telephone numbers set forth on the back
cover of this Offer to Purchase. Additional copies of this Offer to Purchase,
the Letter of Transmittal, the Notice of Guaranteed Delivery and the other
tender offer materials may also be obtained from brokers, dealers, commercial
banks or trust companies.
--------------------------
The Dealer Manager for the Offer is:
Jefferies & Company, Inc.
The Information Agent for the Offer is:
abcdef
December 30, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
---------
<C> <S> <C>
INTRODUCTION.................................................................................................... 1
1. Terms of the Offer................................................................................... 3
2. Acceptance for Payment and Payment................................................................... 4
3. Procedures for Tendering Shares...................................................................... 5
4. Withdrawal Rights.................................................................................... 7
5. Certain Tax Considerations........................................................................... 8
6. Price Range of Shares; Dividends..................................................................... 9
7. Certain Information Concerning the Company........................................................... 10
8. Certain Information Concerning Purchaser and Parent.................................................. 12
9. Sources and Amounts of Funds......................................................................... 14
10. Background of the Offer; Contacts with the Company................................................... 15
11. The Offer and Merger; Merger Agreement and Related Agreements........................................ 17
12. Purpose of the Offer and Merger; Plans for the Company............................................... 30
13. Effect of the Offer on the Market for the Shares; Exchange Act Registration; Margin Regulations...... 31
14. Extension of Tender Period; Amendment; Termination................................................... 32
15. Conditions to the Offer.............................................................................. 33
16. Certain Legal Matters; Regulatory Approvals.......................................................... 35
17. Fees and Expenses.................................................................................... 37
18. Miscellaneous........................................................................................ 37
SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PARENT........................................................... 39
SCHEDULE II DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER....................................................... 41
</TABLE>
i
<PAGE>
To the Holders of Common Stock of
MetroGolf Incorporated
INTRODUCTION
Family Golf Acquisition, Inc., a Colorado corporation ("Purchaser"), hereby
offers to purchase all outstanding shares of common stock, no par value per
share (the "Company Common Stock" or the "Shares"), of MetroGolf Incorporated, a
Colorado corporation (the "Company"), at $1.50 per Share, net to the seller in
cash (the "Offer Price"), upon the terms and subject to the conditions set forth
in this Offer to Purchase and in the related Letter of Transmittal (which, as
amended or supplemented from time to time, together constitute the "Offer"). The
Purchaser is a wholly-owned subsidiary of Family Golf Centers, Inc. ("Parent"),
a Delaware corporation.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by Purchaser
pursuant to the Offer. However, any tendering stockholder or other payee who
fails to complete and sign the Substitute Form W-9 that is included in the
Letter of Transmittal may be subject to a required backup federal tax
withholding of 31% of the gross proceeds payable to such stockholder or other
payee pursuant to the Offer. See Section 3. Purchaser will pay all charges and
expenses of Jefferies & Company, Inc., which is acting as the Dealer Manager (in
such capacity, the "Dealer Manager"), United States Trust Company of New York,
which is acting as the Depositary (in such capacity, the "Depositary"), and
MacKenzie Partners, Inc., which is acting as Information Agent (in such
capacity, the "Information Agent"), incurred in connection with the Offer in
accordance with the terms of agreements entered into between Purchaser and such
persons. See Section 17. For purposes of this Offer to Purchase, references to
"Section" are references to a section of this Offer to Purchase, unless the
context otherwise requires.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED HEREIN), A
NUMBER OF SHARES WHICH, WHEN ADDED TO THE SHARES BENEFICIALLY OWNED BY PURCHASER
OR ITS AFFILIATES, TOGETHER WITH THE SHARES TENDERED PURSUANT TO THE
STOCKHOLDER'S AGREEMENT DATED DECEMBER 23, 1997, BY AND AMONG PARENT, PURCHASER
AND A STOCKHOLDER OF THE COMPANY, CONSTITUTES AT LEAST A MAJORITY OF THE TOTAL
NUMBER OF SHARES OUTSTANDING, ON A FULLY DILUTED BASIS, AS ADJUSTED (THE
"ADJUSTED FULLY DILUTED BASIS") TO EXCLUDE (A) SHARES UNDERLYING ANY OPTIONS,
WARRANTS, CONVERTIBLE NOTES OR CONTRACT RIGHTS WITH AN EXERCISE PRICE PER SHARE
OF $2.00 OR GREATER AND (B) SHARES UNDERLYING OPTIONS OR WARRANTS IF THE HOLDERS
THEREOF HAVE AGREED (I) NOT TO EXERCISE OR CONVERT SUCH OPTIONS OR WARRANTS
PRIOR TO THE CONSUMMATION OF THE OFFER AND (II) TO VOTE IN FAVOR OF THE MERGER
IF SUCH OPTIONS OR WARRANTS ARE EXERCISED OR CONVERTED FOLLOWING THE
CONSUMMATION OF THE OFFER (COLLECTIVELY, THE "EXCLUDED SHARES") (THE "MINIMUM
TENDER CONDITION"); (II) EXPIRATION OR TERMINATION OF THE APPLICABLE WAITING
PERIOD, IF ANY, UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976,
AS AMENDED (THE "HSR ACT"); AND (III) SATISFACTION OF THE OTHER CONDITIONS
SPECIFIED IN SECTION 15 HEREOF. SEE SECTION 15.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of December 23, 1997 (the "Merger Agreement"), by and among Parent, Purchaser
and the Company. The Merger Agreement provides, among other things, that as
promptly as practicable following the completion of the Offer and the
satisfaction or waiver of certain conditions, including the purchase of Shares
pursuant to the Offer (sometimes referred to herein as the "consummation" of the
Offer) and the approval and adoption of the Merger Agreement by the stockholders
of the Company, if required by applicable law, Purchaser will be merged with and
into the Company (the "Merger"), with the Company as the surviving corporation
(the "Surviving Corporation") with the result that all the outstanding Shares
will be owned by Parent. In the Merger, each issued and outstanding Share (other
than Dissenting Shares (as hereinafter defined)) not owned directly or
indirectly by the Company will be converted into and represent the right to
receive $1.50 in cash or any higher price that may be paid per Share in the
Offer, without interest (the "Merger
<PAGE>
Consideration"). See Section 11. The "Dissenting Shares" means those Shares
which are held by holders of Shares who shall not have voted such Shares in
favor of the Merger or consented thereto in writing and who have filed with the
Company a written objection to the Merger and a demand for payment of such
Shares in accordance with the Business Corporation Act of the State of Colorado
(the "BCA").
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD" OR "BOARD OF DIRECTORS")
HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER,
DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS
OF, THE STOCKHOLDERS OF THE COMPANY, AND RECOMMENDS ACCEPTANCE OF THE OFFER AND
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER BY THE STOCKHOLDERS
OF THE COMPANY.
Houlihan Lokey Howard & Zukin (the "Company's Financial Advisor"), financial
advisor to the Company, has delivered to the Board a written opinion dated
December 23, 1997 to the effect that the consideration to be received by the
holders of Shares, in the Offer and the Merger, is fair to such holders from a
financial point of view. A copy of such opinion is included with the Company's
Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"),
which is being mailed to stockholders concurrently herewith, and should be read
carefully in its entirety for a description of the assumptions made, matters
considered and limitations on the review undertaken by the Company's Financial
Advisor.
The Merger Agreement provides that, in the event that Purchaser acquires a
sufficient number of the Shares pursuant to the Offer to satisfy the Minimum
Tender Condition, Purchaser shall be entitled, subject to compliance with
Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), to designate for appointment or election to the Board such number of
persons so that the designees of Purchaser constitute a majority of the Board.
Upon the consummation of the Offer, the Company will, at the option of
Purchaser, increase the size of the Board or obtain the resignation of such
number of directors as is necessary to enable such number of Purchaser designees
to be so elected. In the Merger Agreement, the Company and Purchaser have agreed
that, until the Effective Time (as defined therein), the Board of Directors
shall have at least two directors who are directors on the date of the Merger
Agreement or who are otherwise not officers, directors or affiliates of
Purchaser and are independent directors under any applicable rules of the Boston
Stock Exchange (the "BSE") or the NASDAQ Smallcap Market (the "Independent
Directors") and that if the number of Independent Directors shall be reduced
below two for any reason whatsoever, any remaining Independent Directors (or
Independent Director, if there shall be only one remaining) shall be entitled to
designate a person to fill such vacancy who shall be deemed to be an Independent
Director for purposes of this Agreement or, if no Independent Directors then
remain, the other directors shall designate two persons to fill such vacancies
who shall not be officers, stockholders or affiliates of Purchaser and shall be
independent directors under any applicable rules of the BSE or the NASDAQ
Smallcap Market, and such persons shall be deemed to be Independent Directors
for purposes of the Merger Agreement.
According to the Company, as of December 23, 1997, 4,434,607 Shares were
validly issued and outstanding, and 10,407,421 Shares (plus an indeterminate
number of Shares issuable and potentially issuable pursuant to certain contract
rights) were outstanding on a fully-diluted basis. After excluding the Excluded
Shares there were 8,845,160 Shares, including 1,000,000 Shares underlying a
warrant and a convertible note owned by Parent (the "Parent Shares"),
outstanding on the Adjusted Fully Diluted Basis; a portion of these 8,845,160
Shares (124,984 Shares) represents Shares underlying options, warrants and
contract rights exercisable or convertible at prices between $1.50 to $2.00 per
Share, which Parent and Purchaser believe are unlikely to be exercised or
converted, as the case may be. Based upon the foregoing information, the Minimum
Tender Condition would be satisfied if 3,422,581 Shares (excluding the Parent
Shares) were validly tendered and not withdrawn. Pursuant to the Stockholders
Agreement dated as of December 23, 1997 among Charles D. Tourtellotte, the
Company's Chairman and President (the "Principal Stockholder"), Parent and
Purchaser, the Principal Stockholder has agreed to tender an aggregate of
2
<PAGE>
685,622 Shares and any Shares he acquires upon exercise of options owned by him
to purchase 225,000 Shares. See Section 11. As a result of the Stockholders
Agreement and their beneficial ownership of the Parent Shares, Parent and
Purchaser are the beneficial owners of 33.8% of the outstanding Shares, pursuant
to Rule 13(d)-3(d)(1) under Section 13(d) of the Exchange Act.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER
Upon the terms and subject to the Conditions (as defined in Section 15) of
the Offer, Purchaser will accept for payment and pay for all Shares which are
validly tendered prior to the Expiration Date and not withdrawn in accordance
with Section 4 immediately after expiration of the Offer. The term "Expiration
Date" means 5:00 pm, New York City time, on January 30, 1998, unless and until
Purchaser shall have extended the period of time during which the Offer is open,
in which event the term "Expiration Date" shall refer to the latest time and
date at which the Offer, as so extended by Purchaser, shall expire. Purchaser
may, without the consent of the Company, (a) extend the Offer, if at the initial
or extended Expiration Date of the Offer any of the Conditions shall not be
satisfied or waived, until such time as such Conditions are satisfied or waived;
PROVIDED, HOWEVER, that Purchaser shall not extend the Offer later than June 30,
1998 pursuant to this clause (a) without the Company's prior written consent,
(b) extend the Offer for any period required by any rule, regulation,
interpretation or position of the Securities and Exchange Commission (the "SEC"
or the "Commission"), or the staff thereof applicable to the Offer, (c) extend
the Offer from time to time until two business days after the expiration of the
waiting period under the HSR Act, if applicable, and (d) extend the Offer for a
period not to exceed 15 business days, notwithstanding that all conditions to
the Offer are satisfied as of an Expiration Date of the Offer, if, immediately
prior to such Expiration Date (as it may be extended), the Shares tendered and
not withdrawn pursuant to the Offer equal less than 90%, but more than 75%, of
the outstanding Shares (on a fully diluted basis). See Section 15.
Subject to the terms of the Merger Agreement, Purchaser expressly reserves
the right to modify the terms and conditions of the Offer in any respect by
giving oral or written notice of such amendment to the Depositary, except that,
without the consent of the Company, Purchaser shall not (i) reduce the number of
Shares subject to the Offer, (ii) reduce the price per Share to be paid pursuant
to the Offer, (iii) add to the Conditions, (iv) except as provided above, extend
the Offer, (v) change the form of consideration payable in the Offer, or (vi)
make any other change in the terms of the Offer adverse to the holders of
Shares.
The Offer is subject to: (i) the satisfaction of the Minimum Tender
Condition; (ii) expiration or termination of the applicable waiting periods, if
any, under the HSR Act; and (iii) satisfaction of the other Conditions specified
in Section 15. If any such Condition is not satisfied prior to the expiration of
the Offer, Purchaser may, subject to the terms of the Merger Agreement as
described in Section 11 below, (i) terminate the Offer and return all tendered
Shares to tendering stockholders, (ii) extend the Offer and, subject to
withdrawal rights as set forth in Section 4, retain all such Shares until the
expiration of the Offer as so extended, but in no case later than June 30, 1998
without the Company's prior written consent, (iii) waive such Condition and,
subject to any requirement to extend the period of time during which the Offer
is open, purchase all Shares validly tendered and not withdrawn by the
Expiration Date, or (iv) delay acceptance for payment of (whether or not the
Shares have theretofore been accepted for payment), or payment for, any Shares
tendered and not withdrawn, subject to applicable law, until satisfaction or
waiver (if permitted) of the Conditions to the Offer. For a description of
Purchaser's right to extend the period of time during which the Offer is open,
and to amend, delay or terminate the Offer, see Section 14. Any extension,
amendment or termination will be followed as promptly as practicable by public
announcement thereof, the announcement in the case of an extension to be issued
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date in accordance with Rules
3
<PAGE>
14d-4(c), 14d-6(d) and 14e-1(d) under the Exchange Act. Without limiting the
obligation of Purchaser under such rules or the manner in which Purchaser may
choose to make any public announcement, Purchaser currently intends to make
announcements by issuing a release to the Dow Jones News Service.
If Purchaser extends the Offer, or if Purchaser (whether before or after its
acceptance for payment of Shares) is delayed in its purchase of or payment for
Shares or is unable to pay for Shares pursuant to the Offer for any reason,
then, without prejudice to Purchaser's rights under the Offer, the Depositary
may retain such tendered Shares on behalf of Purchaser, and such Shares may not
be withdrawn except to the extent tendering stockholders are entitled to
withdrawal rights as described in Section 4. However, the ability of Purchaser
to delay the payment for Shares which Purchaser has accepted for payment is
limited by Rule 14e-1(c) under the Exchange Act, which requires that a bidder
pay the consideration offered or return the securities deposited by or on behalf
of holders of securities promptly after the termination or withdrawal of the
Offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
subject to the Merger Agreement, Purchaser will disseminate additional tender
offer materials and extend the Offer if and to the extent required by Rules
14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during
which the Offer must remain open following material changes in the terms of the
Offer or information concerning the Offer, other than a change in price or a
change in percentage of securities sought, will depend upon the facts and
circumstances, including the relative materiality of the changes or information.
With respect to a change in price or a change in percentage of securities
sought, a minimum ten business day period is required to allow for adequate
dissemination to stockholders and investor response. If, prior to the Expiration
Date, Purchaser should decide to increase the price per Share being offered in
the Offer, such increase will be applicable to all stockholders whose Shares are
accepted for payment pursuant to the Offer. As used in this Offer to Purchase,
"business day" means any day other than a Saturday, Sunday or a federal holiday
and consists of the time period from 12:01 AM through 12:00 midnight New York
City time, as computed in accordance with Rule 14d-1 under the Exchange Act.
The Company has provided Purchaser with the Company's stockholder list and
security position listing for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares and will be furnished to brokers, banks and
similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing for subsequent transmittal to beneficial
owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT
Subject to the terms of the Merger Agreement and the Conditions to the Offer
set forth in Section 15, Purchaser will, promptly after the Expiration Date,
accept for payment and pay for all Shares validly tendered and not properly
withdrawn in accordance with Section 4 prior to the Expiration Date. For a
description of Purchaser's right to terminate the Offer and not accept for
payment or pay for Shares or to delay acceptance for payment or payment for
Shares, see Section 14.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment tendered Shares if, as and when Purchaser gives oral or written notice
to the Depositary of its acceptance of the tenders of such Shares. Payment for
Shares purchased pursuant to the Offer will be made by deposit of the purchase
price with the Depositary, which will act as agent for tendering stockholders
for the purpose of receiving payment from Purchaser and transmitting such
payments to tendering stockholders. In all cases, payment for Shares accepted
for payment pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) certificates evidencing such Shares ("Stock Certificates") or
confirmation of a book-entry transfer (a "Book-Entry Confirmation" ) of such
Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities (as defined in Section 3), (ii) a properly completed and duly
executed Letter of
4
<PAGE>
Transmittal (or facsimile thereof), or in the case of a book-entry transfer, an
Agent's Message (as defined in Section 3), and (iii) any other required
documents. For a description of the procedure for tendering Shares pursuant to
the Offer, see Section 3. Accordingly, payment may be made to tendering
stockholders at different times if delivery of the Shares and other required
documents occur at different times. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID
BY PURCHASER ON THE CONSIDERATION PAID FOR SHARES PURSUANT TO THE OFFER,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR DELAY IN MAKING SUCH PAYMENT.
If Purchaser increases the consideration to be paid for Shares pursuant to
the Offer, Purchaser will pay such increased consideration for all Shares
purchased pursuant to the Offer.
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates the right to purchase Shares
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve Purchaser of its obligations under the Offer or prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if Stock Certificates are submitted for more Shares than are
tendered, Stock Certificates for Shares not purchased or tendered will be
returned (or, in the case of Shares tendered by book-entry transfer, such Shares
will be credited to an account maintained at one of the Book-Entry Transfer
Facilities), without expense to the tendering stockholder, as promptly as
practicable after the expiration or termination of the Offer.
3. PROCEDURES FOR TENDERING SHARES
VALID TENDER. To tender Shares pursuant to the Offer, either (a) a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees, or an Agent's Message (in the case of any
book-entry transfer), and any other documents required by the Letter of
Transmittal must be received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date and
either (i) the Stock Certificates evidencing such Shares to be tendered must be
received by the Depositary along with the Letter of Transmittal or (ii) such
Shares must be delivered to the Depositary pursuant to the procedures for
book-entry transfer described below and a Book-Entry Confirmation must be
received by the Depositary including an Agent's Message, in each case prior to
the Expiration Date, or (b) the tendering stockholder must comply with the
guaranteed delivery procedures described below. The term "Agent's Message" means
a message transmitted by a Book-Entry Transfer Facility to and received by the
Depositary and forming a part of a Book-Entry Confirmation, which states that
such Book-Entry Transfer Facility has received an express acknowledgment from
the participant in such Book-Entry Transfer Facility tendering the Shares which
are the subject of such Book-Entry Confirmation, that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that Purchaser may enforce such agreement against such participant.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at each of The Depository Trust Company and the Philadelphia
Depository Trust Company (collectively referred to as the "Book-Entry Transfer
Facilities") for purposes of the Offer within two business days after the date
of this Offer to Purchase, and any financial institution that is a participant
in the system of any Book-Entry Transfer Facility may make book-entry delivery
of Shares by causing a Book-Entry Transfer Facility to transfer such Shares into
the Depositary's account at a Book-Entry Transfer Facility in accordance with
the procedures of such Book-Entry Transfer Facility. However, although delivery
of Shares may be effected through book-entry transfer, the Letter of Transmittal
(or facsimile thereof) properly completed and duly executed, together with any
required signature guarantees and any other required documents, must, in any
case, be received by the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase prior to the Expiration Date, or the
guaranteed delivery procedures described below must be complied with. DELIVERY
OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO A BOOK-ENTRY
TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
5
<PAGE>
SIGNATURE GUARANTEES. Except as set forth below, signatures on all Letters
of Transmittal must be guaranteed by a recognized member of a MEDALLION
SIGNATURE GUARANTEE PROGRAM or by any other "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing, an
"Eligible Institution"). Signatures on a Letter of Transmittal need not be
guaranteed (a) if the Letter of Transmittal is signed by the registered holder
of the Shares tendered therewith and such holder has not completed the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on the Letter of Transmittal or (b) if such Shares are tendered
for the account of an Eligible Institution.
If a Stock Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Stock
Certificate not accepted for payment or not tendered is to be returned, to a
person other than the registered holder(s), then the Stock Certificate must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the Stock
Certificate, with the signature(s) on such Stock Certificate or stock powers
guaranteed as described above. See Instructions 1 and 5 of the Letter of
Transmittal.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Stock Certificates are not immediately
available or time will not permit all required documents to reach the Depositary
on or prior to the Expiration Date, or the procedure for book-entry transfer
cannot be completed on a timely basis, such Shares may nevertheless be tendered
if all the following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by Purchaser, is received by the Depositary
prior to the Expiration Date as provided below; and
(iii) the Stock Certificates for such Shares, in proper form for transfer
(or a Book-Entry Confirmation), together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), any required signature
guarantees (or in the case of a book-entry transfer, an Agent's Message) and any
other documents required by the Letter of Transmittal, are received by the
Depositary within three trading days after the date of execution of the Notice
of Guaranteed Delivery. A "trading day" is any day on which the NASDAQ Smallcap
Market is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mailed to the Depositary and must include a guarantee
by an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS, INCLUDING THROUGH BOOK-ENTRY TRANSFER FACILITIES, IS AT THE
OPTION AND RISK OF THE TENDERING STOCKHOLDER AND DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
BACK-UP FEDERAL INCOME TAX WITHHOLDING. Under the federal income tax laws,
the Depositary will be required to withhold 31% of the amount of any payments
made to certain stockholders pursuant to the Offer. In order to avoid such
backup withholding, each tendering stockholder must provide the Depositary with
such stockholder's correct taxpayer identification number and certify that such
stockholder is not subject to back-up federal income tax withholding by
completing the Substitute Form W-9 included in the Letter of Transmittal (see
Instruction 10 of the Letter of Transmittal) or by filing a Form W-9 with the
Depositary prior to any such payments. If the stockholder is a nonresident alien
or foreign entity not subject to backup withholding, the stockholder must give
the Depositary a completed Form W-8 Certificate of Foreign Status prior to
receipt of any payments.
6
<PAGE>
OTHER REQUIREMENTS. By executing a Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of Purchaser as
the stockholder's attorneys-in-fact and proxies, in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of the stockholder's rights with respect to the Shares tendered by the
stockholder and accepted for payment by Purchaser (and any and all other Shares
or other securities or property issued or issuable in respect of such Shares on
or after the date of the Merger Agreement). All such proxies and powers of
attorney shall be irrevocable and coupled with an interest in the tendered
Shares. Such appointment is effective only upon acceptance for payment of the
Shares by Purchaser. Upon such acceptance for payment, all prior proxies and
consents given by the stockholder with respect to such Shares and other
securities will, without further action, be revoked, and no subsequent proxies
may be given nor any subsequent written consent executed by such stockholder
(and, if given or executed, will not be deemed to be effective) with respect
thereto. The designees of Purchaser will with respect to the Shares and other
securities, be empowered to exercise all voting and other rights of such
stockholder as they in their sole discretion may deem proper at any annual,
special or adjourned meeting of the Company's stockholders, by written consent
or otherwise. Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon Purchaser's acceptance for
payment of such Shares, Purchaser is able to exercise full voting and other
rights with respect to such Shares (including voting at any meeting of
stockholders then scheduled or acting by written consent without a meeting).
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER PRICE FOR TENDERED
SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer, as well as the tendering stockholder's representation
and warranty that such stockholder has the full power and authority to tender
and assign the Shares tendered, as specified in the Letter of Transmittal.
Purchaser's acceptance for payment of Shares tendered pursuant to the Offer will
constitute a binding agreement between the tendering stockholder and Purchaser
upon the terms and subject to the conditions of the Offer.
DETERMINATION OF VALIDITY. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tendered Shares will be determined by Purchaser in its sole discretion,
which determination shall be final and binding. Purchaser reserves the absolute
right to reject any or all tenders of any Shares determined by it not to be in
proper form or the acceptance for payment of, or payment for which may, in the
opinion of Purchaser's counsel, be unlawful. Purchaser also reserves the
absolute right to waive any defect or irregularity in any tender of Shares. No
tender of Shares will be deemed to have been properly made until all defects and
irregularities relating thereto have been cured or waived. Purchaser's
interpretation of the terms and conditions of the Offer in this regard
(including the Letter of Transmittal and the Instructions thereto) will be final
and binding. None of Purchaser, Parent, the Depositary, the Dealer Manager, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or will incur any
liability for failure to give any such notification.
4. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer are irrevocable except that
Shares so tendered may be withdrawn at any time prior to the Expiration Date
and, unless they have previously been accepted for payment as provided in this
Offer to Purchase, may also be withdrawn at any time after March 2, 1998 (or at
such later date as may apply if the Offer is extended). If Purchaser extends the
Offer, is delayed in its acceptance for payment of Shares or is unable to
purchase Shares validly tendered pursuant to the Offer for any reason, then,
without prejudice to Purchaser's rights under this Offer, the Depositary may
nevertheless on behalf of Purchaser, retain tendered Shares and such Shares may
not be withdrawn except to the extent that tendering stockholders are entitled
to withdrawal rights as set forth in this Section 4. Any such delay in payment
will be accompanied by an extension of the Offer to the extent required by law.
7
<PAGE>
Tenders of Shares made pursuant to the Offer may be withdrawn only pursuant to
the procedures set forth below.
To be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase. Any such notice of withdrawal
must specify the name of the person who tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name of the registered holder, if
different from that of the person who tendered such Shares. If Stock
Certificates evidencing Shares to be withdrawn have been delivered to the
Depositary, a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution (except in the case of Shares tendered by an Eligible
Institution) must be submitted prior to the release of such Shares. In addition,
such notice must specify, in the case of Shares tendered by delivery of Stock
Certificates, the name of the registered holder (if different from that of the
tendering stockholder) and the serial numbers shown on the particular Stock
Certificates evidencing the Shares to be withdrawn, or, in the case of Shares
tendered by book-entry transfer, the name and number of the account at one of
the Book-Entry Transfer Facilities to be credited with the withdrawn Shares.
Withdrawals may not be rescinded, and Shares withdrawn will thereafter be
deemed not validity tendered for purposes of the Offer. However, withdrawn
Shares may be tendered by again following one of the procedures described in
Section 3 at any time prior to the Expiration Date.
All questions as to the form and validity (including of receipt) of notices
of withdrawal will be determined by Purchaser, in its sole discretion, whose
determination will be final and binding. None of Purchaser, Parent, the
Depositary, the Dealer Manager, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
5. CERTAIN TAX CONSIDERATIONS
The following summary addresses the material federal income tax consequences
to holders of Shares who sell their Shares in the Offer. The summary does not
address all aspects of federal income taxation that may be relevant to
particular holders of Shares and thus, for example, may not be applicable to
holders of Shares who are not citizens or residents of the United States, who
are employees and who acquired their Shares pursuant to the exercise of
compensatory stock options, or who are entities that are otherwise subject to
special tax treatment under the Internal Revenue Code of 1986, as amended (the
"Code") (such as insurance companies, tax-exempt entities, broker dealers, and
regulated investment companies); nor does this summary address the effect of any
applicable foreign, state, local or other tax laws. The summary assumes that
each holder of Shares holds such Shares as a capital asset within the meaning of
Section 1221 of the Code. The federal income tax discussion set forth below is
included for general information only and is based upon present law. The precise
tax consequences of the Offer (or the Merger) will depend on the particular
circumstances of the holder. STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES TO THEM OF THE PROPOSED TRANSACTION, INCLUDING THE APPLICABILITY
AND EFFECT OF THE ALTERNATIVE MINIMUM TAX.
The receipt of cash for Shares pursuant to the Offer or the Merger will be a
taxable transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local or foreign tax laws. In general, a
stockholder who receives cash for Shares pursuant to the Offer or the Merger
will recognize gain or loss for federal income tax purposes equal to the
difference between the amount of cash received in exchange for the Shares sold
and such stockholder's adjusted tax basis in such Shares. Such gain or loss will
be capital gain or loss, and will be long-term capital gain or loss if the
holder has had the Shares for more than one year at the time of sale. Gain or
loss will be calculated separately for each block of Shares (i.e., Shares which
were purchased at the same time and price) tendered pursuant to the Offer, or
sold in the Merger.
8
<PAGE>
Under current law, net capital gains of individuals from assets held for
more than 18 months are subject to federal income tax at a maximum rate of 20%,
while net capital gains from assets held more than one year but not more than 18
months are subject to federal income tax at a maximum rate of 28%. Ordinary
income (including dividends and short-term capital gains, or gains from sales of
shares held for 12 months or less recognized by individuals) is subject to
federal income tax at a maximum rate of 39.6%. The maximum federal tax rate
applicable to all capital gains and ordinary income recognized by a corporation
is 35%.
WITHHOLDING. Unless a stockholder complies with certain reporting and/or
certification procedures, or is an exempt recipient under applicable provisions
of the Code (and regulations promulgated thereunder), such stockholder may be
subject to a "backup" withholding tax of 31% with respect to any payments
received in the Offer, the Merger or as a result of the exercise of the holder's
dissenters' rights. Stockholders should contact their brokers to ensure
compliance with such procedures. Foreign stockholders should consult with their
tax advisors regarding U.S. withholding taxes in general. Those tendering Shares
in the Offer may prevent backup withholding by completing the substitute form
W-9 included in the Letter of Transmittal.
DISSENTERS. A stockholder who does not tender Shares in the Offer or vote
in favor of the Merger and who otherwise exercises and perfects such
stockholder's rights under the BCA to demand fair value for such Shares will
recognize capital gain or loss (and may recognize an amount of interest income)
attributable to any payment received pursuant to the exercise of such rights
based upon the principles described above. See Section 16.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES
RECEIVED AS COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO
SPECIAL TAX TREATMENT UNDER THE CODE, SUCH AS NON-U.S. PERSONS, LIFE INSURANCE
COMPANIES, TAX-EXEMPT ORGANIZATIONS AND FINANCIAL INSTITUTIONS, AND MAY NOT
APPLY TO A HOLDER OF SHARES IN LIGHT OF INDIVIDUAL CIRCUMSTANCES. STOCKHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL
OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE OFFER AND THE MERGER.
6. PRICE RANGE OF SHARES; DIVIDENDS
The Shares are traded under the symbol "MGO" on the BSE and "MGLF" on the
NASDAQ SmallCap Market. The following table sets forth, for the fiscal quarters
indicated, the high asked and low bid sales prices per Share on the NASDAQ
SmallCap Market from the inception of trading (October 16, 1996).
<TABLE>
<CAPTION>
HIGH
ASK LOW BID
------- -------
<S> <C> <C>
Fiscal Year Ended December 31, 1996:
Quarter ended December 31, 1996..... $ 6 1/2 $ 5 1/4
Fiscal Year Ending December 31, 1997:
Quarter ended March 31, 1997........ $ 6 5/8 $ 2
Quarter ended June 30, 1997......... $ 2 5/8 $ 1
Quarter ended September 30, 1997.... $ 2 5/16 $ 1 1/16
Quarter ending December 31, 1997 $
(through December 29, 1997)....... $ 2 7/8 31/32
</TABLE>
On December 15, 1997, the last full trading day prior to the announcement
that the Company and Parent were negotiating with respect to a transaction at
$1.50 per Share, the reported high asked and low
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bid prices per Share on the NASDAQ Smallcap Market were $1 7/8, and $1 3/8,
respectively. On December 23, 1997, the last full trading day prior to the
announcement of the execution of the Merger Agreement, the reported high asked
and low bid prices per Share on the NASDAQ Smallcap Market were $1 5/16, and $1,
respectively. On December 30, 1997, the last full trading day prior to the
commencement of the Offer, the reported high asked and low bid prices per Share
on the NASDAQ Smallcap Market were $1 15/32, and $1 1/4, respectively. These
reported ask and bid prices are inter-dealer quotations and there may not have
been any actual transactions at these prices.
Since 1993, the Company has not declared nor paid any dividends, and it has
agreed not to declare or pay any dividends unless and until the Merger Agreement
is terminated.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY
The following information concerning the Company has been taken from or
based upon publicly available documents on file with the SEC, other publicly
available information and information provided by the Company. Although neither
Purchaser nor Parent has any knowledge that would indicate that such information
is untrue, neither Purchaser nor Parent takes any responsibility for, or makes
any representation with respect to, the accuracy or completeness of such
information or for any failure by the Company to disclose events that may have
occurred and may affect the significance or accuracy of any such information but
which are unknown to Purchaser or Parent.
GENERAL. The Company is a Colorado corporation with its principal offices
located at 1999 Broadway, Suite 2435, Denver, Colorado 80202. The Company's
operations consist of the acquisition, development and operation of golf
facilities.
CERTAIN FINANCIAL INFORMATION FOR THE COMPANY. The following table sets
forth certain summary consolidated financial information with respect to the
Company and its subsidiaries (the "Subsidiaries") excerpted or derived from the
audited financial statements contained in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996 (the "Company 10-K") and the
unaudited financial information of the Company for the nine months ended
September 30, 1996 and 1997 contained in the Company's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1997. More comprehensive financial
information is included in such reports and other documents filed by the Company
with the SEC, and the following summary is qualified in its entirety by
reference to such documents (which may be inspected and obtained as described
below), including the financial statements and related notes contained therein.
Neither Parent nor Purchaser assumes any responsibility for the accuracy of the
financial information set forth below.
10
<PAGE>
METROGOLF INCORPORATED AND SUBSIDIARIES
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ ------------------------
INCOME STATEMENT DATA 1996 1995 1994 1997 1996
- ------------------------------------------------- ------------ ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Revenues......................................... $ 1,080,936 $ 335,303 $ 291,237 $ 3,589,779 $ 461,746
Net loss......................................... (1,933,264) (532,112) (264,813) (2,776,134) (855,124)
Net loss per common share........................ (1.79) (0.78) (0.36) (.92) (1.12)
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
AT
SEPTEMBER
BALANCE SHEET 1996 1995 30, 1997
- --------------------------------------------------------- ---------- --------- ----------
<S> <C> <C> <C>
Total assets............................................. $16,703,910 $ 979,679 $18,984,001
Long term obligations.................................... 4,133,342 23,151 10,724,832
Stockholders' equity..................................... 3,558,953 100,961 3,397,130
</TABLE>
According to the representations and warranties in the Merger Agreement, the
Company is in default in the payment of loans and under agreements which
represent approximately $8.8 million in principal amount of indebtedness and
obligations and approximately $140,000 of past due lease obligations as of
December 23, 1997. As described in "--Loan Agreements" in Section 11, the
Company has borrowed from Parent $150,000, and may borrow up to an additional
$350,000 from Parent, the proceeds of which may be used to cure or ameliorate
certain of such defaults.
11
<PAGE>
PROJECTED FINANCIAL INFORMATION. In connection with Parent's review of the
Company and in the course of the negotiations described in Section 10, the
Company and its representatives provided Parent with certain business and
financial information which Parent and Purchaser believe is not publicly
available. The revenues, anticipated loss and EBITDA (earnings before interest,
taxes, depreciation and amortization) forecasts for the fourth quarter of 1997
and for 1998 provided by the Company included operations of only the eight
existing facilities, and were as follows: revenues of $1,289,000, a loss of
$395,000 and EBITDA of $112,000 for the fourth quarter of 1997 and revenues of
$7,531,000, a loss of $850,000 and EBITDA of $1,747,000 for 1998. The detailed
assumptions upon which such forecasts were based were not disclosed to Parent's
representatives, although the Company's representatives discussed and responded
to questions concerning certain of such assumptions. According to the Company,
one of the major assumptions underlying such forecasts was an assumption that
the Company would obtain significant additional financing.
In reaching its decision to acquire the Company, Parent made certain
assumptions of its own with regard to the anticipated financial results of the
Company's businesses, which assumptions are not reflected in the forecasts by
the Company.
It is the understanding of Parent and Purchaser that the forecasts prepared
by the Company (the "forecasts") were not prepared with a view to public
disclosure or compliance with the published guidelines of the SEC or the
guidelines established by the American Institute of Certified Public Accountants
regarding projections. The forecasts are included in this Offer to Purchase only
because they were provided to Parent. None of Parent, Purchaser, the Company,
any of their respective advisors or any other party who received such
information assumes any responsibility for the validity, reasonableness,
accuracy or completeness of the forecasts. The forecasts are based upon a
variety of assumptions relating to the business of the Company, industry
performance, general business and economic conditions and other matters, all of
which may not be realized and are subject to significant uncertainties and
contingencies, many of which are beyond the control of the Company and only
certain of which were disclosed to Purchaser and Parent. The Company has also
informed Parent and Purchaser that its internal financial forecasts (upon which
the forecasts provided to Parent and Purchaser were based, in part) are, in
general, prepared solely for internal use and capital budgeting and other
management decision-making purposes and are subjective in many respects and thus
susceptible to various interpretations and periodic revision based on actual
experience and business developments. Forecasts of this type are based on
estimates and assumptions which themselves are based on events and circumstances
that have not taken place and are inherently subject to significant financial,
market, economic and competitive uncertainties and contingencies, all of which
are difficult to predict and many of which are beyond the control of the
Company, Purchaser or Parent or their respective financial advisors. Many of the
assumptions upon which the foregoing forecasts were based, none of which were
approved by Parent or Purchaser, are dependent upon economic forecasting (both
general and specific to the Company's businesses), which is inherently uncertain
and subjective. Therefore, it is expected that there will be differences between
the actual and forecast results and that the actual results may be materially
higher or lower than those forecast. The forecasts have not been reported on,
examined or compiled by the Company's independent public accountants nor by
Parent's or Purchaser's independent public accountants.
The forecasts set forth above constitute forward-looking information. For a
discussion of factors regarding such forward-looking information
see--"Cautionary Statement Regarding Forward-Looking Information" below.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION. For purposes of
the Private Securities Litigation Reform Act of 1995, the following are
important factors identified by the Company which could, among other factors,
cause the Company's actual results to differ materially from the forecasts set
forth above:
12
<PAGE>
(a) The availability of equity and debt financing for working capital and
improvements to existing facilities.
(b) The Company's ability to obtain additional project financings,
including, but not limited to, obtaining financing for and completion
of the Company's facilities in Fremont, California and New York, New
York.
(c) The Company's success in acquiring or leasing and constructing
additional golf facilities at suitable locations upon satisfactory
terms.
(d) The Company's ability to integrate newly acquired or opened golf
centers into its then existing operations.
(e) The Company's ability to compete with other golf facilities, golf
ranges and golf courses, as well as other recreational offerings,
including others with significantly greater financial resources than
the Company.
(f) The Company's ability to satisfy its current loans or to sell or
refinance its golf facilities upon favorable terms at the maturity of
such loans.
(g) The Company's ability to attract or retain qualified personnel at its
offices and facilities.
(h) The effect of the Offer and the Merger.
Other risk factors relating to the Company's business which could affect the
forecasts have been discussed in more detail in the Company's prior filings with
the SEC. The foregoing review of factors pursuant to the Private Litigation
Securities Reform Act of 1995 should not be construed as exhaustive.
The inclusion of the forecasts herein should not be regarded as an
indication that Parent, Purchaser, the Company, any of their respective advisors
or any other party who received such information considers such forecasts an
accurate prediction of future events. Parent made its own independent assessment
of the Company's value based on its own due diligence and on its own
assumptions, and did not rely on the Company's forecasts. Parent also received
third quarter 1997 forecasts which, as described in Section 10, have already
proved inaccurate, and forecasts as to the fourth quarter of 1997 which will
likely prove inaccurate. None of the Company, Parent, Purchaser or any other
party intends to publicly update or otherwise publicly revise the forecasts set
forth above even if experience or future changes make it clear that such
forecasts will not be realized.
AVAILABLE INFORMATION. The Company is subject to the informational
requirements of the Exchange Act, and is required to file reports and other
information with the SEC relating to its business, financial condition and other
matters. Information, as of particular dates, concerning the Company's directors
and officers, their remuneration, options granted to them, the principal holders
of the Company's securities and any material interest of such persons in
transactions with the Company is required to be described in periodic statements
distributed to the Company's stockholders and filed with the SEC. These reports,
proxy statements, and other information, including the Company 10-K, the
Company's Quarterly Reports on Form 10-QSB for the quarters ended March 31,
1997, June 30, 1997 and September 30, 1997, and the Schedule 14D-9, should be
available for inspection and copying at the SEC's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the SEC
located at Seven World Trade Center, Suite 1300, New York, New York 10048, and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of this material may also be obtained by mail, upon payment of the SEC's
customary fees, from the SEC's principal office. Such material should also be
available for inspection at the offices of the BSE, One Boston Place, Boston,
Massachusetts 02108, and at the offices of NASDAQ, 1735 K Street, N.W.,
Washington, D.C. 20006-1500. The SEC also maintains an Internet site on the
World Wide Web at http://www.sec.gov that contains reports and other
information.
13
<PAGE>
A copy of this Offer to Purchase, along with certain of the agreements
referred to herein, is attached to Purchaser's Tender Offer Statement on
Schedule 14D-1, dated December 30, 1997 (the "Schedule 14D-1"), which has been
filed with the SEC. The Schedule 14D-1 and the exhibits thereto, along with such
other documents as may be filed by Purchaser with the SEC, may be examined and
copied from the offices of the SEC in the manner set forth above.
8. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT
GENERAL. Purchaser is a newly-formed Colorado corporation and a
wholly-owned subsidiary of Parent. Parent is a Delaware corporation. To date,
Purchaser has not conducted any business other than in connection with the
Offer. Until immediately prior to the time Purchaser purchases Shares pursuant
to the Offer, it is not anticipated that Purchaser will have any significant
assets or liabilities or engage in activities other than those incident to its
formation and capitalization and the transactions contemplated by the Offer.
Because Purchaser is a newly-formed corporation and has minimal assets and
capitalization, no meaningful financial information regarding Purchaser is
available.
Parent is a leading consolidator and operator of golf centers in the United
States. It also operates ice rinks and a "Family Sports Supercenter" which
includes a golf center, a golf course and an ice rink, in addition to bowling
lanes and a related pro shop, children's rides, video and virtual reality games
and conference centers and related facilities.
Parent's golf centers are designed to provide a wide variety of practice
opportunities, including facilities for driving, chipping, putting, pitching and
sand play. In addition, Parent's golf centers typically offer full-line pro
shops, golf lessons instructed by PGA-certified golf professionals and other
amenities such as miniature golf and snack bars to encourage family
participation. Parent has a proven track record of successfully identifying,
acquiring and integrating golf centers, having grown from one golf facility in
1992 to 50 as of October 9, 1997. As a result, Parent has increased revenues
from $2.6 million in 1993 to $55.5 million for the twelve months ended September
30, 1997, and increased earnings per share from a loss of $0.23 in 1993 to a
profit of $0.75 for the twelve months ended September 30, 1997.
Parent's strategy is to continue to build upon its leadership position in
the golf center industry and expand its concept of family-oriented sports
entertainment through: (i) acquisition within the golf center industry, (ii)
enhancement of facilities and customer service, (iii) leveraging centralized
operations and (iv) developing complementary sports and family entertainment
facilities such as ice rink facilities and Family Sports Supercenters.
The principal executive offices of Parent and Purchaser are located at 225
Broadhollow Road, Melville, New York 11747. The name, citizenship, principal
occupation, business address and material positions held during the past five
years of each of the directors and executive officers of the Purchaser and
Parent is set forth on Schedules I and II attached hereto.
Except as set forth in this Offer to Purchase, none of Purchaser, Parent or,
to the best of their knowledge, any of the persons listed on Schedules I or II
or any subsidiary of Purchaser or Parent, beneficially owns or has a right to
acquire any Shares. Except as set forth in this Offer to Purchase, none of
Purchaser, Parent or, to the best of their knowledge, any of the persons listed
on Schedules I or II hereto, has any contract, arrangement, understanding or
relationship with any other persons with respect to any securities of the
Company, including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or voting of any such securities, joint
ventures, loan or option arrangements, put or calls, guarantees of loans,
guarantees against loss or the giving or withholding of proxies. None of
Purchaser, Parent or, to the best of their knowledge, any of the persons listed
on Schedules I or II hereto, has since January 1, 1994 had any transactions with
the Company or any of its executive officers, directors or affiliates that would
require disclosure under the rules and regulations of the SEC applicable to the
Offer. Except as set forth in this Offer to Purchase, since January 1, 1994,
there have been no contacts, negotiations or transactions between Parent or
Purchaser, or their respective
14
<PAGE>
subsidiaries or, to the best knowledge of any of Parent or Purchaser, any of the
persons listed on Schedules I or II on the one hand, and the Company or its
affiliates, on the other hand, concerning a merger, consolidation or
acquisition, tender offer or other acquisition of securities, election of
directors or a sale or other transfer of a material amount of assets.
CERTAIN FINANCIAL INFORMATION OF PARENT. Set forth below is a summary of
certain consolidated financial and operating data relating to Parent and its
consolidated subsidiaries excerpted or derived from the information contained in
or incorporated by reference into Parent's Annual Report on Form 10-K for the
year ended December 31, 1996 (the "Parent 10-K") and its Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997 (the "Parent 10-Q") filed
with the SEC. More comprehensive financial information is included in or
incorporated by reference into the Parent 10-K, the Parent 10-Q and other
documents filed by Parent with the SEC, and the financial information summary
set forth below is qualified in its entirety by reference to such documents
filed by Parent with the SEC and all the financial information and related notes
contained therein.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1994 1995 1996 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating revenues........................................... $ 5,342 $ 9,795 $ 21,368 $ 36,231 $ 16,234
Merchandise sales............................................ 1,020 2,637 6,536 12,193 4,634
Total revenues............................................... 6,362 12,432 27,904 48,424 20,868
Operating expenses........................................... 4,215 6,614 13,268 22,317 9,109
Cost of merchandise sold..................................... 750 1,779 4,458 7,999 3,043
Selling, general and administrative expenses................. 548 1,242 3,580 3,694 2,149
Income from operations....................................... 849 2,797 6,598 14,414 6,567
Interest expense............................................. (313) (939) (370) (843) (288)
Other income................................................. 16 66 2,172 797 1,155
Income before income taxes, extraordinary item and minority
interest................................................... 552 1,924 8,400 14,368 7,434
Income tax expense(benefit).................................. (65) 669 3,192 5,506 2,676
Income before extraordinary item and minority interest....... 617 1,255 5,208 -- --
Minority interest in income.................................. (129) -- -- -- --
Extraordinary item (net of tax effect)....................... -- (181) -- -- --
Net income................................................... $ 488 $ 1,074 $ 5,208 $ 8,862 $ 4,758
Income per share before extraordinary item................... $ .13 $ .24 $ .51 -- --
Extraordinary item........................................... -- (.04) -- -- --
Net income per share......................................... $ .13 $ .20 $ .51 $ 0.72 $ 0.48
Weighted average number of shares outstanding................ 3,636 5,271 10,290 12,298 9,830
</TABLE>
AVAILABLE INFORMATION. Parent is subject to the informational requirements
of the Exchange Act and is required to file reports and other information with
the SEC relating to its business, financial condition and other matters.
Information, as of particular dates, concerning Parent's directors and officers,
their remuneration, options granted to them, the principal holders of Parent's
securities and any material interest of such persons in transactions with Parent
is required to be described in periodic statements distributed to Parent's
stockholders and filed with the SEC. These reports, proxy statements and other
information, including the Parent 10-K, Parent's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1997, June 30, 1997 and September 30, 1997, and
the Schedule 14D-1 should be available for inspection and copying at the SEC's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the SEC located at Seven World Trade Center, Suite 1300, New
York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of this material may also be obtained by mail
upon payment of the SEC's customary fees, by writing to its
15
<PAGE>
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The
information should also be available for inspection at the offices of NASDAQ,
1735 K Street, N.W., Washington, D.C. 20006-1500. The SEC also maintains an
Internet site on the World Wide Web at http://www.sec.gov that contains reports
and other information.
9. SOURCES AND AMOUNTS OF FUNDS
The total amount of funds required by Purchaser to purchase all currently
outstanding Shares and satisfy its obligations under the Merger Agreement is
expected to be approximately $6.6 million; approximately $5.6 million in
additional funds may be required if outstanding options, warrants and
convertible notes with exercise or conversion prices of $1.50 per Share or less
are exercised or converted. Purchaser will also require approximately $1.5
million to pay fees, expenses and other costs expected to be incurred in
connection with the successful completion of the Offer and the Merger. Purchaser
may also consider paying off some or all of the approximately $10.7 million of
long-term indebtedness of the Company. The amount, if any, to be paid off will
depend on a number of factors, including interest rates, prepayment penalties
(if any) and the ability to obtain necessary consents. Accordingly, the exact
amounts and timing of any payments of existing indebtedness of the Company are
subject to various factors currently under review and are not, at this time,
determinable.
Purchaser plans to obtain all funds needed for the Offer from Parent's
currently available cash resources, which are approximately $64.0 million as of
December 29, 1997. Such funds will be made available to Purchaser at the time
Shares tendered pursuant to the Offer are accepted for payment.
The sources and uses of the funds are expected to be as follows:
<TABLE>
<S> <C>
Sources of Funds:
Parent cash................................................... $13.7 million
Total sources of funds.................................. $13.7 million
Use of Funds:
Payment for Shares............................................ $12.2 million
Fees, expenses and other costs................................ $1.5 million
Total use of funds...................................... $13.7 million
</TABLE>
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY
In April 1997, Dominic Chang, Parent's Chairman, Chief Executive Officer and
President, received the Company's Quarterly Report on Form 10-QSB and, based on
the Company's apparent need for cash, on April 28, 1997 called Charles D.
Tourtellotte, the Company's Chairman and President, to inquire about the Company
and its interest in selling. Mr. Tourtellotte explained to Mr. Chang that he had
heard from several companies both directly and indirectly in the golf business,
due to the recent filing of a Schedule 13D as to the Company. Mr. Chang and Mr.
Tourtellotte scheduled a meeting and, on May 1, 1997, met at the offices of
Parent in New York. At that meeting, Mr. Chang expressed interest in acquiring
the Company at its current market price plus a small premium. Mr. Tourtellotte
responded that the Company was engaged in a private placement effort and would
be following that course of action at that time.
On July 14, 1997, Mr. Chang called Mr. Tourtellotte for an update on the
Company and to determine whether its cash needs had been met or whether a sale
would be of interest. Mr. Tourtellotte requested a more definitive proposal in
order to properly evaluate the issue. The parties designated Prime Charter
Limited ("Prime Charter") and Jefferies & Company, Inc. ("Jefferies") to discuss
certain aspects of a proposed transaction and, on July 21, 1997, Parent
delivered an executed confidentiality agreement, dated as of July 18, 1997, to
the Company. Following delivery of the confidentiality agreement, the Company
provided Parent and its advisors with certain financial information, including
the forecasts referred to
16
<PAGE>
herein. Discussions followed between Prime Charter and Jefferies, regarding a
proposed transaction with the Company and as to the related valuation.
In late July 1997, based primarily on the parties' inability to reach
agreement on price, negotiations were terminated.
In August 1997, the Company engaged an investment banking firm to assist the
Company in securing the private investment capital it required to continue to
operate. According to the Company, a private placement of $15.0 million of
convertible preferred stock to institutional investors was contemplated. More
than 20 meetings were held with prospective investors around the country.
On November 24, 1997, Mr. Tourtellotte called Mr. Chang to advise him that
the Company was reviewing all of its options in light of its recent efforts to
raise capital. Mr. Tourtellotte inquired about the level of Parent's continuing
interest in acquiring the Company. Mr. Chang requested updated financial and
capital structure information which was provided by fax to Parent on November
25, 1997. On November 26, 1997, Mr Chang called Mr. Tourtellotte and expressed
interest in acquiring the Company at $1.25 to $1 3/8 per Share. Mr. Chang noted
that such price was based on the Company's (i) higher than anticipated third
quarter losses, (ii) the fact that third quarter revenues were 28% less than
projected in the forecasts received by Parent, (iii) the fact that the capital
raised by the Company in May 1997 had been used primarily to fund operating
deficits rather than for investment in facilities, (iv) the fact that the
convertible debt issued by the Company was unduly dilutive to the Company and
would make the proposed acquisition even more expensive, and (v) the increase in
the Company's outstanding shares on a fully diluted basis. Mr. Tourtellotte took
the position that a higher price would be appropriate based on the Company's
belief that the Company would be able to complete a $15.0 million financing
which would enable the Company ultimately to achieve a higher stock price. Mr.
Chang responded that the proposed financing was too dilutive to the Company's
existing stockholders and that Parent's offer would be superior to the existing
stockholders. Mr. Tourtellotte reasserted the position that a higher offer was
appropriate.
Mr. Tourtellotte was traveling in New York for more institutional investor
meetings as to the proposed private placement the week of December 8, 1997. On
December 9, 1997, Mr. Tourtellotte called Mr. Chang in Raleigh, North Carolina
to determine his current level of interest in acquiring the Company and
requested that the parties meet. Mr. Chang indicated that the parties were too
far apart for a meeting unless the Company would be amenable to being acquired
for $1 3/8 per Share. Mr. Tourtellotte indicated that this price was less than
desirable to the Company but, given the Company's current cash requirements and
lack of other definitive proposals, indicated that a meeting would be
appropriate while he was in New York.
On December 11, 1997, a meeting was held at the offices of Jefferies in New
York, attended by Mr. Tourtellotte, J.D. Finley, the Company's Executive Vice
President, Chief Financial Officer and Secretary, and representatives of
Jefferies and Prime Charter. At such meeting a purchase price of $1.50 per Share
was discussed, following offers by Mr. Chang of $1 3/8 per Share and
counteroffers by the Company of $2.00 and $1.75 per Share. After negotiation,
Mr. Chang offered $1.50 per Share on a fully diluted basis in a structure
pursuant to which Parent would be responsible for the Company's liabilities
(approximately $15.3 million at September 30, 1997). Mr. Chang agreed that the
$1.50 per Share could be paid in cash or Parent common stock at the Company's
option. Mr. Tourtellotte agreed to present such offer to the Company's Board of
Directors. On December 12, 1997, at a regularly scheduled meeting of Parent's
Board of Directors, Parent's Board of Directors approved the proposed
transaction and an offer letter was sent to the Company and its advisors.
On Monday, December 15, 1997, the Board of Directors of the Company met to
consider the offer letter from Parent. Later that day, the offer letter was
executed. On December 16, 1997, the Company announced that it had entered into
negotiations with Parent with a view towards selling the Company at $1.50 per
Share. From December 16, 1997 through December 22, 1997, extensive additional
due diligence was performed by Parent and the parties negotiated the Merger
Agreement and the related agreements.
17
<PAGE>
On Friday, December 19, 1997, the Company's Board again met to discuss the
progress of the transaction and to receive an oral presentation from Houlihan
Lokey Howard & Zukin, the Company's financial advisor, wherein it reported to
the Board as indicated herein. On Sunday, December 21, 1997, the Company's Board
of Directors met to review and discuss the proposed transaction with Parent and,
at such meeting, the definitive Merger Agreement and related agreements were
approved by the Board. On the night of Tuesday, December 23, 1997, the Merger
Agreement and related documents were executed, followed by an announcement
thereof on December 24, 1997.
To the extent any of the foregoing information described events to which
none of Parent, Purchaser or their advisors were a party, it is based on
information disclosed in publicly filed documents or information furnished by
the Company.
11. THE OFFER AND MERGER; MERGER AGREEMENT AND RELATED AGREEMENTS
The following is a summary of the Merger Agreement and certain related
agreements, copies of which are attached to the Schedule 14D-1 as Exhibits
(c)(1) through (c)(12), respectively, and incorporated by reference hereto. All
references to and summaries of such agreements herein are qualified in their
entirety by reference to the full text of such agreements. Capitalized terms
used and not otherwise defined herein shall have the meanings assigned to them
in the Merger Agreement.
MERGER AGREEMENT
THE OFFER. The Merger Agreement provides for the commencement of the Offer
after the public announcement of the execution of the Merger Agreement as
promptly as practicable, but in no event later than five business days after the
public announcement of the execution of the Merger Agreement, subject to the
other provisions of the Merger Agreement. The obligation of Purchaser to
consummate the Offer and accept for payment, and pay for, Shares tendered
pursuant to the Offer is subject to (i) satisfaction of the Minimum Tender
Condition, (ii) expiration or termination of all waiting periods under the HSR
Act applicable to the purchase of Shares pursuant to the Offer, and (iii) the
satisfaction or waiver of the other conditions described below under
"--Conditions to the Offer" and in Section 15. Subject to the terms of the
Merger Agreement, Purchaser expressly reserves the right to modify the terms and
conditions of the Offer, except that, without the consent of the Company, the
Purchaser shall not (i) reduce the number of Shares subject to the Offer, (ii)
reduce the price per Share to be paid pursuant to the Offer, (iii) add to the
Conditions, (iv) except as provided below, extend the Offer, (v) change the form
of consideration payable in the Offer, or (vi) make any other change in the
terms of the Offer adverse to the holders of Shares. The initial Expiration Date
of the Offer shall be January 30, 1998. Purchaser may extend the Offer in
accordance with applicable law, but if the Conditions set forth in Section 15
are satisfied as of the then scheduled Expiration Date of the Offer, the Offer
may be extended only with the prior written consent of the Company or as
required by law. Notwithstanding the foregoing, Purchaser may, without the
consent the Company, (a) extend the Offer, if at the scheduled or extended
Expiration Date of the Offer any of the Conditions shall not be satisfied or
waived, until such time as such Conditions are satisfied or waived, provided
that Purchaser shall not so extend the Offer later than June 30, 1998 without
the Company's prior written consent, (b) extend the Offer for any period
required by any rule, regulation, interpretation or position of the SEC or the
staff thereof applicable to the Offer, (c) extend the Offer from time to time
until two business days after the expiration of any applicable waiting period
under the HSR Act and (d) extend the Offer for a period not to exceed 15
business days, notwithstanding that all conditions to the Offer are satisfied as
of such Expiration Date of the Offer, if, immediately prior to such Expiration
Date, the Shares tendered and not withdrawn pursuant to the Offer equal less
than 90%, but more than 75%, of the outstanding Shares (on a fully diluted
basis). Subject to the Conditions, Purchaser shall pay for all Shares validly
tendered and not withdrawn pursuant to the Offer promptly after the expiration
of the Offer.
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CONDITIONS TO THE OFFER. The Merger Agreement provides that,
notwithstanding any other term of the Offer or the Merger Agreement, and subject
to the Conditions set forth in Section 15 and in addition to (and not in
limitation of) Purchaser's right to extend and amend the Offer at any time in
its sole discretion (subject to the provisions of the Merger Agreement),
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to Purchaser's obligation to pay for or return
tendered Shares after the termination or withdrawal of the Offer), to pay for,
and may delay the acceptance for payment of or, subject to the restriction
referred to above, the payment for any Shares tendered pursuant to the Offer
unless (a) the Minimum Tender Condition has been satisfied, (b) all waiting
periods, if any, under the HSR Act applicable to the purchase of Shares pursuant
to the Offer shall have expired or have been terminated, and (c) the Conditions
set forth in Section 15 shall have been satisfied.
THE MERGER. The Merger Agreement provides that, following consummation of
the Offer, in accordance with the BCA and upon the terms and subject to the
conditions of the Merger Agreement, on the third business day after the
fulfillment of the conditions of the Merger Agreement, Purchaser will be merged
with and into the Company, at which time the separate corporate existence of
Purchaser will cease and the Company will continue as the Surviving Corporation.
Following consummation of the Merger, the Company, as the Surviving Corporation,
will be a wholly-owned subsidiary of Parent. Hereinafter, the date on which the
Closing shall take place is referred to as the "Closing Date" and the time on
the Closing Date when the Closing shall take place is referred to as the
"Closing Time." The Merger shall become effective at such time as a duly
prepared and executed articles of merger or other appropriate documents
(collectively, the "Articles of Merger"), in form and substance reasonably
satisfactory to Purchaser and Company, providing for the Merger, is filed with
the Secretary of State of the State of Colorado in accordance with the relevant
provisions of the BCA (the "Effective Time"). The Articles of Merger shall be
filed as soon as practicable after the Closing Time.
CONVERSION OF SHARES. (a) At the Effective Time, subject to the provisions
in the Merger Agreement regarding Dissenting Shares, the Shares, immediately
prior to the Effective Time (other than the Dissenting Shares) shall, by reason
of the Merger and without any action by the holders thereof, be converted into
the right to receive the Merger Consideration, without interest. At the
Effective Time, the stock transfer books of the Company shall be closed, and no
transfer of Shares shall thereafter be made. All such Shares, when converted as
provided herein, shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each certificate previously
evidencing such Shares shall thereafter represent only the right to receive the
Merger Consideration.
(b) Each share of the capital stock of Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted into one fully paid
and nonassessable share of common stock, without par value, of the Surviving
Corporation.
DIRECTORS AND OFFICERS; GOVERNING DOCUMENTS. At the Effective Time, the
directors and officers of Purchaser will become the directors and officers of
Surviving Corporation until the earlier of their death, resignation or removal
or until their respective successors are duly elected or appointed and
qualified, as the case may be. The Articles of Incorporation of the Company
shall be the Articles of Incorporation of the Surviving Corporation, until duly
amended in accordance with the terms thereof and the BCA. The By-laws of the
Company will be the By-laws of the Surviving Corporation until thereafter
amended as provided therein, by the Articles of Incorporation or by applicable
law.
STOCKHOLDERS' APPROVAL. Pursuant to the Merger Agreement, if required by
applicable law, the Company will take (and Purchaser and Parent shall use all
reasonable efforts to cause the Company to take) all action necessary in
accordance with Colorado law, the Company's Articles of Incorporation, as
amended, its By-laws and any applicable requirements of the BSE and the NASDAQ
Smallcap Market, to duly call, give notice of and convene a special meeting of
the Company's stockholders (the "Stockholders Meeting") as promptly as
practicable following the expiration of the Offer to obtain stockholder approval
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of the Merger, the Merger Agreement and the transactions contemplated thereby
("Company Stockholder Approval"). The Company's Board of Directors shall, except
as the Company's Board determines in good faith and as advised by outside legal
counsel would be inconsistent with the fiduciary duties of the Board under
applicable law, recommend that the stockholders vote in favor of the Merger, the
Merger Agreement and the transactions thereby contemplated and cause the Company
to take all lawful actions to solicit from its stockholders proxies in favor of
such approval. Notwithstanding the foregoing, if Purchaser and its affiliates
shall own at least 90% of the outstanding Shares, the parties shall take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after the expiration of the Offer without a meeting of the
stockholders of the Company in accordance with Section 7-111-104 of the BCA.
DESIGNATION OF DIRECTORS. The Merger Agreement provides that, provided the
Minimum Tender Condition is satisfied, promptly upon the acceptance for payment
of, and payment by Purchaser for, all Shares tendered and not withdrawn pursuant
to the Offer, Purchaser shall be entitled to designate such number of directors
on the Board of the Company as will give Purchaser, subject to compliance with
Section 14(f) of the Exchange Act, a majority of such directors and the Company
shall, at such time, cause Purchaser's designees to be so elected; PROVIDED,
HOWEVER, that in the event that Purchaser's designees are appointed or elected
to the Board of Directors of the Company, until the Effective Time such Board
shall have at least two directors who are directors on the date hereof or who
are otherwise not officers, directors or affiliates of Purchaser and are
Independent Directors and PROVIDED FURTHER that, in such event, if the number of
Independent Directors shall be reduced below two for any reason whatsoever, any
remaining Independent Directors (or Independent Director, if there shall be only
one remaining) shall be entitled to designate a person to fill such vacancy who
shall be deemed to be an Independent Director for purposes of the Merger
Agreement or, if no Independent Directors then remain, the other directors shall
designate two persons to fill such vacancies who shall not be officers,
stockholders or affiliates of Purchaser and who shall be independent directors
under any applicable rules of the BSE and the NASDAQ Smallcap Market, and such
persons shall be deemed to be Independent Directors for purposes of the Merger
Agreement. Subject to applicable law, the Company shall take all action
requested by Parent necessary to effect any such election, and will promptly, at
the option of Purchaser, either increase the size of the Company's Board of
Directors or obtain the resignation of such number of its current directors as
is necessary to enable Purchaser's designees to be elected to the Company's
Board of Directors as provided above. Following the election or appointment of
Purchaser's designees and prior to the Effective Time, the affirmative vote of a
majority of the Independent Directors then in office shall be required to (i)
amend or terminate the Merger Agreement by the Company, (ii) exercise or waive
any of the Company's rights or remedies under the Merger Agreement or (iii)
extend the time for performance of Parent's and Purchaser's respective
obligations under the Merger Agreement.
ACCESS TO INFORMATION. The Company has agreed that directors, officers,
employees, lenders, accountants, counsel and other representatives of Parent and
Purchaser (collectively, the "Representatives") shall be permitted full access,
during usual business hours during the period prior to the Closing Date to the
properties, accounts, books, contracts, commitments, tax returns and records of
the Company and the Subsidiaries, and such other information relating to the
Company and the Subsidiaries as Parent shall reasonably request, PROVIDED, that
no such investigation shall affect any representation or warranty given by the
Company to Parent and Purchaser, and in the Merger Agreement. The
Representatives shall be permitted to discuss the business affairs, finances and
accounts of the Company and the Subsidiaries with the officers, directors,
executives, counsel, auditors and actuaries of the Company and the Subsidiaries.
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NO SOLICITATION. The Merger Agreement provides that, until such time as
Parent's designees shall constitute a majority of the members of the Board of
Directors of the Company, the Company shall not, and shall not permit any of the
Subsidiaries, or any of its or their officers, directors, employees,
representatives, agents or affiliates (including, without limitation, any
investment banker, attorney or accountant retained by the Company or any of the
Subsidiaries) to, directly or indirectly, enter into, solicit, initiate or
continue any discussions or negotiations with, or provide any information to, or
otherwise cooperate in any other way with, any corporation, partnership, person
or other entity or group (each, a "Third Party"), concerning any offer or
proposal which constitutes or is reasonably likely to lead to any Acquisition
Proposal (as defined below); PROVIDED that the Board of Directors of the Company
may, in the event of an unsolicited Acquisition Proposal, engage in negotiations
or discussions with, or provide information or data to, any Third Party relating
to an Acquisition Proposal if (i) the Acquisition Proposal is a bona fide
fully-financed written offer submitted to the Company's Board of Directors and
such Board of Directors, after consulting with a nationally recognized
investment bank, determines that such Acquisition Proposal is a Superior
Proposal (as defined below) and (ii) the Company's Board of Directors
determines, after having received the written opinion of outside legal counsel
to the Company, that the failure to engage in such negotiations or discussions
or provide such information would result in a breach of the fiduciary duties of
the Board of Directors of the Company under applicable law. Then, in such event,
the Board of Directors may withdraw or modify its approval or recommendation of
the Offer, the Merger Agreement or the Merger, approve or recommend the Superior
Proposal or terminate the Merger Agreement. Parent shall have the right to match
any such Superior Proposal, and have such matching proposal immediately accepted
by the Company for five (5) business days after Parent is informed of the
necessary determination in clauses (i) and (ii) of the second preceding sentence
with respect to such Superior Proposal. Any information furnished to any Third
Party in connection with an Acquisition Proposal shall be provided pursuant to a
confidentiality agreement in customary form. Subject to all of the foregoing
requirements, the Company will immediately notify Parent orally and in writing
if any discussions or negotiations are sought to be initiated, any inquiry or
proposal is made, or any information is requested by any Third Party with
respect to any Acquisition Proposal or which could lead to an Acquisition
Proposal and immediately notify Parent of all material terms of any proposal
which it may receive in respect of any such Acquisition Proposal, including the
identity of the Third Party making the Acquisition Proposal or the request for
information, if known, and thereafter shall inform Parent on a timely, ongoing
basis of the status and content of any discussions or negotiations with such a
Third Party, including immediately reporting any material changes to the terms
and conditions thereof. The Company shall, and shall cause the Subsidiaries, and
will use its best efforts to ensure their respective officers, directors,
employees, investment bankers, attorneys, accountants and other agents to,
immediately cease and cause to be terminated all discussions and negotiations
that had taken place prior to December 23, 1997, if any, with any Third Parties
with respect to any Acquisition Proposal.
For purposes of the Merger Agreement, "Acquisition Proposal" means any
inquiry, proposal or offer from any Third Party relating to any direct or
indirect acquisition or purchase of 15% or more of any class of equity
securities of the Company or any of the Subsidiaries, any tender offer or
exchange offer that if consummated would result in any Third Party beneficially
owning 15% or more of any class of equity securities of the Company or any of
the Subsidiaries, any merger, consolidation, business combination, sale of all
or substantially all the assets, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any of the Subsidiaries, other than
the transactions contemplated by the Merger Agreement, or any other transaction
the consummation of which could reasonably be expected to impede, interfere
with, prevent or materially delay the Offer and/or the Merger or which would
reasonably be expected to dilute materially the benefits to Parent of the
transactions contemplated hereby; and "Superior Proposal" means any bona fide
fully-financed written offer made by a Third Party to acquire, directly or
indirectly, for consideration consisting of cash and/or securities, more than
50% of the Shares then outstanding or all or substantially all the assets of the
Company and otherwise on terms which the Board of
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Directors of the Company determines (after consultation with a nationally
recognized investment bank) to be economically superior to the transaction
contemplated by the Merger Agreement.
INDEMNIFICATION AND INSURANCE. Parent and Purchaser agree that all rights
to indemnification existing as of the date of the Merger Agreement in favor of
the present or former directors, officers, employees, fiduciaries and agents of
the Company or any of the Subsidiaries as provided in the Company's Articles of
Incorporation or By-laws or pursuant to other agreements, arrangements or the
articles of incorporation, by-laws or similar documents of any of the
Subsidiaries as in effect on the date of the Merger Agreement with respect to
matters occurring prior to the Effective Time shall survive the Merger and shall
continue in full force and effect pursuant to the terms thereof. Parent agrees
that it will cause the Surviving Corporation to pay the amount of the deductible
for the directors' and officers' liability insurance referred to below in this
paragraph. The Surviving Corporation shall, unless Parent agrees to provide,
upon the same terms and up to the same extent and the same amount, coverage as
provided by such policies of directors' and officers' liability insurance, cause
to be maintained in effect for not less than six years from the Effective Time
the policies of directors' and officers' liability insurance maintained by the
Company and the Subsidiaries, each as in effect on the date of the Merger
Agreement (provided that they may substitute therefor policies of at least the
same coverage containing terms and conditions which are no less advantageous and
shall not be required to expend an amount in excess of 150% of the annual
premiums currently paid by the Company (which the Company represented is
approximately $55,000)), with respect to matters occurring prior to the
Effective Time.
It is understood and agreed that the Company shall, to the fullest extent
permitted under applicable law and regardless of whether the Merger becomes
effective, indemnify and hold harmless, and after the Effective Time, the
Surviving Corporation and Parent shall, to the fullest extent permitted under
applicable law, indemnify and hold harmless, each present and former director,
officer and fiduciary of the Company or any of the Subsidiaries (collectively,
the "Indemnified Parties") against any fees, costs or expenses (including
reasonable attorneys' fees) and judgments, fines, losses, damages, liabilities
and amounts paid in settlement (collectively, "Losses"), in connection with any
pending, threatened or completed claim, action, suit, proceeding or
investigation arising out of any actions or omissions occurring at or prior to
the Effective Time that are in whole or in part based on or arising out of the
fact that such person is or was a director, officer or fiduciary of the Company
or pertaining to any of the transactions contemplated by the Merger Agreement.
In no event shall the Company or the Surviving Corporation be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld).
This indemnification obligation shall survive for a period of six years (and
thereafter with respect to claims then pending) following the Effective Time and
is intended to benefit the Company, the Surviving Corporation and the
Indemnified Parties.
OPTIONS. The Company agrees to amend before the Effective Time its 1996
Stock Option Plan and Stock Bonus Plan and its Senior Executive Incentive Stock
Option Plan, and any other program pursuant to which there are holders of
options (the "Options") to purchase Shares granted by the Company (collectively,
the "Stock Option Plans") to provide that all outstanding, unexercised Options
shall be immediately exercisable and that if the optionees do not exercise their
unexercised Options, each optionee shall receive, at such optionee's option (i)
in settlement of each Option held by such optionee, a "Cash Amount" (less any
applicable withholding taxes) with respect to the number of previously
unexercised Shares underlying the Option immediately prior to the Effective
Time, or (ii) an option (a "Parent Option") to purchase the number of shares of
common stock, par value $.01 per share, of Parent equal to 1/20 of the number of
Shares underlying the Options at the exercise price equal to the aggregate
exercise price of the 20 Options in respect of which the Parent Option was
granted and upon terms and conditions substantially similar to those contained
in the applicable Stock Option Plan. Such election must be made in writing at
least 10 days prior to the Effective Time and, if not made, the optionee shall
be deemed to have elected to receive the Cash Amount. The Stock Option Plans
shall also be amended to provide that each
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Option shall terminate as of the Effective Time. The Cash Amount payable for
each Option shall equal the product of (i) the Merger Consideration minus the
exercise price per Share of each such Option and (ii) the number of previously
unexercised Shares covered by each such Option.
Prior to the Effective Time, the Company shall provide notice to
participants in the Stock Option Plans and other holders of Options to purchase
shares granted by the Company that the Company proposes to merge with another
corporation; that the optionee under the plans or program may exercise his
Options in full for all shares not theretofore purchased by him prior to the
Effective Time or receive Parent Options as described above; and that the plans
and program have been amended to provide that, to the extent an optionee does
not exercise such Options prior to the Effective Time or elect to receive Parent
Options, the optionee shall receive, in settlement of each Option held by the
optionee, a "Cash Amount" (less any applicable withholding taxes) with respect
to the number of previously unexercised Shares underlying the Option immediately
prior to the Effective Time; that each Option shall terminate as of the
Effective Time; and that the Cash Amount payable for each Option shall equal the
product of (i) the Merger Consideration minus the exercise price per Share of
each such Option and (ii) the number of previously unexercised Shares offered by
each such Option and that number of Parent Options which may be received is 1/20
of the number of Options not exercised for the Cash Amount and the method of
calculating the exercise price of such Parent Options.
Except as may be otherwise agreed to by Parent or Purchaser and the Company,
the Company's Stock Option Plans shall terminate as of the Effective Time and
the provisions in any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any of the Subsidiaries shall be deleted as of the Effective Time.
The Company shall use its best efforts so that, following the Effective
Time, no holder of employee stock options will have any right to receive Shares
upon exercise of an employee stock option.
Notwithstanding anything to the contrary in the Merger Agreement, if it is
determined that compliance with any of the foregoing would cause any individual
subject to Section 16 of the Exchange Act to become subject to the profit
recovery provisions thereof, any Options held by such individual will be
canceled or purchased, as the case may be, at the Effective Time or at such
later time as may be necessary to avoid application of such profit recovery
provisions and such individual will be entitled to receive from the Company or
the Surviving Corporation an amount in cash or other consideration satisfactory
to the Surviving Corporation and such individual equal to the excess, if any, of
the Merger Consideration over the per Share exercise price of such Option
multiplied by the number of Shares subject thereto (less any applicable
withholding taxes), and the parties to the Merger Agreement will cooperate and
take any and all necessary actions so as to achieve the intent of the foregoing
without giving rise to such profit recovery.
FURTHER ACTION, REASONABLE EFFORTS. The Merger Agreement provides that each
of the Company, Parent and Purchaser shall use its reasonable efforts to
effectuate the transactions contemplated by the Merger Agreement and by the
agreements (together with the Merger Agreement, the "Operative Agreements")
relating to the Option Agreement described below under the caption "--Option
Agreement,", the loan ("Loan") in the principal amount of up to $500,000 by
Parent to the Company and the related Pledge Agreement, and warrants (the
"Warrants") to purchase up to 500,000 Shares, and to fulfill the conditions to
the obligations of each under the Operative Agreements, including cooperating
fully with the other party, including by provision of information and making of
all necessary filings in connection with, among other things, approvals under
the HSR Act. The Company will use all reasonable efforts to obtain any consent
from third parties necessary to allow the Company and the Subsidiaries to
continue operating their business as presently conducted as a result of the
consummation of the transactions contemplated by the Operative Agreements. In
case at any time after the Effective Time, any further action is necessary or
desirable to carry out the purposes of the Operative Agreements or to vest the
Surviving Corporation with full title to all properties, assets, rights,
approval, immunities and franchises of
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either of the Company or Purchaser, the proper officers and directors of each
party to the Merger Agreement shall take all such necessary action.
CONDUCT OF BUSINESS PENDING THE MERGER. The Merger Agreement provides that,
except as contemplated by it or as expressly agreed to in writing by Parent,
during the period from the date of the Merger Agreement until such time as
Parent's designees shall constitute a majority of the members of the Board of
Directors of the Company, the Company will, and will cause each of the
Subsidiaries to, conduct its operations according to its ordinary and usual
course of business and consistent with past practice and use its and their
respective best efforts to preserve intact their current business organizations,
keep available the services of their current officers and employees and preserve
their relationships with customers, suppliers, licensors, licensees,
advertisers, distributors and others having business dealings with them and to
preserve goodwill. Without limiting the generality of the foregoing, and except
as (a) otherwise expressly provided in the Merger Agreement, (b) required by
law, or (c) set forth on the schedules to the Merger Agreement, the Company will
not, and will cause the Subsidiaries not to, without the consent of Parent:
(i) except with respect to annual bonuses made in the ordinary course of
business consistent with past practice, adopt or amend in any material
respect any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, pension, retirement, employment or
other employee benefit agreement, trust, plan or other arrangement for the
benefit or welfare of any director, officer or employee of the Company or
any of the Subsidiaries, or increase in any manner the compensation or
fringe benefits of any director, officer or employee of the Company or any
of the Subsidiaries or pay any benefit not required by any existing
agreement or place any assets in any trust for the benefit of any director,
officer or employee of the Company or any of the Subsidiaries (in each case,
except with respect to employees and directors in the ordinary course of
business consistent with past practice);
(ii) incur any indebtedness for borrowed money in excess of $25,000,
other than in consultation with Parent;
(iii) expend funds for individual capital expenditures in excess of
$50,000 in the aggregate for any 12-month period (to be apportioned pro-rata
over any period less than 12 months), other than in consultation with
Parent;
(iv) sell, lease, license, mortgage or otherwise encumber or subject to
any lien or otherwise dispose of any of its properties or assets, except in
the ordinary course of business consistent with past practice;
(v) (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, (y) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for shares
of its capital stock or (z) purchase, redeem or otherwise acquire any shares
of capital stock of the Company or any of the Subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(vi) authorize for issuance, issue, deliver, sell or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise),
pledge or otherwise encumber any shares of its capital stock or the capital
stock of any of the Subsidiaries, any other voting securities or any
securities convertible into, or any rights, warrants or options to acquire,
any such share, voting securities or convertible securities or any other
securities or equity equivalents (including without limitation stock
appreciation rights) other than issuances upon exercise of options,
warrants, notes and contract rights set forth in a schedule to the Merger
Agreement;
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(vii) amend its Articles of Incorporation, By-laws or equivalent
organizational documents or alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate
structure or ownership of any Subsidiary of the Company;
(viii) make or agree to make any acquisition of assets which is material
to the Company and the Subsidiaries, taken as a whole, except for (A)
purchases of inventory in the ordinary course of business, (B) pursuant to
purchase orders entered into in the ordinary course of business which do not
call for payments in excess of $5,000 or (C) project-related expenditures
which, individually, do not exceed $10,000;
(ix) settle or compromise any shareholder derivative suits arising out
of the transactions contemplated by the Merger Agreement or any other
litigation (whether or not commenced prior to the date of the Merger
Agreement) or settle, pay or compromise any claims required to be paid; or
(x) authorize, or commit or agree to take, any of the foregoing actions.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains
representations and warranties of the Company regarding: the due organization,
good standing qualification and authority to conduct business and own, lease and
operate its properties for each of the Company and its Subsidiaries; the
capitalization of the Company; the authority of the Company to enter into the
Merger Agreement and the other Operative Agreements and to consummate the
transactions contemplated thereby, subject to Company Stockholder Approval; the
absence of conflict between transactions contemplated by the Merger Agreement
and the Operative Agreements and other agreements, documents and permits, and
absence of violations of the Articles of Incorporation or By-laws of the Company
or its Subsidiaries; the absence of violation of laws applicable to the Company;
the need for consents and approvals; the accuracy, truthfulness and adequacy of
documents filed with or sent to the SEC or any other regulatory authority; the
absence of violations of certain agreements, documents and permits of the
Company; compliance with applicable generally accepted accounting principles and
law regarding the conduct of its business; the compliance with laws regarding
improper payments, including the Foreign Corrupt Practices Act of 1977; the
absence of litigation; certain matters relating to taxes; insurance coverage;
the full disclosure by the Company of certain management, employment, consulting
or other material agreements, contracts or commitments and debt instruments;
certain matters relating to ERISA; the conduct of business in the ordinary
course and the absence of certain changes or events since September 30, 1997;
finder's fees; labor matters; indemnification of employees; the condition of the
tangible property of the Company and its Subsidiaries; the ownership of or the
rights to use the Company's and its Subsidiaries' intellectual property;
environmental matters; the ownership of real property in fee, and the holding of
leasehold interests, by the Company and its Subsidiaries free and clear of all
mortgages, pledges, liens, encumbrances and security interests; the holding of
good title by the Company and its Subsidiaries to tangible personal property and
assets; the recommendation by the Board of Directors of the Company of the
Merger Agreement, the Offer and the Merger; the disclosure of certain related
company transactions; and the compliance of the Schedule 14D-9 in all material
respects with the Exchange Act.
The Merger Agreement also includes representations and warranties by Parent
and Purchaser regarding: the due organization, good standing and authority of
each to conduct business and own, lease and operate its properties; the
authority of Parent and Purchaser to enter into the Merger Agreement and the
other Operative Agreements to which they are parties; the absence of conflict
between the Operative Agreements and other agreements and documents to which
Parent or Purchaser is a party and laws applicable to Parent and Purchaser;
consents and approvals; and finder's fees.
CONDITIONS TO THE MERGER. Pursuant to the Merger Agreement, the respective
obligations of each party to the Merger Agreement to effect the Merger are
subject to the satisfaction or waiver of the following conditions prior to the
Closing Date: (i) approval and adoption of the Merger Agreement and the Merger
by the holders of the outstanding Shares entitled to vote thereon in a manner
required by applicable law; (ii) termination or expiration of any applicable
waiting period under the HSR Act; (iii) no court, agency or
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other authority having issued any order, decree or judgment to set aside,
restrain, enjoin or prevent the performance of any of the parties' obligations
under the Merger Agreement and no statute, rule, regulation, executive order,
decree or injunction having after the date of the Merger Agreement been enacted,
entered, promulgated or enforced by any United States court or Governmental
Authority of competent jurisdiction which prohibits the consummation of the
Merger; and (iv) Purchaser having accepted for purchase and paid for Shares
tendered pursuant to the Offer. In addition, the following are conditions to the
obligations of Parent and Purchaser: (a) the representations and warranties of
the Company contained in the Merger Agreement shall be true and correct in all
material respects at and as of the Effective Time, with the same force and
effect as if made at and as of the Effective Time, other than such
representations and warranties as are expressly made as of another date, and
Parent and Purchaser shall have received a certificate of the Company to that
effect signed by a duly authorized officer thereof; and (b) each of the
employment agreements entered into by the Company with its employees, directors
or officers shall have been terminated except for the employment agreements
between the Company and each of J.D. Finley and Charles D. Tourtellotte.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company or by Purchaser:
(a) by the mutual consent of Purchaser and the Company;
(b) by Purchaser, if prior to consummation of the Offer (i) the Board of
Directors of the Company fails to make, or withdraws or materially modifies or
changes in a manner adverse to Purchaser its recommendation to stockholders of
the Company to accept the Offer, the Merger or the Merger Agreement and the
transactions contemplated thereby, or resolves to do the foregoing or (ii) the
Board of Directors of the Company shall have recommended that the stockholders
of the Company accept or approve an Acquisition Proposal with a Third Party, or
resolves to do the foregoing or (iii) a tender or exchange offer for any of the
outstanding shares of capital stock of the Company is commenced (other than by
Parent, Purchaser or their affiliates) and the Board of Directors of the Company
fails to timely recommend against the tendering by the Company's stockholders of
their Shares into such tender or exchange offer;
(c) by the Company, if, prior to the Effective Time, any Third Party has
made a bona fide fully financed written offer relating to an Acquisition
Proposal, or has commenced a tender or exchange offer for the Shares, and the
Company's Board determines in good faith (i) after consultation with its
financial advisors, that such transaction constitutes a Superior Proposal and
(ii) after having received the written opinion of outside legal counsel to the
Company, that the failure to engage in such negotiations or discussions or
provide such information would result in a breach of the fiduciary duties of the
Board of Directors of the Company under applicable law;
(d) by the Company or Purchaser, if the Offer shall not have been
consummated on or before June 30, 1998, or the Offer is terminated by Purchaser
or allowed to expire with no Shares being accepted for payment; PROVIDED,
HOWEVER, that neither Purchaser nor the Company may terminate the Merger
Agreement pursuant to this provision if such party shall have materially
breached the Merger Agreement; or if prior to such day a reasonable,
well-informed person would conclude that any Condition shall be incapable of
being satisfied by such date (except that a party whose breach of covenant has
caused such failure to consummate shall not be entitled to so terminate the
Merger Agreement), or the Merger has not been consummated by December 31, 1998;
(e) by the Company, if there has been a violation or breach by Parent or
Purchaser of any representation, warranty or agreement contained in the Merger
Agreement specifically qualified by materiality, or a material violation or
breach by Purchaser of any material representation, warranty or agreement not so
qualified contained in the Merger Agreement (which violation or breach is not
cured by
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Parent or Purchaser within 30 days after written notice by the Company to Parent
or Purchaser reasonably describing such breach);
(f) by Purchaser prior to consummation of the Offer, if there has been a
violation or breach by the Company of any representation, warranty or agreement
contained in the Merger Agreement or any other Operative Agreement as though
such representations, warranties and agreements were made without reference to a
Material Adverse Effect (which violation or breach is not cured by the Company
within 30 days after written notice by Purchaser to the Company reasonably
describing such breach), except in all cases where the failure or failures of
such representations and warranties to be so true and correct or such agreements
to be performed or complied with would not have, singly or in the aggregate, a
Material Adverse Effect; PROVIDED, HOWEVER, that any such violation or breach
that occurs during a 15 business day extension of the Offer implemented in the
event that the Shares tendered and not withdrawn pursuant to the Offer equal
less than 90% but more than 75% of the outstanding Shares (on a fully diluted
basis), shall be deemed not to constitute a Material Adverse Effect if such
violation or breach shall be as a result of a decline in the financial
performance or operations of the Company, so long as the Company has operated
its business in accordance with the provisions of the Merger Agreement regarding
"--Conduct of Business Pending the Merger," and otherwise consistent with its
past practices;
(g) by either Purchaser or the Company, if Company Stockholder Approval
shall not have been obtained at the Stockholders Meeting, if required pursuant
to the terms of the Merger Agreement.
TERMINATION FEES AND EXPENSES. The Merger Agreement provides that all costs
and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby will be paid by the party incurring such
expenses, except as otherwise described below.
The Merger Agreement provides that (i) the Company shall promptly reimburse
the Parent or Purchaser, as the case may be, in the event that the Merger
Agreement is terminated pursuant to subparagraphs (b), (c) or (f) of the
preceding subsection ("Termination"), up to $1.5 million, and (ii) Parent or
Purchaser shall promptly reimburse the Company in the event that the Merger
Agreement is terminated pursuant to subparagraph (e) of the preceding
subsection, up to $250,000, for all out-of-pocket expenses and fees (including,
without limitation, fees and expenses payable to all Governmental Authorities,
banks, investment banking firms and other financial institutions, and their
respective agents and counsel, and all fees and expenses of counsel,
accountants, financial printers, proxy solicitors, exchange agents, experts and
consultants to Parent and its affiliates), whether incurred prior to, on or
after the date of the Merger Agreement, in connection with the Merger and the
consummation of all transactions contemplated by the Merger Agreement. The
prevailing party in any legal action undertaken to enforce the Merger Agreement
or any provision thereof shall be entitled to recover from the other party the
costs and expenses (including attorneys' and expert witness fees and expenses)
incurred in connection with such action.
In addition, if the Merger Agreement is terminated pursuant to subparagraphs
(b), (c) or (f), Parent has the right to exercise its option (described in
"Option Agreement" below) to acquire two of the Company's golf facilities and
the right to exercise its option to acquire the Principal Stockholder's Shares
(described under "Stockholders Agreement" below).
CONFIDENTIALITY. The Merger Agreement provides that any corporate
information, records, documents, descriptions or other disclosures of whatsoever
nature or kind made or disclosed by any of the parties to the other parties, or
to the authorized representatives thereof, or learned or discovered by such
other party or by any representatives thereof in connection with the
transactions contemplated by the Merger Agreement (whether prior to or after the
date of the execution of the Merger Agreement) and not known by or available to
the public at large, shall be received in confidence and none of the parties nor
any such authorized representative shall disclose or make use of such
information or authorize anyone else to disclose or make use thereof without the
written consent of the other parties thereto, except (a) as necessary to
consummate the transactions contemplated by the Merger Agreement or (b) as
compelled by
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judicial or administrative process or by other requirements of applicable law
including any disclosure under federal securities laws; PROVIDED, HOWEVER, that
in the case of any disclosure contemplated pursuant to clause (b), the party
seeking to disclose such information shall give the other parties reasonable
prior written notice thereof in order to afford such other parties reasonable
opportunity to seek a protective order or other limitation under such
disclosure.
STOCKHOLDERS AGREEMENT
As an inducement to Parent and Purchaser to enter into the Merger Agreement
and to incur the obligations therein, the Principal Stockholder entered into a
Stockholders Agreement with Purchaser and Parent, pursuant to which, provided
that neither Parent nor Purchaser is then in material breach of the Merger
Agreement and provided that there has not been issued an injunction which would
prohibit the Principal Stockholder from tendering his shares, the Principal
Stockholder agreed to validly tender (and not to withdraw), pursuant to and in
accordance with the terms of the Offer, not later than the fifth business day
after the receipt by the Principal Stockholder of the Offer, the 685,622 Shares
owned by the Principal Stockholder on the date of the Stockholders Agreement,
together with any Shares acquired by the Principal Stockholder after the date of
the Stockholders Agreement (including pursuant to the exercise of Options) and
prior to the termination of the Stockholders Agreement.
In addition, the Principal Stockholder has agreed to grant Purchaser an
option ("Stockholder Option") to purchase his Shares at a purchase price equal
to $1.50 per Share, subject to adjustment, during the period commencing upon a
termination of the Merger Agreement pursuant to clauses (b), (c) and (f)
described in "Termination" above, and terminating on the date which is 270 days
therefrom, so long as all applicable waiting periods under the HSR Act have
expired or been waived and there has not been an injunction which would prohibit
Purchaser from exercising the Stockholder Option. Prior to the earliest of (i)
the Effective Time, (ii) 270 days from the date of the Stockholder Agreement,
and (iii) the termination of the Merger Agreement as a result of a breach by
Parent or Purchaser, Purchaser has a proxy to exercise the voting rights of the
Principal Stockholder to vote for the Merger and against any other Acquisition
Proposal.
OPTION AGREEMENT
As a condition to their willingness to enter into the Merger Agreement and
to make the Loan, Parent and Purchaser have requested that the Company agree,
and the Company has agreed, to grant an option to Purchaser to acquire certain
assets held by the Company, or certain Subsidiaries of the Company, for
$2,000,000 and the assumption of up to $4,000,000 in indebtedness.
GRANT OF OPTION. Pursuant to the Option Agreement ("Option Agreement"),
dated December 23, 1997, among the Company, Parent and Purchaser, the Company
granted to Purchaser an irrevocable option (the "Option") to purchase and
acquire for two million dollars ($2,000,000) plus the assumption of up to four
million dollars ($4,000,000) of liabilities ("Option Purchase Price"):
(a) the Company's leasehold estate and other assets with respect to its
facility located in Fremont, California, including, among other things, a
driving range, pro shop and the right to build a 9-hole executive golf
course (the "Fremont Facility");
(b) all of the limited partnership interests held by the Company of
Illinois Center Golf Partners L.P., an Illinois limited partnership (the
"Owner"), which owns and operates a facility located in Chicago, Illinois,
including, among other things, a driving range, club house and executive
golf course (the "Chicago Facility," and, together with the Fremont
Facility, the "Ranges"); and
(c) all of the issued and outstanding capital stock held by the Company
of MetroGolf Illinois Center, Inc., a Colorado corporation and Managing
General Partner of the Owner (the "General Partner").
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So long as the Option remains in effect, the Company covenants and agrees
that it shall not, and shall cause its Subsidiaries, including the General
Partner and the Owner, not to, sell or dispose of, or enter into any agreement
for the sale or disposition of, all or any part of the Ranges or the capital
stock of the General Partner or the limited partnership interests of the Owner,
and it will, and will cause its Subsidiaries, including the General Partner and
the Owner, to conduct the operations at the Ranges according to their ordinary
and usual course of business in a manner consistent with past practice and use
its and their respective best efforts, with respect to the General Partner, the
Owner and the Ranges, to preserve intact their current business organizations,
keep available the services of current officers and employees and preserve their
relationships with customers, suppliers, licensors, licensees, advertisers,
distributors and others having business dealings with them and to preserve
goodwill. Furthermore, so long as the Option remains in effect, the Company
covenants and agrees that it shall, and shall cause its Subsidiaries, including
the General Partner and the Owner, to, conduct its and their affairs and the
operations at the Ranges in such a manner as to ensure that the representations
and warranties of the Company, the General Partner and the Owner contained in
the Option Agreement and in the applicable Purchase Agreements (as defined
below) remain as true and correct as of the date of the exercise of the Option
as they are as of the date of the Option Agreement.
EXERCISE OF OPTION. The Option Agreement provides that, provided (a) any
applicable waiting periods provided for under the HSR Act have expired, and (b)
the Merger Agreement has terminated in accordance with clauses (b), (c) and (f)
described in "Termination" above, Purchaser may exercise the Option at any time
following such termination for a period ending on the sixtieth day after such
termination. The Company shall appoint the Escrow Agent (as defined below) its
agent for the receipt of notice (the "Exercise Notice") of exercise of the
Option. The Exercise Notice shall specify that the Merger Agreement has
terminated in accordance with clauses (b), (c) and (f) described in
"Termination" above, and state that the Option is being exercised immediately
after receipt by the Escrow Agent of such written notice in accordance with the
terms of the Option Agreement. The closing of the purchase of the Ranges and all
of the capital stock of the General Partner and the limited partnership
interests of the Owner (the "Option Closing") shall take place on the third
business day after the exercise of the Option or such other time, date and place
as the parties thereto shall mutually agree.
DELIVERY OF DOCUMENTS. (a) A purchase agreement with respect to the Fremont
Facility, and a purchase agreement with respect to the capital stock and limited
partnership interests of the General Partner and the Owner, respectively (each,
a "Purchase Agreement", and, together, the "Purchase Agreements"), have been
executed by all parties necessary to consummate the transactions contemplated in
the Option Agreement and placed into escrow with United States Trust Company of
New York (the "Escrow Agent"). The Purchase Agreements contain certain
representations and warranties, covenants and indemnification obligations of the
Company and the sellers. Certain other documents contemplated by the Purchase
Agreements (the "Option Closing Documents") are to be executed by all parties
thereto and delivered to the Escrow Agent on or before the close of business on
January 9, 1998. The Purchase Agreements and the Option Closing Documents shall
be delivered by the Escrow Agent to Purchaser on behalf of the Company in
conformity with the Option Agreement and the escrow agreement with the Escrow
Agent ("Escrow Agreement") and tender of payment to the Company of the Option
Purchase Price (a portion of which may be paid by cancellation of the Note (as
defined below)), as provided in the Option Agreement, or delivery of such
payment to the Escrow Agent for the Company's account at the Option Closing with
instructions to deliver such payment to the Company. The Escrow Agreement also
provides that the Company may object to an Exercise Notice within five days of
receipt thereof, in which case, the matter will be submitted to arbitration.
(b) The Option shall terminate upon the Effective Date or upon the
expiration of the Option pursuant to the Option Agreement.
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LOAN AGREEMENTS
In order to provide the Company with operating capital during the
negotiations for the Merger Agreement, Parent agreed to lend the Company
$150,000, evidenced by a Secured Promissory Note dated as of December 18, 1997
issued by the Company and secured by a Pledge and Security Agreement dated as of
December 18, 1997, between the Company and Parent.
Contemporaneously with the execution of the Merger Agreement, Parent agreed
to lend the Company up to an additional $350,000 to pay certain of its operating
expenses, which has been consolidated with the earlier loan of $150,000, to
constitute the Loan.
The Loan is evidenced by a Consolidated Secured Convertible Promissory Note
("Note") dated as of December 23, 1997 by the Company, and secured by the First
Amended Pledge and Security Agreement ("Pledge Agreement") dated as of December
23, 1997 between the Company and Parent, which has superseded the Secured
Promissory Note and the Pledge and Security Agreement.
The Note provides that the principal amount of up to $500,000 will be
payable with interest at 8% per annum, upon the terms and conditions set forth
in the Note, in one lump sum, on the first to occur of (i) the Closing as
defined in the Option Agreement after the exercise of the Option, (ii) the
Effective Date, (iii) if the Merger Agreement is terminated or breached by the
Company and such breach causes a Material Adverse Affect, the date of such
termination or breach, and (iv) the later to occur of (a) the termination of the
Offer and (b) April 21, 1998.
Moreover, the Note provides that, if it is not paid in full on or prior to
the due date, the principal amount thereof shall bear interest, commencing from
the date thereof, at the rate of 12% per annum and all sums payable thereunder
shall be due and payable upon demand. If (a) the Company defaults in making any
payment thereunder when due or in performing any of the Company's other
obligations under the Note, or (b) an "Event of Default" as defined in the
Pledge Agreement occurs, then the outstanding balance then due thereunder shall
accelerate and become due and payable on demand and the principal amount thereof
shall bear interest at the rate of 12% per annum, commencing from the date
thereof.
The Note is convertible into a number of Shares equal to the principal
amount of the Note divided by the then-effective Conversion Price (as defined in
the Note). The Initial Conversion Price shall equal $1.00. The number of Shares
issuable upon conversion of the Note and the Conversion Price may be adjusted
from time to time as provided in the Note. The Note may be converted at the
option of Parent at any time prior to its payment as to the whole or any lesser
number of whole Shares, by the surrender of the Note (together with written
notice as to the principal amount of the Note to be converted) to the Company.
The Note may not be prepaid.
To secure payment of the Note, the Company granted to Parent a security
interest under the Uniform Commercial Code as adopted in Colorado, and under the
terms of the Pledge Agreement in all the "Collateral" as defined in the Pledge
Agreement. The Pledge Agreement provides that the Company grants to Parent a
continuing perfected and first priority lien upon and security interest in, to
and under all of the Company's right, title and interest in and to the
Collateral, including any interest it has in the Owner or the General Partner.
To further secure payment of the Note, the Company has entered into a Deed of
Trust with Assignment of Rents as Additional Security, pursuant to which it has
irrevocably granted, transferred and assigned to a trustee with power of sale,
its leasehold estate relating to the Fremont Facility, and named Parent as
beneficiary of such Deed of Trust. Also in connection with the issuance of the
Note, the Company issued to Parent a Warrant ("Warrant"), exercisable at any
time until its expiration on June 30, 1999, to purchase up to 500,000 Shares
(subject to adjustment as provided in the Warrant), at a price of $1.00 per
Share, subject to adjustment as provided therein. The Warrant shall not be
redeemable by the Company. The Warrant may be sold, transferred, assigned or
hypothecated at any time.
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EMPLOYEE MATTERS
In order to ensure the cooperation of certain key employees of the Company
in connection with the consummation of the transactions contemplated by the
Merger Agreement, Parent has entered into certain agreements and arrangements as
follows:
(a) Parent has agreed to use commercially reasonable efforts following
the consummation of the Offer to obtain releases of all written personal
guarantees made by Charles D. Tourtellotte, prior to December 23, 1997 of
any indebtedness of the Company or its Subsidiaries, and to indemnify and
hold Mr. Tourtellotte harmless from and against any liability he may incur
that arises out of or relates to such guarantees as a result of a default
under the debt underlying such guarantees by the Company or any of its
Subsidiaries.
(b) Parent has had discussions with Messrs. Tourtellotte and Finley,
pursuant to which Parent is considering terminating the existing employment
agreements of Messrs. Tourtellotte and Finley following the consummation of
the Offer, and paying them an amount equal to the amount they would have
received over the remaining terms of such agreements.
(c) Parent has entered into employment letters with each of four current
employees of the Company pursuant to which Parent has agreed to retain such
employees upon the consummation of the Offer, at their current levels of
compensation, including salary and bonuses, for a period of at least 90 days
following the consummation of the Offer, in consideration for each such
employee's agreement to honor his or her current employment arrangements in
all respects and devote his or her full time and attention to his or her
duties until such time as such 90-day period has expired. Upon the
conclusion of such 90-day period, Parent intends to cause the Surviving
Corporation to reevaluate its personnel requirements. At that time, the
terms of the continued and future employment of such employees with the
Surviving Corporation will be discussed and may be mutually agreed upon.
(d) Parent has entered into letter agreements with each of Messrs.
Tourtellotte and Finley, pursuant to which options to acquire an aggregate
of 100,000 and 75,000 Shares, respectively, at an exercise price of $1.25
per share granted to Messrs. Tourtellotte and Finley on December 3, 1997,
will be terminated if, in the reasonable discretion of Parent, either of
Messrs. Tourtellotte or Finley has not used reasonable best efforts to
assist Parent and Purchaser in consummating the Offer, including, without
limitation, using his reasonable best efforts to effect the following prior
to the consummation of the Offer: (i) elimination of the minority
shareholder interest in the general partner of the Owner; (ii) elimination
of the minority limited partner interests of the Owner and Goose Creek Golf
Partners Limited Partnership; (iii) obtaining the consents of the Landlords
and Mortgage Lenders as defined in Section 15; and (iv) renegotiating the
terms of the Leases and the accounts payable in such manner as Parent shall
request.
(e) Parent has obtained agreements from certain employees of the Company
holding options to purchase an aggregate of 454,500 Shares, that such
employees will not, without the consent of Parent, exercise such options
prior to the consummation of the Offer and that if such options are
exercised after consummation of the Offer, such employees will vote in favor
of the Merger. Accordingly, Shares underlying such options are deemed
Excluded Shares for purposes of the Minimum Tender Condition.
12. PURPOSE OF THE OFFER AND MERGER; PLANS FOR THE COMPANY
The purpose of the Offer and the Merger is to acquire all the outstanding
Shares and thereby to obtain control of the Company. The Offer, as the first
step in the acquisition of the Company, is intended to facilitate the
acquisition of all the Shares. Consummation of the Offer will provide Purchaser
with at least a majority of the outstanding equity interests of the Company. The
Merger will allow Purchaser to acquire all Shares not tendered and purchased
pursuant to the Offer or otherwise. Pursuant to the Merger, each then
outstanding Share (other than Shares owned directly or indirectly by Purchaser
or Parent, Shares
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held by the Company and Shares owned by stockholders who perfect appraisal
rights under the BCA) would be converted into the right to receive an amount in
cash equal to the price per Share paid by Purchaser pursuant to the Offer. The
acquisition of the entire equity interest in the Company has been structured as
a cash tender offer and a cash merger in order to provide a prompt and orderly
transfer of ownership of the Company from the public stockholders of the Company
to Parent. The purchase of Shares pursuant to the Offer will increase the
likelihood that the Merger will be consummated.
Except in the case of a "short-form" merger as described below, under the
BCA, the approval of the Company's Board of Directors and the affirmative vote
of the holders of a majority of the outstanding Shares (including any Shares
owned by the Purchaser and its affiliates) would be required to approve the
Merger. Upon consummation of the Offer, Purchaser will have obtained voting
power with respect to at least a majority of the outstanding Shares, sufficient
voting power to effect the Merger without the vote of any other stockholder of
the Company.
The BCA also provides that if a parent company owns at least 90% of each
class of stock of a subsidiary, the parent company can effect a "short-form"
merger with that subsidiary without a stockholder vote. Accordingly, if, as a
result of the Offer or otherwise, Purchaser acquires or controls the voting
power of at least 90% of the outstanding Shares, Purchaser could, and in the
Merger Agreement has agreed to, effect the Merger without prior notice to, or
any action by, any other stockholder of the Company.
The Merger Agreement provides that Parent and Purchaser intend that (i) the
directors of Purchaser at the Effective Time will be the initial directors of
the Surviving Corporation, and (ii) the officers of the Purchaser at the
Effective Time will be the initial officers of the Surviving Corporation.
In connection with the Offer, Parent has reviewed, and will continue to
review, various possible business strategies that it might consider in the event
that it acquires all or substantially all of the equity interest in the Company.
Prior to making the Offer, Parent reviewed and analyzed the business of the
Company on the basis of publicly available information and information provided
by the Company. Upon the completion of the Offer, Parent intends to conduct a
detailed review of the Company and its assets, corporate structure,
capitalization, operations, properties, policies, management and personnel and
consider what, if any, changes would be desirable in light of the circumstances
which then exist. Parent may change the ownership structure of certain of the
Company's golf facilities and change their operations and policies to better
integrate them with Parent's current operations; Parent also intends to evaluate
the Company's personnel. Parent does not currently intend to dispose of any of
the Company's golf facilities, but reserves the right to change its views.
Except as described above or elsewhere in this Offer to Purchase, Purchaser
does not have any present plans or proposals which relate to or would result in
an extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving the Company or any of the Subsidiaries, a sale or transfer
of a material amount of the Company's assets (or assets of its Subsidiaries),
any material change in the Company's present capitalization or dividend policy,
any other material change in the Company's business or corporate structure,
causing a class of securities of the Company to be delisted from a national
securities exchange or to cease to be authorized to be quoted in an inter-dealer
quotation system of a registered national securities association, or causing a
class of equity securities of the Company to become eligible for termination of
registration pursuant to the Exchange Act.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE ACT REGISTRATION;
MARGIN REGULATIONS
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and may reduce the number of holders
of Shares, which could adversely affect the liquidity and market value of the
remaining Shares held by stockholders other than Purchaser. Purchaser cannot
predict whether the reduction in the number of Shares that might otherwise trade
publicly would have an adverse or beneficial effect on the market price for or
marketability of the Shares or whether it would cause future market prices to be
greater or less than the Offer Price.
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Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the BSE or NASDAQ Smallcap Market
for continued listing and may, therefore, be delisted from such exchanges.
According to the BSE's and NASDAQ Smallcap Market's published guidelines, the
BSE and NASDAQ Smallcap Market could consider delisting the Shares if, among
other things, the number of publicly held Shares (excluding Shares held by
officers, directors, their immediate families and other concentrated holdings of
5% (in the case of the BSE), 10% (in the case of NASDAQ Smallcap Market), or
more) were less than 150,000 and 1 million, respectively, there were less than,
respectively, 250 and 300 public holders of at least 100 Shares, or the
aggregate market value of the publicly held Shares was less than $500,000 and $5
million, respectively. If, as a result of the purchase of Shares pursuant to the
Offer, the Shares no longer meet the requirements of the BSE or NASDAQ Smallcap
Market for continued listing and the listing of Shares thereon is discontinued,
the market for the Shares could be adversely affected.
If the BSE and NASDAQ Smallcap Market were to delist the Shares, it is
possible that the Shares would trade on another securities exchange or in the
over-the-counter market and that price quotations for the Shares would be
reported by such exchange or on the Bulletin Board, the "pink sheets" or other
sources. The extent of the public market for the Shares and the availability of
such quotations would, however, depend upon such factors as the number of
holders and/or the aggregate market value of the publicly held Shares at such
time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration of the Shares under
the Exchange Act and other factors.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of the Shares. Depending upon factors similar to those
described above regarding listing and market quotations, it is possible that,
following the Offer, the Shares would no longer constitute "margin securities"
for the purposes of the margin regulations of the Federal Reserve Board and
therefore could no longer be used as collateral for loans made by brokers.
The Shares are currently registered under the Exchange Act. Registration of
the Shares under the Exchange Act may be terminated upon application of the
Company to the SEC if the Shares are neither listed on a national securities
exchange nor held by 300 or more holders of record. Termination of registration
of the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to its stockholders and to the SEC and
would make certain provisions of the Exchange Act no longer applicable to the
Company, such as the short-swing profit recovery provisions of Section 16(b) of
the Exchange Act, the requirement of furnishing a proxy statement pursuant to
Section 14(a) of the Exchange Act in connection with stockholders' meetings and
the related requirement of furnishing an annual report to stockholders and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions. Furthermore, the ability of "affiliates" of the Company
and persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or 144A promulgated under the Securities Act may
be impaired or eliminated. It is the current intention of Parent to deregister
the Shares after consummation of the Offer if the requirements for termination
of registration are met.
14. EXTENSION OF TENDER PERIOD; AMENDMENT; TERMINATION
Purchaser also reserves the right, in its sole discretion, subject to the
terms of the Merger Agreement, in the event any of the Conditions specified in
Section 15 will not have been satisfied and so long as Shares have not
theretofore been accepted for payment, to delay (except as otherwise required by
applicable law) acceptance for payment of, or payment for, Shares, or to
terminate the Offer and not accept for payment, or pay for, Shares.
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If Purchaser extends the Offer, or if Purchaser (whether before or after its
acceptance for payment of Shares) is delayed in its purchase of or payment for
Shares or is unable to pay for Shares pursuant to the Offer for any reason,
then, without prejudice to Purchaser's rights under the Offer, the Depositary
may retain tendered Shares on behalf of Purchaser, and such Shares may not be
withdrawn except to the extent tendering stockholders are entitled to withdrawal
rights as described in Section 4. However, the ability of Purchaser to delay the
payment for Shares which Purchaser has accepted for payment is limited by Rule
14e-1(c) under the Exchange Act, which requires that a bidder pay the
consideration offered or return the securities deposited by or on behalf of
holders of securities promptly after the termination or withdrawal of such
bidder's offer.
If Purchaser makes a material change in the terms of the Offer or in the
information concerning the Offer (including the Minimum Tender Condition),
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of securities
sought, will depend upon the facts and circumstances, including the relative
materiality of the terms or information. With respect to a change in price or a
change in percentage of securities sought, a minimum ten business day period is
generally required to allow for adequate dissemination to stockholders and
investor response. If prior to the Expiration Date, Purchaser should decide to
increase the price per Share being offered in the Offer, such increase will be
applicable to all stockholders whose Shares are accepted for payment pursuant to
the Offer.
15. CONDITIONS TO THE OFFER
Notwithstanding any other term of the Offer or the Merger Agreement and in
addition to (and not in limitation of) Purchaser's right to extend and amend the
Offer at any time in its sole discretion (subject to the provisions of the
Merger Agreement), Purchaser shall not be required to accept for payment or,
subject to any applicable rules and regulations of the Commission, including
Rule 14e-1(c) under the Exchange Act (relating to Purchaser's obligation to pay
for, or return tendered Shares after the termination or withdrawal of the
Offer), to pay for and may delay the acceptance for payment of or, subject to
the restriction referred to above, payment for any Shares tendered pursuant to
the Offer unless (a) the Minimum Tender Condition has been met and (b) all
waiting periods under the HSR Act applicable to the purchase of Shares pursuant
to the Offer shall have expired or have been terminated. Furthermore,
notwithstanding any other term of the Offer or the Merger Agreement, Purchaser
shall not be required to accept for payment or, subject as aforesaid, to pay for
any Shares not theretofore accepted for payment or paid for, and may terminate
or amend the Offer, if at any time on or after the date of the Merger Agreement
and before the acceptance of such Shares for payment or the payment therefor,
any of the following conditions exists and shall be continuing:
(a) ACTIONS OR PROCEEDINGS. There shall be threatened by any Governmental
Authority, or instituted or pending by any Person or Governmental Authority any
suit, action, investigation or proceeding (i) challenging the acquisition by
Parent or Purchaser of any Shares under the Offer or seeking to restrain or
prohibit the making or consummation of the Offer or the Merger or the
performance of any of the other transactions contemplated by the Merger
Agreement, or seeking to obtain from the Company, Parent or Purchaser any
damages that are material in relation to the Company and the Subsidiaries taken
as a whole, (ii) seeking to prohibit or impose any material limitations on
Parent's or Purchaser's ownership or operation (or that of any of their
respective subsidiaries or affiliates) of all or a material portion of their or
the Company's businesses or assets, or to compel Parent or Purchaser or their
respective subsidiaries and affiliates to dispose of or hold separate any
material portion of the business or assets of the Company or Parent and their
respective subsidiaries, in each case taken as a whole, (iii) seeking to impose
material limitations on the ability of Purchaser, or render Purchaser unable, to
accept for payment, pay for or purchase some or all of the Shares pursuant to
the Offer and the Merger, (iv) seeking to impose material
34
<PAGE>
limitations on the ability of Purchaser or Parent effectively to exercise full
rights of ownership of the Shares, including, without limitation, the right to
vote the Shares purchased by it on all matters properly presented to
stockholders of the Company, or (v) which otherwise is reasonably likely to have
an MGI Material Adverse Effect;
(b) LAWS. There shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to the
Offer or the Merger, or any other action shall be taken by a Governmental Entity
or court, other than the application to the Offer or the Merger of applicable
waiting periods under the HSR Act that is reasonably likely to result, directly
or indirectly, in any of the consequences referred to in clause (i) through (v)
of paragraph (a) above;
(c) LATER EVENTS. There shall have occurred any events after the date of the
Merger Agreement that, either individually or in the aggregate, have caused or
are reasonably likely to cause an MGI Material Adverse Effect other than a
change resulting from the announcement of the Offer or the Merger;
(d) OTHER TRANSACTIONS. (i) The Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner adverse to Parent
or Purchaser its approval or recommendation of the Offer, the Merger or the
Merger Agreement, or approved or recommended any Acquisition Proposal, (ii) the
Company shall have entered into any agreement (other than an agreement that
solely gives a party access to documents under conditions of confidentiality)
with respect to any Superior Proposal in accordance with the Merger Agreement or
(iii) the Board of Directors of the Company or any committee thereof shall have
resolved to take any of the foregoing actions;
(e) REPRESENTATIONS AND WARRANTIES. There shall have been a violation or
breach by the Company of any representation, warranty or agreement in the Merger
Agreement or any of the Operative Agreements as though such representations,
warranties and agreements were made without reference to an MGI Material Adverse
Effect, except in all cases where the failure or failures of such
representations and warranties to be so true and correct or such agreements to
be performed or complied with would not have, singly or in the aggregate, an MGI
Material Adverse Effect;
(f) TERMINATION. The Merger Agreement shall have been terminated in
accordance with its terms;
(g) FORCE MAJEURE. There shall have occurred (i) any general suspension of,
or limitation on prices for, trading in securities on the New York Stock
Exchange or on the NASDAQ Market, (ii) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States, (iii) a
commencement of a war, armed hostilities or other international or national
calamity directly involving the armed forces of the United States, (iv) any
general limitation (whether or not mandatory) by any governmental authority on
the extension of credit by banks or other lending institutions, (v) in the case
of any of the foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof, (vi) a decline of at least twenty
percent (20%) in the Dow Jones Industrial Average or the Standard and Poors 500
Index from the date of the Merger Agreement to the expiration or termination of
the Offer or (vii) a change in general financial, bank or capital market
conditions which materially and adversely affects the ability of financial
institutions in the United States to extend credit or syndicate loans;
(h) THIRD PARTY OWNERSHIP. Any Third Party acquires beneficial ownership (as
defined in Rule 13d-3 promulgated under the Exchange Act), of at least 15% of
the outstanding Common Stock of the Company (other than any person not required
to file a Schedule 13D under the rules promulgated under the Exchange Act);
(i) STOCKHOLDERS AGREEMENT. The Stockholders Agreement shall no longer be in
full force and effect, or the Principal Stockholder shall have breached any
material obligation thereunder;
(j) OPTION AND PLEDGE AGREEMENTS. The Option Agreement and the Pledge
Agreement shall no longer be in full force and effect or the Company shall have
breached any material obligation thereunder;
35
<PAGE>
PROVIDED, HOWEVER, that if all other Conditions to the Offer shall have been
satisfied or waived, Parent and Purchaser shall consummate the Offer even if the
Condition referred to in this clause (j) is not satisfied;
(k) ESTOPPEL CERTIFICATES. Parent shall have received from each Landlord and
any overlandlord of each Landlord of the properties set forth in the schedules
to the Merger Agreement, an estoppel certificate in one of the forms annexed as
exhibits to the Merger Agreement; PROVIDED, HOWEVER, that in any case if the
Company or any of the Subsidiaries obtain any consents as a result of a default
to which Parent has consented, this Condition shall be waived as to such
property.
(l) DEED OF TRUST. With respect to the properties set forth in the schedules
to the Merger Agreement, Parent shall have received from each of the Company's
or its Subsidiaries' lenders whose loan is secured by a mortgage or deed of
trust encumbering any of such properties (each a "Mortgage Lender"), other than
any Mortgage Lender whose loan is in default or has gone into default with the
consent of Parent, a statement to the effect that to its knowledge no default
under its mortgage or deed of trust exists nor is such lender aware of the
occurrence or non-occurrence of any event which, with notice of the passage of
time, or both, would constitute such a default;
(m) TITLE INSTRUMENTS. Parent shall have promptly ordered and received from
the title company or companies it selects to report the condition of the title
to the properties set forth in the schedules to the Merger Agreement a
commitment for title instrument with premiums at ordinary rates showing that the
condition of title is such as represented by the Company in the Merger
Agreement;
(n) ENVIRONMENTAL ASSESSMENTS. Any environmental site assessment
commissioned by Parent with respect to any of the properties set forth in the
schedules to the Merger Agreement shall show that the representations with
respect to environmental representations set forth in the Merger Agreement are
true in all material respects; or
(o) CONSENTS. With respect to the properties set forth in the schedules to
the Merger Agreement, Parent shall have received consents to the change of
control contemplated by the consummation of the Offer and/or the Merger from (i)
each Landlord and any overlandlord of each Landlord whose consent to the Merger
is required by any Lease and (ii) each Mortgage Lender whose consent to the
Merger is required by applicable loan documents or whose loan would be in
default as a result of the Merger.
The foregoing Conditions are for the sole benefit of Parent and Purchaser
and may be asserted by Parent or Purchaser regardless of the circumstances
giving rise to any such Condition (other than a breach by Parent or Purchaser of
the Merger Agreement) and may be waived by Parent or Purchaser in whole or in
part, at any time and from time to time, in the sole discretion of Parent or
Purchaser. The failure by Parent or Purchaser at any time to exercise any of the
foregoing rights will not be deemed a waiver of any right and each right will be
deemed an ongoing right which may be asserted at any time and from time to time.
16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
GENERAL. Except as described in this Section 16, based upon a review of
publicly available filings by the Company with the SEC and other publicly
available information concerning the Company, neither Parent nor Purchaser is
aware of any regulatory permit that appears to be material to the business of
the Company and its subsidiaries, taken as a whole, that might be adversely
affected by the acquisition of Shares by Purchaser pursuant to the Offer, the
Merger or otherwise, except as set forth below, or of any approval or other
action by any governmental, administrative or regulatory agency or authority,
domestic or foreign, that would be required prior to the acquisition of Shares
by Purchaser pursuant to the Offer, the Merger or otherwise. Should any such
approval or other action be required, Purchaser currently contemplates that it
will be sought. While Purchaser does not currently intend to delay the
acceptance for payment of Shares tendered pursuant to the Offer pending the
outcome of any such matter, there can be no assurance that any such approval or
other action, if needed, would be obtained or would be obtained
36
<PAGE>
without substantial conditions, or that adverse consequences might not result to
the Company's business, or that certain parts of the business of the Company or
Parent might not have to be disposed of in the event that such approvals were
not obtained or any other actions were not taken. Purchaser's obligation under
the Offer to accept for payment and pay for Shares is subject to certain
conditions, including conditions relating to certain of the legal matters
discussed in this Section 16. See Section 15.
STATE TAKEOVER STATUTES. A number of states have adopted "takeover"
statutes that purport to apply to attempts to acquire corporations that are
incorporated in such states, or whose business operations have substantial
economic effects in such states, or which have substantial assets, security
holders, employees, principal executive offices or principal places of business
in such states. The Company conducts business in a number of states throughout
the United States, some of which have enacted "takeover" statutes. Except as
discussed herein, Purchaser does not know whether any of these statutes will, by
their terms, apply to the Offer, and has not complied with any such statutes. To
the extent that certain provisions of these statutes purport to apply to the
Offer, Purchaser believes that there may be reasonable bases for contesting such
statutes. If any person should seek to apply any state takeover statute,
Purchaser would take such action as then appears desirable, which action may
include challenging the validity or applicability of any such statute in
appropriate court proceedings. If it is asserted that one or more takeover
statutes apply to the Offer, and it is not determined by an appropriate court
that such statute or statutes do not apply or are invalid as applied to the
Offer, Purchaser might be required to file certain information with, or receive
approvals from, the relevant state authorities, and Purchaser might be unable to
purchase or pay for Shares tendered pursuant to the Offer, or be delayed in
continuing or consummating the Offer. In such case, Purchaser may not be
obligated to accept for payment, or pay for, Shares tendered. See Section 15.
ANTITRUST. Purchaser and Parent believe that the provisions of the HSR Act
are inapplicable to the acquisition of the Shares by Purchaser. While private
parties and state attorneys general may also bring legal action under the
antitrust laws in certain circumstances, based upon an examination of publicly
available information relating to the businesses in which Parent and the Company
are engaged, Parent and Purchaser believe that the acquisition of Shares by
Purchaser will not violate the antitrust laws. Nevertheless, there can be no
assurance that a challenge to the Offer or other acquisition of Shares by
Purchaser on antitrust grounds will not be made or, if such challenge is made,
of the result. See Section 15 for certain Conditions to the Offer, including
Conditions with respect to litigation and certain governmental actions.
RULE 13E-3; DISSENTERS' RIGHTS.
The SEC has adopted Rule 13e-3 under the Exchange Act, which is applicable
to certain "going private" transactions and which may under certain
circumstances be applicable to a business combination following the purchase of
Shares pursuant to the Offer in which Purchaser seeks to acquire the remaining
Shares not held by it. Purchaser believes, however, that if such a business
combination is consummated within one year of its purchase of Shares pursuant to
the Offer, Rule 13e-3 will not be applicable to it. Purchaser believes that if
such a business combination is not consummated within one year of its purchase
of Shares pursuant to the Offer, Rule 13e-3 will be applicable to it. Rule 13e-3
requires, among other things, that certain financial information concerning the
Company and certain information relating to the fairness of the proposed
transaction and the consideration offered to minority stockholders in such
transaction be filed with the SEC and disclosed to stockholders prior to
consummation of the transaction.
Holders of Shares do not have appraisal rights as a result of the Offer;
however, holders of Shares will have certain rights pursuant to the provisions
of Article 113 of the BCA upon consummation of the Merger including the right to
dissent and demand appraisal of their Shares. Under Article 113, dissenting
stockholders who comply with the applicable statutory procedures and cannot
resolve their dissension pursuant to Article 113, may be entitled to receive a
judicial determination of the fair value of their Shares and to receive payment
of such fair value in cash, together with a fair rate of interest, if any. Any
such judicial determination of the fair value of Shares could be based upon
factors other than, or in addition to, the price per Share to be paid in the
Merger or the market value of the Shares. The value so determined
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could be more or less than the price per Share paid in the Merger. The foregoing
summary of Article 113, does not purport to be complete and is qualified in its
entirety by reference to Article 113.
17. FEES AND EXPENSES
Purchaser has retained Jefferies & Company, Inc. to act as the Dealer
Manager and to provide certain financial advisory services in connection with
the proposed acquisition of the Company. In connection with such services,
Purchaser has agreed to pay Jefferies & Company, Inc. a fee of $125,000. Parent
and Purchaser jointly and severally will also reimburse Jefferies & Company,
Inc. for certain out-of-pocket expenses, including attorneys' fees. Parent and
Purchaser jointly and severally will also indemnify Jefferies & Company, Inc.
against certain liabilities and expenses in connection with the Offer, including
certain liabilities under the federal securities laws. In the ordinary course of
its business, Jefferies & Company, Inc. engages in securities trading,
market-making and brokerage activities and may, at any time, hold long or short
positions and may trade or otherwise effect transactions in securities of the
Company. Parent has from time to time retained Jefferies & Company, Inc. in the
past in connection with other transactions. Purchaser and Parent have retained
MacKenzie Partners, Inc. to act as the Information Agent and United States Trust
Company of New York to serve as the Depositary in connection with the Offer. The
Information Agent and the Depositary each will receive reasonable and customary
compensation for their services, be reimbursed for certain reasonable
out-of-pocket expenses and be indemnified against certain liabilities and
expenses in connection therewith, including certain liabilities and expenses
under the federal securities laws.
Neither Purchaser nor Parent will pay any fees or commissions to any broker
or dealer or other person or entity (other than as described in the preceding
paragraph) in connection with the solicitation of tenders of Shares pursuant to
the Offer. Brokers, dealers, banks and trust companies will be reimbursed by
Purchaser upon request for customary mailing and handling expenses incurred by
them in forwarding material to their customers.
18. MISCELLANEOUS
Purchaser is not aware of any jurisdiction in which the making of the Offer
is not in compliance with applicable law. If Purchaser becomes aware of any
jurisdiction in which the making of the Offer would not be in compliance with
applicable law, Purchaser will make a good faith effort to comply with any such
law. If, after such good faith effort, Purchaser cannot comply with any such
law, the Offer will not be made to (nor will tenders be accepted from or on
behalf of) the holders of Shares residing in such jurisdiction. In those
jurisdictions whose securities or blue sky laws require the Offer to be made by
a licensed broker or dealer, the Offer is being made on behalf of Purchaser by
one or more registered brokers or dealers which are licensed under the laws of
such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE OR
IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Purchaser and Parent have filed with the SEC the Tender Offer Statement on
Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act, together with
exhibits, furnishing certain additional information with respect to the Offer,
and may file amendments thereto. Such Schedule 14D-1 and any amendments thereto,
including exhibits, should be available for inspection and copies should be
obtainable in the manner set forth in Section 8 (except that such material will
not be available at the regional offices of the SEC).
Family Golf Centers, Inc.
Family Golf Acquisition, Inc.
December 31, 1997
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
The name, business address, present principal occupation or employment and
five-year employment history of each director and executive officer of Parent
and certain other information are set forth below. The address of each director
and officer is Family Golf Centers, Inc. (for purposes of this Schedule I,
"Parent" or "Family Golf"), 225 Broadhollow Road, Melville, New York 11747.
Unless otherwise indicated, each occupation set forth below an individual's name
refers to employment with Parent. All directors and executive officers listed
below are citizens of the United States. Unless otherwise indicated, each such
person has held his or her present occupation as set forth below, or has been an
executive officer of Parent, or the organization indicated, for the past five
years.
DIRECTORS OF PARENT
DOMINIC CHANG has been the Chairman of the Board, Chief Executive Officer
and President of Parent and its predecessors since 1991. From 1989 to 1992, Mr.
Chang was a Senior Vice President and Sector Executive for Corporate Real Estate
and General Services for The Bank of New York. He was responsible for the
acquisition, management and disposition of The Bank of New York's properties
worldwide, facilities design and construction, security and centralized
administrative services. Mr. Chang previously had over 15 years banking
experience with Bankers Trust and Irving Trust Company. He has a Masters Degree
in Industrial Engineering from New York University and a Bachelors Degree from
the State University of New York at Stonybrook.
JAMES GANLEY has been a director of Parent since 1994. From October 1988
until his retirement in 1990, Mr. Ganley was a Senior Executive Vice President
of The Bank of New York. Mr. Ganley was a member of the Senior Management
Steering Committee at The Bank of New York and was directly responsible for the
mergers of the systems, products and operations of The Bank of New York with
Irving Trust Company. Prior to 1988, Mr. Ganley had held various executive
positions at Irving Trust Company and was Group Executive responsible for
Banking Operation activities, which comprised 13 divisions. He was also a member
of Irving Trust Company's Senior Executive Management Committee. Mr. Ganley
received a Bachelors Degree in Economics from New York University and was a
participant in Harvard University's program for management development.
JIMMY C.M. HSU has been a director of Parent since 1994. From 1995 until
1996, Mr. Hsu was the Vice Chairman of Russ Berrie and Company, Inc. ("Russ
Berrie"), a New York Stock Exchange listed company which manufactures and
distributes toys and gifts to retail stores. Mr. Hsu joined Russ Berrie in 1979
as Vice President, Far East Operations. In 1987, he was appointed Senior Vice
President and Director of World-Wide Marketing of Russ Berrie. In 1991, he was
elected to the board of Russ Berrie and was appointed to the position of
Executive Vice President. In 1995, Mr. Hsu became Vice Chairman of Russ Berrie.
Mr. Hsu is currently an independent investor.
KRISHNAN P. THAMPI has been the Chief Financial Officer, Chief Operating
Officer, Executive Vice President, Assistant Secretary, and Treasurer of Parent
and its predecessors since 1992. He became a director of the Company in 1994.
From 1989 to 1992, he was a Senior Vice President for Administrative Services at
The Bank of New York. From 1988 to 1989, he was a Senior Vice President for
Systems Services at Irving Trust Company. He also performed controller and
personnel management functions while at Irving Trust Company. Mr. Thampi has a
Masters Degree in Business Administration from Columbia University and a
Bachelors Degree in Engineering from McGill University.
YUPIN WANG has been a director of Parent since 1994. Mr. Wang is currently
the President of W W International, a worldwide management consulting firm.
Prior to establishing W W International in 1992, Mr. Wang was a member of the
executive management team of International Business Machines Corp. ("IBM") from
1962 to 1992. He had held various positions at IBM, including Director of
Marketing Operations, Director of Marketing Strategy and Director of Customer
Satisfaction. As Director of
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Customer Satisfaction, he established IBM's Customer Satisfaction Management
System, which contributed to IBM Rochester winning the Malcolm Baldrige Award.
Mr. Wang received a Bachelors Degree in Economics from National Taiwan
University and Masters Degrees from Oklahoma State University and New York
University.
EXECUTIVE OFFICERS OF PARENT
DOMINIC CHANG (see above)
KRISHNAN P. THAMPI (see above)
RICHARD W. HASSLINGER joined Parent's predecessor in November 1992 as a Site
Manager and has been Senior Vice President--Regional Manager of Parent since
January 1995. From May 1992 to November 1992, he served as a consultant to
Parent. From May 1988 until May 1992, he was Vice President and Division Head
for Facilities Management at The Bank of New York. His responsibilities there
included leasing and acquisitions, design and construction, and property
management. From 1973 to 1988, he managed several operational activities at
Irving Trust Company. Mr. Hasslinger has a Bachelors Degree in Business
Administration from Hope College.
ROBERT J. KRAUSE joined Parent's predecessor in June 1993 and served as a
Site Manager until January 1995, when he became a Senior Vice
President--Regional Manager of Parent. From 1983 to 1993, Mr. Krause was Vice
President of Administrative Services for The Bank of New York. From 1978 to
1983, he held product development, marketing and strategic planning
responsibilities at Irving Trust Company. Mr. Krause has a Bachelors Degree in
Electrical Engineering from the University of Oklahoma.
WILLIAM A. SCHICKLER, III is a Senior Vice President of Parent and President
of The Practice Tee, Inc. ("TPT"), a subsidiary of Parent. Mr. Schickler is
responsible for Parent's operations in the West Coast Region. Prior to joining
TPT in 1992, Mr. Schickler was a founding general partner with The Waterford
Group, a partnership involved in the development and marketing of golf course
related real estate projects. Mr. Schickler is a certified public accountant and
holds a B.S. Degree in Business Administration.
PAMELA S. CHARLES joined Parent as Vice President, Secretary and General
Counsel in January 1997. From February 1994 until January 1997, she was an
associate at the law firm of Squadron, Ellenoff, Plesent & Sheinfeld, LLP where
she specialized in federal securities law, mergers and acquisitions. From 1987
to 1994, Ms. Charles was an associate at the law firm of Schulte, Roth & Zabel.
Ms. Charles has a law degree from Hofstra University School of Law and a
Bachelors degree from the State University of New York at Binghamton.
GARRETT J. KELLEHER, a certified public accountant, joined Parent's
predecessor in July 1993 as a Site Manager and served as Controller from January
1994 to June 1995. He has been the Vice President-- Finance since July 1995.
From 1980 to September 1990, Mr. Kelleher was Group Controller for Bank
Operations at The Bank of New York. He has held a variety of accounting and
financial management positions at The Bank of New York and previously in public
accounting. Mr. Kelleher acted as an independent consultant from September 1990
to July 1993. Mr. Kelleher has a Masters Degree in Finance from St. John's
University and a Bachelors Degree in Business Administration from Manhattan
College.
RODGER P. POTOCKI was the Northern District Director for Parent from
September 1994 until he was appointed Vice President Regional Manager, Northern
Region, in February 1995. From October 1979 to September 1994, he was Executive
Vice President of Oneida County Industrial Development Corporation, a non-profit
development corporation ("Oneida Industrial"). At Oneida Industrial, Mr. Potocki
was responsible for new investment and job creation projects in Oneida County,
New York, and implemented New York State's first direct loan fund for new
businesses. Previously, he served as Director of Planning and Development for
the City of Rome, New York. Mr. Potocki has a Masters Degree in Political
Science from the Graduate School of Public Affairs in Albany, New York and a
Bachelors Degree from Syracuse University.
MARGARET M. SANTORUFO joined Parent as Controller in June 1995. From January
1990, until she joined Parent in 1995, she was an audit supervisor with Richard
A. Eisner & Company, LLP. Ms. Santorufo received a Bachelors Degree in
Accounting from St. John's University.
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SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
The name of each director and executive officer of Purchaser are set forth
below. The present principal occupation or employment and five-year employment
history of such persons are set forth in Schedule I. The address of each
director and officer is Family Golf Acquisition, Inc., c/o Family Golf Centers,
Inc., 225 Broadhollow Road, Melville, New York 11747. Unless otherwise
indicated, each occupation set forth opposite an individual's name refers to
employment with Purchaser. All directors and executive officers listed below are
citizens of the United States.
DIRECTORS OF PURCHASER
Robert J. Krause--See Schedule I
Garrett J. Kelleher--See Schedule I
EXECUTIVE OFFICERS OF PURCHASER
Robert J. Krause, Chief Executive Officer and Senior Vice President--See
Schedule I
Garrett J. Kelleher, Vice President and Treasurer--See Schedule I
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The Letter of Transmittal, certificates for Shares and any other required
documents should be sent or delivered by each stockholder of the Company or his
broker, dealer, commercial bank or other nominee to the Depositary at one of its
addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS:
UNITED STATES TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY HAND UP TO 4:30 P.M.: BY OVERNIGHT COURIER AND BY BY REGISTERED OR CERTIFIED
HAND AFTER 4:30 P.M.: MAIL:
111 Broadway 770 Broadway Cooper Station
Lower Level 13th Floor P.O. Box 844
New York, NY 10006 New York, NY 10003 New York, NY 10276-0844
Attn: Corporate Trust Attn: Corporate Trust Attn: Corporate Trust
Services Services Services
</TABLE>
OTHER INFORMATION
<TABLE>
<CAPTION>
BY FACSIMILE: TELEPHONE NUMBERS:
<S> <C>
(212) 780-0592 (800) 548-6565
</TABLE>
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent at its telephone numbers and location
listed below. You may also contact your broker, dealer, commercial bank or trust
company or nominee for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE: (800) 322-2885
THE DEALER MANAGER FOR THE OFFER IS:
Jefferies & Company, Inc.
650 Fifth Avenue
New York, NY 10019
(212) 903-2550 (call collect)
<PAGE>
EXHIBIT (A)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
METROGOLF INCORPORATED
AT
$1.50 NET PER SHARE
PURSUANT TO THE OFFER TO PURCHASE
DATED DECEMBER 30, 1997
BY
FAMILY GOLF ACQUISITION, INC.
A WHOLLY-OWNED SUBSIDIARY
OF
FAMILY GOLF CENTERS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 PM, NEW YORK CITY TIME,
ON JANUARY 30, 1998, UNLESS EXTENDED.
This Letter of Transmittal, certificates for shares of the Common Stock, no
par value per share, of MetroGolf Incorporated ("Shares") and any other required
documents should be sent or delivered by each stockholder of the Company or his
broker, dealer, commercial bank or other nominee to the Depositary at one of its
addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS:
UNITED STATES TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY OVERNIGHT COURIER AND BY HAND
BY HAND UP TO 4:30 P.M.: AFTER 4:30 P.M.: BY REGISTERED OR CERTIFIED MAIL:
111 Broadway 770 Broadway, 13th Floor Cooper Station
Lower level New York, NY 10003 P.O. Box 844
New York, NY 10016 New York, NY 10276-0844
Attn: Corporate Trust Services Attn: Corporate Trust Services Attn: Corporate Trust Services
</TABLE>
OTHER INFORMATION
<TABLE>
<S> <C>
BY FACSIMILE: TELEPHONE NUMBERS:
(212) 780-0592 For information call
(800) 548-6565
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE,
WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER
OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS
COMPLETED.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DESCRIPTION OF SHARES TENDERED
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE CERTIFICATE(S) AND SHARE(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON TENDERED
SHARE CERTIFICATE(S) AND SHARE(S) TENDERED) (ATTACH ADDITIONAL LIST IF NECESSARY)
TOTAL
NUMBER
OF SHARES
SHARE REPRESENTED NUMBER
CERTIFICATE BY OF SHARES
NUMBER(S)* CERTIFICATES* TENDERED**
<S> <C> <C> <C>
TOTAL SHARES:
<CAPTION>
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share
Certificate delivered to the Depositary are being tendered hereby. See Instruction 4.
</TABLE>
2
<PAGE>
This Letter of Transmittal is to be completed by stockholders of MetroGolf
Incorporated either if certificates are to be forwarded herewith or if delivery
is to be made by book-entry transfer to the Depository's account at The
Depository Trust Company ("DTC") or the Philadelphia Depository Trust Company
("PDTC") (each, a "Book-Entry Transfer Facility" and collectively, the
"Book-Entry Transfer Facilities") pursuant to the procedures set forth in
Section 3 of the Offer to Purchase (as defined below).
Stockholders whose certificates evidencing Shares ("Share Certificates") are
not immediately available or who cannot deliver their Share Certificates and all
other documents required hereby to the Depositary prior to the Expiration Date
(as defined in Section 1 of the Offer to Purchase) or who cannot comply with the
book-entry transfer procedures on a timely basis must tender their Shares
according to the guaranteed delivery procedure set forth in Section 3 of the
Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY
TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY
/ / CHECK HERE, IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH ONE OF THE
BOOK-ENTRY TRANSFER FACILITIES, AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: __________________________________________
Check Box of Book-Entry Transfer Facility (Check one):
/ / The Depository Trust Company / / Philadelphia Depository Trust
Company
Account Number: _________________________________________________________
Transaction Code Number: ________________________________________________
/ / CHECK HERE, IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY SENT TO THE DEPOSITARY PRIOR TO THE DATE HEREOF,
AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s): _________________________________________
Window Ticket Number (if any): __________________________________________
Date of Execution of Notice of Guaranteed Delivery: _____________________
Name of Institution that Guaranteed Delivery: ___________________________
Check Box of Book-Entry Transfer Facility if Delivered by Book-Entry
Transfer (check one):
/ / The Depository Trust Company / / Philadelphia Depository Trust
Company
Account Number (if delivered by Book-Entry Transfer): ___________________
Transaction Code Number: ________________________________________________
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
3
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Family Golf Acquisition, Inc., a Colorado
corporation ("Purchaser") and a wholly-owned subsidiary of Family Golf Centers,
Inc., a Delaware corporation ("Parent"), the above-described shares of Common
Stock, no par value per share (collectively, the "Shares"), of MetroGolf
Incorporated, a Colorado corporation (the "Company"), at $1.50 per Share, net to
the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated December 31, 1997 (the
"Offer to Purchase"), receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which, as amended or supplemented from time to time,
together constitute the "Offer"). The undersigned understands that Purchaser
reserves the right to transfer or assign, in whole or in part from time to time
to Parent or one or more direct or indirect wholly-owned subsidiaries of Parent,
the right to purchase Shares tendered pursuant to the Offer.
Subject to and effective upon acceptance for payment of the Shares tendered
herewith in accordance with the terms and subject to the conditions of the
Offer, the undersigned hereby sells, assigns and transfers to, or upon the order
of, Purchaser all right, title and interest in and to all of the Shares that are
being tendered hereby and all other Shares or other securities or property
issued or issuable in respect thereof (such other Shares, securities or property
other than the Shares being referred to herein as the "Other Securities") and
irrevocably appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares and all Other
Securities with full power of substitution (such power of attorney being deemed
to be an irrevocable power coupled with an interest), to (a) deliver Share
Certificates evidencing such Shares and all Other Securities, or transfer
ownership of such Shares and all Other Securities on the account books
maintained by any of the Book-Entry Transfer Facilities, together, in either
case, with all accompanying evidences of transfer and authenticity, to or upon
the order of Purchaser, upon receipt by the Depositary, as the undersigned's
agent, of the purchase price (adjusted, if appropriate, as provided in the Offer
to Purchase), (b) present such Shares and all Other Securities for transfer on
the books of the Company, and (c) receive all benefits and otherwise exercise
all rights of beneficial ownership of such Shares and all Other Securities, all
in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints Parent, Purchaser, and each of
them or any other designees of Parent or Purchaser, the attorneys and proxies of
the undersigned, each with full power of substitution, to the full extent of the
undersigned's rights, including to exercise such voting and other rights as each
such attorney and proxy or his (or her) substitute shall, in his (or her) sole
discretion, deem proper, and otherwise act (including pursuant to written
consent), with respect to all of the Shares tendered hereby which have been
accepted for payment by Purchaser (and any and all Other Securities issued or
issuable in respect thereof) which the undersigned is entitled to vote at any
meeting of stockholders of the Company (whether annual or special and whether or
not an adjourned meeting), or written consent in lieu of such meeting, or
otherwise. This proxy and power of attorney is coupled with an interest in the
Shares tendered hereby and is irrevocable and is granted in consideration of,
and is effective upon, the acceptance for payment of such Shares by Purchaser in
accordance with the terms of the Offer. Such acceptance for payment shall,
without further action, revoke all prior proxies and consents granted by the
undersigned with respect to such Shares (and all Shares and other securities
issued in Other Securities in respect of such Shares), and no subsequent proxy
or power of attorney or written consent shall be given (and if given or
executed, shall be deemed not to be effective) with respect thereto by the
undersigned. Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon Purchaser's acceptance for
payment of such Shares, Purchaser is able to exercise full voting and other
rights with respect to such Shares (including voting at any meeting of
stockholders then scheduled or acting by written consent without a meeting).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby and all Other Securities, and that when such Shares are accepted for
payment by Purchaser, Purchaser will acquire good, marketable and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances, and that none of such Shares and Other Securities will be subject
to any adverse claim. The undersigned, upon request, shall execute and deliver
any signature guarantees or additional documents deemed by the Depositary or
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of the Shares tendered hereby and all Other Securities. In addition,
the undersigned shall promptly remit and transfer to the Depositary for the
account of Purchaser all Other Securities in respect of the Shares tendered
hereby, accompanied by appropriate documentation of transfer, and pending such
remittance or appropriate assurance thereof Purchaser shall be entitled to all
rights and privileges as owner of such Other Securities and may withhold the
entire purchase price or deduct from the purchase price the amount or value
thereof, as determined by Purchaser in its sole discretion.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned. Except as stated in
the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and Purchaser upon the terms and subject to the conditions of the Offer. The
undersigned recognizes that under certain circumstances set forth in the Offer
to Purchase, Purchaser may not be required to accept for payment any of the
Shares tendered hereby.
4
<PAGE>
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Share
Certificates evidencing Shares not tendered or not accepted for payment in the
name(s) of the registered holder(s) appearing under "Description of Shares
Tendered." Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price and/or return any
Share Certificates evidencing Shares not tendered or accepted for payment (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing under "Description of Shares Tendered." In the event that
both the Special Delivery Instructions and the Special Payment Instructions are
completed, please issue the check for the purchase price and/or return any Share
Certificates evidencing Shares not purchased (together with accompanying
documents as appropriate) in the name(s) of, and deliver said check and/or
return such Share Certificates to, the person or persons so indicated.
Stockholders tendering Shares by book-entry transfer may request that any Shares
not accepted for payment be returned by crediting such account maintained at DTC
or PDTC as such stockholder may designate by making an appropriate entry under
"Special Payment Instructions." The undersigned recognizes that Purchaser has no
obligation pursuant to the Special Payment Instructions to transfer any Share
from the name of the registered holder(s) thereof if Purchaser does not accept
for payment any of the Shares so tendered.
5
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6, AND 7)
To be completed ONLY if the check for the purchase price of Shares purchased or
Share Certificates evidencing Shares not tendered or not purchased are to be
issued in the name of someone other than the undersigned.
Issue
/ / Check and/or / / Certificate(s)
To:
________________________________________________________________________________
Name(s) (Please Print)
________________________________________________________________________________
________________________________________________________________________________
Address
________________________________________________________________________________
(Include Zip Code)
________________________________________________________________________________
(Taxpayer Identification or Social Security No.)
(See Substitute Form W-9)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if the check for the purchase price of Shares purchased or
Share Certificates evidencing Shares not tendered or not purchased are to be
mailed to someone other than the undersigned, or to the undersigned at an
address other than that shown under "Description of Shares Tendered."
Mail
/ / Check and/or / / Certificate(s)
To:
________________________________________________________________________________
Name(s) (Please Print)
________________________________________________________________________________
________________________________________________________________________________
Address
________________________________________________________________________________
(Include Zip Code)
/ / CHECK HERE IF ANY OF THE SHARE CERTIFICATES THAT YOU OWN AND WISH
TO TENDER HAVE BEEN LOST, DESTROYED OR STOLEN. (SEE INSTRUCTION 11.)
Number of Shares represented by lost, destroyed or stolen certificates:
6
<PAGE>
STOCKHOLDERS SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9)
______________________________________________________________________________
______________________________________________________________________________
SIGNATURE(S) OF STOCKHOLDER(S)
(Must be signed by registered holder(s) as name(s) appear(s) on share
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted
herewith. If signature is by trustee, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or any other person acting
in a fiduciary or representative capacity, please provide the following
information. See Instruction 5.)
PLEASE PRINT OR TYPE
Dated: _____________________ , 1998
Name(s): _____________________________________________________________________
______________________________________________________________________________
(PLEASE PRINT OR TYPE)
Capacity (Full Title) ________________________________________________________
Address ______________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and
Telephone Number (Home) ______________________________________________________
Area Code and
Telephone Number (Business) __________________________________________________
Tax Identification or
Social Security Number _______________________________________________________
(COMPLETE SUBSTITUTE FORM W-9 BELOW)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Authorized Signature _________________________________________________________
Name _________________________________________________________________________
(PLEASE PRINT OR TYPE)
Full Title ___________________________________________________________________
Name of Firm _________________________________________________________________
Address ______________________________________________________________________
______________________________________________________________________________
ZIP CODE
Area Code and
Telephone Number _____________________________________________________________
Dated: _____________________ , 1998
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a participant in the Medallion Signature Guarantee Program
or any other "eligible guarantor institution" as defined in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended (each, an "Eligible
Institution"), unless (i) this Letter of Transmittal is signed by the registered
holder(s) of Shares (which term, for the purposes of this document, shall
include any participant in a Book-Entry Transfer Facility whose name appears on
a security position listing as the owner of Shares) tendered hereby and such
holder(s) has (have) not completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" on this Letter
of Transmittal or (ii) such Shares are tendered for the account of an Eligible
Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed by stockholders
either if Share Certificates are to be forwarded herewith or if a tender of
Shares is to be made pursuant to the procedures for delivery by book-entry
transfer set forth in Section 3 of the Offer to Purchase. Share Certificates
evidencing all physically tendered Shares, or confirmation ("Book-Entry
Confirmation") of any book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility of Shares delivered by book-entry transfer as well
as a properly completed and duly executed Letter of Transmittal, must be
received by the Depositary, at one of the addresses set forth herein prior to
the Expiration Date (as defined in Section 1 of the Offer to Purchase). If Share
Certificates are forwarded to the Depositary in multiple deliveries, a properly
completed and duly executed Letter of Transmittal must accompany each such
delivery. Stockholders whose Share Certificates are not immediately available,
who cannot deliver their Share Certificates and all other required documents to
the Depositary prior to the Expiration Date or who cannot comply with the
book-entry transfer procedures on a timely basis may tender their Shares by
properly completing and duly executing a Notice of Guaranteed Delivery pursuant
to the guaranteed delivery procedure set forth in Section 3 of the Offer to
Purchase. Pursuant to such procedure, (i) such tender must be made by or through
an Eligible Institution, (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by Purchaser, must be
received by the Depositary prior to the Expiration Date and (iii) the Share
Certificates evidencing all physically tendered Shares (or Book-Entry
Confirmation with respect to such Shares), as well as a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Depositary within three NASDAQ trading days
after the date of execution of such Notice of Guaranteed Delivery, all as
provided in Section 3 of the Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARES AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, IT IS RECOMMENDED THAT SUCH CERTIFICATES AND DOCUMENTS BE SENT BY
REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted. All
tendering stockholders, by execution of this Letter of Transmittal (or facsimile
thereof), waive any right to receive any notice of the acceptance of their
Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the certificate numbers and/or the number of
Shares tendered should be listed on a separate signed schedule and attached
hereto.
4. PARTIAL TENDERS. (Not applicable to stockholders who tender by
book-entry transfer.) If fewer than all the Shares evidenced by any Share
Certificate submitted are to be tendered, fill in the number of Shares which are
to be tendered in the box entitled "Number of Shares Tendered." In such case,
new Share Certificate(s) evidencing the remainder of the Shares that were
evidenced by the old Share Certificate(s) will be sent to the registered holder,
unless otherwise provided in the appropriate box on this Letter of Transmittal
as soon as practicable after the Expiration Date. All Shares represented by
Share Certificates delivered to the Depositary will be deemed to have been
tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the Share Certificate(s) without alteration, enlargement
or any change whatsoever. If any of the Shares tendered hereby are held of
record by two or more persons, all such persons must sign this Letter of
Transmittal.
8
<PAGE>
If any tendered Shares are registered in different names on several Share
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of such Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares evidenced by Share Certificates listed and transmitted hereby, no
endorsements of Share Certificates or separate stock powers are required unless
payment is to be made to or Share Certificates evidencing Shares not tendered or
purchased are to be issued in the name of a person other than the registered
holder(s), in which case the Share Certificate(s) evidencing the Shares tendered
hereby must be endorsed or accompanied by appropriate stock powers, in either
case signed exactly as the name(s) of the registered holder(s) appear(s) on such
Share Certificate(s). Signatures on such certificates and stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name or names of
the registered holder or holders appear on the Share Certificate(s). Signatures
on such Share Certificate(s) or stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificates or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact, agent,
officer of a corporation or any person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority so to act must be
submitted.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6,
Purchaser will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of Shares to it or its order pursuant to the Offer. If,
however, payment of the purchase price is to be made to, or if Share
Certificates evidencing Shares not tendered or purchased are to be registered in
the name of, any person other than the registered holder(s), or if Share
Certificates evidencing tendered Shares are registered in the name of any person
other than the person(s) signing this Letter of Transmittal, the amount of any
stock transfer taxes (whether imposed on the registered holder(s) or such other
person) payable on account of the transfer to such person will be deducted from
the purchase price unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or any such Share Certificate is to be sent and/or any Share Certificates
are to be returned to someone other than the signer above, or to the signer
above but at an address other than that shown in the box entitled "Description
of Shares Tendered" on the first page hereof, the appropriate boxes on this
Letter of Transmittal should be completed. Stockholders tendering Shares by
book-entry transfer may request that Shares not purchased be credited to such
account maintained at any of the Book-Entry Transfer Facilities as such
stockholder may designate under "Special Delivery Instructions." If no such
instructions are given, any such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facilities designated above.
8. REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
may be directed to, or additional copies of the Offer to Purchase, this Letter
of Transmittal and the Notice of Guaranteed Delivery may be obtained from, the
Information Agent or the Dealer Manager at the telephone numbers and address set
forth below. Stockholders may also contact their broker, dealer, commercial bank
or trust company.
9. WAIVER OF CONDITIONS. Except as otherwise provided in the Offer to
Purchase, Purchaser reserves the right in its sole discretion to waive in whole
or in part at any time or from time to time any of the specified conditions of
the Offer or any defect or irregularity in tender with regard to any Shares
tendered.
9
<PAGE>
10. SUBSTITUTE FORM W-9. The tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN"), generally
the stockholder's Social Security Number or Employer Identification Number, on
Substitute Form W-9, which is provided under "Important Tax Information" below,
and to certify, under penalties of perjury, whether he or she is subject to
backup withholding of federal income tax. If a tendering stockholder is subject
to backup withholding, he or she must cross out item (2) of the Certification
Box on Substitute Form W-9. Failure to provide the information on Substitute
Form W-9 may subject the tendering stockholder to 31% federal income tax
withholding on the payment of the purchase price. If the tendering stockholder
has not been issued a TIN and has applied for a number or intends to apply for a
number in the near future, he or she should write "Applied For" in the space
provided for the TIN in Part I, sign and date the Substitute Form W-9 and sign
and date the Certificate of Awaiting Taxpayer Identification Number. If "Applied
For" is written in Part I and the Depositary is not provided with a TIN within
60 days, the Depositary will withhold 31% of payments for surrendered Shares
thereafter until a TIN is provided to the Depositary.
11. MUTILATED, LAST, STOLEN OR DESTROYED CERTIFICATES. Any holder of a
Share Certificate whose certificate(s) has been mutilated, lost, stolen or
destroyed should (i) complete this Letter of Transmittal and check the
appropriate box on this Letter of Transmittal and (ii) complete and return to
the Depositary any additional documentation, including the posting of any
indemnity bond, requested by the Depositary. If required by Purchaser, the
holder will be required to post a bond in such reasonable amount as Purchaser
may direct as indemnity against any claim that may be made against Parent,
Purchaser or any of their respective affiliates with respect to such
certificate(s).
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED, OR AN AGENT'S MESSAGE IN THE CASE OF A BOOK-ENTRY
DELIVERY, TOGETHER WITH CERTIFICATES (OR BOOK-ENTRY CONFIRMATION) AND ALL OTHER
REQUIRED DOCUMENTS OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE
EXPIRATION DATE.
10
<PAGE>
IMPORTANT TAX INFORMATION
Under federal tax law, a stockholder whose tendered Shares are accepted for
payment is required to provide the Depositary (as payor) with such stockholder's
correct TIN on Substitute Form W-9 below. If such stockholder is an individual,
the TIN is such stockholder's Social Security Number. If the Depositary is not
provided with the correct TIN or an adequate basis for exemption, the
stockholder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, payments that are made to such stockholder with respect to
Shares purchased pursuant to the Offer may be subject to backup withholding in
an amount equal to 31% of the gross proceeds resulting from the Offer.
Certain stockholders (including, among others, certain corporations and
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit an IRS Form W-8, signed under penalties
of perjury, attesting to that individual's exempt status. Such statements can be
obtained from the Depositary. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, it is applied as an amount paid, against the stockholder's current
annual federal income tax liability. If withholding results in an overpayment of
taxes, a refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of his or her correct TIN by completing the
Substitute Form W-9 contained herein, certifying that the TIN provided on the
Substitute Form W-9 is correct (or that such stockholder is awaiting a TIN) and
that (1) the stockholder is exempt from backup withholding, (2) the stockholder
has not been notified by the Internal Revenue Service that he or she is subject
to backup withholding as a result of failure to report all interest or
dividends, or (3) the Internal Revenue Service has notified the stockholder that
he or she is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the Social Security
Number or Employer Identification Number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidance on which number to report.
If the tendering stockholder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future, he or she should
write "Applied For" in the space provided for the TIN in Part I, sign and date
the Substitute Form W-9 and sign and date the Certificate of Awaiting Taxpayer
Identification Number. If "Applied For" is written in Part I and the Depositary
is not provided with a TIN within 60 days, the Depositary will withhold 31% of
all payments of the purchase price until a TIN is provided to the Depositary.
11
<PAGE>
<TABLE>
<S> <C> <C>
PAYOR'S NAME: UNITED STATES TRUST COMPANY OF NEW YORK, AS DEPOSITARY
SUBSTITUTE PART I--PLEASE PROVIDE YOUR TIN IN
FORM W-9 THE BOX AT RIGHT AND CERTIFY BY Social Security or
DEPARTMENT OF THE TREASURY SIGNING AND DATING BELOW. Employee Identification
INTERNAL REVENUE SERVICE Number
PAYOR'S REQUEST FOR NAME (Please Print)
TAXPAYER IDENTIFICATION (If awaiting TIN write
NUMBER (TIN) ADDRESS "Applied For")
AND CERTIFICATION
CITY STATE ZIP
CODE
PART II -- For Payees NOT subject to backup withholding, see
the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 and complete as
instructed therein. CERTIFICATION -- UNDER PENALTIES OF
PERJURY, I CERTIFY THAT:
1. The number shown on this form is my correct Taxpayer
Identification Number (or I am waiting for a number to be
issued to me), and
2. I am not subject to backup withholding because either (a)
I am exempt from backup withholding, (b) I have not been
notified by the Internal Revenue Service ("IRS") that I
am subject to backup withholding as a result of a failure
to report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup
withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2)
above if you have been notified by the IRS that you are
subject to backup withholding because of under-reporting
interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup
withholding you received another notification from the IRS
that you are no longer subject to backup withholding, do not
cross out item (2).
(Also see instructions in the enclosed Guidelines.)
Signature: Dated: , 1998
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE
THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN PART I OF
SUBSTITUTE FORM W-9.
<TABLE>
<C> <S>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed
or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social
Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number within sixty (60) days, 31% of all reportable payments made to me thereafter will be
withheld until I provide a number.
Signature(s): Dated:
</TABLE>
12
<PAGE>
The Letter of Transmittal, certificates for Shares and any other required
documents should be sent or delivered by each stockholder of the Company or his
broker, dealer, commercial bank or other nominee to the Depositary at one of its
addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS:
UNITED STATES TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY HAND UP TO 4:30 P.M.: BY OVERNIGHT COURIER AND BY HAND BY REGISTERED OR CERTIFIED MAIL:
111 Broadway AFTER 4:30 P.M.: Cooper Station
Lower level 770 Broadway, 13th Floor P.O. Box 844
New York, NY 10016 New York, NY 10003 New York, NY 10276-0844
Attn: Corporate Trust Services Attn: Corporate Trust Services Attn: Corporate Trust Services
</TABLE>
OTHER INFORMATION
<TABLE>
<S> <C>
BY FACSIMILE: TELEPHONE NUMBERS:
(212) 780-0592 For information call
(800) 548-6565
</TABLE>
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent at its telephone numbers and location
listed below. You may also contact your broker, dealer, commercial bank or trust
company or nominee for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL FREE: (800) 322-2885
THE DEALER MANAGER FOR THE OFFER IS:
Jefferies & Company, Inc.
650 Fifth Avenue
New York, NY 10019
(212) 903-2550 (Call Collect)
<PAGE>
EXHIBIT (A)(3)
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF SHARES OF COMMON STOCK
OF
METROGOLF INCORPORATED
TO
FAMILY GOLF ACQUISITION, INC.
A WHOLLY-OWNED SUBSIDIARY
OF
FAMILY GOLF CENTERS, INC.
As set forth in Section 3 of the Offer to Purchase (as defined below), this
form, or a form substantially equivalent to this form, must be used to accept
the Offer (as defined below) if the certificates representing shares of common
stock, no par value per share (collectively, the "Shares"), of MetroGolf
Incorporated are not immediately available or time will not permit all required
documents to reach the Depositary prior to the Expiration Date (as defined in
the Offer to Purchase) or the procedures for book-entry transfer cannot be
completed on a timely basis. Such form may be delivered by hand or transmitted
by facsimile transmission or mail to the Depositary and must include a guarantee
by an Eligible Institution (as defined in Section 3 of the Offer to Purchase).
See Section 3 of the Offer to Purchase.
If a stockholder desires to tender Shares pursuant to the Offer and such
stockholder's Stock Certificates are not immediately available or time will not
permit all required documents to reach the Depositary on or prior to the
Expiration Date, or the procedure for book-entry transfer cannot be completed on
a timely basis, such Shares may nevertheless be tendered if all the following
conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by Purchaser, is received by the Depositary
prior to the Expiration Date as provided below; and
(iii) the Stock Certificates for such Shares, in proper form for transfer
(or a Book-Entry Confirmation (as defined in Section 3 of the Offer to
Purchase)), together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), any required signature guarantees (or in the
case of a book-entry transfer, an Agent's Message (as defined in Section 3 of
the Offer to Purchase)) and any other documents required by the Letter of
Transmittal, are received by the Depositary within three trading days after the
date of execution of the Notice of Guaranteed Delivery. A "trading day" is any
day on which the NASDAQ Smallcap Market is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mailed to the Depositary and must include a guarantee
by an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS, INCLUDING THROUGH BOOK-ENTRY TRANSFER FACILITIES, IS AT THE
OPTION AND RISK OF THE TENDERING STOCKHOLDER AND DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
<PAGE>
THE DEPOSITARY FOR THE OFFER IS:
UNITED STATES TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
BY OVERNIGHT COURIER AND BY BY REGISTERED OR CERTIFIED
BY HAND UP TO 4:30 P.M.: HAND AFTER 4:30 P.M.: MAIL:
<S> <C> <C>
111 Broadway 770 Broadway 13th Floor Cooper Station
Lower level New York, NY 10003 P.O. Box 844
New York, NY 10006 New York, NY 10276-0844
Attn: Corporate Trust Attn: Corporate Trust Attn: Corporate Trust
Services Services Services
</TABLE>
OTHER INFORMATION
<TABLE>
<CAPTION>
BY FACSIMILE: TELEPHONE NUMBERS:
<S> <C>
(212) 780-0592 For information call
(800) 548-6565
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER
THAN AS LISTED ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Family Golf Acquisition, Inc., a Colorado
corporation and a wholly-owned subsidiary of Family Golf Centers, Inc., a
Delaware corporation, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated December 31, 1997 (the "Offer to Purchase") and the
related Letter of Transmittal (which, as amended or supplemented from time to
time, together constitute the "Offer"), receipt of which is hereby acknowledged,
the number of Shares indicated below pursuant to the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase.
Number of Shares: ______________________________________________________________
Share Certificate Numbers (if available):
________________________________________________________________________________
________________________________________________________________________________
If Shares will be delivered by book-entry transfer, check one box:
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company
Account Number: ________________________________________________________________
Dated: ___________________________________________________________________, 1998
Name(s) of Record Holder(s): ___________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Please Type or Print
Address(es): ___________________________________________________________________
________________________________________________________________________________
Zip Code
Area Code and Telephone Number:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Signature(s)
Dated: ___________________________________________________________________, 1998
3
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a participant in the Medallion Signature Guarantee Program
or any other "eligible guarantor institution" as defined in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended (each, an "Eligible
Institution"), hereby guarantees that either the certificates representing the
Shares tendered hereby in proper form for transfer, or timely confirmation of a
book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company or Philadelphia Depository Trust Company (pursuant to
procedures set forth in Section 3 of the Offer to Purchase), together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees (or, in the case of a book-entry
transfer, an Agent's Message (as defined in the Offer to Purchase)) and any
other documents required by the Letter of Transmittal, will be received by the
Depositary at one of its addresses set forth above within three (3) NASDAQ
trading days after the date of execution hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal,
certificates for Shares and any other required documents to the Depositary
within the time period shown herein. Failure to do so could result in a
financial loss to such Eligible Institution.
Name of Firm: ________________________________________________________________
Address: _____________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Zip Code
Area Code and
Telephone Number: ____________________________________________________________
AUTHORIZED SIGNATURE
Name: ________________________________________________________________________
Please Type or Print
Title: _______________________________________________________________________
Dated: _________________________________________________________________, 1998
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES ARE TO BE DELIVERED WITH THE LETTER OF
TRANSMITTAL.
4
<PAGE>
EXHIBIT (A)(4)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
METROGOLF INCORPORATED
BY
FAMILY GOLF ACQUISITION, INC.
A WHOLLY-OWNED SUBSIDIARY
OF
FAMILY GOLF CENTERS, INC.
AT
$1.50 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
JANUARY 30, 1998, UNLESS THE OFFER IS EXTENDED.
December 31, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Family Golf Acquisition, Inc., a Colorado
corporation ("Purchaser") and a wholly-owned subsidiary of Family Golf Centers,
Inc., a Delaware corporation ("Parent"), to act as Dealer Manager in connection
with its offer to purchase all outstanding shares of common stock, no par value
per share (collectively, the "Shares"), of MetroGolf Incorporated, a Colorado
corporation (the "Company"), at $1.50 per Share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in the
Purchaser's Offer to Purchase dated December 31, 1997 (the "Offer to Purchase")
and in the related Letter of Transmittal (which, as amended or supplemented from
time to time, together constitute the "Offer"), copies of which are enclosed
herewith.
For your information and for forwarding to your clients for whose accounts
you hold Shares registered in your name or in the name of your nominee, we are
enclosing the following documents:
1. Offer to Purchase;
2. Letter of Transmittal for your use and for the information of your
clients, together with Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 providing information relating to backup federal
income tax withholding,
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents cannot be delivered to the Depositary by
the Expiration Date (as defined in the Offer to Purchase);
4. A form of letter which may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee, with space
provided for obtaining such clients' instructions with regard to the Offer;
5. Solicitation/Recommendation Statement on Schedule 14D-9 issued by the
Company; and
6. A return envelope addressed to United States Trust Company of New York,
as the Depositary.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of December 23, 1997 (the "Merger Agreement"), by and among Parent, Purchaser
and the Company. The Merger Agreement provides that, among other things,
following the consummation of the Offer and the satisfaction or waiver of the
other conditions set forth in the Merger Agreement, Purchaser will be merged
with and into the Company (the "Merger"). At the effective time of the Merger,
each outstanding Share (other than Shares owned directly or indirectly by the
Company or any held by stockholders who perfect their
<PAGE>
dissenters' rights under Colorado law) will be converted into the right to
receive the per Share price paid in the Offer, without interest.
The Board of Directors of the Company has, by the unanimous vote of all
directors, approved the Merger Agreement, the Offer and the Merger, has
determined that the Offer and the Merger are fair to and in the best interests
of the stockholders of the Company and recommends that stockholders accept the
Offer and approve the Merger.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), Purchaser will be deemed to have accepted for payment, and will pay
for, all Shares validly tendered and not properly withdrawn by the Expiration
Date (as defined in the Offer to Purchase) if, as and when the Purchaser gives
oral or written notice to the Depositary of the Purchaser's acceptance of the
tenders of such Shares for payment pursuant to the Offer. Payment for Shares
purchased pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) certificates evidencing such Shares or timely confirmation of
a book-entry transfer of such Shares into the Depositary's account at one of the
Book-Entry Transfer Facilities (as defined in the Offer to Purchase), (ii) a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) or, in the case of a book-entry transfer, Agent's Message (as defined
in the Offer to Purchase) and (iii) any other documents required by the Letter
of Transmittal.
In order to tender Shares pursuant to the Offer, a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message (in the case of any book-entry
transfer), and any other documents required by the Letter of Transmittal, should
be sent to the Depositary, and either certificates representing the tendered
Shares should be delivered or such Shares must be delivered to the Depositary
pursuant to the procedures for book-entry transfers, all in accordance with the
instructions set forth in the Letter of Transmittal and the Offer to Purchase.
If holders of Shares wish to tender their Shares, but it is impracticable
for them to deliver their certificates on or prior to the Expiration Date or to
comply with the book-entry transfer procedures on a timely basis, a tender may
be effected by following the guaranteed delivery procedures specified in Section
3 of the Offer to Purchase.
Neither Parent nor Purchaser will pay any fees or commissions to any broker,
dealer or other person (other than the Dealer Manager, the Information Agent and
the Depositary as described in the Offer to Purchase) in connection with the
solicitation of tenders of Shares pursuant to the Offer. Purchaser will,
however, upon request, reimburse brokers, dealers, commercial banks and trust
companies for reasonable expenses incurred by them in forwarding materials to
their customers. Purchaser will pay all stock transfer taxes applicable to its
purchase of Shares pursuant to the Offer, subject to Instruction 6 of the Letter
of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON JANUARY 30, 1998, UNLESS THE OFFER IS EXTENDED.
Any inquiries you may have with respect to the Offer may be addressed to the
Information Agent or the undersigned at the addresses and telephone numbers set
forth on the back cover page of the Offer to Purchase. Requests for additional
copies of the enclosed materials may be directed to the Information Agent or the
Dealer Manager.
Very truly yours,
Jefferies & Company, Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR
ANY PERSON THE AGENT OF PURCHASER, PARENT, THE COMPANY, ANY AFFILIATE OF THE
COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS
ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
<PAGE>
EXHIBIT (A)(5)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
METROGOLF INCORPORATED
AT
$1.50 NET PER SHARE
BY
FAMILY GOLF ACQUISITION, INC.
A WHOLLY-OWNED SUBSIDIARY OF
FAMILY GOLF CENTERS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
JANUARY 30, 1998, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated December 30,
1997 (the "Offer to Purchase") and the related Letter of Transmittal (which, as
amended or supplemented from time to time, together constitute the "Offer") and
other materials relating to the Offer by Family Golf Acquisition, Inc., a
Colorado corporation ("Purchaser") and a wholly-owned subsidiary of Family Golf
Centers, Inc., a Delaware corporation ("Parent"), to purchase all of the
outstanding shares of common stock, no par value per share (collectively, the
"Shares"), of MetroGolf Incorporated, a Colorado corporation (the "Company"), at
$1.50 per Share, net to the seller in cash, without interest, upon the terms and
subject to the conditions set forth in the Offer. Also enclosed is the letter to
stockholders of the Company from the Chairman of the Board and President of the
Company accompanied by the Company's Solicitation/ Recommendation Statement on
Schedule 14D-9. This material is being sent to you as the beneficial owner of
Shares held by us for your account but not registered in your name. A tender of
such Shares can be made only by us as the holder of record and pursuant to your
instructions. The Letter of Transmittal accompanying this letter is furnished to
you for your information only and cannot be used by you to tender Shares held by
us for your account.
We request instructions as to whether you wish to have us tender any or all
of the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer.
Your attention is directed to the following:
1. The tender price is $1.50 per Share, net to the seller in cash, without
interest, upon the terms and subject to the conditions of the Offer.
2. The Offer and withdrawal rights will expire at 5:00 P.M., New York City
time, on January 30, 1998, unless the Offer is extended.
3. The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of December 23, 1997 (the "Merger Agreement"), by and among Parent,
Purchaser and the Company. The Merger Agreement provides that, among other
things, following the consummation of the Offer and the satisfaction or waiver
of the other conditions set forth in the Merger Agreement, Purchaser will be
merged with and into the Company (the "Merger"). At the effective time of the
Merger, each outstanding Share (other than Shares owned directly or indirectly
by the Company or any held by stockholders who perfect their dissenters' rights
under Colorado law) will be converted into the right to receive the per Share
price paid in the Offer, without interest.
<PAGE>
4. The Board of Directors of the Company has, by the unanimous vote of all
directors, approved the Merger Agreement, the Offer and the Merger, has
determined that the Offer and the Merger are fair to and in the best interests
of the stockholders of the Company and recommends that stockholders accept the
Offer and approve the Merger.
5. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer, that number of
Shares which, together with any Shares beneficially owned by Parent, represent
at least a majority of the Shares outstanding on a fully-diluted basis,
excluding (a) Shares underlying any options, warrants, convertible notes or
contract rights with an exercise price per share of $2.00 or greater and (b)
Shares underlying options or warrants if the holders thereof have agreed (i) not
to exercise or convert such options or warrants prior to the consummation of the
Offer and (ii) to vote in favor of the Merger if such options or warrants are
exercised or converted following the consummation of the Offer (the "Minimum
Tender Condition"). Subject to the terms of the Merger Agreement, the Offer is
also subject to other terms and conditions, set forth in the Offer to Purchase.
6. Any stock transfer taxes applicable to the sale of Shares to Purchaser
pursuant to the Offer will be paid by Purchaser, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
In order to tender Shares pursuant to the Offer, a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or (in the case of any book-entry transfer) an Agent's
Message (as defined in the Offer to Purchase) and any other documents required
by the Letter of Transmittal, should be sent to United States Trust Company of
New York, the Depositary, and either certificates representing the tendered
Shares should be delivered or such Shares must be delivered to the Depositary
pursuant to the procedures for book-entry transfers, all in accordance with the
instructions set forth in the Letter of Transmittal and the Offer to Purchase.
The Offer is being made to all holders of Shares. The Offer is not being
made to, nor will tenders be accepted from or on behalf of, holders of Shares in
any jurisdiction in which the making of the Offer or acceptance thereof would
not be in compliance with the laws of such jurisdiction. In any jurisdiction
where the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of
Purchaser by Jefferies & Company, Inc. or one or more registered brokers or
dealers licensed under the laws of such jurisdictions.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing and returning to us the
instruction form set forth below. Please forward your instructions to us in
ample time to permit us to submit a tender on your behalf prior to the
expiration of the Offer. If you authorize the tender of your Shares, all such
Shares will be tendered unless otherwise specified on the instruction form set
forth below.
<PAGE>
INSTRUCTIONS WITH RESPECT TO
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
METROGOLF INCORPORATED
BY
FAMILY GOLF ACQUISITION, INC.
A WHOLLY-OWNED SUBSIDIARY
OF
FAMILY GOLF CENTERS, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated December 31, 1997 and the related Letter of Transmittal, in
connection with the offer by Family Golf Acquisition, Inc., a Colorado
corporation and a wholly-owned subsidiary of Family Golf Centers, Inc., a
Delaware corporation, to purchase for cash all outstanding shares of common
stock, no par value per share (collectively, the "Shares"), of MetroGolf
Incorporated, a Colorado corporation.
This will instruct you to tender the number of Shares indicated below (or if
no number is indicated below, all Shares) that are held by you for the account
of the undersigned, upon the terms and subject to the conditions set forth in
the Offer and the related Letter of Transmittal.
DATED: , 1998
NUMBER OF SHARES TO BE TENDERED:
___________________ SHARES*
______________________________________________________________________________
SIGNATURE(S)
______________________________________________________________________________
PLEASE PRINT NAME(S)
______________________________________________________________________________
PLEASE PRINT ADDRESS(ES)
______________________________________________________________________________
AREA CODE AND TELEPHONE NUMBER(S)
______________________________________________________________________________
TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S)
--------------------------
* I (WE) UNDERSTAND THAT IF I (WE) SIGN THIS INSTRUCTION FORM WITHOUT
INDICATING A LESSER NUMBER OF SHARES IN THE SPACE ABOVE, ALL SHARES HELD
BY YOU FOR MY (OUR) ACCOUNT WILL BE TENDERED.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- -----------------------------------------------------
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------
<S> <C> <C>
1. An individual's The individual
account
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds, the
first individual on
the account(1)
3. Custodian account of The minor(2)
a minor (Uniform
Gift to Minors Act)
4. a. The usual The
revocable savings grantor-trustee(1)
trust (grantor is
also trustee)
b. So-called trust
account that is The actual owner(1)
not a legal or
valid trust under
state law.
5. Sole proprietorship The owner(3)
6. A valid trust, The legal entity (Do
estate, or pension not furnish the
trust identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated in
the account
title.)(4)
- -----------------------------------------------------
<CAPTION>
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
<S> <C> <C>
- -----------------------------------------------------
7. Corporate account The corporation
8. Religious, The organization
charitable, or
educational
organization account
9. Partnership account The partnership
10. Association, club, The organization
or other tax-exempt
organization
11. A broker or The broker or
registered nominee nominee
12. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
state or local
government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
- ---------------------------------------------
- ---------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has an SSN, that person's number must be
furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show your individual name. You may also enter your business or "doing
business as" name. You may use either your social security number or your
employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name listed, the number
will be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
Note: Section references are to the Internal Revenue Code unless otherwise
noted.
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service (the "IRS") and apply for a
number.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in
items (1) through (13) and a person registered under the Investment Advisors Act
of 1940 who regularly acts as a broker are exempt. Payments subject to reporting
under sections 6041 and 6041A are generally exempt from backup withholding only
if made to payees described in items (1) through (7), except a corporation
(other than certain hospitals described in Regulations section 1.6041-3(c)) that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (1) through (5) are exempt from backup
withholding for barter exchange transactions and patronage dividends.
(1) An organization exempt from tax under section 501(a), or an IRA, or a
custodial account under section 403(b)(7), if the account satisfies the
requirements of section 401(f)(2).
(2) The United States or any of its agencies or instrumentalities.
(3) A state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities.
(4) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(5) An international organization or any of its agencies or instrumentalities.
(6) A corporation.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States, the District of Columbia or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures Trading
Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the Investment
Company Act of 1940
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries, Inc.,
Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends that generally are exempt from
backup withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident alien partner.
- - Payments of patronage dividends not paid in money.
- - Payments made by certain foreign organizations.
- - Section 404(k) payments made by an ESOP.
Payments of interest that generally are exempt from backup withholding include
the following:
- - Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payor.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Payments of mortgage interest to you.
Exempt payees described above should file substitute Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND
DATE THE FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NON-RESIDENT ALIEN OR A
FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED
INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045,
6049, 6050A and 6050N and the regulations promulgated thereunder.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payors
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must generally withhold 31% of taxable interest,
dividend, and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your correct taxpayer identification number to a requester, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
Companies - Portfolio (FGCI Article) Page 1
MetroGolf to be Acquired by Business Wire
Family Golf
December 24, 1997 9:53 AM EST
[LOGO]
MELVILLE, NY--(BUSINESS WIRE)--Dec. 24, 1997--Family
Golf Centers, Inc. (NASDAQ, NM: FGCI) and MetroGolf
Incorporated (NASDAQ: MGLF, BSE: MGO), announced today
the execution of definitive agreements pursuant to which
a subsidiary of Family Golf will commence a cash tender
offer for all of the outstanding shares of the Company's
Common Stock at a purchase price of $1.50 per share
some time next week. The offer will be subject to
customary conditions, including the tender of a
minimum of 51% of the Company's shares on a fully
diluted basis (subject to certain exceptions), certain
regulatory and contractual approvals and certain other
conditions. Following consummation of the offer,
the agreements contemplate a merger to acquire the
remaining shares at the same $1.50 per share price.
MetroGolf's Board of Directors unanimously approved the
agreement and recommends that stockholders tender
their shares. In connection with such approval and
recommendation, the Board obtained the opinion of its
financial advisor to the effect that, as of the date
of the definitive agreements and subject to the manner
set forth therein, the cash consideration to be
received by the MetroGolf stockholders, in the offer
and the merger, is fair to such Stockholders from a
financial point of view.
Mr. Charles D. Tourtellotte, Chairman and CEO
MetroGolf, stated that: "We are pleased to announce
the acquisition of our Company by Family Golf at what
we believe to be a fair price for our shareholders."
MetroGolf Incorporated operates 8 golf facilities in
major metropolitan locations. Family Golf owns,
operates or is constructing 57 golf-related facilities
in 18 states.
-c- Business Wire. All rights reserved.
<PAGE>
MetroGolf Tender Offer Filed by
Family Golf
December 31, 1997
[LOGO]
MELVILLE, NY--Dec. 31, 1997--Family Golf Centers, Inc.
(NASDAQ, NM: FGCI) announced today that it has filed
the necessary documents with the Securities and
Exchange Commission in connection with the
commencement of a cash tender offer by its subsidiary
Family Golf Acquisition, Inc. for all of the
outstanding shares of the Common Stock of MetroGolf
Incorporated (NASDAQ: MGLF, BSE: MGO), at a purchase
price of $1.50 per share.
The offer is subject to customary conditions, including
the tender of a least a majority of MetroGolf's shares
on a fully diluted basis (subject to certain exceptions),
certain contractual approvals and certain other
conditions. Following consummation of the offer, Family
Golf and MetroGolf contemplate a merger for Family Golf
to acquire the remaining shares of MetroGolf at the same
$1.50 per share price. Definitive agreements relating
to these transactions were executed on December 23,
1997 and announced by MetroGolf on December 24, 1997.
The Offer to Purchase is in the process of being
mailed to stockholders of record of the Company.
MetroGolf's Board of Directors unanimously approved the
tender offer and recommends that stockholders tender
their shares.
Family Golf owns, operates or is constructing 57
golf-related facilities in 18 states.
<PAGE>
Exhibit 99(c)(1)
AGREEMENT AND PLAN OF MERGER
by and among
FAMILY GOLF CENTERS, INC.
FAMILY GOLF Acquisition, INC.
and
METROGOLF INCORPORATED
December 23, 1997
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TABLE OF CONTENTS
Page
ARTICLE I
THE OFFER................................................................. 1
Section 1.01. The Offer.................................................. 1
Section 1.02. Company Actions............................................ 3
ARTICLE II
THE MERGER................................................................ 5
Section 2.01. The Merger Closing......................................... 5
Section 2.02. The Merger................................................. 5
Section 2.03. Certain Effects of the Merger.............................. 5
Section 2.04. Corporate Organization..................................... 5
Section 2.05. Conversion of Shares....................................... 6
Section 2.06. Dissenting Shares.......................................... 6
Section 2.07. Exchange of Certificates................................... 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MGI..................................... 8
Section 3.01. Organization and Good Standing............................. 8
Section 3.02. Foreign Qualification...................................... 8
Section 3.03. Capitalization............................................. 8
Section 3.04. Authority of MGI........................................... 10
Section 3.05. No Conflict; Required Filings and Consents................. 10
Section 3.06. SEC Reports................................................ 11
Section 3.07. Title to Property.......................................... 12
Section 3.08. Compliance with Law........................................ 14
Section 3.09. Litigation................................................. 15
Section 3.10. Taxes...................................................... 15
Section 3.11. Insurance.................................................. 17
Section 3.12. Material Contracts; Debt Instruments....................... 17
Section 3.13. Employment Agreements...................................... 20
Section 3.14. Intellectual Property...................................... 20
Section 3.15. Employees and Related Agreements: ERISA.................... 20
Section 3.16. Absence of Certain Changes or Events....................... 25
Section 3.17. Finder's Fee............................................... 26
Section 3.18. Environmental Matters...................................... 26
Section 3.19. Employment Relations; Compliance........................... 29
Section 3.20. Indemnification of Employees, Etc.......................... 29
Section 3.21. Labor Relations............................................ 29
Section 3.22. Board Recommendation....................................... 29
<PAGE>
Section 3.23. Opinion of Financial Advisor............................... 30
Section 3.24. Related Party Transactions................................. 30
Section 3.25. Schedule 14D-9, Offer Documents and Schedule 14D-1......... 30
Section 3.26. Charter Documents.......................................... 30
Section 3.27. Full Disclosure............................................ 31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION.................. 31
Section 4.01. Organization and Good Standing............................. 31
Section 4.02. Authority of Parent and Acquisition........................ 31
Section 4.03. No Conflict; Required Filings and Consents................. 31
Section 4.04. Finder's Fees.............................................. 32
ARTICLE V
COVENANTS................................................................. 32
Section 5.01. No Solicitation............................................ 32
Section 5.02. Interim Operations......................................... 34
Section 5.03. Stockholder Approval....................................... 35
Section 5.04. Access by Acquisition...................................... 37
Section 5.05. Government Filings; Hart Scott Rodino Filing............... 38
Section 5.06. No Breach of Representations and Warranties................ 38
Section 5.07. Consents; Notices.......................................... 38
Section 5.08. Reasonable Efforts......................................... 39
Section 5.09. Indemnification; Directors' and Officers' Insurance........ 39
Section 5.10. Options.................................................... 40
Section 5.11. Directors.................................................. 42
Section 5.12. Notification of Certain Matters............................ 42
Section 5.13. Fees and Expenses.......................................... 43
Section 5.14. Certain Litigation......................................... 43
Section 5.15. Insurance.................................................. 44
Section 5.16. Purchase Agreements........................................ 44
ARTICLE VI
CONDITIONS TO PARENT'S AND ACQUISITION'S OBLIGATIONS...................... 44
Section 6.01. Injunctions................................................ 44
Section 6.02. Stockholder Approval....................................... 44
Section 6.03. Consummation of the Offer.................................. 45
Section 6.04. Representations and Warranties............................. 45
Section 6.05. HSR Approvals.............................................. 45
Section 6.06. Employment Agreements...................................... 45
ARTICLE VII
CONDITIONS TO MGI'S OBLIGATIONS........................................... 45
Section 7.01. Injunctions................................................ 45
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<PAGE>
Section 7.02. Stockholder Approval....................................... 45
Section 7.03. Consummation of the Offer.................................. 45
Section 7.04. HSR Approvals.............................................. 45
ARTICLE VIII
TERMINATION............................................................... 46
Section 8.01. Termination................................................ 46
Section 8.02. Effect of Termination...................................... 47
ARTICLE IX
MISCELLANEOUS............................................................. 47
Section 9.01. Amendment.................................................. 47
Section 9.02. Extension: Waiver.......................................... 47
Section 9.03. Non-Survival............................................... 48
Section 9.04. Further Assurances......................................... 48
Section 9.05. Entire Agreement........................................... 48
Section 9.06. Notices.................................................... 48
Section 9.07. Successors and Assigns..................................... 49
Section 9.08. Governing Law.............................................. 49
Section 9.09. Gender and Person.......................................... 49
Section 9.10. Captions................................................... 49
Section 9.11. Confidentiality of Disclosures............................. 50
Section 9.12. Publicity.................................................. 50
Section 9.13. Third Parties.............................................. 50
Section 9.14. Counterparts............................................... 50
Section 9.15. Interpretation............................................. 50
Section 9.16. Enforcement................................................ 51
Exhibit A
Conditions of the Offer................................................... 53
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated December 23, 1997, among FAMILY GOLF
CENTERS, INC. ("Parent"), a Delaware corporation, FAMILY GOLF Acquisition,
INC. ("Acquisition"), a Colorado corporation and a wholly-owned subsidiary of
Parent, and METROGOLF INCORPORATED ("MGI" or the "Company"), a Colorado
corporation.
WHEREAS, the respective Boards of Directors of Parent, Acquisition and
MGI deem it to be desirable and in the best interests of their respective
companies and stockholders to consummate the business transactions provided
for herein and have approved such transactions;
WHEREAS, in the furtherance of such transactions, Acquisition shall make
a tender offer (as it may be amended from time to time as permitted
hereunder, the "Offer") to purchase all the issued and outstanding shares of
common stock, without par value (the "Common Stock"), of MGI, at a price per
share of $1.50, upon the terms and subject to the conditions of this
Agreement; and the Board of Directors of MGI has adopted resolutions
approving the Offer and Merger (as hereinafter defined) and recommending that
the Company's stockholders accept the Offer; and
WHEREAS, the respective Boards of Directors of Acquisition, Parent and
MGI have approved the merger of Acquisition with and into MGI, following
consummation of the Offer as set forth below (the "Merger"), upon the terms
and subject to the conditions of this Agreement, whereby each issued and
outstanding share of Common Stock of MGI not owned directly or indirectly by
Acquisition, except shares of Common Stock held by persons who object to the
Merger and comply with all the provisions of Colorado law concerning the
right of holders of Common Stock to dissent from the Merger and require
appraisal of their shares of Common Stock, will be converted into the right
to receive the per share consideration paid pursuant to the Offer;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
THE OFFER
Section 1.01. The Offer. (a) Subject to the provisions of this
Agreement, as promptly as practicable but in no event later than five
business days after the public announcement of the execution of this
Agreement, Acquisition shall commence the Offer. The obligation of
Acquisition to consummate the Offer and accept for payment, and pay for, any
shares of Common Stock (the "MGI Shares" and each holder thereof, a "MGI
Stockholder") tendered pursuant to the Offer shall be subject to the
conditions set forth in Exhibit A (any of which may be waived by Acquisition
in its sole discretion). Acquisition expressly reserves the right to modify
the terms of the Offer, except that, without the consent of MGI, Acquisition
shall not (i) reduce the number of MGI Shares subject to the Offer, (ii)
reduce the price per MGI Share to be paid pursuant to the Offer, (iii) add to
the conditions set forth in Exhibit A, (iv) except as
1
<PAGE>
provided in this Section 1.01(a) below, extend the Offer, (v) change the form
of consideration payable in the Offer, or (vi) make any other change in the
terms of the Offer adverse to the MGI Stockholders. The initial expiration
date of the Offer shall be the date this is 20 business days after the date
that the Offer has been commenced. Acquisition may extend the Offer in
accordance with applicable law, but if the conditions set forth in Exhibit A
are satisfied as of the then scheduled expiration date of the Offer, the
Offer may be extended only with the prior written consent of MGI or as
required by law. Notwithstanding the foregoing, Acquisition may, without the
consent of MGI, (A) extend the Offer, if at the scheduled or extended
expiration date of the Offer any of the Offer Conditions shall not be
satisfied or waived, until such time as such conditions are satisfied or
waived; provided, however, that Acquisition shall not extend the Offer later
than June 30, 1998 pursuant to this clause (A) without MGI's prior written
consent, (B) extend the Offer for any period required by any rule,
regulation, interpretation or position of the Securities and Exchange
Commission (the "SEC" or the "Commission") or the staff thereof applicable to
the Offer, (C) extend the Offer from time to time until two business days
after the expiration of the waiting period under the HSR Act (as defined in
Section 3.05 below), if applicable, and (D) extend the Offer for a period not
to exceed 15 business days, notwithstanding that all conditions to the Offer
are satisfied as of such expiration date of the Offer, if, immediately prior
to such expiration date (as it may be extended), the MGI Shares tendered and
not withdrawn pursuant to the Offer equal less than 90%, but more than 75%,
of the outstanding MGI Shares (on a fully-diluted basis). Subject to the
conditions set forth in this Agreement, Acquisition shall pay for all MGI
Shares validly tendered and not withdrawn pursuant to the Offer promptly
after the expiration of the Offer.
(b) Parent shall provide or cause to be provided to Acquisition on
a timely basis the funds necessary to accept for payment, and pay for, any
MGI Shares that Acquisition becomes obligated to accept for payment, and pay
for, pursuant to the Offer.
(c) MGI will not, nor will it permit any of its Subsidiaries (as
defined below) to, tender into the Offer any MGI Shares beneficially owned by
it. For purposes of this Section 1.01 only, "Subsidiaries" means, as to any
Person (as defined below): (i) any corporation of which at least a majority
of the outstanding shares of stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such
corporation (other than stock having such voting power solely by reason of
the happening of any contingency) is at the time directly or indirectly
owned or controlled by such Person and/or one or more of the Subsidiaries;
(ii) any limited liability company, partnership or joint venture in which
such Person or Subsidiary of such Person is a managing member, general
partner or joint venturer or of which a majority of the partnership or other
ownership interests are at the time owned by such Person and/or one or more
of the Subsidiaries; or (iii) any entity which is controlled (as hereinafter
defined) by such Person or any of the Subsidiaries. For all other purposes
of this Agreement, "Subsidiaries" shall have the meaning therefor set forth
in Article III hereof. For purposes of this Agreement, (A) "Person" means
any individual, corporation, company, voluntary association, limited
liability company, partnership, joint venture, trust, unincorporated
organization or other entity and (B) "control" (including, with correlative
meanings, "controlled by" and "under common control with") means possession,
directly or
2
<PAGE>
indirectly, of power to direct or cause the direction of the management or
policies of a Person (whether through the ownership of securities or
partnership or other ownership interests, by contract or otherwise).
(d) On the date of commencement of the Offer, Parent and
Acquisition shall file with the SEC a Tender Offer Statement on Schedule
14D-1 with respect to the Offer, which shall contain an offer to purchase and
a related letter of transmittal and summary advertisement (such Schedule
14D-1 and the documents therein pursuant to which the Offer will be made,
together with any supplements or amendments thereof, the "Offer Documents").
The Offer Documents shall be consistent with this Agreement, shall add no
conditions to the consummation of the Offer not set forth in Exhibit A and
shall add no provisions to the Offer adverse to the MGI Stockholders. The
Offer Documents shall comply as to form in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated thereunder, and on
the date first published, sent or given to the MGI Stockholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation is made by Parent or
Acquisition with respect to information supplied by MGI or any of its
representatives, agents or stockholders for inclusion or incorporation by
reference in the Offer Documents. Each of Parent, Acquisition and MGI agrees
promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that such information shall have become false
or misleading in any material respect, and Parent and Acquisition further
agree to take all steps necessary to cause the Offer Documents as so
corrected to be filed with the Commission and to be disseminated to the MGI
Stockholders, in each case as and to the extent required by applicable
Federal securities laws. Acquisition shall afford MGI and its counsel a
reasonable opportunity to review and comment on the Offer Documents prior to
the filing of the respective Offer Documents with the Commission.
Acquisition agrees to provide MGI and its counsel in writing with any
comments Acquisition or its counsel may receive from the Commission or its
staff with respect to the Offer Documents promptly after the receipt of such
comments.
(e) All amounts payable pursuant to the Offer and the Merger may
be paid net of amounts required to be deducted and withheld with respect to
the making of such payment under the Internal Revenue Code of 1986, as
amended (the "Code"), or under any provision of state, local or foreign tax
law. To the extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the MGI
Stockholder in respect of which such deduction and withholding was made.
Section 1.02. Company Actions. (a) MGI hereby approves of and
consents to the Offer and represents that (i) the Board of Directors of MGI
(the "Board" or "Board of Directors"), at a meeting duly called and held, has
duly adopted resolutions approving the execution, delivery and performance of
this Agreement, the Offer and the Merger, determining that the price and
terms of the Offer and Merger are fair to, adequate and in the best interests
of, MGI and the MGI stockholders and recommending that the MGI stockholders
accept the Offer, tender their MGI
3
<PAGE>
Shares pursuant to the Offer and approve and adopt this Agreement; (ii) such
approval constitutes Board approval of the Offer, this Agreement and the
transactions contemplated hereby, including the Merger, for purposes of
Section 7-111-101 of the Colorado Business Corporation Act, as amended (the
"BCA"); and (iii) Houlihan Lokey Howard & Zukin (the "Financial Advisor")
has delivered to the Board its opinion (the "Fairness Opinion") to the effect
that, as of the date of this Agreement and based upon and subject to the
matters set forth therein, the cash consideration to be received by the MGI
Stockholders, in the Offer and the Merger, is fair to such MGI Stockholders
from a financial point of view.
(b) At the time the Offer Documents are filed with the SEC, MGI
shall file with the Commission a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended
from time to time, the "Schedule 14D-9") containing the recommendations
described in paragraph (a) and shall mail the Schedule 14D-9 to the MGI
Stockholders. The Schedule 14D-9 shall comply as to form in all material
respects with the requirements of the Exchange Act and, on the date filed
with the Commission and on the date first published, sent or given to the MGI
Stockholders, shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that no representation is made
by MGI with respect to information supplied by Parent or Acquisition,
expressly for inclusion or incorporation by reference in the Schedule 14D-9.
Each of MGI, Parent and Acquisition agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if and to the extent
that such information shall have become false or misleading in any material
respect, and MGI further agrees to take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the Commission and
disseminated to the MGI Stockholders, in each case as and to the extent
required by applicable Federal securities laws. MGI shall afford Parent and
Acquisition and their counsel a reasonable opportunity to review and comment
on the Schedule 14D-9 prior to its filing with the SEC. MGI agrees to
provide Parent and Acquisition and their counsel in writing with any comments
MGI or its counsel may receive from the Commission or its staff with respect
to the Schedule 14D-9 promptly after the receipt of such comments.
Section 1.03. Stockholder Lists. In connection with the Offer and the
Merger, MGI will furnish, or cause its transfer agent to furnish, Acquisition
with mailing labels containing the names and addresses of the record holders
of MGI Shares as of a recent date and of those persons becoming record
holders subsequent to such date, together with copies of all lists of
stockholders, security position listings and computer files and all other
information in MGI's possession or control regarding the beneficial owners of
MGI Shares, and information concerning outstanding options, warrants and
other rights to acquire MGI Common Stock and shall furnish to Acquisition
such information and assistance (including updated lists of stockholders,
security position listings and computer files) as Parent may reasonably
request in communicating the Offer to MGI's Stockholders. Subject to the
requirements of applicable law and stock exchange rules, and except for such
steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, Parent, Acquisition and their
agents shall hold in confidence the information contained in any such labels,
listings
4
<PAGE>
and files, will use such information only in connection with the Offer and
the Merger and, if this Agreement shall be terminated, will deliver to MGI
all copies of such information in their possession.
ARTICLE II
THE MERGER
Section 2.01. The Merger Closing. Upon the terms and subject to the
conditions of this Agreement, the closing (the "Closing") of the Merger shall
take place at 10:00 A.M., on the third business day after the fulfillment of
the conditions specified in Sections 6.02 and 7.02 hereof, at the offices of
Squadron, Ellenoff, Plesent & Sheinfeld LLP, 551 Fifth Avenue, New York, New
York 10176, or at such other time, date and place as may be agreed upon in
writing by Parent and MGI. The date on which the Closing shall take place is
referred to as the "Closing Date" and the time on the Closing Date when the
Closing shall take place is referred to as the "Closing Time," MGI, Parent
and Acquisition shall use their respective best efforts to cause the Merger
to be consummated at the earliest practicable time after consummation of the
Offer.
Section 2.02. The Merger. Upon the terms and subject to the conditions
of this Agreement and in accordance with the BCA, at the Effective Time (as
hereinafter defined), Acquisition shall be merged with and into MGI. MGI
shall continue its existence as the surviving corporation (the "Surviving
Corporation") in the Merger and the separate corporate existence of
Acquisition shall terminate at the Effective Time (as hereinafter defined).
The Merger shall become effective at such time as a duly prepared and
executed articles of merger or other appropriate documents (collectively, the
"Articles of Merger"), in form and substance reasonably satisfactory to
Parent and MGI, providing for the merger of Acquisition with and into MGI, is
filed with the Secretary of State of the State of Colorado in accordance with
the relevant provisions of the BCA (the "Effective Time"). The Articles of
Merger and all other filings or recordings required under the BCA shall be
filed as soon as practicable after the Closing Time.
Section 2.03. Certain Effects of the Merger. At the Effective Time,
the Surviving Corporation shall thereafter, consistently with its articles
of incorporation as altered by the Merger, possess all the rights,
privileges, immunities, powers and purposes, and assume and be liable for all
the liabilities, obligations and penalties, of each of Acquisition and MGI
(sometimes hereinafter referred to as the "Constituent Corporations"); and
all property, real and personal, causes of action and every other asset of
each of the Constituent Corporations shall vest in the Surviving Corporation
without further act or deed. The directors and officers of Acquisition
immediately prior to the Effective Time shall be, from and after the
Effective Time, the directors and officers of the Surviving Corporation until
their successors have been duly elected or appointed and qualified, or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and By-laws.
Section 2.04. Corporate Organization. The Articles of Incorporation
and By-laws of MGI at the Effective Time shall be the Articles of
Incorporation and By-laws, respectively, of the Surviving Corporation after
the Effective Time.
5
<PAGE>
Section 2.05. Conversion of Shares. (a) At the Effective Time,
subject to Section 2.06, each issued and outstanding MGI Share, immediately
prior to the Effective Time (other than the Dissenting Shares) shall, by
reason of the Merger and without any action by the holders thereof, be
converted into the right to receive $1.50 per share in cash (the "Merger
Consideration"), without interest.
(b) Each share of the capital stock of Acquisition issued and
outstanding immediately prior to the Effective Time shall be converted into
one fully paid and nonassessable share of common stock, without par value, of
the Surviving Corporation.
Section 2.06. Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the contrary,
any MGI Shares which are outstanding immediately prior to the Effective Time
and which are held by MGI Stockholders who shall not have voted such MGI
Shares in favor of the Merger or consented thereto in writing and who shall
have filed with MGI a written objection to the Merger and a demand for
payment of such MGI Shares in accordance with the BCA ("Dissenting Shares")
shall not be converted into the right to receive, or be exchangeable for, the
Merger Consideration, but, instead, such MGI Stockholders shall be entitled
only to such rights as are granted by Article 113 of the BCA with respect to
Dissenting Shares held by them in accordance with the provisions of the BCA,
except that all Dissenting Shares held by MGI Stockholders who shall have
failed to perfect or who effectively shall have withdrawn or lost their
rights to appraisal of such Dissenting Shares under the BCA shall thereupon
be deemed to have been converted into and to have become exchangeable for, as
of the Effective Time, the right to receive the Merger Consideration, without
any interest thereon, upon surrender, in the manner provided in Section 2.07,
of the certificate or certificates that formerly evidenced such MGI Shares.
(b) MGI shall give Acquisition (i) prompt notice of any demands
for appraisal received by MGI, withdrawals of such demands and any other
instruments served pursuant to the BCA and received by MGI and (ii) the
opportunity to participate in and direct all negotiations and proceedings
with respect to demands for appraisal under the BCA. MGI shall not, except
with the prior written consent of Acquisition, make any payment with respect
to any demands for appraisal or offer to settle or settle or otherwise
negotiate any such demands.
Section 2.07. Exchange of Certificates
(a) Prior to the Effective Time, Parent shall designate a bank or trust
company reasonably acceptable to MGI to act as paying agent in the Merger
(the "Paying Agent"), and, from time to time on, prior to or after the
Effective Time, Parent shall make available, or cause the Surviving
Corporation to make available, to the Paying Agent funds in amounts and at
the times necessary for the payment of the Merger Consideration upon
surrender of certificates
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representing MGI Shares (it being understood that any and all interest earned
on funds made available to the Paying Agent pursuant to this Agreement shall
be turned over to Parent).
(b) As soon as reasonably practicable after the Effective Time,
the Paying Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented MGI
Shares (the "Certificates"), (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in a form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for the Merger Consideration. Upon surrender
of a Certificate for cancellation to the Paying Agent or to such other agent
or agents as may be appointed by Parent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Paying Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration into which
the MGI Shares theretofore represented by such Certificate shall have been
converted pursuant to Section 2.05, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of MGI Shares
that is not registered in the transfer records of MGI, payment may be made to
a person other than the person in whose name the Certificate so surrendered
is registered, if such Certificate shall be properly endorsed or otherwise be
in proper form for transfer and the person requesting such payment shall pay
any transfer or other taxes required by reason of the payment to a person
other than the registered holder of such Certificate or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is
not applicable. Until surrendered as contemplated by this Section 2.07, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration,
without interest, into which the MGI Shares theretofore represented by such
Certificate shall have been converted pursuant to Section 2.05. No interest
will be paid or will accrue on the Merger Consideration payable upon the
surrender of any Certificate.
(c) All Merger Consideration paid upon the surrender of
Certificates in accordance with the terms of this Article II shall be deemed
to have been paid in full satisfaction of all rights pertaining to the MGI
Shares theretofore represented by such Certificates. At the Effective Time,
the stock transfer books of MGI shall be closed, and there shall be no
further registration of transfers on the stock transfer books of the
Surviving Corporation of the MGI Shares that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation or the Paying Agent for any reason,
they shall be canceled and exchanged as provided in this Article II.
(d) At any time following six months after the Effective Time, the
Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any funds (including any interest received with respect thereto) which had
been made available to the Paying Agent and which have not been disbursed to
holders of Certificates, and thereafter such holders shall be entitled to look
to the Surviving Corporation (subject to abandoned property, escheat or other
similar laws) only as general creditors thereof with respect to the Merger
Consideration payable upon due surrender of their Certificates, without any
interest thereon. Notwithstanding the
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foregoing, neither the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a Certificate for Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MGI
MGI represents and warrants to Parent and Acquisition that:
Section 3.01. Organization and Good Standing. Each of MGI and the
Subsidiaries (as hereinafter defined) is a corporation, limited liability
company or limited partnership duly organized, validly existing and in good
standing under the laws of their respective jurisdictions of incorporation or
organization, and each has the requisite power and authority to own, lease
and operate all of the properties and assets owned or leased by it and to
carry on its business as it is now being conducted.
Section 3.02. Foreign Qualification. Each of MGI and the Subsidiaries
is duly licensed or qualified to do business as a foreign corporation,
limited liability company or limited partnership and is in good standing in
each jurisdiction in which its ownership or leasing of property or the
conduct of its business requires such qualification, except for jurisdictions
in which the failure to become so qualified or to be in good standing would
not individually or in the aggregate have a MGI Material Adverse Effect. As
used herein, "MGI Material Adverse Effect" means any event, occurrence or
condition which has or would be reasonably likely to (i) have a material
adverse effect on the business, properties, assets, liabilities, results of
operations or financial condition of MGI and the Subsidiaries taken as a
whole or (ii) materially impair the ability of MGI to perform its obligations
under this Agreement, or to consummate the transactions contemplated herein.
Section 3.03. Capitalization. (a) MGI is authorized to issue (i)
50,000,000 MGI Shares, (A) 4,434,607 of which are issued and outstanding as
of the date hereof, (B) 1,019,931 of which are reserved for issuance upon the
exercise of outstanding warrants, (C) 667,500 of which are reserved for
issuance upon the exercise of outstanding options, (D) 86,997 (plus an
indeterminate number of shares in connection with the Rocky Point and Solano
transactions and the Hitters' Haven lease) of which are reserved for issuance
pursuant to certain contracts and rights set forth in Schedule 3.03, and (E)
3,198,386 (plus (x) an indeterminate number of shares reserved for issuance
upon conversion of accrued interest on such notes and (y) 83,035 shares that
will be issuable per month commencing January 1, 1998 if a registration
statement with respect to certain shares is not in effect by such date) of
which are reserved for issuance pursuant to the convertible notes set forth
on Schedule 3.03, and (ii) 1,000,000 Preferred Shares, none of which are
issued or outstanding as of the date hereof. The capitalization of MGI is set
forth on Schedule 3.03, provided that up to an additional 175,000 MGI Shares
may be issuable pursuant to the terms of certain agreements. There are no
other series or classes of capital stock of MGI authorized to be issued, and
there are no other shares of outstanding capital stock of MGI.
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(b) There are no issued or outstanding bonds, debentures, notes or
other indebtedness of MGI or any of the Subsidiaries which, without
conversion thereof by their terms entitle the holders thereof to the right
to vote on any matters on which MGI Stockholders may vote ("Voting Debt").
Except as set forth in Schedule 3.03, neither MGI nor any Subsidiary is a
party to any outstanding or authorized subscriptions, convertible securities,
warrants, options, contracts, rights (preemptive or otherwise), calls,
commitments or demands of any kind or character relating to any authorized
and issued or unissued shares of capital stock of MGI or any of the
Subsidiaries, including, without limitation, MGI Shares, or outstanding
securities, obligations, rights, bonds, debentures, notes or other
instruments convertible into or exchangeable for such stock, which obligate
MGI to seek authorization to issue, deliver or sell or cause to be issued,
delivered or sold any additional MGI Shares or MGI Preferred Shares or any
other capital stock or Voting Debt of MGI or any securities convertible into,
or exercisable or exchangeable for, or evidencing the right to subscribe for
any such shares, interests or Voting Debt or obligating MGI to grant, extend
or enter into any such option, warrant, call, subscription or other right.
Except as set forth in Schedule 3.03, immediately after the Effective Time,
there will be no subscriptions, options, warrants, calls, rights, commitments
or agreements which will entitle (conditionally or unconditionally) any
person or entity to purchase or otherwise acquire, or will obligate
(conditionally or unconditionally) the Surviving Corporation (as MGI's
successor) to sell, issue or deliver any shares of capital stock, any other
equity interest or any Voting Debt of the Surviving Corporation or obligating
the Surviving Corporation to grant, extend or enter into any such
subscription, warrant, call, right, commitment or agreement. Except as set
forth in Schedule 3.03, MGI has not adopted, authorized or assumed any plans,
arrangements or practices for the benefit of its officers, employees or
directors which require or permit the issuance, sale, purchase or grant of
any capital stock, other equity interests or Voting Debt of MGI, any options,
warrants or other securities convertible into, or exercisable or exchangeable
for, any such stock, interests or Voting Debt or any phantom shares, phantom
equity interests or stock or equity appreciation rights.
(c) All of the outstanding MGI Shares have been duly authorized
and validly issued, are fully paid and nonassessable, and, as of the date
hereof, a total of 4,446,607 MGI Shares have been listed for trading on the
Boston Stock Exchange and the NASDAQ Smallcap Market. None of the MGI Shares
is subject to or has been issued in violation of any preemptive rights nor
have any MGI Shares been issued in violation of the Securities Act or the
securities or "blue sky" laws of any state or territory of the United States
of America.
(d) Except as set forth in Schedule 3.03, MGI does not own any
shares of stock or any other securities of any corporation or have any
interest in any other Person. All of the outstanding shares of capital stock
or ownership interest of each corporation, partnership or other organization,
whether incorporated or unincorporated, which is consolidated with MGI for
financial reporting purposes (a "Subsidiary") (i) have been duly authorized
and validly issued, (ii) in the case of each corporation, are fully paid and
nonassessable, (iii) are owned, directly or indirectly, by MGI, free and
clear of any mortgage, charge, pledge, lien, security interest, claim,
encumbrance or restriction, of any kind or nature (other than any pledges or
grants in favor of Parent), and (iv) are not subject to, nor have they been
issued in violation of, any preemptive
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rights. Except for those granted in favor of Parent, there are no
outstanding or authorized subscriptions, warrants, options, contracts, rights
(preemptive or otherwise), calls, commitments or demands of any character to
which MGI or any Subsidiary is a party that, directly or indirectly, (i) call
for or relate to the sale, pledge, transfer or other disposition by MGI or
any Subsidiary of any shares of capital stock, any partnership or other
equity interests, or any Voting Debt of any Subsidiary or (ii) relate to the
voting or control of such capital stock, partnership or other equity
interests or Voting Debt. Except as contemplated by this Agreement, there
are no stockholder agreements, voting trusts or other agreements or
understandings to which MGI is a party or by which it is bound relating to
the voting of or any other rights in or to, any shares of the capital stock
of MGI which will limit in any way the tender and purchase of the MGI Shares
pursuant to the Offer, or the solicitation of proxies by or on behalf of MGI
from, or the casting of votes by, the MGI Stockholders with respect to the
Merger. There are no restrictions on the right of MGI to vote the stock of,
or any other equity interest in, any of the Subsidiaries.
Section 3.04. Authority of MGI. MGI has all requisite corporate power
and authority to execute and deliver the Operative Agreements (as hereinafter
defined) and all other documents hereby or thereby contemplated, to
consummate the transactions hereby and thereby contemplated and to take all
other actions required to be taken by it and them pursuant to the provisions
hereof and thereof. The execution, delivery and performance of, and
consummation of the transactions contemplated by, the Operative Agreements
and all other documents hereby or thereby contemplated have been duly
authorized by MGI's Board of Directors and, except for approval of this
Agreement and the transactions contemplated hereby by the holders of
outstanding MGI Shares, no other corporate proceedings on the part of MGI are
necessary to authorize the Operative Agreements and the transactions
contemplated hereby or thereby. The Operative Agreements constitute and, on
the Closing Date, the Articles of Merger and all other documents hereby
contemplated to be executed by MGI will constitute, legal, valid and binding
obligations of MGI, enforceable against it in accordance with their
respective terms. The note, dated as of even date herewith, in the principal
amount of $500,000 by MGI to Parent; the Option Agreement ("Option
Agreement"), dated as of even date herewith, between Parent and MGI; the
Pledge Agreement (the "Pledge Agreement"), dated as of even date herewith,
between Parent and MGI; and the Escrow Agreement (the "Escrow Agreement"),
dated as of even date herewith, among Parent, MGI and United States Trust
Company of New York (the "Escrow Agent"), are collectively referred to in
this Agreement as the "Operative Agreements."
Section 3.05. No Conflict; Required Filings and Consents. (a) Except
as set forth on Schedule 3.05, the execution and delivery of the Operative
Agreements by MGI do not, and the performance by MGI of its obligations
hereunder and thereunder, and the consummation by MGI of the transactions
contemplated hereby or thereby, will not, (i) violate the Articles of
Incorporation or By-laws of MGI or any similar organization document of any
of the Subsidiaries, (ii) subject to making the filings and obtaining the
approvals identified in Section 3.05(b), violate any law, rule, regulation,
order, judgment or decree applicable to MGI or any of the Subsidiaries or by
which any property or asset of MGI or any of the Subsidiaries is bound or
affected, or (iii) subject to making the filings and obtaining the approvals
identified in Section 3.05(b), result in any breach of or constitute a
default (or an event which with notice or lapse of
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time or both would become a default) under, result in the loss of a benefit
under, or give to others any right of purchase or sale, or any right of
termination, amendment, acceleration, increased payments or cancellation of,
or result in the creation of a lien on any property or asset of MGI or any of
the Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which MGI or any of the Subsidiaries is a party or by which MGI
or any of the Subsidiaries or any property or asset of MGI or any of the
Subsidiaries is bound or affected (any such conflict, violation, breach,
default or other occurrence, a "Violation").
(b) The execution and delivery of the Operative Agreements and all
other documents contemplated hereby or thereby by MGI do not, and the
performance of the Operative Agreements and such other documents and the
consummation by MGI of the transactions contemplated hereby or thereby will
not, (i) require any consent, approval, authorization or permit of, or filing
with or notification to, any court, administrative agency or commission or
other governmental or regulatory authority, domestic or foreign (each a
"Governmental Authority"), except as set forth in Schedule 3.05 and except
for (A) applicable requirements, if any, of the Exchange Act, (B) the
pre-merger notification requirement, if any, of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act"), and (c) filing and recordation of appropriate
merger and similar documents as required by Colorado; or (ii) require any
consent by or approval of (a "Contract Consent") or notice to (a "Contract
Notice") any other person or entity (other than a Governmental Authority),
under any contract or otherwise.
Section 3.06. SEC Reports. Since its incorporation, MGI has filed all
required forms, reports and documents with the SEC (the "SEC Reports")
required to be filed by it pursuant to the Federal securities laws and the
rules and regulations thereunder, all of which have complied in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), the Exchange Act and the rules and
regulations promulgated thereunder. Except as set forth in Schedule 3.06
hereof, as of their respective dates of filing in final or definitive form
(or, if amended or superseded by a subsequent filing, then on the date of
such subsequent filing), none of the SEC Reports of MGI, including, without
limitation, any financial statements or schedules included therein, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not
misleading. Except as set forth in Schedule 3.06 hereof, the financial
statements (including the related notes) included in the SEC Reports of MGI
complied as to form in all material respects with the published rules and
regulations of the Commission with respect thereto, were prepared in
accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved, except as otherwise noted
therein or, in the case of the unaudited financial statements, as permitted
by the applicable rules and regulations of the Commission and fairly
presented in all material respects in accordance with applicable requirements
of GAAP (subject, in the case of the unaudited statements, to year-end audit
adjustments, as permitted by Rule 10-01, and any other adjustments described
therein) the consolidated financial position of MGI and its consolidated
Subsidiaries as of their respective
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dates and the consolidated results of operations and the consolidated cash
flows of MGI and its consolidated Subsidiaries for the periods presented
therein. Except as and to the extent set forth or disclosed in the
consolidated balance sheet of MGI as of September 30, 1997 (the "Last
Balance Sheet") or as set forth on Schedule 3.06, (i) at September 30, 1997,
neither MGI nor any Subsidiary had any material liabilities, absolute,
accrued or contingent, required by GAAP to be reflected on a balance sheet of
MGI or the notes thereto, and (ii) since September 30, 1997, MGI has not
incurred any liabilities (absolute, accrued or contingent) which are required
by GAAP, to be reflected on a balance sheet of MGI and which individually or
in the aggregate, would have a MGI Material Adverse Effect, except
liabilities incurred in the ordinary course of business.
Section 3.07. Title to Property. (a) Schedule 3.07 sets forth a list
of all real property owned in fee by MGI and/or the Subsidiaries
(individually, an "Owned Property" and, collectively, the "Owned
Properties"). Except as set forth on Schedule 3.07, either MGI and/or a
Subsidiary has good and marketable fee title to each Owned Property,
including the buildings, structures and other improvements located thereon,
in each case free and clear of all mortgages, liens, claims, charges,
security interests, easements, restrictive covenants, rights-of-way, leases,
purchase agreements, options and other encumbrances and agreements ("Liens"),
except for (i) Liens for taxes and other governmental charges, assessments or
fees which are not yet due and payable and (ii) imperfections of title which,
individually or in the aggregate, do not materially detract from the value of
or materially interfere with the present use of any of the Owned Properties
(collectively, "Permitted Liens"). There are no condemnations or eminent
domain (which term, as used herein, shall include all compulsory acquisitions
or takings by Governmental Authorities) proceedings pending or, to the
knowledge of MGI and/or the Subsidiaries, threatened against any Owned
Property or any material portion thereof. Neither MGI nor the Subsidiaries
has received any notice from any city, village or other Governmental
Authority of any zoning, ordinance, land use, building, fire or health code
or other legal Violation in respect of any Owned Property, other than
violations which have been corrected. There are no material structural
defects or material defects in the heating, ventilation, air-conditioning,
mechanical and electrical systems and roofs relating to any of the
improvements at any of the other Owned Properties.
(b) Schedule 3.07 lists all the real property (including all land
and buildings) which is leased by MGI and/or any Subsidiaries as lessee or
sublessee (the "Leased Real Estate"). Except as set forth on Schedule 3.07,
either MGI and/or a Subsidiary has good and marketable leasehold title to the
land underlying each parcel of Lease Real Estate, good and marketable fee or
leasehold title to the buildings, structures and other improvements located
thereon, in each case free and clear of (i) all Liens, except for Permitted
Liens, and (ii) any right of the landlord for each such parcel (a "Landlord")
to terminate the lease for each such parcel in the absence of a default of
the tenant thereunder. With respect to those parcels of Leased Real Estate
in respect of which a landlord has such right of termination, a copy of the
lease provision giving rise to such right is included in Schedule 3.07. MGI
has delivered or caused to be delivered to Parent and Acquisition accurate
copies of all of the written leases and subleases, and any and all amendments
and modifications thereto, which MGI or any of the Subsidiaries is a party.
All such leases, subleases and amendments, and the Leased Real Estate which
each covers, are listed in Schedule 3.07. Neither MGI nor any of the
Subsidiaries has received written notice of condemnation or eminent domain
proceedings pending or threatened against any Leased Real Estate. Neither
MGI nor any of the Subsidiaries has received any notice from any city,
village or other Governmental Authority of any zoning, ordinance, building,
fire or health code or other legal Violation in respect of any Leased Real
Estate, other than violations which have been corrected. There are no
material structural defects or material defects in the heating, ventilation,
air-conditioning, mechanical and electrical systems and roofs relating to any
Leased Real Estate. Except as set forth on Schedule 3.07: (i) each of the
leases or subleases relating to the Leased Real Estate (each, a "Lease" and
collectively, the "Leases") is in full force and effect and, to the knowledge
of MGI, valid and binding on the lessor or sublessor and enforceable in
accordance with its terms; (ii) no amount payable under any Lease is past
due; (iii) neither MGI nor any Subsidiary has received any written notice (A)
of a default (which has not been cured), offset or counterclaim under any
Lease, or any other communication calling upon MGI and/or the applicable
Subsidiary to comply with any provision of any Lease or asserting
noncompliance, or
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asserting MGI and/or the applicable Subsidiary has waived or altered its
rights thereunder, and no event or condition has happened or presently exists
which constitutes a default or, after notice or lapse of time or both, would
constitute a default under any Lease on the part of MGI and/or the
Subsidiaries or any other party thereto, or (B) of any action against any
party under any Lease which if adversely determined would result in such
Lease being terminated or modified in a manner adverse to MGI and/or the
applicable Subsidiary; (iv) neither MGI nor any Subsidiary has assigned,
mortgaged, pledged or otherwise encumbered its interest, if any, under any
Lease; and (v) MGI and/or the applicable Subsidiary has exercised within the
time prescribed in each Lease any option provided therein to extend or renew
the term thereof.
(c) The Owned Properties and the Leased Real Estate constitute, in
the aggregate, all of the real property used to conduct the business of MGI
in the manner in which such business was conducted during the 12-month period
ended December 23, 1997 and since such time. Except as set forth in Schedule
3.07, no consent is required of any party to any of the Leases by virtue of
the Merger, and the Merger will not result in the termination of any Lease.
None of the Leased Real Estate is owned, in whole or in part, by any
director, officer or stockholder of MGI or any of the Subsidiaries, by any
affiliate thereof or by any entity created for the benefit of any family
member(s) of any of the foregoing persons.
(d) Except as disclosed on Schedule 3.07, MGI and/or the
Subsidiaries has good and valid title to all tangible personal property which
it owns or uses in the operation of its business, including all such tangible
personal property reflected in the Last Balance Sheet as owned by MGI and/or
the Subsidiaries, except for such tangible personal property disposed of to
third parties since the date of the Last Balance Sheet in the ordinary course
of business and consistent with past practices, in each case free and clear
of all Liens, except (i) mechanics', materialmen's, carriers', workmen's,
warehousemen's, repairmen's, landlord's or other like Liens securing
obligations that are not delinquent; (ii) Liens for taxes and other
governmental charges which are not due and payable or which may be paid
without penalty; (iii) purchase money liens securing the purchase price of
the related personal property listed as purchase money liens on Schedule
3.07; and (iv) other Liens, if any, set forth in Schedule 3.07. With respect
to those Liens which are mortgages or deeds of trust, MGI has delivered, or
caused to be delivered, to Parent accurate copies of such mortgages and deeds
of trust, and any and all amendments and modifications thereto. All such
documents, and the Owned Properties and Leased Real Estate which each
encumbers, are listed on Schedule 3.07. Except as set forth in Schedule
3.07, no consent is required of any Mortgage Lender (as hereinafter defined)
by virtue of any "change of control" provisions in any pertinent agreement or
document. Except as set forth in Schedule 3.07, none of the tangible
personal property which is used in the business by MGI is leased by MGI. The
tangible personal property owned or used in the operation of the business of
MGI is in good working order, reasonable wear and tear excepted, and is
suitable for the use for which it is intended in all material respects.
(e) The tangible personal property of MGI which is currently owned
or leased by it is, in the aggregate, all of the tangible personal property
used to conduct such business in the manner in which such business was
conducted during the 12-month period ended December 23, 1997 and since such
time there have been no changes in such property, except for additions
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thereto and deletions therefrom in the ordinary course of business and
consistent with past practice which could not reasonably be expected to have
a MGI Material Adverse Effect.
Section 3.08. Compliance with Law. (a) Except as set forth in
Schedule 3.08, each of MGI and the Subsidiaries has complied with all Laws
(as hereinafter defined) applicable to MGI or any of the Subsidiaries or to
the Owned Real Estate or to the Leased Real Estate, except in those instances
were the failure to so comply would not individually or in the aggregate have
an MGI Material Adverse Effect. Each of MGI and the Subsidiaries has
maintained in full force and effect and is in compliance with, all licenses,
permits, variances, exemptions, orders, franchises, approvals and consents
for the lawful conduct of its business, except in those instances where the
failure to so comply would not individually or in the aggregate have a MGI
Material Adverse Effect. No violation exists (and no event has occurred
which, with notice or lapse of time or both would constitute a violation) of
any term, condition or provision of the Articles of Incorporation or By-laws
of MGI or of any similar organization document of any Subsidiaries. No
claims or investigations by any Governmental Authority alleging any violation
by MGI of any such Laws have at any time been made or settled during the last
two years.
(b) Neither MGI nor any of the Subsidiaries has, nor, to the best
of MGI's and the Subsidiaries' knowledge, has any director, officer, agent of
employee thereof: (i) made or agreed to make any contributions, payments or
gifts of its funds or property to any governmental official, employee or
agent where either the payment or the purpose of such contribution, payment
or gift was or is illegal under the laws of the United States, any state
thereof or any other jurisdiction (foreign or domestic); (ii) established or
maintained any unrecorded fund or asset for any purpose, or made any false or
artificial entries on any of its books or records for any reason; (iii) made
or agreed to make any contribution, or reimbursed any political gift or
contribution made by any other person or entity, to candidates for public
office whether Federal, state, local or foreign, where such contributions
were or would be violative of applicable law; or (iv) otherwise violated the
Federal Corrupt Practices Act of 1977, as amended.
(c) For purposes of this Agreement, "Law" shall mean the common
law and any statute, ordinance, code or other law, rule, regulation, order,
technical or other standard, requirement or procedure enacted, adopted,
promulgated, applied or followed by any Governmental Authority or court.
Section 3.09. Litigation. Except as set forth in Schedule 3.09 or in
the SEC Reports:
(a) there is no claim, suit, action, proceeding, audit or
investigation pending or, to the best of MGI's knowledge, threatened against,
involving or affecting MGI or any of the Subsidiaries, the officers and
directors of MGI or any of the Subsidiaries in such capacities or any of the
properties or rights of MGI or any of the Subsidiaries seeking equitable
relief or claiming monetary damages, nor is there any judgment, decree,
injunction, rule or order of any court, governmental department, commission,
agency, instrumentality or arbitrator outstanding against MGI or any of the
Subsidiaries or the officers and directors of MGI or any of the Subsidiaries
in such capacities which seeks to or would likely (i) result in the
modification or any termination or suspension of any contract to which MGI or
any of the Subsidiaries is a party; (ii)
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affect the manner in which MGI and the Subsidiaries conduct their business;
or (iii) affect the ability of MGI, Parent or Acquisition to consummate the
transactions contemplated hereby;
(b) neither MGI nor any of the Subsidiaries has been charged with
or, to the best of MGI's knowledge, threatened with a charge of any violation
of, or, to the best of MGI's knowledge, is under investigation with respect
to a possible violation of, any provision of any Federal, state or local law
or administrative ruling or regulation relating to its business;
(c) neither MGI nor any of the Subsidiaries has received any
written notice of any pending or threatened action or proceeding, in any
court, before any arbitrator or arbitration tribunal or before or by any
Governmental Authority which if adversely determined would have a MGI
Material Adverse Effect, nor to the best knowledge of MGI or the
Subsidiaries, has any officer, director or employee of MGI or any of the
Subsidiaries been served, within the 12-month period prior to the date
hereof, with a subpoena to testify before a Governmental Authority with
regard to a governmental investigation or governmental proceeding with
respect to matters relating to the business, operations or activities of MGI
or any of the Subsidiaries; and
(d) neither MGI nor any of the Subsidiaries is in default under or
with respect to any judgment, writ, injunction, order or decree of any court,
any arbitrator or arbitration tribunal or any Governmental Authority against
MGI or any of the Subsidiaries or any of MGI's or any of the Subsidiaries'
assets.
Section 3.10. Taxes. (a) Each of MGI and the Subsidiaries has timely
and duly filed, or will timely or duly file (giving effect to extensions duly
taken), all Federal, state, local or foreign income tax returns or reports
(including, without limitation, information returns) ("Tax Returns") and
other material Tax Returns and reports required to be filed by, or with
respect to, MGI or any of the Subsidiaries on or prior to the Closing Date.
All such Tax Returns are, or will be, correct and complete in all material
respects. MGI's federal income tax returns have not been audited. Complete
and accurate copies of the Federal, state and local Tax Returns for MGI and
the Subsidiaries for the years 1996, 1995 and 1994 have been made available
to Parent.
(b) Each of MGI and the Subsidiaries has paid or will pay all
taxes, charges, fees, levies or other assessments of any nature whatsoever
(including, without limitation, all Federal, state, local and foreign income
taxes, alternative or add-on minimum taxes, withholding taxes, estimated
taxes, excise taxes, sales taxes, use taxes, transfer taxes, gross receipt
taxes, franchise taxes, employment and payroll related taxes, property taxes
and import duties, whether or not measured in whole or in part by net
income), together with any related penalties, interest and additions to taxes
(any of the foregoing being referred to herein as a "Tax") required to be
paid by it. All Taxes not yet due but incurred on or before the Closing Date
(other than Taxes, if any, arising out of the transactions hereby
contemplated) are adequately disclosed and fully provided for (in accordance
with GAAP) on the books and records and the financial statements of MGI or
the Subsidiaries. Except as set forth on Schedule 3.10, each of MGI and the
Subsidiaries has fully collected, withheld and/or paid over all Taxes
required to be collected, withheld and/or paid over for material sales taxes,
wages or otherwise to a taxing authority.
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(c) Except as set forth in Schedule 3.10, neither MGI nor any of
the Subsidiaries is currently being audited by any taxing authority with
respect to the returns and reports and there are no claims or assessments
proposed or assessed by any taxing or other Governmental Authority against
MGI or any of the Subsidiaries. Except as set forth in Schedule 3.10,
neither MGI nor any of the Subsidiaries has agreed to waive or extend the
statute of limitations with respect to any Taxes or tax returns or has filed
any consent under Section 341(f) of the Code (or any corresponding provision
of state, local or foreign tax law). Except as set forth on Schedule 3.10,
neither MGI nor any of the Subsidiaries is liable for the Taxes of any other
Person or entity or is a party to any agreement providing for the allocation
or sharing of any Taxes and neither has a contractual obligation to indemnify
any other individual, firm, corporation, partnership, limited liability
company, trust, joint venture, Governmental Authority or other Person with
respect to any Taxes. No written claim has been made in the last five years
by a taxing authority in a jurisdiction in which MGI or any of the
Subsidiaries does not presently file tax returns that MGI or any of the
Subsidiaries is or may be subject to taxation by that jurisdiction. True and
complete copies of all tax returns and reports filed by MGI or any of the
Subsidiaries have been made available to Parent and Acquisition. Except as
set forth in Schedule 3.10, neither MGI nor any of the Subsidiaries is
contesting any of the property taxes or assessments with respect to the Owned
Properties or Leased Real Estate. True and complete copies of any closing
agreements with respect to MGI or any of the Subsidiaries which were entered
into with the Internal Revenue Service or any other taxing authority in the
last five years have heretofore been furnished to Parent and Acquisition.
(d) Neither MGI nor any of the Subsidiaries has agreed to make
any material adjustment pursuant to Section 481(a) of the Code (or any
predecessor provision).
(e) Neither MGI nor any of the Subsidiaries has made any payment,
is obligated to make any payment, or is a party to an agreement that could
obligate it to make any payments that are subject to Code Section 280G or are
not (or will not be) deductible under Section 162 of the Code.
(f) Neither MGI nor any of the Subsidiaries has engaged in, or is
a party to any transaction that is characterized as, or subject to the
deferred intercompany transactions rules as set forth in Treas. Regs. Section
1.1502-13.
(g) No Powers of Attorney have been executed by MGI or the
Subsidiaries with respect to tax matters which are currently in force.
(h) MGI is not a "foreign person" within the meaning of Section
1445(f)(3) of the Code.
Section 3.11. Insurance. (a) Each of MGI and the Subsidiaries has
insurance coverage for the assets and operations of the business of MGI and
the Subsidiaries which it believes is adequate. All policies of insurance
carried by MGI or any of the Subsidiaries or pursuant to which MGI or any of
the Subsidiaries is a named beneficiary or pursuant to which the business or
properties of MGI and the Subsidiaries are insured are in full force and
effect; all premiums due
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and payable in respect of such policies have been paid in full; and there
exists no material default or other circumstance which would create the
substantial likelihood of the cancellation or non-renewal of any such policy;
provided, however, each such representation with respect to policies
maintained by others for MGI's benefit is limited to the best of MGI's
knowledge. MGI or a Subsidiary has notified such insurers of any material
claim known to MGI or any of the Subsidiaries which it believes is covered by
any such insurance policy.
(b) All policies or binders of fire, liability, workmen's
compensation, vehicular or other insurance held by or on behalf of MGI and/or
the Subsidiaries insure against risks and liabilities customary for companies
of similar size, financial condition and engaged in the business in which MGI
is engaged. As of the date that MGI delivers the list of policies and
binders referred to Section 5.15, except for claims set forth on Schedule
3.11 (which schedule shall be delivered by MGI with such list of policies and
binders), there are no outstanding unpaid claims under any such policy or
binder, and neither MGI nor the Subsidiaries has been advised of any defense
to coverage in connection with any claim to coverage asserted or noticed by
MGI and/or the Subsidiaries under or in connection with any of its extant
insurance policies. Neither MGI nor the Subsidiaries has received any written
notice from or on behalf of any insurance carrier issuing policies or binders
relating to or covering MGI and/or the Subsidiaries that there will be a
cancellation or non-renewal of existing policies or binders, or that
alteration of any equipment or assets or any improvements to real estate
occupied by or leased to or by MGI and/or the Subsidiaries, purchase of
additional equipment or assets, or material modification of any of the
methods of doing business, will be required.
Section 3.12. Material Contracts; Debt Instruments. (a) Except as set
forth in Schedule 3.12, neither MGI nor any of the Subsidiaries is a party to
any of the following (collectively, "Material Contracts"):
(i) any collective bargaining or other agreement with labor
unions, trade unions, employee representatives, work committees, guilds or
associations representing employees of either MGI or any of the Subsidiaries;
(ii) any employment, consulting, severance, termination, or
indemnification agreement, contract or arrangement, written or oral, with any
current or former officer, consultant, director or employee which (x)
provides for payments in excess of $25,000 per annum or (y) requires
aggregate payments over the life of such agreement, contract or arrangement
in excess of $50,000, which in any case is not terminable by MGI and/or any
Subsidiary on 30 days' notice or less without penalty or obligation to make
payments related to or after such termination;
(iii) any joint venture contract or arrangement or any
other agreement which has involved or is expected to involve a sharing of
revenues with other persons or entities;
(iv) any management agreement, lease or other significant
agreement or arrangement between MGI and/or any of the Subsidiaries and any
entity for whom MGI and/or any of the Subsidiaries provides concession
services;
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(v) any lease for real or personal property in which the
amount of payments which MGI and/or any of the Subsidiaries is required to
make, or is expected to receive, on an annual basis exceeds $10,000;
(vi) any material agreement, contract, policy, license,
document, instrument, arrangement or commitment which has not been terminated
or performed in its entirety and which may be, by its terms, terminated,
impaired or adversely affected by reason of the execution of the Operative
Agreements, the closing of the Merger, or the consummation of the other
transactions contemplated hereby or thereby;
(vii) any agreement, contract, policy, license, document,
instrument or additional advance arrangement or commitment that materially
limits the freedom of MGI and/or any of the Subsidiaries to compete in any
line of business or with any person or entity or in any geographic area or
which would so materially limit the freedom of the Surviving Corporation or
Parent or any of Parent's subsidiaries after the Effective Time;
(viii) any agreement or contract relating to any
outstanding commitment for capital expenditures in excess of $10,000
individually or $25,000 in the aggregate, or any partially or fully executory
agreement or contract relating to the acquisition or disposition of rights or
assets having a value of in excess of $10,000 individually or $25,000 in the
aggregate;
(ix) any sale-leaseback, conditional sale, exclusive dealing,
brokerage, finder's fee or take-or-pay contract or agreement; or
(x) any other agreement, contract, policy, license, document,
instrument arrangement or commitment not made in the ordinary course of
business which is material to MGI and/or any of the Subsidiaries.
(b) Set forth in Schedule 3.12 is (x) a list of all loan or credit
agreements, notes, bonds, mortgages, indentures and other agreements and
instruments pursuant to which any indebtedness of MGI or any Subsidiary is
outstanding or may be incurred (collectively, "Loan Agreements") and (y) the
respective principal amounts outstanding thereunder as of the dates specified
in Schedule 3.12. Since September 30, 1997, none of MGI and the Subsidiaries
has made any drawings under or with respect to the loan or credit agreements,
notes, bonds, mortgages, indentures and other agreements referred to in
clause (x) above. Except as set forth in Schedule 3.12, all such
indebtedness is prepayable at any time without penalty, subject to the notice
provisions of the agreements governing such indebtedness. For purposes of
this Section 3.12 "indebtedness" shall mean, without duplication, (A) all
obligations for borrowed money, or with respect to deposits or advances of
any kind, (B) all obligations evidenced by bonds, debentures, notes or
similar instruments, (C) all obligations upon which interest charges are
customarily paid, (D) all obligations under conditional sale or other title
retention agreements relating to purchased property, (E) all obligations
issued or assumed as the deferred purchase price of property or services
(excluding obligations to creditors for inventory, services and supplies
incurred in the ordinary course of business), (F) all capitalized lease
obligations, (G) all obligations of others secured by any Lien on property or
assets owned or acquired, whether or not
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the obligations secured thereby have been assumed, (H) all obligations under
interest rate or currency swap transactions (valued at the termination value
thereof), (I) all letters of credit issued for the account of MGI and/or any
of the Subsidiaries (excluding letters of credit issued for the benefit of
suppliers to support accounts payable to suppliers incurred in the ordinary
course of business), (J) all obligations to purchase securities (or other
property) which arise out of or in connection with the sale of the same or
substantially similar securities or property, and (K) all guarantees and
arrangements having the economic effect of a guarantee of any indebtedness of
any other person or entity.
(c) Except as set forth in Schedule 3.12, as of the date hereof
each of the Material Contracts and Loan Agreements is in full force and
effect and is a valid and binding obligation of MGI and/or a Subsidiary and,
to the knowledge of MGI, the other parties thereto. Except as set forth in
Schedule 3.12, neither MGI nor any of the Subsidiaries is in either payment
default or material non-payment default under any Material Contract or Loan
Agreement, nor does any condition exist that with notice or lapse of time or
both would constitute a material default thereunder. To the knowledge of
MGI, no other party to any Material Contract or Loan Agreement is in default
thereunder. Neither MGI nor any Subsidiary has any reason to believe that
any of the Material Contracts or Loan Agreements that are renewable will not
be renewed on reasonable terms, nor does MGI and/or any Subsidiary know of
any expressed desire or intent, on the part of any other party to any of the
Material Contracts or Loan Agreements, to materially reduce or terminate the
amount of its business with MGI and/or the Subsidiaries in the future.
Except as set forth in Schedule 3.12, no consent is required of any party to
any of the Material Contracts or any of the Loan Agreements by virtue of the
Merger, and the Merger will not result in the termination of any Material
Contract or Loan Agreement.
Section 3.13. Employment Agreements. Schedule 3.13 contains a complete
list of each management, employment, consulting or other agreement, contract
or commitment, in each case, in writing, between MGI or any of the
Subsidiaries and any employee, officer or director thereof (a) providing for
the employment of any person or providing for retention of management,
executive or consulting services and providing for an obligation to pay or
accrue compensation of $50,000 or more per annum, or (b) providing for the
payment or accrual of any compensation or severance upon (i) a change in
control of MGI or any of the Subsidiaries or (ii) any termination of such
management, employment, consulting or other relationship.
Section 3.14. Intellectual Property. Schedule 3.14 is a list of all
trademarks, trade names, patents, fictitious business names, service marks
and pending applications therefor that are owned by MGI or the Subsidiaries
and a list of all trademarks, trade names, patents, fictitious business
names, service marks and pending applications therefor that are used by MGI
or the Subsidiaries or which MGI or the Subsidiaries have the right to use.
The trademarks, trade names, patents, fictitious business names, service
marks and pending applications appearing in Schedule 3.14, together with any
other trademarks, trade names, patents, fictitious business names and service
marks owned or used by MGI or the Subsidiaries, are collectively herein
referred to as the "Proprietary Rights". Except as disclosed in Schedule
3.14, to the best of MGI's knowledge, in the last five years, no written
claim alleging any infringement or violation
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of any statutory or common law or any other rights of any third parties
(including, without limitation, copyright, trademark and the rights of
privacy and publicity) has been received by MGI or any of the Subsidiaries.
Section 3.15. Employees and Related Agreements: ERISA. (a) Schedule
3.15 sets forth each Plan (as hereinafter defined) which MGI or any of the
Subsidiaries or any ERISA Affiliate (as hereinafter defined) maintains or
contributes to, or has any obligation to contribute to, or during the six
year period ending on the date hereof, maintained, contributed to, or had any
obligation to contribute to, and each Plan as to which MGI or any of the
Subsidiaries has any material liability (including, without limitation, a
liability arising out of an indemnification, guarantee, hold harmless or
similar agreement) or obligation. Except as set forth in Schedule 3.15, none
of these Plans is a Single Employer Defined Benefit Plan (as hereinafter
defined), a Multiemployer Plan (as hereinafter defined) or a severance pay
plan.
(b) No event has occurred with respect to a Plan (other than a
Multiemployer Plan) in connection with which MGI or any of the Subsidiaries
or any Plan identified in Schedule 3.15 or any "plan administrator" (as
defined in section 3(16) of ERISA) thereof, directly or indirectly, is or, to
the best of MGI's knowledge, could be subject to liability, other than for
routine claims for benefits, contingent or otherwise, or any lien, whether or
not perfected, under the terms of any Plan or under ERISA, the Code or any
other law, regulation or governmental order applicable to any Plan at any
time maintained or contributed to by MGI or any of the Subsidiaries or by any
ERISA Affiliate or under any agreement, instrument, statute, rule of law or
regulation pursuant to or under which MGI or any of the Subsidiaries has
agreed to indemnify or is required to indemnify any person against liability
incurred under, or for a violation or failure to satisfy the requirements of,
any such statute, regulation or order.
(c) Except as set forth in Schedule 3.15, all payments and
contributions due from MGI or any of the Subsidiaries under each Plan
identified in said Schedule 3.15 with respect to all prior periods have been
made or properly recorded on the books of MGI or the Subsidiaries.
(d) Except as set forth in Schedule 3.15, and except for any
Multiemployer Plan, no "employee welfare benefit plan" as defined in section
3(1) of ERISA or "multiple employer welfare arrangement" as defined in
section 3(40) of ERISA provides benefits, including, without limitation,
death or medical benefits (whether or not insured) with respect to any
current or former employee of MGI or any of the Subsidiaries beyond his or
her retirement or other termination of service other than (i) coverage
mandated by applicable law or (ii) disability benefits that have been fully
provided for by insurance or otherwise.
(e) Except as set forth in Schedule 3.15, the transactions
contemplated by this Agreement will not result in any payment or series of
payments by the Surviving Corporation under any Plan established by MGI or
any of the Subsidiaries to any Person of a parachute payment within the
meaning of section 280G of the Code.
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(f) Except as set forth in Schedule 3.15, the consummation of the
transactions contemplated by the Operative Agreements will not (i) entitle
any employee or former employee of MGI or any of the Subsidiaries to
severance pay, unemployment compensation or any other payment except as
expressly provided in this Agreement or (ii) result in any prohibited
transaction described in section 406 of ERISA or section 4975 of the Code for
which an exemption is not available.
(g) There has been delivered to Parent and Acquisition with
respect to each Plan identified in Schedule 3.15 other than a Multiemployer
Plan:
(1) A copy of the annual report (with accompanying schedules and
exhibits), if required under ERISA, which has been filed with respect
to such Plan for the two most recently completed plan years. The
information contained in such report (including such schedules and
exhibits) is true and complete in all material respects.
(2) A copy of the most recent summary plan description, together
with each Summary of Material Modifications with respect thereto,
required under ERISA with respect to such Plan, and a true and
complete copy of such Plan;
(3) If such Plan is funded through a trust or any third party
funding vehicle, a copy of the trust or other funding vehicle and the
latest financial statements thereof;
(4) The most recent determination letter received from the
Internal Revenue Service with respect to each Plan that is intended to
qualify under section 401 of the Code;
(5) A copy of the actuarial report, if any, with respect to each
such Plan for the last two years. The information contained therein,
and the information furnished by the administrator of such Plan or by
MGI or any of the Subsidiaries or by any ERISA Affiliate in connection
with the preparation thereof, is true and complete in all material
respects; and
(6) A copy of each Plan, including all amendments thereto, or in
the cases where there is no formal Plan document, a description of
each such Plan.
(h) Neither MGI nor any of the Subsidiaries nor any ERISA Affiliate
has made any agreement, understanding or promise, whether written or oral, to
create, establish, sponsor, maintain or contribute, directly or indirectly, to
or under any additional Plan for the benefit of current or former employees of
MGI or any of the Subsidiaries nor, except as set forth in Schedule 3.15, to
amend or modify any existing Plan identified in Schedule 3.15 in any manner not
reflected in the plan documents of such Plan delivered to Parent and
Acquisition.
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(i) Except as set forth in Schedule 3.15, neither MGI nor any of
the Subsidiaries is a party to any collective bargaining agreements, whether
or not expired. MGI does not know of any activities or proceedings of any
labor organization (or representative thereof) to organize any unorganized
employees of MGI or any of the Subsidiaries. A copy of each such collective
bargaining agreement has been delivered to Parent and Acquisition.
(j) Neither MGI nor any of the Subsidiaries has violated any
provision of Federal or state law or any governmental rule or regulation, or
any order, ruling, decree, judgment or arbitration award of any court,
arbitrator or any government agency regarding the terms and conditions of
employment of employees or former employees or, without limitation, laws,
rules, regulations, orders, rulings, decrees, judgments and awards relating
to discrimination (including, without limitation, discrimination on the basis
of age, sex, race or religion), fair labor standards and occupational health
and safety, wrongful discharge or violation of the personal rights of
employees, former employees or prospective employees or state temporary
disability laws, rules or regulations.
(k) There is and, for two years prior to the date hereof there has
been, no material unfair labor practice, charge or complaint pending or, to
the best of MGI's knowledge, threatened against MGI or any of the
Subsidiaries before the National Labor Relations Board or any State Labor
Relations Board. There are and, for two years prior to the date hereof, there
have been no material claims of discrimination of any kind pending or, to the
best of MGI's knowledge, threatened against MGI or any of the Subsidiaries
before any Governmental Authority. Neither MGI nor any of the Subsidiaries
has any liability to any or all of its employees under or arising as a result
of the Worker Adjustment and Retraining Act.
(l) Other than matters affecting generally the industries in which
MGI or a Subsidiary is engaged, there is, and for one year prior to the date
hereof there has been, no labor strike, work stoppage or lockout, or material
dispute, slowdown, disturbance, grievance or claim pending or, to the best of
MGI's knowledge, threatened against MGI or any of the Subsidiaries.
(m) Other than with respect to a Multiemployer Plan, each Plan to
which MGI or any of the Subsidiaries contributes or has any obligation to
contribute and which is intended to be qualified under section 401 of the
Code, has received a favorable determination letter from the Internal Revenue
Service with respect to such qualification and with respect to the exemption
from tax of the trusts created thereunder under section 501(a) of the Code,
and, to the best of MGI's knowledge, nothing has occurred that has affected
or is likely adversely to affect such qualification or exemption since the
date of such letter with respect to each Plan.
(n) Except as set forth in Schedule 3.15, with respect to each
Plan other than a Multiemployer Plan, all reports and other information
required under ERISA or any other applicable law or regulation to be filed in
respect of any Plan by the administrator thereof or by MGI or any of the
Subsidiaries on or prior to the date hereof with the relevant governmental
authority and/or distributed or made available to any Plan participant and
beneficiary (including "alternate payees," as such term is defined in section
206(d)(3)(K) of ERISA), as the case may be, have been filed, distributed or
made available in accordance with ERISA or such other
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applicable law or regulation, as the case may be, and all such reports and
other information are true and complete in all material respects as of the
date given.
(o) Except as set forth in Schedule 3.15, other than with respect
to a Multiemployer Plan, neither MGI nor any of the Subsidiaries has entered
into any agreement, written or otherwise, relating to any Plan providing
medical benefits obligating MGI or any of the Subsidiaries or its successor
in interest to make any supplemental or retrospective premium payments for
the current or any prior contract period in the event of adverse experience,
termination of the minimum premium arrangement or termination of an insurance
contract relating to such Plan. To the extent reasonably available to MGI, a
disclosure of the attendant costs is set forth in Schedule 3.15.
(p) With respect to each Multiemployer Plan identified in Schedule
3.15 which is subject to the provisions of Subtitle B of Title IV of ERISA,
(i) none of MGI, any of the Subsidiaries or any ERISA Affiliate has received
any notice of any claim or demand for complete or partial withdrawal
liability under ERISA sections 4201 et seq. except as attached to Schedule
3.15; (ii) none of MGI, any of the Subsidiaries or any ERISA Affiliate has
received any notice that such Multiemployer Plan is in "reorganization"
(within the meaning of section 4241 of ERISA), that increased contributions
may be required to avoid a reduction in plan benefits or the imposition of an
excise tax, or that the Multiemployer Plan is or may become "insolvent"
(within the meaning of section 4245 of ERISA) except as attached to Schedule
3.15; (iii) except as set forth in Schedule 3.15, to the best of MGI's
knowledge, none of MGI, any of the Subsidiaries nor any ERISA Affiliate has
incurred any withdrawal liability not set forth in Schedule 3.15; and (iv)
MGI, the Subsidiaries and each ERISA Affiliate have timely made all required
contributions or payments to each Multiemployer Plan or such contributions or
payments will be made prior to the Closing.
(q) With respect to each Single Employer Defined Benefit Plan
identified in Schedule 3.15, (i) except with respect to the transactions
contemplated by this Agreement, there has not occurred any "reportable event"
within the meaning of section 4043(b) of ERISA or the regulations thereunder
with respect to which the 30 day notice requirement has not been waived under
applicable regulations, (ii) there exists no ground upon which the PBGC (as
hereinafter defined) could demand termination of any Single Employer Defined
Benefit Plan or appointment of itself or its nominee as trustee thereunder,
(iii) there has been no notice given of intent to terminate any Single
Employer Defined Benefit Plan under section 4041 of ERISA, (iv) there has not
been any proceeding instituted under section 4042 of ERISA to terminate any
Single Employer Defined Benefit Plan, and (v) there has been no termination,
or except as set forth in Schedule 3.15, a partial termination of any Single
Employer Defined Benefit Plan within the meaning of section 411(d)(3) of the
Code. The PBGC has not instituted or, to the best of MGI's knowledge,
threatened a proceeding to terminate any Single Employer Defined Benefit
Plan. All PBGC premiums due on or before the Closing with respect to each
Single Employer Defined Benefit Plan have been, or prior to the Closing will
be, paid in full, including late fees, interest and penalties, if and to the
extent applicable.
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(r) No funding waiver from the Internal Revenue Service has been
requested or received with respect to any Single Employer Defined Benefit
Plan identified in Schedule 3.15, and no extension of the amortization period
within the meaning of section 412 of the Code or section 302 of ERISA has
been applied for.
(s) Neither MGI, the Subsidiaries nor any ERISA Affiliate has
engaged in any transaction described under section 4069 of ERISA nor has any
lien been imposed with respect to an amount on any such persons or their
assets under section 4068 of ERISA.
(t) With respect to any Single Employer Defined Benefit Plan, any
significant reduction in the rate of future benefit accrual was preceded by
an adequate and appropriate notice to the parties described in and as
required by section 204(h) of ERISA.
(u) Concerning any Single Employer Defined Benefit Plan maintained
by MGI or any ERISA Affiliate (i) since January 1, 1991, there has been no
cessation of operations at a facility so as to become subject to the
provisions of sections 4062(e) of ERISA, (ii) since January 1, 1991, there
has been no withdrawal of a substantial employer from any Single Employer
Defined Benefit Plan so as to become subject to the provisions of section
4063 of ERISA.
(v) For the purposes of this Agreement:
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, any successor statute thereto and all final or
temporary regulations promulgated thereunder and generally applicable
published rulings entitled to precedential effect.
"ERISA Affiliate" means all members of a controlled group of
corporations and all trades and businesses (whether or not incorporated)
under common control and all other entities which, together with MGI, are
treated as a single employer under any or all of sections 414(b) or (c) of
the Code on either the date of this Agreement or the Closing Date.
"Multiemployer Plan" means a "Multi-employer plan" as defined in
section 3(37) or section 4001(a)(3) of ERISA.
"PBGC" means the Pension Benefit Guaranty Corporation or any person
succeeding to the functions thereof.
"Single Employer Defined Benefit Plan" means a plan subject to
Subtitle B of Title IV of ERISA which is not a Multi-employer Plan.
"Plan" means any plan, program, arrangement, agreement or
commitment which is a pension, profit sharing, savings, thrift or other
retirement plan, life, health, accident or disability insurance plan
(including without limitation any "employee benefit plan as defined in
section 3(3) of ERISA), deferred compensation, stock purchase, stock option,
performance share,
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bonus or other executive plan or severance pay plan, policy or procedure, or
vacation or other employee benefit plan, program arrangement, agreement or
commitment.
Section 3.16. Absence of Certain Changes or Events. Since September
30, 1997, except as disclosed in Schedule 3.16, MGI and the Subsidiaries have
conducted their business, in all material respects, in the ordinary course
and in a manner consistent with past practice (except in connection with the
negotiation and execution and delivery of this Agreement), and since
September 30, 1997, except as disclosed in Schedule 3.16, and except as
permitted in this Agreement, there has not been (i) any event or events
(whether or not covered by insurance), individually or in the aggregate,
having a MGI Material Adverse Effect, (ii) any material change by MGI in its
accounting methods, principles or practices, (iii) any entry by MGI or any
Subsidiary into any commitment or transaction material to MGI or such
Subsidiary, except in the ordinary course of business and consistent with
past practice or except in connection with the negotiation and execution and
delivery of this Agreement, (iv) any declaration, setting aside or payment of
any dividend or distribution in respect of any capital stock of MGI or any
redemption, purchases or other acquisition of any of MGI's or the
Subsidiaries' securities (except for cash dividends paid to MGI by its
wholly-owned Subsidiaries with regard to their capital stock), (v) other than
pursuant to the Plans or as required by law, any increase in, amendment to,
or establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option, stock purchase or other
employee benefit plan (other than a Multi-employer plan), (vi) granted any
general increase in compensation, bonus or other benefits payable to the
employees of MGI or the Subsidiaries, except for increases occurring in the
ordinary course of business in accordance with its customary practice, (vii)
paid any bonus to the employees of MGI or the Subsidiaries except for bonuses
accrued on MGI's unaudited balance sheet for the quarter ended September 30,
1997, (viii) any incurrence of indebtedness for borrowed money or assumption
or guarantee of indebtedness for borrowed money by MGI or any of the
Subsidiaries (other than loans from MGI to any wholly-owned Subsidiary or
from any wholly-owned Subsidiary to MGI or any other wholly-owned
Subsidiary), or the grant of any Lien on the material assets of MGI or the
Subsidiaries to secure indebtedness for borrowed money except, in any such
case, any drawdowns by MGI under its revolving credit facility consistent
with past practice, (ix) any sale or transfer of any material assets of MGI
or the Subsidiaries other than in the ordinary course of business and
consistent with past practice, (x) any loan, advance or capital contribution
to or investment in any person in an aggregate amount in excess of $100,000
by MGI or any Subsidiary (excluding any loan, advance or capital contribution
to, or investment in, MGI or any wholly-owned Subsidiary); or (xi) entered
into any contractual arrangement or understanding (written or oral, express
or implied) to do any of the foregoing.
Section 3.17. Finder's Fee. Neither MGI nor any of the Subsidiaries
has incurred any liability for finder's or brokerage fees or commissions in
connection with this Agreement or the transactions hereby contemplated,
except for fees owed Prime Charter Ltd.
Section 3.18. Environmental Matters. (a) Except as set forth in
Schedule 3.18, MGI and the Subsidiaries have obtained or caused to be
obtained and continue to maintain and will continue to maintain up to the
Closing Date, or cause the maintenance of permits, licenses,
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consents and approvals necessary (the "Environmental Approvals") for
conducting the business of MGI and the Subsidiaries which are required under
Environmental Laws (as hereinafter defined), and neither MGI nor any of the
Subsidiaries has operated in violation of any Environmental Law or the terms
of any Environmental Approval. To the best of MGI's knowledge, the
operations of MGI and each of the Subsidiaries, as of the date of
consummation of the Offer, will be in compliance in all respects with all
Environmental Laws.
(b) Except as set forth in Schedule 3.18:
(i) neither MGI nor any of the Subsidiaries has used, stored,
generated, discharged, emitted, transported, disposed of or treated
Hazardous Substances (as hereinafter defined) except in a manner which
complies with the applicable Environmental Laws and Environmental
Approvals and to the best of knowledge of MGI and each of the
Subsidiaries, there are no Hazardous Substances present in, on or
under any Owned Real Property owned by MGI or any of the Subsidiaries
or any real property leased or managed by MGI or any of the
Subsidiaries, the nature, amount or concentration of which would
reasonably be expected to result in any Federal, state or local
environmental protection agency undertaking or requiring the removal
or Remediation (as defined below) of such Hazardous Substances if such
agency were aware of the presence of such Hazardous Substances.
(ii) to the best of MGI's knowledge, no prior owner, occupant,
tenant or user of any facility which is now or has heretofore been
owned or used by MGI or any of the Subsidiaries (a "Facility") has
ever used, stored, generated, discharged, emitted, transported,
disposed of or treated Hazardous Substances at, on or from any
Facility except in a manner which complies with all Environmental Laws
and Environmental Approvals;
(iii) there is not, and there has not been, any Environmental
Condition (as defined herein) or release or threat of release (as
those terms are defined in Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C.
section 9601 et seq.) ("CERCLA")) of Hazardous Substances at, on or
from any Facility;
(iv) to the best knowledge of MGI and each of the Subsidiaries,
there is not now nor has there ever been, on or in any Owned Real
Property or real property leased by MGI or any of the Subsidiaries,
any underground storage tanks or surface impoundments containing
Hazardous Substances; and
(v) MGI has furnished Parent with copies of the environmental
reports and assessments that MGI has commissioned or been provided
with in respect to the Owned Properties and Leased Real Estate set
forth on Schedule 3.18, and shall promptly furnish Parent with all
other such reports and assessments in its possession.
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(c) Except as set forth in Schedule 3.18, neither MGI nor any of the
Subsidiaries has received notice of any pending or threatened investigation,
claim, enforcement proceeding, cleanup order, citizen suit or other action
instituted by any private party, employee or Governmental Authority under any
Environmental Laws arising out of the conduct or the operations of MGI or any of
the Subsidiaries or as a result of any Environmental Condition at any Facility.
Neither MGI nor any of the Subsidiaries is subject to any outstanding written
orders from, or written agreements with, any Governmental Entity respecting (i)
violations or liability pursuant to Environmental Laws, (ii) Remedial Action (as
hereinafter defined) or (iii) any Release or threatened Release (as hereinafter
defined) of a Hazardous Substance. No judicial or administrative proceedings
or governmental investigations are pending, or to the knowledge of MGI or any of
the Subsidiaries threatened, against MGI or any of the Subsidiaries alleging the
violation of or seeking to impose liability pursuant to any Environmental Law or
as the result of the Release or alleged Release of a Hazardous Substance, except
for any such proceedings or investigations that would not result in a MGI
Material Adverse Effect, and neither MGI nor any of the Subsidiaries has
received any notice of any pending or threatened investigation, claim,
enforcement proceeding or other action instituted by any Governmental Authority
or private party under any Environmental Laws arising out of the conduct or
operations of MGI or any of the Subsidiaries.
(d) For the purpose of this Agreement:
"Environment" means soil, surface waters, ground waters, land, stream,
sediments, surface or subsurface strata and ambient air.
"Environmental Condition" means any condition with respect to the
Environment, whether or not yet discovered, at any Facility, including any
condition resulting from the operation of the business of MGI or any of the
Subsidiaries or the operation of the business of any subtenant or occupant of
any Facility, which is reasonably likely to or does result in any material
losses.
"Environmental Laws" means all laws of any Governmental Authority or
any judgment, decree, injunction, writ or order of any Governmental Authority
relating to injury to, or the protection of, human health or the Environment
that are in effect prior to the Closing Date, including, without limitation, all
valid and lawful requirements of courts and other Governmental Authorities
pertaining to reporting, licensing, permitting, investigating, Remediation and
removal of, emissions, discharges, Releases or threatened Releases of Hazardous
Substances, chemical substances, pesticides, petroleum or petroleum products,
pollutants, contaminants or hazardous or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the Environment, or relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances, pollutants, contaminants or
hazardous or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature.
"Hazardous Substances" means any substance (a) the presence of which
requires notification, investigation or remediation under any Environmental Law
as in effect prior to the Closing Date; (b) which prior to the Closing Date is
or becomes defined under any
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Environmental Laws as "hazardous waste", "hazardous material" or "hazardous
substance", "extremely hazardous waste," "restricted hazardous waste," "solid
waste,: "toxic waste," "toxic substance" or "pollutant" or "contaminant" and
is regulated under any Environmental Law, (c) which is toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or
otherwise hazardous and is or become regulated by any Governmental Authority
under Environmental Laws prior to the Closing Date; (d) which contains
gasoline, diesel fuel or other petroleum hydrocarbons or volatile organic
compounds regulated under Environmental Laws prior to the Closing Date; (e)
which contains polychlorinated byphenyls (PCBs) or friable asbestos or urea
formaldehyde foam insulation; or (f) which contains or emits radioactive
particles, waves or materials, including radon gas.
"RCRA" means the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.
"Release" means any release, spill, effluent, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching, or
migration into the environment; and
"Remedial Action" means all actions, including, without limitation,
any capital expenditures, required by a Governmental Authority or required under
any Environmental Law, or voluntarily undertaken to (1) clean up, treat or in
any other way ameliorate or address any Hazardous Materials or other substance
in the environment, (2) prevent the Release or threat of Release, or minimize
the further Release of any Hazardous Material so it does not endanger or
threaten to endanger the public health or welfare or the environment; (3)
perform pre-remedial studies and investigations or post-remedial monitoring and
care pertaining or relating to a Release; or (4) bring the applicable party into
compliance with any Environmental Law.
Section 3.19. Employment Relations; Compliance. There are no
administrative proceedings, audits or investigations pending or, to the best of
MGI's knowledge, threatened and no written or, to the best of MGI's knowledge,
oral or threatened complaints against MGI or any of the Subsidiaries concerning
the employment or term of employment of any employee of MGI or any of the
Subsidiaries, or any violation of any Federal, state or local law, executive
order or regulation relating to employment relations, collective bargaining,
employment discrimination, employee benefits, occupational safety and health,
wages and hours of employees, immigration, medical and family leave and the
collection and payment of withholding and/or social security taxes and any
similar tax (an "Employment Law"). To the best knowledge of MGI, each of MGI
and the Subsidiaries is in compliance in all material respects with all
Employment Laws.
Section 3.20. Indemnification of Employees, Etc. Except in connection
with matters set forth in Schedule 3.20 hereto, and except for matters covered
by insurance (subject to deductibles) as of the date hereof, there is no
proceeding, claim, suit, action or governmental investigation pending or, to the
best knowledge of MGI, threatened, with respect to which any current or former
director, officer, employee or agent of MGI or any of the Subsidiaries is
entitled, or has asserted he is entitled, to claim indemnification from MGI or
any of the Subsidiaries pursuant to the Articles of Incorporation or By-Laws of
MGI or any provisions of the comparable charter or organizational documents of
any of the Subsidiaries, as provided in any
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indemnification agreement to which MGI or any Subsidiary is a party, or
pursuant to applicable law.
Section 3.21. Labor Relations. Except as set forth in Schedule 3.21,
there are or were, at any time in the three (3) year period preceding the date
of this Agreement, no collective bargaining agreements, memoranda of
understanding, side letters, or other agreements with any labor union or
organization in effect to which MGI or any of the Subsidiaries are or were a
party or otherwise bound and which materially affect MGI's business
(collectively, the "Labor Agreements"), including agreements referred to or
incorporated by reference into any of the Labor Agreements, and no employees of
MGI or any of the Subsidiaries are represented by any labor organization. There
are no provisions in any of the Labor Agreements that would materially interfere
with MGI's ability to consummate the Offer or Merger hereunder.
Section 3.22. Board Recommendation. On or prior to the date hereof, the
Board of Directors of MGI, at a meeting duly called and held, has by the vote of
those directors present (a) determined that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, taken together, are
fair and in the best interests of the MGI Stockholders and has approved the same
and (b) resolved to recommend that the holders of the MGI Shares accept the
Offer and approve the Merger.
Section 3.23. Opinion of Financial Advisor. The MGI Board of Directors
has received the written opinion of the Financial Advisor, dated the date of
this Agreement, to the effect that the cash consideration to be received, in the
Offer and the Merger, by the MGI Stockholders is fair to the MGI Stockholders
from a financial point of view, a copy of such opinion has been delivered to
Parent and such opinion has not been withdrawn or modified.
Section 3.24. Related Party Transactions. Since September 30, 1997,
except as set forth on Schedule 3.24 and except for the Plans or as otherwise
disclosed hereunder, no director hereunder, no director, officer, "affiliate" or
"associate" (as such terms are defined in Rule 12b-2 under the Exchange Act) of
MGI or any of the Subsidiaries (a) has borrowed any monies from or has
outstanding any indebtedness or other similar obligations to MGI or any of the
Subsidiaries for indebtedness or similar obligations incurred in the ordinary
course of business or (b) is otherwise a party to any contract, arrangement or
understanding with MGI or any of the Subsidiaries of a nature that would be
required to be disclosed under Item 404 of Regulation S-K of the Securities Act.
Section 3.25. Schedule 14D-9, Offer Documents and Schedule 14D-1. The
Schedule 14D-9 and any amendments and supplements thereto will, when filed with
the Commission and when published, sent or given to holders of MGI Shares,
comply as to form in all material respects with the Exchange Act and the rules
and regulations thereunder and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by MGI with respect to information supplied by Parent and
Acquisition in writing for inclusion therein. None of the information supplied
by MGI for inclusion in the Offer Documents or the Schedule 14D-1, and
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any amendments thereof or supplements thereto, will, when such materials are
filed with the Commission and when published, sent or given to holders of MGI
Shares, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
Section 3.26. Charter Documents. MGI has delivered to Parent and
Acquisition true and correct copies of MGI's Articles of Incorporation and
By-laws, and each of the Subsidiaries has delivered to Parent and Acquisition
true and correct copies of their similar charter and organization documents, all
as amended through and in effect on the date hereof. The minute books of MGI
and the Subsidiaries, as made available to Parent and Acquisition, contain true
records of all meetings of, or written consents in lieu of meetings executed by,
MGI's or the Subsidiaries' board of directors (and all committees thereof) and
the Stockholders of MGI or the Subsidiary. All material actions and
transactions taken or entered into by MGI and/or the Subsidiaries, as the case
may be, requiring action by MGI's and/or the Subsidiaries board of directors or
Stockholders or members, were duly authorized or ratified as necessary. The
stock certificate books and stock records of MGI and/or the Subsidiaries as made
available to Parent and Acquisition are true and complete.
Section 3.27. Full Disclosure. No statement herein or in the Schedules
hereto or in any certificate delivered pursuant to the requirements of this
Agreement by or on behalf of MGI and/or the Subsidiaries contains or will
contain any untrue statement of a material fact concerning MGI and/or the
Subsidiaries or any or their affiliates, or omits or will omit to state a
material fact necessary in order to make the statements made herein or therein
concerning MGI and/or the Subsidiaries or any or their affiliates, in light of
the circumstances under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
Parent and Acquisition represent and warrant to MGI that:
Section 4.01. Organization and Good Standing. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, Acquisition is a corporation duly organized validly existing
and in good standing under the laws of the State of Colorado, and each has the
corporate power and authority to own or lease all of the properties and assets
owned or leased by it and to carry on its business as it is now being conducted.
Section 4.02. Authority of Parent and Acquisition. Each of Parent and
Acquisition has the corporate power to execute and deliver this Agreement and
all other documents hereby contemplated, to consummate the transactions
hereby contemplated and to take all other actions required to be taken by it
pursuant to the provisions hereof. The execution, delivery and performance
of, and consummation of the transactions contemplated by, this Agreement and
all other documents hereby contemplated have been duly authorized by Parent's
and Acquisition's
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Board of Directors and Parent as Acquisition's sole stockholder, and no other
corporate proceedings on the part of Parent of Acquisition are necessary to
authorize this Agreement and the transactions contemplated hereby. This
Agreement constitutes the legal, valid and binding obligation of Parent and
Acquisition enforceable against each in accordance with its terms.
Section 4.03. No Conflict; Required Filings and Consents. The execution
and delivery of this Agreement by Parent and Acquisition does not, and the
consummation by Parent and Acquisition of the transactions contemplated hereby
will not, (i) violate the Certificate or Articles of Incorporation or By-laws of
Parent or Acquisition, or (ii), subject to making the filings and obtaining the
approvals identified in Section 4.03(b), violate any law, rule, regulation,
order, judgment or decree applicable to Parent or Acquisition or by which any
property or asset of Parent or Acquisition is bound or affected, or (iii)
subject to making the filings and obtaining the approvals identified in
Schedule 4.03(a), result in any violation pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent or Acquisition is a party or by which
Parent or Acquisition or any property or assets of Parent or Acquisition is
bound or affected, except, in the case of clause (ii) or (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would not
prevent or delay consummation of the Offer or Merger in any material respect, or
otherwise prevent Parent of Acquisition from performing its material obligations
under this Agreement, or would not, individually or in the aggregate, limit
Parent's or Acquisition's ability to consummate the transactions hereby
contemplated or have a material adverse effect on the business, properties,
assets, liabilities, results of operations or financial condition of Parent or
Acquisition (a "Parent or Acquisition Material Adverse Effect").
(b) The execution and delivery of this Agreement by Parent and
Acquisition do not, and the performance of this Agreement and the consummation
by Parent and Acquisition of the transactions contemplated hereby will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except for (A) applicable
requirements of the Exchange Act, (B) the pre-merger notification requirements
of the HSR Act, and (C) filing and recordation of appropriate merger and similar
documents as required by Colorado law.
Section 4.04. Finder's Fees. Neither Parent nor Acquisition has incurred
any liability for finder's, brokerage or similar fees or commissions in
connection with this Agreement or the transactions hereby contemplated, except
for fees owed Jefferies & Company, Inc.
ARTICLE V
COVENANTS
Section 5.01. No Solicitation. From the date hereof until such time as
Parent's designees shall constitute a majority of the members of the Board of
Directors of MGI, MGI shall not, and shall not permit any of the Subsidiaries,
or any of its or their officers, directors, employees, representatives, agents
or affiliates (including, without limitation, any investment banker, attorney or
accountant retained by MGI or any of the Subsidiaries) to, directly or
indirectly, enter into, solicit, initiate or continue any discussions or
negotiations with, or provide
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any information to, or otherwise cooperate in any other way with, any
corporation, partnership, person or other entity or group (each, a "Third
Party"), concerning any offer or proposal which constitutes or is reasonably
likely to lead to any Acquisition Proposal (as hereinafter defined);
provided that the Board of Directors of MGI may, in the event of an
unsolicited Acquisition Proposal, engage in negotiations or discussions with,
or provide information or data to, any Third Party relating to an Acquisition
Proposal if (i) the Acquisition Proposal (as hereinafter defined) is a bona
fide fully-financed written offer submitted to MGI's Board of Directors and
such Board of Directors, after consulting with a nationally recognized
investment bank, determines that such Acquisition Proposal is a Superior
Proposal (as hereinafter defined) and (ii) MGI's Board of Directors
determines, after having received the written opinion of outside legal
counsel to MGI, that the failure to engage in such negotiations or
discussions or provide such information would result in a breach of the
fiduciary duties of the Board of Directors of MGI under applicable law.
Then, in such event, the Board of Directors may withdraw or modify its
approval or recommendation of the Offer, this Agreement or the Merger,
approve or recommend the Superior Proposal or terminate this Agreement
pursuant to Section 8.01(c) hereof. Parent shall have the right to match any
such Superior Proposal, and have such matching proposal immediately accepted
by MGI for five business days after Parent is informed of the necessary
determination in clauses (i) and (ii) of the preceding sentence with respect
to such Superior Proposal. Any information furnished to any Third Party in
connection with an Acquisition Proposal shall be provided pursuant to a
confidentiality agreement in customary form. Subject to all of the foregoing
requirements, MGI will immediately notify Parent orally and in writing if any
discussions or negotiations are sought to be initiated, any inquiry or
proposal is made, or any information is requested by any Third Party with
respect to any Acquisition Proposal or which could lead to an Acquisition
Proposal and immediately notify Parent of all material terms of any proposal
which it may receive in respect of any such Acquisition Proposal, including
the identity of the Third Party making the Acquisition Proposal or the
request for information, if known, and thereafter shall inform Parent on a
timely, ongoing basis of the status and content of any discussions or
negotiations with such a Third Party, including immediately reporting any
material changes to the terms and conditions thereof. MGI shall, and shall
cause the Subsidiaries, and will use its best efforts to ensure their
respective officers, directors, employees, investment bankers, attorneys,
accountants and other agents to, immediately cease and cause to be terminated
all discussions and negotiations that have taken place prior to the date
hereof, if any, with any Third Parties conducted heretofore with respect to
any Acquisition Proposal.
(b) For purposes hereof:
(i) "Acquisition Proposal" means any inquiry, proposal or offer
from any Third Party relating to any direct or indirect acquisition or purchase
of 15% or more of any class of equity securities of MGI or any of the
Subsidiaries, any tender offer or exchange offer that if consummated would
result in any Third Party beneficially owning 15% or more of any class of equity
securities of MGI or any of the Subsidiaries, any merger, consolidation,
business combination, sale of all or substantially all of the assets,
recapitalization, liquidation, dissolution or similar transaction involving MGI
or any of the Subsidiaries, other than the transactions contemplated by this
Agreement, or any other transaction the consummation of which could reasonably
be expected to impede, interfere with, prevent or materially delay the Offer
and/or the
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Merger or which would reasonably be expected to dilute materially the
benefits to Parent of the transactions contemplated hereby; and
(ii) "Superior Proposal" means any bona fide fully-financed
written offer made by a Third Party to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, more than 50% of the shares
of Common Stock then outstanding or all or substantially all the assets of MGI
and otherwise on terms which the Board of Directors of MGI determines (after
consultation with the Financial Advisor or another nationally recognized
investment bank) to be economically superior to the transaction contemplated by
this Agreement.
(c) Nothing contained in this Section 5.01 shall prohibit MGI from
taking and disclosing to MGI's Stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
MGI Stockholders if, in the good faith judgment of the Board of Directors of
MGI, after consultation with outside counsel, failure so to disclose would be
inconsistent with its fiduciary duties to the MGI Stockholders under applicable
law; provided, however, neither MGI nor its Board of Directors nor any committee
thereof shall, except as permitted by Section 5.01(a), withdraw or modify, or
propose to withdraw or modify, its position with respect to the Offer, this
Agreement or the Merger or approve or recommend, or propose to approve or
recommend, an Acquisition Proposal.
Section 5.02. Interim Operations. Except as contemplated by this Agreement
or as expressly agreed to in writing by Parent, during the period from the date
of this Agreement until such time as Parent's designees shall constitute a
majority of the members of the Board of Directors of MGI, MGI will, and will
cause each of the Subsidiaries to, conduct its operations according to its
ordinary and usual course of business and consistent with past practice and use
its and their respective best efforts to preserve intact their current business
organizations, keep available the services of their current officers and
employees and preserve their relationships with customers, suppliers, licensors,
licensees, advertisers, distributors and others having business dealings with
them and to preserve goodwill. Without limiting the generality of the
foregoing, and except as (a) otherwise expressly provided in this Agreement, (b)
required by law, or (c) set forth on Schedule 5.02, MGI will not, and will cause
the Subsidiaries not to, without the consent of Parent:
(i) except with respect to annual bonuses made in the ordinary
course of business consistent with past practice, adopt or amend in any material
respect any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, pension, retirement, employment or other
employee benefit agreement, trust, plan or other arrangement for the benefit or
welfare of any director, officer of employee of MGI or any of the Subsidiaries
or increase in any manner the compensation or fringe benefits of any director,
officer or employee of MGI or any of the Subsidiaries or pay any benefit not
required by any existing agreement or place any assets in any trust for the
benefit of any director, officer or employee of MGI or any of the Subsidiaries
(in each case, except with respect to employees and directors in the ordinary
course of business consistent with past practice);
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(ii) incur any indebtedness for borrowed money in excess of
$25,000, other than in consultation with Parent;
(iii) expend funds for individual capital expenditures in
excess of $50,000 in the aggregate for any 12-month period (to be apportioned
pro-rata over any period less than 12 months), other than in consultation with
Parent;
(iv) sell, lease, license, mortgage or otherwise encumber or
subject to any lien or otherwise dispose of any of its properties or assets,
except in the ordinary course of business consistent with past practice;
(v) (A) declare, set aside or pay any dividends on, or make
anyother distributions in respect of, any of its capital stock, (B) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (C) purchase, redeem or otherwise acquire
any shares of capital stock of MGI or any of the Subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(vi) authorize for issuance, issue, deliver, sell or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise),
pledge or otherwise encumber any shares of its capital stock or the capital
stock of any of the Subsidiaries, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such share,
voting securities or convertible securities or any other securities or equity
equivalents (including without limitation stock appreciation rights) other than
issuances upon exercise of the options, warrants, notes and contract rights set
forth in Schedule 3.03.
(vii) amend its Articles of Incorporation, By-laws or
equivalent organizational documents or alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate structure or
ownership of any Subsidiary of MGI;
(viii) make or agree to make any acquisition of assets which
is material to MGI and the Subsidiaries, taken as a whole, except for (A)
purchases of inventory in the ordinary course of business, (B) pursuant to
purchase orders entered into in the ordinary course of business which do not
call for payments in excess of $5,000, or (C) project-related expenditures
which, individually, do not exceed $10,000;
(ix) settle or compromise any shareholder derivative suits
arising out of the transactions contemplated hereby or any other litigation
(whether or not commenced prior to the date of this Agreement) or settle, pay or
compromise any claims required to be paid, or
(x) authorize any of, or commit or agree to take any of, the
foregoing.
Section 5.03. Stockholder Approval. To the extent stockholder approval
of this Agreement or the Merger is required by law, MGI will take (and
Acquisition and Parent shall use
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all reasonable efforts to cause MGI to take) all action necessary in
accordance with Colorado law, MGI's Articles of Incorporation, as amended,
its By-laws and the requirements of the Boston Stock Exchange and the NASDAQ
Smallcap Market, to duly call, give notice of and convene a special meeting
of the MGI Stockholders (the "MGI Stockholders Meeting") as promptly as
practicable following the expiration of the Offer to obtain such stockholder
approval. Without limiting the generality of the foregoing, MGI agrees that
its obligations pursuant to this Section 5.03(a) shall not be affected by (i)
the commencement, public proposal, public disclosure or communication to MGI
of any Acquisition Proposal or (ii) the withdrawal or modification by the
Board of Directors of MGI of its approval or recommendation of the Offer,
this Agreement or the Merger.
(b) Except as MGI's Board of Directors determines in good faith and
as advised by outside legal counsel would be inconsistent with the fiduciary
duties of the Board of Directors under applicable law, MGI's Board of Directors
shall recommend that the MGI Stockholders vote in favor of the Merger, this
Agreement and the transactions hereby contemplated and cause MGI to take all
lawful actions to solicit from the MGI Stockholders proxies in favor of such
approval.
(c) Notwithstanding the foregoing, if Acquisition and its affiliates
shall own at least 90% of the outstanding MGI Shares, the parties shall take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after the expiration of the Offer without a meeting of MGI
Stockholders in accordance with Section 7-111-104 of the BCA.
(d) If stockholder approval of this Agreement or the Merger is
required by law, MGI shall, at Parent's request, prepare and file a preliminary
Proxy Statement with the SEC and will use its best efforts to respond to any
comments of the SEC or its staff and to cause the Proxy Statement to be mailed
to MGI's Stockholders as promptly as practicable after responding to all such
comments to the satisfaction of the staff. MGI will notify Parent promptly of
the receipt of any comments from the SEC or its staff and of any request by the
SEC or its staff for amendments or supplements to the Proxy Statement or for
additional information and will supply Parent with copies of all correspondence
between MGI or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Proxy Statement or the Merger. If
at any time prior to the MGI Stockholders Meeting there shall occur any event
that should be set forth in an amendment or supplement to the Proxy Statement,
MGI will promptly prepare and mail to MGI Stockholders such an amendment or
supplement. MGI will not mail any Proxy Statement, or any amendment or
supplement thereto, to which Parent reasonably objects.
(e) MGI covenants that none of the information supplied, or to be
supplied, by MGI specifically for inclusion or incorporation by reference in the
MGI Proxy Statement, including, without limitation, information concerning MGI
or any of its affiliates, directors, officers, employees, agents or
representatives will, at the time of mailing of the MGI Proxy Statement or any
amendment or supplement thereto to the MGI Stockholders, contain any untrue
statement of any material fact, or omit to state any material fact necessary in
order to make the
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statements therein, in light of the circumstances under which they were made,
not misleading. If, at any time prior to the date of the MGI Stockholders'
Meeting, any event with respect to MGI or any of the Subsidiaries, or with
respect to other information supplied by MGI specifically for inclusion in
the MGI Proxy Statement, shall occur which is required to be described in an
amendment of, or a supplement to, the MGI Proxy Statement, such event shall
be so described, and such amendment or supplement shall be promptly filed
with the Commission and, as required by law, disseminated to the MGI
Stockholders. All documents that MGI is responsible for filing with the
Commission in connection with the transactions contemplated herein, including
the Schedule 14D-9 or the MGI Proxy Statement, insofar as it relates to MGI
or the Subsidiaries or other information supplied by MGI specifically for
inclusion therein, will comply as to form, in all material respects, with the
provisions of the Securities Act, the Exchange Act or the rules and
regulations thereunder, and each such document required to be filed with any
Governmental Authority other than the Commission will comply in all material
respects with the provisions of applicable law as to the information required
to be contained therein, except that no covenant is made by MGI with respect
to statements made therein based on information supplied by Parent
Acquisition or any of their affiliates, directors, officers, employees,
agents or representatives in writing expressly for inclusion therein.
(f) Parent and Acquisition covenant that none of the information
supplied, or to be supplied, by Parent and Acquisition specifically for
inclusion or incorporation by reference in the MGI Proxy Statement, including,
without limitation, information concerning Parent, Acquisition or any of their
respective affiliates, directors, officers, employees, agents or representatives
supplied by Acquisition in connection with MGI's preparation of the MGI Proxy
Statement will, at the time of mailing of the MGI Proxy Statement or any
amendment or supplement thereto to the MGI Stockholders, contain any untrue
statement of any material fact, or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. If, at any time prior to the date of the MGI
Stockholders' Meeting, any event with respect to Parent or Acquisition, or with
respect to other information supplied by Parent or Acquisition for inclusion in
the MGI Proxy Statement, shall occur which is required to be described in an
amendment of, or a supplement to, the MGI Proxy Statement, such event shall be
so described, and the information required to be filed in such amendment or
supplement shall be promptly delivered to MGI for filing with the Commission
and, as required by law, dissemination to the MGI Stockholders. All documents
that Parent or Acquisition is responsible for filing with the Commission in
connection with the transactions contemplated herein, including the Schedule
14D-1, insofar as it relates to Parent or Acquisition or other information
supplied by Parent or Acquisition specifically for inclusion therein, will
comply as to form, in all material respects, with the provisions of the
Securities Act, Exchange Act or the rules and regulations thereunder, and each
such document required to be filed with any Governmental Authority other than
the Commission will comply in all material respects with the provisions of
applicable law as to the information required to be contained therein, except
that no covenant is made by Parent or Acquisition with respect to statements
made therein based on information supplied by MGI or any of the Subsidiaries or
any of their respective affiliates, directors, officers, employees, agents or
representatives in writing for inclusion therein.
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(g) Parent and Acquisition agree to cause all MGI Shares purchased
pursuant to the Offer and all other MGI Shares owned by Parent, Acquisition or
any Subsidiary thereof to be voted in favor of the approval and adoption of this
Agreement and the Merger.
Section 5.04. Access by Acquisition. The directors, officers, employees,
lenders, accountants, counsel and other representatives of Parent and
Acquisition (collectively, the "Representatives") shall be permitted full
access, during usual business hours during the period prior to the Closing Date
to the properties, accounts, books, contracts, commitments, tax returns and
records of MGI and the Subsidiaries, and such other information relating to MGI
and the Subsidiaries as Parent shall reasonably request; provided, that no
investigation pursuant to this Section 5.04 shall affect any representation or
warranty given by MGI to Parent and Acquisition hereunder; and provided,
further, that any information provided to Parent and/or Acquisition pursuant to
this Section 5.04 shall be subject to a confidentiality agreement in customary
form, the terms of which shall continue to apply, except as otherwise agreed by
MGI, unless and until Parent and Acquisition shall have purchased a majority of
the outstanding Shares pursuant to the Offer and notwithstanding termination of
this Agreement. The Representatives shall be permitted to discuss the business
affairs, finances and accounts of MGI and the Subsidiaries with the officers,
directors, executives, counsel, auditors and actuaries of MGI and the
Subsidiaries.
Section 5.05 Government Filings; Hart Scott Rodino Filing. Each party
hereto shall file or cause to be filed with the Federal Trade Commission (the
"FTC") and the Antitrust Division of the Department of Justice (the "Antitrust
Division") any notification required to be filed by their respective "ultimate
parent" companies under the HSR Act and the rules and regulations promulgated
thereunder with respect to the transactions contemplated hereby. Such parties
will use all reasonable efforts to make such filings within five business days
after commencement of the Offer, and to respond on a timely basis to any
requests for additional information made by either of such agencies. Each of
the parties hereto agrees to furnish the other with copies of all
correspondence, filings and communications (and memoranda setting forth the
substance thereof) between it and its affiliates and their respective
representatives, on the one hand, and the FTC, the Antitrust Division or any
other Governmental Authority or members or their respective staffs, on the other
hand, with respect to this Agreement and the transactions contemplated hereby,
other than personal financial information filed therewith. Each party hereto
agrees to furnish the others with such necessary information and reasonable
assistance as such other parties and their respective affiliates may reasonably
request in connection with their preparation of necessary filings, registrations
or submissions of information to any Governmental Authorities, including without
limitation any filings necessary under the provisions of the HSR Act.
Section 5.06. No Breach of Representations and Warranties. Each of MGI,
Parent and Acquisition shall not knowingly and MGI shall not knowingly permit
any Subsidiary to take any action which would be reasonably likely to cause or
constitute a material breach, or knowingly take any action which, if it had been
taken prior to the date hereof, would have caused or constituted a material
breach of, any of its representations and warranties set forth in Articles III
and IV, respectively. Each of MGI, Parent and Acquisition shall, in the event
of, or promptly after the occurrence of, or promptly after obtaining knowledge
of the occurrence of or the
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impending or threatened occurrence of, any fact or event which would cause or
constitute a breach of any of the representations and warranties set forth in
Articles III and IV, respectively, as of the Closing Date, give detailed
notice thereof to each other non-breaching party; and each of MGI, Parent and
Acquisition shall use its reasonable best efforts to prevent or promptly to
remedy such breach whether or not caused by any action knowingly taken.
Section 5.07. Consents; Notices. Each of MGI, Parent and Acquisition
shall use its reasonable efforts to obtain and deliver to each other party all
written consents, in form and substance satisfactory to each other party,
required in connection with this Agreement, the other Operative Agreements or
the transactions hereby and thereby contemplated. Each of MGI and Acquisition
shall also deliver all notices to Governmental Authorities and third parties
required to be delivered in connection with the execution of this Agreement and
the transactions hereby contemplated.
Section 5.08. Reasonable Efforts. Each of MGI, Parent and Acquisition
shall use its reasonable efforts to effectuate the transactions contemplated by
the Operative Agreements and to fulfill the conditions to the obligations of
each under the Operative Agreements, including cooperating fully with the other
party, including by provision of information and making of all necessary filings
in connection with, among other things, approvals under the HSR Act. MGI will
use all reasonable efforts to obtain any consent from third parties necessary to
allow MGI and the Subsidiaries to continue operating their business as presently
conducted as a result of the consummation of the transactions contemplated
hereby or thereby. In case at any time after the Effective Time, any further
action is necessary or desirable to carry out the purposes of the Operative
Agreements or to vest the Surviving Corporation with full title to all
properties, assets, rights, approval, immunities and franchises of either of MGI
or Acquisition, the proper officers and directors of each party to this
Agreement shall take all such necessary action.
Section 5.09. Indemnification; Directors' and Officers' Insurance.
(a) Parent and Acquisition agree that all rights to indemnification
existing as of the date hereof in favor of the present or former directors,
officers, employees, fiduciaries and agents of MGI or any of the Subsidiaries as
provided in MGI's certificate of incorporation or by-laws or pursuant to other
agreements, arrangements or the certificate of incorporation, by-laws or similar
documents of any of the Subsidiaries as in effect on the date hereof with
respect to matters occurring prior to the Effective Time shall survive the
Merger and shall continue in full force and effect pursuant to the terms
thereof. Parent agrees that it will cause the Surviving Corporation to pay the
amount of the deductible for the directors' and officers' liability insurance
referred to below. The Surviving Corporation shall, unless Parent agrees to
provide, upon the same terms and up to the same extent and the same amount,
coverage as provided by the policies of directors' and officers' liability
insurance referred to below, cause to be maintained in effect for not less than
six years from the Effective Time the policies of directors' and officers'
liability insurance maintained by MGI and the Subsidiaries, each as in effect on
the date hereof (provided that they may substitute therefor policies of at least
the same coverage containing terms and conditions which are no less advantageous
and shall not be required to expend an amount in
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excess of 150% of the annual premiums currently paid by MGI (which MGI
represents is approximately $55,000)), with respect to matters occurring
prior to the Effective Time.
(b) It is understood and agreed that MGI shall, to the fullest
extent permitted under applicable law and regardless of whether the Merger
becomes effective, indemnify and hold harmless, and after the Effective Time,
the Surviving Corporation and Parent shall, to the fullest extent permitted
under applicable law, indemnify and hold harmless, each present and former
director, officer and fiduciary of MGI or any of the Subsidiaries
(collectively, the "Indemnified Parties") against any fees, costs or expenses
(including reasonable attorneys' fees) and judgments, fines, losses, damages,
liabilities and amounts paid in settlement (collectively, "Losses"), in
connection with any pending, threatened or completed claim, action, suit,
proceeding or investigation arising out of any actions or omissions occurring
at or prior to the Effective Time that are in whole or in part based on or
arising out of the fact that such person is or was a director, officer or
fiduciary of MGI or pertaining to any of the transactions contemplated
hereby. In no event shall MGI or the Surviving Corporation be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld). Any Indemnified Party wishing to claim
indemnification under this Section 5.09(b), upon learning of any such claim,
action, suit, proceeding or investigation, shall notify MGI (or after the
Effective Time, the Surviving Corporation) (but the failure so to notify
shall not relieve a party from any liability which it may have under this
Section 5.09(b) except to the extent such failure prejudices such party's
position with respect to such claims) and shall deliver to MGI (or after the
Effective Time, the Surviving Corporation) the undertaking contemplated by
Section 7-109-104 of the BCA. MGI (or, after the Effective Time, the
Surviving Corporation) shall be entitled to assume and control the defense of
any such action or proceeding, including the employment of counsel reasonably
satisfactory to the Indemnified Party; provided, however, that any
Indemnified Party may at its own expense retain separate counsel to
participate in such defense. If MGI or the Surviving Corporation does not
elect to assume such defense, then the Indemnified Parties may assume such
defense with one counsel (and, if required, one local counsel) of their own
choosing reasonably acceptable to MGI or the Surviving Corporation.
(c) If any action, suit, proceeding or investigation relating hereto
or to the transactions contemplated hereby is commenced, whether before or after
the Effective Time, MGI and, after the Effective Time, the Surviving
Corporation, shall agree to use their commercially reasonable efforts to defend
against and respond thereto.
(d) This Section 5.09 shall survive for a period of six years (and
thereafter with respect to claims then pending) following the Effective Time and
is intended to benefit MGI, the Surviving Corporation and the Indemnified
Parties. In the event MGI, Parent or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation of such
consolidation or merger, or (ii) transfers all or substantially all of its
properties to any person, then, and in each case, proper provision shall be made
so that the successors and assigns of MGI and the Surviving Corporation, as the
case may be, shall assume the obligations set forth in this Section 5.09.
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Section 5.10. Options. Prior to the Effective Time, MGI shall amend (i)
the 1996 Stock Option and Stock Bonus Plan and the Senior Executive Incentive
Stock Option Plan and any other program pursuant to which there are holders of
options (the "Options") to purchase Shares granted by MGI (collectively, the
"Stock Option Plans") to provide that all outstanding, unexercised Options shall
be immediately exercisable and that if the optionees do not exercise their
unexercised Options, each optionee shall receive, at such optionee's option (i)
in settlement of each Option held by such optionee, a "Cash Amount" (less any
applicable withholding taxes) with respect to the number of previously
unexercised Shares underlying the Option immediately prior to the Effective
Time, or (ii) an option (a "Parent Option") to purchase the number of shares of
common stock, par value $.01 per share, of Parent equal to 1/20 of the number
of MGI Shares underlying the Options at the exercise price equal to the
aggregate exercise price of the 20 MGI Options in respect of which the Parent
Option was granted and upon terms and conditions substantially similar to those
contained in the applicable Stock Option Plan. Such election must be made in
writing at least 10 days prior to the Effective Time and, if not made, the
optionee shall be deemed to have elected to receive the Cash Amount. The Stock
Option Plans shall also be amended to provide that each Option shall terminate
as of the Effective Time. The Cash Amount payable for each Option shall equal
the product of (i) the Merger consideration minus the exercise price per Share
of each such Option and (ii) the number of previously unexercised Shares covered
by each such Option.
(b) Prior to the Effective Time, MGI shall provide notice to
participants in the Stock Option Plans and other holders of Options to purchase
shares granted by MGI that MGI proposes to merge with another corporation; that
the Optionee under the plans or program may exercise his Options in full for all
shares not theretofore purchased by him prior to the Effective Time or receive
Parent Options as described above; and that the plans and program have been
amended to provide that to the extent an optionee does not exercise such Options
prior to the Effective Time or elect to receive Parent Options, the optionee
shall receive, in settlement of each Option held by the optionee, a "Cash
Amount" (less any applicable withholding taxes) with respect to the number of
previously unexercised Shares underlying the Option immediately prior to the
Effective Time; that each Option shall terminate as of the Effective Time; and
that the Cash Amount payable for each Option shall equal the product of (i) the
Merger Consideration minus the exercise price per Share of each such Option and
(ii) the number of previously unexercised Shares offered by each such Option and
that number of Parent Options which may be received is 1\20 of the number of
Options not exercised for the Cash Amount and the method of calculating the
exercise price of such Parent Options.
(c) Except as may be otherwise agreed to be Parent or Acquisition and
MGI, MGI's Stock Option Plans shall terminate as of the Effective Time and the
provisions in any other plan, program or arrangement providing for the issuance
or grant of any other interest in respect of the capital stock of MGI or any of
the Subsidiaries shall be deleted as of the Effective Time.
(d) MGI shall use its best efforts such that following the Effective
Time no holder of employee stock options will have any right to receive MGI
Shares upon exercise of an employee stock option.
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(e) Notwithstanding anything to the contrary herein, if it is
determined that compliance with any of the foregoing would cause any individual
subject to Section 16 of the Exchange Act to become subject to the profit
recovery provisions thereof, any Options held by such individual will be
canceled or purchased, as the case may be, at the Effective Time or at such
later time as may be necessary to avoid application of such profit recovery
provisions and such individual will be entitled to receive from MGI or the
Surviving Corporation an amount in cash or other consideration satisfactory to
the Surviving Corporation and such individual equal to the excess, if any, of
the Merger Consideration over the per Share exercise price of such Option
multiplied by the number of Shares subject thereto (less any applicable
withholding taxes), and the parties hereto will cooperate and take any and all
necessary actions so as to achieve the intent of the foregoing without giving
rise to such profit recovery.
Section 5.11. Directors. Provided that the Minimum Tender Condition
(as such term is defined in Exhibit A) has been satisfied, promptly upon the
acceptance for payment of, and payment by Acquisition for, all MGI Shares
tendered and not withdrawn pursuant to the Offer, Acquisition shall be
entitled to designate such number of directors on the Board of Directors of
MGI as will give Acquisition, subject to compliance with Section 14(f) of the
Exchange Act, a majority of such directors and MGI shall, at such time, cause
Acquisition's designees to be so elected; provided, however, that in the
event that Acquisition's designees are appointed or elected to the Board of
Directors of MGI, until the Effective Time such Board of Directors shall have
at least two directors who are directors on the date hereof or who are
otherwise not officers, directors or affiliates of Acquisition and are
independent directors under any applicable rules of the Boston Stock Exchange
or the NASDAQ Smallcap Market (the "Independent Directors"); and provided
further that, in such event, if the number of Independent Directors shall be
reduced below two for any reason whatsoever, any remaining Independent
Directors (or Independent Director, if there shall be only one remaining)
shall be entitled to designate a person to fill such vacancy who shall be
deemed to be an Independent Director for purposes of this Agreement or, if no
Independent Directors then remain, the other directors shall designate two
persons to fill such vacancies who shall not be officers, stockholders or
affiliates of Acquisition and who shall be independent directors under the
rules of the Boston Stock Exchange, and such persons shall be deemed to be
Independent Directors for purposes of this Agreement. Subject to applicable
law, MGI shall take all action requested by Parent necessary to effect any
such election, including mailing to its Stockholders the Information
Statement containing the information required by Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder, and MGI agrees to make
such mailing with the mailing of the Schedule 14D-9 (provided that
Acquisition shall have provided to MGI on a timely basis all information
required to be included in the Information Statement with respect to
Acquisition's designees). In connection with the foregoing, MGI will
promptly, at the option of Acquisition, either increase the size of MGI's
Board of Directors or obtain the resignation of such number of its current
directors as is necessary to enable Acquisition's designees to be elected to
MGI's Board of Directors as provided above.
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Section 5.12. Notification of Certain Matters. MGI and Parent shall
promptly notify each other of :
(a) any notice or other communication from any person alleging that
the consent of such person is required or contemplated by this Agreement;
(b) any notice or other communication from any Government Authority
or governmental entity in connection with the transactions contemplated by this
Agreement;
(c) any action, suits, claims, investigations or proceedings
commenced or, to the actual knowledge of the executive officers of the notifying
party, threatened against, relating to or involving or otherwise affecting such
party or any of the Subsidiaries;
(d) an administrative or other order or notification relating to any
material violation or claimed violation of law;
(e) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or prior to
the Closing Date; and
(f) any material failure of any party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder;
provided, however, that the delivery of any notice pursuant to this Section 5.12
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 5.13. Fees and Expenses. In addition to any other amounts
which may be payable or become payable pursuant to any other paragraph of
this Section 5.13, (i) in the event that this Agreement is terminated
pursuant to Section 8.01(b), 8.01(c) or 8.01(f) hereof, MGI shall promptly
reimburse the Parent or Acquisition, as the case may be, up to $1.5 million,
or (ii) in the event that this Agreement is terminated pursuant to Section
8.01(e) hereof, Parent or Acquisition shall promptly reimburse MGI, up to
$250,000, for all out-of-pocket expenses and fees (including, without
limitation, fees and expenses payable to all Governmental Authorities,
banks, investment banking firms and other financial institutions, and their
respective agents and counsel, and all fees and expenses of counsel,
accountants, financial printers, proxy solicitors, exchange agents, experts
and consultants to Parent and its affiliates), whether incurred prior to, on
or after the date hereof, in connection with the Merger and the consummation
of all transactions contemplated by this Agreement.
(b) Except as otherwise specifically provided for herein, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated by this Agreement shall be
paid by the party incurring such expenses.
(c) The prevailing party in any legal action undertaken to enforce
this Agreement or any provision hereof shall be entitled to recover from the
other party the costs and
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expenses (including attorneys' and expert witness fees and expenses) incurred
in connection with such action.
Section 5.14. Certain Litigation. MGI agrees that it will not settle any
litigation commenced after the date hereof against MGI or any of its directors
by any stockholder of MGI relating to the Offer, the Merger or this Agreement,
without the prior written consent of Parent. In addition, MGI will not
voluntarily cooperate with any Third Party which may hereafter seek to restrain
or prohibit or otherwise oppose the Offer or the Merger and will cooperate with
Parent and Acquisition to resist any such effort to restrain or prohibit or
otherwise oppose the Offer or the Merger, unless the Board of Directors of MGI
determines in good faith, after consultation with outside counsel, that failing
so to cooperate with such Third Party or cooperating with Parent or Acquisition,
as the case may be, would constitute a breach of the director's fiduciary duty
under applicable law.
Section 5.15. Insurance. As soon as practicable after the date hereof,
but in no event later than ten business days thereafter, MGI shall deliver to
Parent (i) a true and complete list of all policies or binders of fire,
liability, workmen's compensation, vehicular or other insurance held by or on
behalf of MGI and/or the Subsidiaries (specifying the insurer, the policy
number or covering note number with respect to binders, and describing each
pending claim thereunder of more than $5,000, setting forth the aggregate
amounts paid out under each such policy through the date of delivery of such
list and the aggregate limit of any of the insurer liability thereunder) and
(ii) Schedule 3.11.
Section 5.16. Purchase Agreements. MGI agrees to deliver to the Escrow
Agent the closing documents, exhibits and schedules under the Purchase
Agreements (as such term is defined in the Option Agreement) that are
referred to in Section 4 of the Option Agreement on or before the close of
business on January 9, 1998.
ARTICLE
CONDITIONS TO PARENT'S AND ACQUISITION'S OBLIGATIONS
All obligations of Parent and Acquisition under this Agreement to effect
the Merger are subject solely to the fulfillment at or prior to the Closing Time
of each of the following conditions (any of which may be waived in writing by
Parent or Acquisition):
Section 6.01. Injunctions. No court, agency or other authority shall
have issued any order, decree or judgment to set aside, restrain, enjoin or
prevent the performance of any of Acquisition's material obligations under
Article II and no statute, rule, regulation, executive order, decree or
injunction shall have after the date of this Agreement been enacted, entered,
promulgated or enforced by any United States court or Governmental Authority
of competent jurisdiction which prohibits the consummation of the Merger;
provided, however, that Parent and Acquisition shall have used their
commercially reasonable best efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any
injunction or other order that may be entered.
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Section 6.02. Stockholder Approval. The Merger, this Agreement and the
transactions contemplated hereby shall have been approved in a manner
required by applicable law, and by the applicable regulations of any stock
exchange or other regulatory body; provided, however, that Acquisition and
its affiliates shall have voted all MGI Shares owned by them in favor of this
Agreement; and provided further, that each of Acquisition and MGI shall have
used its commercially reasonable efforts to cause such approval to be
obtained.
Section 6.03. Consummation of the Offer. Acquisition shall have
accepted for purchase and paid for MGI Shares tendered pursuant to the Offer.
Section 6.04. Representations and Warranties. The representations and
warranties of MGI contained in this Agreement shall be true and correct in
all material respects at and as of the Effective Time, with the same force
and effect as if made at and as of the Effective Time, other than such
representations and warranties as are expressly made as of another date, and
Parent and Acquisition shall have received a certificate of MGI to that
effect signed by a duly authorized officer thereof.
Section 6.05. HSR Approvals. The applicable waiting periods under the
HSR Act shall have expired or been terminated.
Section 6.06. Employment Agreements. Each of the employment agreements
entered into by MGI with its employees, directors or officers shall have been
terminated except for the employment agreements between MGI and each of J.D.
Finley and Charles D. Tourtellotte.
ARTICLE
CONDITIONS TO MGI'S OBLIGATIONS
All obligations of MGI under this Agreement to effect the Merger are
subject solely to the fulfillment, at the Closing Time, of each of the following
conditions (any of which may be waived in writing by MGI):
Section 7.01. Injunctions. No, court, agency or other authority shall
have issued any order, decree or judgment to set aside, retrain, enjoin or
prevent the performance of MGI's obligations under Article II hereof. No
statute, rule, regulation, executive order, degree or injunction shall have
after the date of this Agreement been enacted, entered, promulgated or
enforced by any United States court or Governmental Authority of competent
jurisdiction which prohibits the consummation of the Merger.
Section 7.02. Stockholder Approval. The Merger, this Agreement and the
transactions contemplated hereby shall have been approved in a manner
required by applicable law.
Section 7.03. Consummation of the Offer. Acquisition shall have
accepted for purchase and paid for MGI Shares tendered pursuant to the Offer.
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Section 7.04. HSR Approvals. The applicable waiting periods under the
HSR Act shall have expired or been terminated.
ARTICLE
TERMINATION
Section 8.01. Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Merger by the MGI Stockholders or by
Acquisition:
(a) by the mutual consent of Acquisition and MGI;
(b) by Acquisition, if prior to consummation of the Offer (i) the
Board of Directors of MGI fails to make, or withdraws or materially modifies or
changes in a manner adverse to Acquisition, its recommendation to the MGI
Stockholders to accept the Offer, the Merger or this Agreement and the
transactions contemplated hereby, or resolves to do the foregoing or (ii) the
Board of Directors of MGI shall have recommended that the MGI Stockholders
accept or approve an Acquisition Proposal with a Third Party, or resolves to do
the foregoing or (iii) a tender or exchange offer for any of the outstanding
shares of capital stock of MGI is commenced (other than by Parent, Acquisition
or their affiliates) and the Board of Directors of MGI fails to timely recommend
against MGI Stockholders' tendering their MGI Shares into such tender or
exchange offer;
(c) by MGI, if, prior to the Effective Time, any Third Party has made
a bona fide fully financed written offer relating to an Acquisition Proposal, or
has commenced a tender or exchange offer for MGI Shares, and MGI's Board
determines in good faith (i) after consultation with its financial advisors, and
that such transaction constitutes a Superior Proposal and (ii) after having
received the written opinion of outside legal counsel to MGI, that the failure
to engage in such negotiations or discussions or provide such information would
result in a breach of the fiduciary duties of the Board of Directors of MGI
under applicable law;
(d) by MGI or Acquisition, if the Offer shall not have been
consummated on or before June 30, 1998, or the Offer is terminated by
Acquisition or allowed to expire with no MGI Shares being accepted for payment;
provided, however, that neither Acquisition or MGI may terminate this Agreement
pursuant to this Section 8.01(d) if such party shall have materially breached
this Agreement; or if prior to such day a reasonable, well-informed person would
conclude that any condition set forth in Exhibit A shall be incapable of being
satisfied by such date (except that a party whose breach of covenant has caused
such failure to consummate shall not be entitled to so terminate this
Agreement), or the Merger has not been consummated by December 31, 1998; or
(e) by MGI, if there has been a violation or breach by Parent or
Acquisition of any representation, warranty or agreement contained in this
Agreement specifically qualified by materiality, or a material violation or
breach by Acquisition of any material representation, warranty or agreement not
so qualified contained in this Agreement (which violation or breach is
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not cured by Parent or Acquisition within 30 days after written notice by MGI
to Parent or Acquisition reasonably describing such breach);
(f) by Acquisition prior to consummation of the Offer, if there has
been a violation or breach by MGI of any representation, warranty or agreement
contained in this Agreement or any other Operative Agreement as though such
representations, warranties and agreements were made without reference to a MGI
Material Adverse Effect (which violation or breach is not cured by MGI within 30
days after written notice by Acquisition to MGI reasonably describing such
breach), except in all cases where the failure or failures of such
representations and warranties to be so true and correct or such agreements to
be performed or complied with would not have, singly or in the aggregate, a MGI
Material Adverse Effect; provided, however, that any such violation or breach
that occurs during the 15 business day period referred to in Section 1.01(a)(D)
hereof shall be deemed not to constitute an MGI Material Adverse Effect if such
violation or breach shall be as a result of a decline in the financial
performance or operations of MGI, provided that MGI has operated its business in
accordance with Section 5.02 hereof and otherwise consistent with its past
practices; or
(g) by either Acquisition or MGI, if the stockholder approval shall
not have been obtained at the MGI Stockholders' Meeting, if required pursuant to
the terms thereof.
Section 8.02. Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 8.01, this Agreement shall forthwith
become void and all obligations and liabilities of the parties hereunder
shall terminate, except obligations of the parties pursuant to Sections 5.13,
9.03, 9.08, 9.11, 9.16 and this Section 8.02.
ARTICLE
MISCELLANEOUS
Section 9.01. Amendment. This Agreement may be amended by the parties
hereto at any time before or after approval of the matters presented in
connection with the Merger by the MGI Stockholders, but, after any such
approval, no amendment shall be made which by law requires further approval
by the MGI Stockholders without such further approval. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto. Following the election or appointment of the
Acquisition's designees pursuant to Section 5.11 and prior to the Effective
Time, the affirmative vote of a majority of the Independent Directors then in
office shall be required by MGI to (i) amend or terminate this Agreement by
MGI, (ii) exercise or waive any of MGI's rights or remedies under this
Agreement or (iii) extend the time for performance of Parent and
Acquisition's respective obligations under this Agreement
Section 9.02. Extension: Waiver. At any time prior to the Effective
Time, Acquisition and MGI may, to the extent legally allowed (i) extend the
time for the performance of any of the obligations or other acts of the other
party hereto, (ii) waive any inaccuracies in the representation and
warranties of the other party contained herein or in any document delivered
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pursuant hereto and (iii) waive compliance by the other party with any of the
agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of Acquisition and MGI. The failure
of any party hereto to assert any of its rights hereunder shall not constitute
a waiver of such rights.
Section 9.03. Non-Survival. The representations, warranties, covenants
and agreements in this Agreement shall terminate at the Effective Time, except
that the agreements set forth in Article II, Section 5.09 and in this Article
IX, any other covenant or agreement that contemplates performance after the
Effective Date shall survive the Effective Time, and no claim may be brought
after the Effective Time against any person alleging a breach of any
representation or warranty or a failure to comply with the terms and provisions
of this Agreement except those agreements set forth in Article II, Section 5.09
and in this Article IX.
Section 9.04. Further Assurances. Each of the parties agrees and
covenants promptly to execute and deliver, or cause to be executed and
delivered, to the other party such documents or instruments, in addition to
those expressly required by this Agreement to be executed and delivered, as the
other party may reasonably deem necessary or desirable to carry out or implement
any provision of this Agreement and the transaction contemplated hereby.
Section 9.05. Entire Agreement. All prior or contemporaneous agreements,
contracts, promises, representations and statements, if any, between the parties
hereto as to the subject matter hereof, are merged into this Agreement. This
Agreement, together with all agreements, Schedules, documents and other
instruments to be attached hereto or delivered hereunder sets forth the entire
understanding between the parties, and there are no terms, conditions,
representations, warranties or covenants other than those contained herein and
in such agreements, Schedules, documents and other instruments to be attached
hereto or delivered hereunder.
Section 9.06. Notices. All notices, consents, demands or other
communications required or permitted to be given pursuant to the Agreement shall
be in writing and shall be deemed sufficiently given on (i) the day on which
delivered personally during a business day to the appropriate location listed as
the address below, (ii) three business days after the posting thereof by United
States registered or certified first class mail, return receipt requested with
postage and fees prepaid, or (iii) one business day after deposit thereof for
overnight delivery. Such notices, consents, demands or other communications
shall be addressed respectively:
As to MGI: MetroGolf Incorporated
1999 Broadway
Suite 2435
Denver, Colorado 80202
Attention: Charles D. Tourtellotte
Fax: (303) 294-9360
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with a copy to: Brownstein Hyatt Farber & Strickland,
P.C.
410 Seventeenth Street
22nd Floor
Denver, Colorado 80202-4437
Attention: Brent T. Slosky, Esq.
Fax: (303) 623-1956
As to Parent or Acquisition: Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Attention: Dominic Chang
Fax: (516) 694-0918
with a copy to: Squadron, Ellenoff, Plesent &
Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Kenneth R. Koch, Esq.
Fax: (212) 697-6686
or to any other address which such party may have subsequently communicated to
the other parties in writing.
Section 9.07. Successors and Assigns. Each and every representation,
warranty, covenant, agreement, indemnification, and provision of the Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto. Except as otherwise
expressly provided herein, this Agreement may not be assigned by either party
hereto without the prior written consent of the other party hereto, except that
Acquisition may assign, in its sole discretion, any or all of its rights,
interests and obligations hereunder to any direct or indirect wholly owned
subsidiary of Parent. Any purported assignment in violation of this Agreement
shall be void.
Section 9.08. Governing Law. This Agreement and any other agreement
entered into in connection herewith shall be governed by, and construed under
and in accordance with, the laws of the State of Colorado, as to matters of
corporate law, and the laws of the State of New York, as to matters applicable
to contracts made and wholly to be performed therein by residents thereof,
without giving effect to the conflict of law principles thereof.
Section 9.09. Gender and Person. Wherever the context so requires, the
masculine pronoun shall include the feminine and the neuter, and the singular
shall include the plural.
Section 9.10. Captions. The captions and the table of contents appearing
in this Agreement are inserted only as a matter of convenience and for reference
and in no way define, limit or describe the scope or intent of this Agreement or
any of the provisions hereof.
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Section 9.11. Confidentiality of Disclosures. Any corporate information,
records, documents, descriptions or other disclosures of whatsoever nature or
kind made or disclosed by either of the parties to the other party, or to the
authorized representatives thereof, or learned or discovered by such other party
or by any representatives thereof in connection with the transactions
contemplated by this Agreement (whether prior to or after the date of the
execution of this Agreement) and not known by or available to the public at
large, shall be received in confidence and neither of the parties nor any such
authorized representative shall disclose or make use of such information or
authorize anyone else to disclose or make use thereof without the written
consent of the other party hereto, except (a) as necessary to consummate the
transactions contemplated hereby or (b) as compelled by judicial or
administrative process or by other requirements of applicable law including any
disclosure under Federal securities laws; provided, however, that in the case of
any disclosure contemplated pursuant to this clause (b), the party seeking to
disclose such information shall give the other party reasonable prior written
notice thereof in order to afford such other party reasonable opportunity to
seek a protective order or other limitation under such disclosure.
Section 9.12. Publicity. Any communications and notices to third parties
and all other publicity concerning the transactions contemplated by the
Agreement (other than governmental or regulatory filings) shall be planned and
coordinated by and between the parties. Unless required by applicable law or
the rules of the NASDAQ National Market, the Boston Stock Exchange or The NASDAQ
Smallcap Market, neither of the parties shall disseminate or make public or
cause to be disseminated or made public any information regarding the
transactions contemplated hereunder without the prior approval of the other
party, which approval shall not be unreasonably withheld. Notwithstanding the
foregoing, either party to this Agreement may, without the prior approval of the
other, make public statements that are not inconsistent with public documents
filed with the Commission in connection therewith.
Section 9.13. Third Parties. Other than the parties hereto and as
provided in Section 5.09, no person shall have any right under or to enforce any
provision of this Agreement.
Section 9.14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute a single agreement and shall become effective when two
or more counterparts have been signed by each of the parties and delivered to
the other parties, it being understood that all parties need not sign the same
counterpart.
Section 9.15. Interpretation. When a reference is made in this Agreement
to an Article or a Section, such reference shall be to an Article or a Section
of this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
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Section 9.16. Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of New York or in a New York state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (i) consents to submit to the personal
jurisdiction of any Federal court in the event any dispute arises out of this
Agreement or any of the transactions contemplated hereby, (ii) agrees that such
party will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court, (iii) agrees that such party will
not bring any action relating to this Agreement or any of the transactions
contemplated hereby in any court other than a Federal court sitting in the State
of New York or a New York state court and (iv) waives any right to trail by jury
with respect to any claim or proceeding related to or arising out of this
Agreement or any of the transactions contemplated hereby.
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IN WITNESS WHEREOF, Parent, Acquisition and MGI have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of the
date first written above.
FAMILY GOLF CENTERS, INC.
By: /s/ Dominic Chang
--------------------------------------
Name: Dominic Chang
Title:
FAMILY GOLF ACQUISITION, INC.
By: /s/ Dominic Chang
--------------------------------------
Name: Dominic Chang
Title:
METROGOLF INCORPORATED
By: /s/ Charles Tourtellotte
--------------------------------------
Name: Charles Tourtellotte
Title:
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Exhibit A
Conditions of the Offer
Reference is made to the Agreement and Plan of Merger, dated as of
December 23, 1997 (the "Agreement"), by and among Parent, Acquisition and
MetroGolf Incorporated ("MGI"). Capitalized terms defined in the Agreement
and not otherwise defined herein are used herein with the meanings so defined.
Notwithstanding any other term of the Offer or this Agreement and in
addition to (and not in limitation of) Acquisition's right to extend and amend
the Offer at any time in its sole discretion (subject to the provisions of this
Agreement), Acquisition shall not be required to accept for payment or, subject
to any applicable rules and regulations of the Commission, including Rule
14e-1(c) under the Exchange Act (relating to Acquisition's obligation to pay for
or return tendered MGI Shares after the termination or withdrawal of the Offer),
to pay for and may delay the acceptance for payment of or, subject to the
restriction referred to above, any MGI Shares tendered pursuant to the Offer
unless (a) there shall have been validly tendered and not withdrawn prior to the
expiration of the Offer a number of MGI Shares which, when added to any other
MGI Shares beneficially owned by Parent, Acquisition or their affiliates, shall
equal at least a majority of the number of MGI Shares outstanding on a
fully-diluted basis (excluding (i) shares underlying any options, warrants,
convertible notes or contract rights with an exercise price per share of $2.00
or greater and (ii) shares underlying options or warrants if the holders thereof
have agreed (A) not to exercise or convert such options or warrants prior to the
consummation of the Offer and (B) to vote in favor of the Merger if such options
or warrants are exercised or converted following the consummation of the Offer)
immediately after the termination of the Offer (the "Minimum Tender Condition")
and (b) all waiting periods under the HSR Act applicable to the purchase of MGI
Shares pursuant to the Offer shall have expired or have been terminated.
Furthermore, notwithstanding any other term of the Offer or this Agreement,
Acquisition shall not be required to accept for payment or, subject as
aforesaid, to pay for any MGI Shares not theretofore accepted for payment or
paid for, and may, terminate or amend the Offer, if at any time on or after the
date of this Agreement and before the acceptance of such MGI Shares for payment
or the payment therefor, any of the following conditions exists and shall be
continuing:
(a) there shall be threatened by any Governmental Authority or
instituted or pending by any Person or Governmental Authority any suit, action,
investigation or proceeding (i) challenging the acquisition by Parent or
Acquisition of any MGI Shares under the Offer or seeking to restrain or prohibit
the making or consummation of the Offer or the Merger or the performance of any
of the other transactions contemplated by this Agreement, or seeking to obtain
from MGI, Parent or Acquisition any damages that are material in relation to MGI
and the Subsidiaries taken as a whole, (ii) seeking to prohibit or impose any
material limitations on Parent's or Acquisition's ownership or operation (or
that of any of their respective subsidiaries or affiliates) of all or a material
portion of their or MGI's businesses or assets, or to compel Parent
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or Acquisition or their respective subsidiaries and affiliates to dispose of
or hold separate any material portion of the business or assets of MGI or
Parent and their respective subsidiaries, in each case taken as a whole,
(iii) challenging the acquisition by Parent or Acquisition of any MGI Shares
under the Offer, seeking to restrain or prohibit the making or consummation
of the Offer or the Merger or the performance of any of the other
transactions contemplated by this Agreement, or seeking to obtain from MGI,
Parent or Acquisition any damages that are material in relation to MGI and
the Subsidiaries taken as a whole, (iv) seeking to impose material
limitations on the ability of Acquisition, or render Acquisition unable, to
accept for payment, pay for or purchase some or all of the MGI Shares
pursuant to the Offer and the Merger, (v) seeking to impose material
limitations on the ability of Acquisition or Parent effectively to exercise
full rights of ownership of the MGI Shares, including, without limitation,
the right to vote the MGI Shares purchased by it on all matters properly
presented to MGI Stockholders, or (vi) which otherwise is reasonably likely
to have a MGI Material Adverse Effect;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to the
Offer or the Merger, or any other action shall be taken by the Governmental
Entity or court, other than the application to the Offer or the Merger of
applicable waiting periods under the HSR Act that is reasonably likely to
result, indirectly or indirectly, in any of the consequences referred to in
clause (i) through (vi) of paragraph (a) above;
(c) there shall have occurred any events after the date of this
Agreement that, either individually or in the aggregate, have caused or are
reasonably likely to cause a MGI Material Adverse Effect other than a change
resulting from the announcement of the Offer or the Merger.
(d) (i) the Board of Directors of MGI or any committee thereof shall
have withdrawn or modified in a manner adverse to Parent or Acquisition its
approval or recommendation of the Offer, the Merger or the Agreement, or
approved or recommended any Acquisition Proposal, (ii) MGI shall have entered
into any agreement (other than an agreement that solely gives a party access to
documents under conditions of confidentiality) with respect to any Superior
Proposal in accordance with Section 5.01(a) of the Agreement or (iii) the Board
of Directors of MGI or any committee thereof shall have resolved to take any of
the foregoing actions;
(e) there has been a violation or breach by MGI of any
representation, warranty or agreement contained in the Agreement or any of the
Operative Agreements as though such representations, warranties and agreements
were made without reference to an MGI Material Adverse Effect, except in all
cases where the failure or failures of such representations and warranties to be
so true and correct or such agreements to be performed or complied with would
not have, singly or in the aggregate, an MGI Material Adverse Effect.
(f) the Agreement shall have been terminated in accordance with
its terms;
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(g) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the New York Stock Exchange
or on the NASDAQ Market, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iii) a
commencement of a war, armed hostilities or other international or national
calamity directly involving in the armed forces of the United States, (iv) any
general limitation (whether or not mandatory) by any governmental authority on
the extension of credit by banks or other lending institutions, (v) in the case
of any of the foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof, (vi) a decline of at least twenty
percent (20%) in the Dow Jones Industrial Average or the Standard and Poors 500
Index from the date of this Agreement to the expiration or termination of the
Offer or (vii) a change in general financial, bank or capital market conditions
which materially and adversely affects the ability of financial institutions in
the United States to extend credit or syndicate loans;
(h) any Third Party acquires beneficial ownership (as defines in Rule
13d-3 promulgated under the Exchange Act), of at least 15% of the outstanding
Common Stock of MGI (other than any person not required to file a Schedule 13D
under the rules promulgated under the Exchange Act); or
(i) The Stockholders Agreement of even date herewith, among Parent,
Acquisition and the stockholders of MGI set forth in Schedule A thereto (the
"Principal Stockholders") shall no longer be in full force and effect, or any of
the Principal Stockholders shall have breached any material obligation
thereunder.
(j) The Option Agreement and Pledge Agreement, each of even date
herewith, between Parent and MGI shall no longer be in full force and effect or
MGI shall have breached any material obligation thereunder; provided, however,
that if all conditions to the Offer set forth in this Exhibit A other than this
clause (j) have been satisfied or waived, Parent and Acquisition shall
consummate the Offer.
(k) Parent shall have received from each Landlord and any
overlandlord of each landlord of the properties set forth in Schedule I hereto,
an estoppel certificate in the form annexed as Exhibit B, except that with
respect to the Illinois center golf facilities, Parent shall have received from
its Landlord an estoppel certificate substantially in the form of Exhibit C;
provided, however, that, in any case, if MGI or any of the Subsidiaries obtains
any consent as a result of a default to which Parent has consented, this
condition shall be waived as to such property.
(l) With respect to the properties set forth in Schedule I hereto,
Parent shall have received from each of MGI's or its Subsidiaries' lenders whose
loan is secured by a mortgage or deed of trust encumbering any of such
properties (each a "Mortgage Lender"), other than any Mortgage Lender whose loan
is in default or has gone into default with the consent of Parent, a statement
to the effect that to its knowledge no default under its mortgage or deed of
trust exists nor is such lender aware of the occurrence or non-occurrence of any
event which, with notice of the passage of time, or both, would constitute such
a default.
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(m) Parent shall have promptly ordered and received from the title
company or companies it selects to report the condition of the title to the
properties set forth in Schedule I hereto a commitment for title instrument with
premiums at ordinary rates showing that the condition of title is such as
represented by MGI under Sections 3.07(a) or 3.07(b).
(n) Any environmental site assessment commissioned by parent with
respect to any of the properties set forth on Schedule I hereto shall show that
the representations set forth in Section 3.18 are true in all material respects.
(o) With respect to the properties set forth in Schedule I hereto,
Parent shall have received consents to a change of control contemplated by the
consummation of the Offer and/or the Merger from (i) each Landlord and any
overlandlord of each Landlord whose consent to the Merger is required by any
lease and (ii) each Mortgage Lender whose consent to the Merger is required by
applicable loan documents or whose loan would be in default as a result of the
Merger.
The foregoing conditions are for the sole benefit of Parent and
Acquisition and may be asserted by Parent and Acquisition regardless of the
circumstances giving rise to any such condition (other than a breach by Parent
or Acquisition of the Agreement) and may be waived by Parent or Acquisition, in
whole or in part, at any time and from time to time, in the sole discretion of
Parent and Acquisition. The failure by Parent or Acquisition at any time to
exercise any of the foregoing rights will not be deemed a waiver of any right
and each right will be deemed an ongoing right which may be asserted at any time
and from time to time.
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STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT, dated as of December 23, 1997 (the
"Agreement"), is made and entered into by Family Golf Centers, Inc., a
Delaware corporation ("Parent"), Family Golf Acquisitions, Inc., a Colorado
corporation and a wholly-owned subsidiary of Parent ("Acquisition"), and the
parties listed on Schedule A (the "Stockholders").
WITNESSETH:
WHEREAS, on December 23, 1997, Parent, Acquisition and MetroGolf
Incorporated, a Colorado corporation (the "Company"), entered into an
Agreement and Plan of Merger (as such agreement may hereafter be amended,
restated or renewed from time to time, the "Merger Agreement"), pursuant to
which Acquisition will commence a cash tender offer to purchase any and all
outstanding shares of common stock, without par value per share, of the
Company (the "Company Common Stock"), and Acquisition will be merged with and
into the Company. Capitalized terms used and not defined herein shall have
the respective meanings ascribed to them in the Merger Agreement;
WHEREAS, set forth opposite each Stockholder's name on Schedule A is the
number of shares of Company Common Stock owned by such Stockholder; and
WHEREAS, the Stockholders are executing this Agreement as an inducement
to Parent and Acquisition to facilitate the Offer and the Merger.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to
any securities shall mean having "beneficial ownership" of such securities
(as determined pursuant to Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), including pursuant to any agreement,
arrangement or understanding, whether or not in writing but excluding any
shares deemed to be beneficially owned by a Person as a result of the
participation of such Person in a "group" within the meanings of Section
13(d)(3) of the Exchange Act.
(b) "Merger" shall mean the merger contemplated by the Merger
Agreement.
(c) "Offer" shall mean the cash tender offer contemplated by the
Merger Agreement for all of the outstanding shares of Company Common Stock as
such offer may be amended as permitted by the Merger Agreement.
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(d) "Person" shall mean an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity.
(e) "Termination Event " shall mean the termination of the Merger
Agreement in accordance with Section 8.01(b), 8.01(c) and 8.01(f) thereof.
2. The Acquisition Offer.
(a) Provided that neither Parent nor Acquisition is not then in
material breach of the Merger Agreement and provided that there has not been
issued an injunction which would prohibit the Stockholders from tendering
their respective shares, the Stockholders hereby, severally and not jointly
and severally, agree to validly tender (and not to withdraw), pursuant to and
in accordance with the terms of the Offer, not later than the fifth business
day after the receipt by the respective Stockholders of the offer to
purchase, transmittal letter and other relevant offer documents (the "Offer
Documents"), the number of shares of Company Common Stock set forth opposite
such Stockholder's name on Schedule A attached hereto, which shares
constitute all of the Company Common Stock Beneficially Owned by each
Stockholder (other than, for purposes of this Agreement, shares underlying
any options held by such Stockholder until such time any such option is
exercised) (collectively, the "Existing Shares" and, together with any shares
of Company Common Stock acquired by any Stockholder after the date hereof and
prior to the termination of this Agreement, whether upon exercise of options,
warrants or rights, the conversion or exchange of convertible or exchangeable
securities, or by means of purchase, dividend, distribution or otherwise, the
"Shares"). Each Stockholder hereby acknowledges and agrees that
Acquisition's obligation to accept for payment Shares purchased pursuant to
the Offer, including the Shares Beneficially Owned by such Stockholder, is
subject to the terms and conditions of the Offer.
(b) Each Stockholder hereby agrees to permit Acquisition to publish
and disclose in the Offer Documents and, if stockholder approval is required
under applicable law, the proxy statement, if any (including all documents
and schedules filed with the Securities and Exchange Commission (the
"Commission")), such Stockholder's identity and ownership of Company Common
Stock and the nature of such Stockholder's commitments, arrangements and
understandings under this Agreement.
(c) Each of the Stockholders hereby grants to Acquisition an
irrevocable option (each, a "Purchase Option" and collectively, the "Purchase
Options") to purchase the Shares Beneficially Owned by such Stockholder (the
"Option Shares") at a purchase price equal to $1.50, subject to adjustment as
hereinafter provided. Subject to the penultimate sentence of this Section
2(c), each Purchase Option is currently exercisable in whole or in part, and
shall remain exercisable in whole but not in part until 5:00 p.m. (Denver,
Colorado time) on the date which is 270 days after a Termination Event (the
"Option Period"), so long as: (i) all applicable waiting periods under the
HSR Act required for the purchase by Acquisition of the Option Shares upon
such exercise shall have expired or been waived, and (ii) there shall not be
in effect any preliminary or final injunction or other order issued by any
court or governmental, administrative or regulatory agency or authority
prohibiting the exercise of the Purchase Options pursuant to this Agreement.
The Option Period
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<PAGE>
shall be extended for the time period that any such preliminary injunction or
order shall be in effect that otherwise prohibits the exercise of a Purchase
Option. To exercise the Purchase Options, Acquisition shall send a written
notice (the "Notice") to the Stockholders identifying the place, date and
time (not less than five nor more than 20 business days from the date of the
Notice) for the closing of such purchase. Acquisition shall not exercise the
Purchase Options prior to the occurrence of a Termination Event. At such
closing, the Stockholders shall deliver the certificates for the Shares duly
endorsed for transfer against receipt of the purchase price therefor.
3. Grant of Irrevocable Proxy. Concurrently with the execution hereof,
each Stockholder is delivering to Acquisition an irrevocable proxy (the
"Proxy"), in the form of Exhibit A hereto, which shall be deemed to be
coupled with an interest with respect to all of the Shares, to vote all of
the Shares and to represent and otherwise act for the Stockholders in the
same manner and with the same effect as if the Stockholder were personally
present, for the Merger or, in Acquisition's discretion, against any other
proposal for a merger or other business combination of the Company with any
party other than Acquisition, or against any sale of all or substantially all
of the assets of the Company to any party other than Acquisition, or any
similar extraordinary corporate transaction with any party other than
Acquisition (any such merger, business combination, sale of assets or similar
extraordinary corporate transaction, other than the Merger, is referred to
herein as a "Business Combination"), at any annual or special meeting (or any
adjournment or postponement thereof) of the stockholders of the Company at
which the Merger or any Business Combination is submitted to a vote. The
Proxy shall expire upon the earlier of (i) the consummation of the Merger;
(ii) 270 days from the date hereof or (iii) the termination of the Merger
Agreement resulting from a breach thereof by either Parent or Acquisition.
4. Covenants, Representations and Warranties of Each Stockholder.
(a) Each Stockholder hereby, severally and not jointly and
severally, represents and warrants, to Parent and Acquisition as follows:
(i) Ownership of Shares. Each Stockholder is either (A)
the record and Beneficial Owner of, or (B) the Beneficial Owner but not the
record holder of, the number of Shares set forth opposite the Stockholder's
name on Schedule A hereto, as the case may be. As of December __, 1997, the
Shares set forth opposite such Stockholder's name on Schedule A hereto
constitute all of the Shares owned of record or Beneficially Owned by such
Stockholder. Except as provided on Schedule A, such Stockholder has sole
power to issue instructions with respect to the matters set forth in Sections
2 and 3 hereof, sole power of disposition, sole power of conversion, sole
power to demand appraisal rights and sole power to agree to all of the
matters set forth in this Agreement, in each case with respect to all of the
Shares set forth opposite such Stockholder's name on Schedule A hereto, as
the case may be, with no material limitations, qualifications or restrictions
on such rights, subject to applicable securities laws and the terms of this
Agreement.
(ii) Power; Binding Agreement. Each Stockholder has the
legal capacity, power and authority to enter into and perform all of such
Stockholder's obligations under this Agreement. The execution, delivery and
performance of this Agreement by such Stockholder will not violate any other
agreement to which such Stockholder is a party, including, without
limitation,
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<PAGE>
any voting agreement, stockholder's agreement or voting trust. This Agreement
has been duly and validly executed and delivered by such Stockholder and
constitutes a valid and binding agreement of such Stockholder, enforceable
against such Stockholder in accordance with its terms. There is no
beneficiary or holder of a voting trust certificate or other interest of any
trust of which such Stockholder is trustee whose consent is required for the
execution and delivery of this Agreement or the consummation by such
Stockholder of the transactions contemplated hereby. If such Stockholder is
married and such Stockholder's Shares constitute community property, this
Agreement has been duly authorized, executed and delivered by, and
constitutes a valid and binding agreement of, such Stockholder's spouse,
enforceable against such person in accordance with its terms.
(iii) No Conflicts. Except for filings under the
Exchange Act or, if applicable, the HSR Act (A) no filing with, and no
permit, authorization, consent or approval of, any state or federal public
body or authority is necessary for the execution of this Agreement by each
Stockholder and the consummation by such Stockholder of the transactions
contemplated hereby, except where the failure to obtain such consent, permit,
authorization, approval or filing would not interfere with such Stockholder's
ability to perform its obligations hereunder, and (B) none of the execution
and delivery of this Agreement by such Stockholder, the consummation by such
Stockholder of the transactions contemplated hereby or compliance by such
Stockholder with any of the provisions hereof shall (1) conflict with or
result in any breach of any applicable organizational documents applicable to
such Stockholder, (2) except as provided on Schedule A, result in a violation
or breach of, or constitute (with or without notice or lapse of time or both)
a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of any kind to which such Stockholder is a party or
by which such Stockholder or any of such Stockholder's properties or assets
may be bound, or (3) violate any order, writ, injunction, decree, judgment,
order, statute, rule or regulation applicable to such Stockholder or any of
such Stockholder's properties or assets, in each such case except to the
extent that any conflict, breach, default or violation would not interfere
with the ability of such Stockholder to perform its obligations hereunder.
(iv) No Encumbrances. Except as provided on Schedule A or
required by Sections 2 and 3, the Shares of each Stockholder and the
certificates representing such Shares are now, and at all times during the
term hereof will be, held by such Stockholder, or by a nominee or custodian
for the benefit of such Stockholder, free and clear of all liens, claims,
security interests, proxies, voting trusts or agreements, understandings or
arrangements or any other encumbrances whatsoever.
(v) No Finder's Fees. No broker, investment banker,
financial adviser or other person (other than Prime Charter Ltd.) is entitled
to any broker's, finder's, financial adviser's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of any Stockholder.
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<PAGE>
(vi) Restriction on Transfer, Proxies and
Non-Interference. Except as required by this Agreement, no Stockholder shall
directly or indirectly without the consent of Acquisition: (A) offer for
sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose
of, or enter into any contract, option or other arrangement or understanding
with respect to the offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of such
Stockholder's Shares, or any interest therein, (B) grant any proxies or
powers of attorney, deposit any shares into a voting trust or enter into a
voting agreement with respect to any Shares, or (C) take any action that
could reasonably be expected to have the effect of preventing or disabling
such Stockholder from performing such Stockholder's obligations under this
Agreement.
(vii) Waiver of Appraisal Rights. Each Stockholder
hereby waives any rights of appraisal or rights to dissent from the Merger
that the Stockholder may have.
(b) Each of Parent and Acquisition hereby represents and warrants
to each of the Stockholders as follows:
(i) Organization, Standing and Corporate Power. Parent
is a corporation duly organized, validly existing and in good standing under
the laws of the state of Delaware and Acquisition is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Colorado, and each has adequate corporate power and authority to own its
properties and carry on its business as presently conducted. Each of Parent
and Acquisition has the corporate power and authority to enter into and
perform all of its obligations under this Agreement and to consummate the
transactions contemplated hereby.
(ii) No Conflicts. Except, if applicable, for filings
under the Exchange Act and the HSR Act, (A) no filing with, and no permit,
authorization, consent or approval of, any state or federal public body or
authority is necessary for the execution of this Agreement by either Parent
or Acquisition and the consummation by Parent and Acquisition of the
transactions contemplated hereby, except where the failure to obtain such
consent, permit, authorization, approval or filing would not interfere with
its ability to perform its obligations hereunder, and (B) none of the
execution and delivery of this Agreement by Parent or Acquisition, the
consummation by Parent or Acquisition of the transactions contemplated hereby
or compliance by Parent and Acquisition with any of the provisions hereof
shall (1) conflict with or result in any breach of any applicable
organizational documents applicable to Parent or Acquisition, (2) result in a
violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which Parent or
Acquisition is a party or by which Parent or Acquisition or any of Parent's
or Acquisition's properties or assets may be bound, or (3) violate any order,
writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to Parent or Acquisition or any of Parent's or Acquisition's
properties or assets, in each such case except to the extent that any
conflict, breach, default or violation would not interfere with the ability
of Parent or Acquisition to perform its obligations hereunder.
5
<PAGE>
(iii) Execution, Delivery and Performance by Parent
and Acquisition. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of Parent and Acquisition, and each of
Parent and Acquisition has taken all other actions required by law, its
Certificate of Incorporation and its Bylaws or other organizational documents
in order to consummate the transactions contemplated by this Agreement. This
Agreement constitutes the valid and binding obligation of Parent and
Acquisition and is enforceable in accordance with its terms, except as
enforceability may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally.
(c) Each Stockholder hereby agrees to use his best efforts to
obtain all necessary releases, consents or waivers from all lien holders
and/or pledgees to perform his obligations under this Agreement, including,
without limitation, the obligations under Section 2(a).
5. Stop Transfer. Each Stockholder agrees with, and covenants to,
Parent and Acquisition that prior to a Termination Event such Stockholder
shall not request that the Company register the transfer (book-entry or
otherwise) of any certificate or uncertificated interest representing any of
such Stockholder's Shares, unless such transfer is made in compliance with
this Agreement.
6. Recapitalization. In the event of a stock dividend or distribution,
or any change in the Company Common Stock by reason of any stock dividend,
split-up, recapitalization, combination, exchange of shares or the like, the
term "Shares" shall be deemed to refer to and include the Shares as well as
all such stock dividends and distributions and any shares into which or for
which any or all of the Shares may be changed or exchanged and the purchase
price of the Shares, as contained in the Offer, and the Purchase Price of the
Purchase Options, shall be amended as may be appropriate to reflect such
event.
7. Stockholder Capacity. No person executing this Agreement who is or
becomes during the term hereof a director or officer of the Company makes any
agreement or understanding herein in his or her capacity as such director or
officer and nothing herein shall limit or affect any action taken by such
person in his or her capacity as a director or officer. Each Stockholder
signs solely in his or her capacity as the record and Beneficial Owner of, or
the trustee of a trust whose beneficiaries are the Beneficial Owners of, such
Stockholder's Shares.
8. Stockholders' Obligations. All obligations and liabilities of each
Stockholder under this Agreement shall be several and not joint and no
Stockholder shall have any liability for any obligations or liabilities under
this Agreement of any other Stockholder.
9. Further Assurances. From time to time, at the other parties'
reasonable request and without further consideration, each Stockholder and
Acquisition and Parent shall execute and deliver such additional documents as
may be reasonably necessary or desirable to consummate and make effective, in
the most expeditious manner practicable, the tender of Shares or sale of
Option Shares by any such Stockholder contemplated by Section 2 of this
Agreement.
10. Miscellaneous.
6
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(a) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.
(b) Certain Events. Each Stockholder agrees that this Agreement
and the obligations hereunder shall attach to such Stockholder's Shares and
shall be binding upon any person or entity to which legal or beneficial
ownership of such Shares shall pass, whether by operation of law or
otherwise, including, without limitation, such Stockholder's heirs,
guardians, administrators or successors. Notwithstanding any transfer of
Shares, the transferor shall remain liable for the performance of all
obligations under this Agreement of the transferor.
(c) Assignment. This Agreement shall not be assigned by operation
of law or otherwise without the prior written consent of the other parties.
(d) Amendment, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, except
upon the execution and delivery of a written agreement executed by the
parties hereto.
(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, or by mail
(registered or certified mail, postage prepaid, return receipt requested) or
by any courier service, such as Federal Express, providing proof of delivery.
All communications hereunder shall be delivered to the respective parties at
the following addresses or the addresses set forth on the signature pages
hereto:
If to Parent or Acquisition: Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Fax: 526-694-0918
Attn: Mr. Dominic Chang
copies to: Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Fax: 212-697-6686
Attn: Kenneth R. Koch, Esq.
If to the Company: MetroGolf Incorporated
1999 Broadway, Suite 2435
Denver, Colorado 80202
Fax: 303-294-9300
Attn: Mr. Charles D. Tourtellotte
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<PAGE>
copies to: Brownstein, Hyatt, Farber & Strickland
410 17th Street
Denver, Colorado 80202
Fax: 303-623-1956
Attn: Brent T. Slosky, Esq.
If to Stockholders: At the addresses set forth on the signature
pages
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) Severability. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and
this Agreement will be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision or portion of any
provision had never been contained herein.
(g) Specific Performance. Each of the parties hereto recognizes
and acknowledges that a breach by it of any covenants or agreements contained
in this Agreement will cause the other party to sustain damages for which it
would not have an adequate remedy at law for money damages, and therefore
each of the parties hereto agrees that in the event of any such breach the
aggrieved party shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in equity.
(h) Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
(i) No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or practice
of the parties at variance with the terms hereof, shall not constitute a
waiver by such party of its right to exercise any such or other right, power
or remedy or to demand such compliance.
(j) No Third-Party Beneficiaries. This Agreement is not intended
to be for the benefit of, and shall not be enforceable by, any person or
entity who or which is not a party hereto; provided that, in the event of a
Stockholder's death, the benefits to be received by the Stockholder hereunder
shall inure to his successors and heirs.
8
<PAGE>
(k) Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of New York, without giving effect
to the principles of conflicts of law thereof.
(l) Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of the Supreme Court in the State of New York in any
action, suit or proceeding arising in connection with this Agreement, and
agrees that any such action, suit or proceeding shall be brought only in such
court (and waives any objection based on forum non conveniens or any other
objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this paragraph (1) and
shall not be deemed to be a general submission to the jurisdiction of said
Court or in the State of New York other than for such purposes. Each party
hereto hereby waives any right to a trial by jury in connection with any such
action, suit or proceeding.
(m) Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
(n) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement. This Agreement shall
not be effective as to any party hereto until such time as this Agreement or
a counterpart thereof has been executed and delivered by each party hereto.
(o) Trust Funds. In the event that any party hereto should receive
any funds that are to be paid to another party pursuant to the terms of this
Agreement, then the receiving party shall hold such funds in trust for the
benefit of the party entitled to receive such funds and shall promptly pay
such funds to the party entitled to receive such funds in accordance with
this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on this 23th day of December, 1997.
FAMILY GOLF CENTERS, INC.
By: /s/ Dominic Chang
----------------------
Name: Dominic Chang
Title:
FAMILY GOLF ACQUISITIONS, INC.
By: /s/ Dominic Chang
----------------------
Name: Dominic Chang
Title:
STOCKHOLDER
/s/ Charles Tourtellotte
--------------------------
Name: Charles Tourtellotte
Adress:
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SCHEDULE A
Stockholder No. of Shares
----------- -------------
Charles Tourtellotte 685,622
<PAGE>
EXHIBIT A
Irrevocable Proxy
The undersigned hereby revokes any previous proxies and irrevocably
appoints Family Golf Acquisition, Inc., a Colorado corporation (the
"Proxyholder") as attorney and proxy of the undersigned to attend any and all
meetings of stockholders of MetroGolf Incorporated, a Colorado corporation
(the "Company"), to vote ____ shares of Common Stock of the Company owned by
the undersigned on the date hereof, and to represent and otherwise to act for
the undersigned in the same manner and with the same effect as if the
undersigned were personally present, for the proposed merger of the
Proxyholder with and into the Company, or, in the Proxyholder's discretion,
against any other proposal for a merger, business combination, sale of
assets, or similar extraordinary corporate transaction with any party other
than the Proxyholder which is submitted to stockholders of the Company for
approval or consent. This proxy is subject to termination as provided in
Paragraph 3 of the Stockholders Agreement dated December 23, 1997 between
Family Golf Centers, Inc. and the stockholders of the Company signatory
thereto.
The undersigned authorizes the Proxyholder to substitute any other person
to act hereunder, to revoke any such substitution and to file this proxy and
any substitution or revocation with the Secretary of the Company.
Date: ______________, 1997
_________________________________
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OPTION AGREEMENT
OPTION AGREEMENT, dated as of December 23, 1997, among MetroGolf
Incorporated, a Colorado corporation (the "Company"), Family Golf Centers, Inc.,
a Delaware corporation ("Parent"), and Family Golf Acquisition, Inc., a Colorado
corporation and a wholly-owned subsidiary of Parent (the "Subsidiary").
W I T N E S S E T H
WHEREAS, the Company, Parent and the Subsidiary propose to enter into an
Agreement and Plan of Merger (the "Agreement of Merger") of even date herewith
providing for the making of a cash tender offer by the Subsidiary for the Common
Stock of the Company and the merger of the Company with the Subsidiary; and
WHEREAS, Parent has made a loan (the "Loan") in the principal amount of
$500,000 to the Company, as evidenced by that certain promissory note of the
Company dated December 23, 1997 (the "Note"); and
WHEREAS, as a condition to their willingness to enter into the Agreement of
Merger and to make the Loan, Parent and the Subsidiary have requested that the
Company agree, and the Company has agreed, to grant an option to the Subsidiary
to acquire certain assets held by the Company, or certain subsidiaries of the
Company, for $2,000,000 and other consideration set forth in Section 1 below on
the terms set forth herein:
NOW, THEREFORE, to induce Parent and the Subsidiary to enter into, and in
consideration of the entering into of, the Loan, the Agreement of Merger and of
the mutual covenants and agreements set forth herein, the parties agree as
follows:
1. Grant of Option. The Company hereby grants to the Subsidiary an
irrevocable option (the "Option") to purchase and acquire the following for Two
Million Dollars ($2,000,000) and the assumption of certain liabilities of up to
$4,000,000 as more fully set forth in the Purchase Agreements (as defined below)
(the "Purchase Price"):
(a) the Company's leasehold estate and other assets with respect to
its facility located in Fremont, California, including, among other things,
a driving range, pro shop and the right to build a 9-hole executive golf
course (the "Fremont Facility");
(b) all of the limited partnership interests held by the Company of
Illinois Center Golf Partners L.P., an Illinois limited partnership (the
"Owner"), which owns and operates a facility located in Chicago, Illinois,
including, among other things, a driving range, club house and executive
golf course (the "Chicago Facility," and, together with the Fremont
Facility, the "Ranges"); and
<PAGE>
(c) all of the issued and outstanding capital stock held by the
Company of MetroGolf Illinois Center, Inc., a Colorado corporation and
Managing General Partner of the Owner (the "General Partner").
So long as the Option remains in effect, the Company covenants and agrees
that it shall not, and shall cause its subsidiaries, including the General
Partner and the Owner, not to, sell or dispose of, or enter into any agreement
for the sale or disposition of, all or any part of the Ranges or the capital
stock of the General Partner or the limited partnership interests of the Owner,
and it will, and cause its subsidiaries, including the General Partner and the
Owner, to, conduct the operations at the Ranges according to their ordinary and
usual course of business in a manner consistent with past practice and use its
and their respective best efforts, with respect to the General Partner, the
Owner and the Ranges, to preserve intact their current business organizations,
keep available the services of current officers and employees and preserve their
relationships with customers, suppliers, licensors, licensees, advertisers,
distributors and others having business dealings with them and to preserve
goodwill. Furthermore, so long as the Option remains in effect, the Company
covenants and agrees that it shall, and shall cause its subsidiaries, including
the General Partner and the Owner, to, conduct its and their affairs and the
operations at the Ranges in such a manner as to ensure that the representations
and warranties of the Company, the General Partner and the Owner contained
herein and in the applicable Purchase Agreements (as hereinafter defined) remain
as true and correct as of the date of the exercise of the Option as they are as
of the date hereof.
2. Exercise of Option. Provided (a) any applicable waiting periods
provided for under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 have
expired, and (b) the Agreement of Merger has terminated in accordance with
Section 8.01(b), 8.01(c) or 8.01(f) of the Agreement of Merger, the Subsidiary
may exercise the Option at any time following such termination for a period
ending on the sixtieth day after such termination. The Company shall appoint the
Escrow Agent (as hereinafter defined) its agent for the receipt of notice (the
"Exercise Notice") of exercise of the Option. The Exercise Notice shall specify
that the Agreement of Merger has terminated in accordance with Section 8.01(b),
8.01(c) or 8.01(f) thereof, and state that the Option is being exercised
immediately after receipt by the Escrow Agent of such written notice, whether or
not during normal business hours, in accordance with the terms of Section 4(a)
below. The closing of the purchase of the Ranges and all of the capital stock
of the General Partner and the limited partnership interests of the Owner (the
"Closing") shall take place in the offices of counsel for the Subsidiary,
Squadron, Ellenoff, Plesent & Sheinfeld, LLP, 551 Fifth Avenue, New York, New
York 10176, at 10:00 a.m. on the third business day after the exercise of the
Option or such other time, date and place as the parties hereto shall mutually
agree.
3. Payment of Purchase Price. In the event the Subsidiary exercises
the Option, Parent shall make payment to the Company at the Closing by check or
wire transfer provided, the Subsidiary, in its sole discretion, may deliver the
Note for cancellation and apply the principal amount thereof, plus any accrued
and unpaid interest thereon, toward payment of the Purchase Price.
2
<PAGE>
4. Delivery of Documents. (a) A purchase agreement, substantially in the
form of Exhibit A hereto with respect to the Fremont Facility, and substantially
in the form of Exhibit B hereto with respect to the capital stock and limited
partnership interests of the General Partner and the Owner, respectively (each,
a "Purchase Agreement", and, together, the "Purchase Agreements"), has been
executed by all parties necessary to consummate the transactions contemplated
hereby and thereby and placed into escrow with an escrow agent located in New
York, New York agreed upon the parties hereto (the "Escrow Agent"). The
documents contemplated by Sections 5.2 and 5.3 of the Purchase Agreement set
forth as Exhibit A hereto and Section 1.1 of the Purchase Agreement set forth in
Exhibit B hereto (collectively, the "Closing Documents"), together with each of
the Exhibits and Schedules to be attached to the Purchase Agreement (the
"Exhibits and Schedules") shall be executed by all parties thereto and delivered
to the Escrow Agent, together with the Exhibits and Schedules on or before the
close of business on January 9, 1998. Any Schedule or Exhibit not received by
such time shall be deemed to state "None." The Purchase Agreements, the
Exhibits and Schedules and the Closing Documents shall be delivered by the
Escrow Agent to the Subsidiary on behalf of the Company in conformity with this
Agreement and the Escrow Agreement and tender of payment to the Company of the
Purchase Price (or a portion thereof), as provided in Section 3 above, or
delivery of such payment to the Escrow Agent for the Company's account at the
Closing with instructions to deliver such payment to the Company.
(b) The Option shall terminate upon the Effective Date (as defined in the
Agreement of Merger) of the merger contemplated thereby or upon the expiration
of the Option pursuant to Section 2 above.
5. Representations and Warranties of the Company. The Company hereby
represents and warrants to Parent and the Subsidiary as follows:
(a) Due Authorization. This Agreement has been duly authorized by all
necessary corporate action on the part of the Company and has been duly executed
by a duly authorized officer of the Company, and constitutes a legal, valid and
binding agreement of the Company enforceable against the Company in accordance
with its terms, except as its enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization and other laws affecting creditors'
rights generally.
(b) Due Organization. Each of the Company and the General Partner is a
duly organized, validly existing corporation in good standing under the laws of
the State of Colorado and has the requisite corporate power to enter into and
perform this Agreement and the applicable Purchase Agreement, respectively. The
Owner is a duly organized, validly existing limited partnership in good standing
under the laws of the State of Illinois and has the requisite partnership power
to enter into and perform the applicable Purchase Agreement.
(c) Conflicting Instruments. Neither the execution and delivery of this
Agreement or the Purchase Agreements nor the consummation of the transactions
contemplated hereby or thereby (except as disclosed therein) will violate or
result in any violation of or be in conflict with or
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constitute a default under any term of the Articles of Incorporation or
Bylaws or any similar organization documents of the Company or any subsidiary
thereof, including the General Partner and the Owner, or of any judgment,
decree or order of any court or administrative body applicable to the
Company, the General Partner, the Owner or the Ranges or any term of any
agreement or other instrument applicable to the Company, the General Partner,
the Owner or the Ranges.
(d) Title. The Company represents and warrants that it, or the Owner,
except as set forth in Section 3.07 of the Agreement of Merger, has a good and
valid leasehold interest in the real property on which the Ranges are located.
(e) Capitalization. The Company is the beneficial owner and record holder
of 93.6% of all of the outstanding limited partnership interests of the Owner
and 900 shares of Common Stock of General Partner representing 90.0% of all of
the outstanding capital stock of the General Partner. General Partner is the
Managing General Partner of the Owner, and holds such interests and stock free
and clear of all liens, security interests, claims, pledges and voting trusts
and any other encumbrances, restrictions and limitations, except for those
granted to Parent and pursuant to an Assignment of Proceeds, dated March 17,
1992, as amended by Settlement Agreement dated December 21, 1995, Vulcan
Investments, Inc. is entitled to receive 15% of the profits of the Owner. Other
than such interests and stock, there are no outstanding options, warrants,
convertible securities, subscriptions or other commitments or rights of any
nature or kind whatsoever to acquire, sell, convert or issue any securities of
the General Partner or the Owner.
(f) Partnership Agreement. The Partnership Agreement of Owner, a true,
full and correct copy of which has been provided to Parent, is in full force and
effect and no default or event with which notice or passage of time would
constitute a default (including the execution, delivery and performance of the
Agreement and the applicable Purchase Agreement) has occurred.
6. Indemnification and Survival. (a) All of the representations,
warranties and covenants contained herein shall survive the Closing.
(b) The Company hereby agrees to protect, defend, indemnify and hold
harmless Parent and Subsidiary from and against any and all losses, claims,
damages, expenses, and liabilities (including, without limitation, all
out-of-pocket expenses, investigation expenses and fees and disbursements of
counsel, accountants and other experts) caused by any event, occurrence, claim,
circumstance, or other matter which results in any breach, failure or untruth of
any representation, warranty, covenant or agreement contained herein or in any
Purchase Agreement.
7. Miscellaneous. (a) Further Assurances. In the event the Subsidiary
exercises the Option, each of Parent, the Subsidiary and the Company will, and
the Company will cause the General Partner and the Owner to, execute and deliver
all such further documents and instruments and take, and cause their respective
subsidiaries to take, all such further action as may be necessary in order to
consummate the transactions contemplated hereby. In addition, the Company will,
and will cause General Partner and the Owner to, furnish to the Subsidiary
copies of all lease and
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property files and records, information and data and any other information or
data relating to the Ranges requested by the Subsidiary.
(b) Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement.
(c) Assignment. The Option shall not be assigned by the Subsidiary except
to Parent or a wholly-owned subsidiary of Parent without the prior written
consent of the Company.
(d) Amendments. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by all of the parties hereto.
(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given if so given) if delivered in person, by cable,
telegram or telex, or by mail (registered or certified mail, postage prepaid,
return receipts requested), to the respective parties as follows:
If to the Company:
MetroGolf Incorporated
1999 Broadway
Denver, Colorado 80202
Fax: 303-294-9360
Attn: Charles D. Tourtellotte
with copies to:
Brownstein, Hyatt, Farber & Strickland, P.C.
410 17th Street
Denver, Colorado 80202
Fax: 303-623-1956
Attn: Brent T. Slosky, Esq.
If to Parent or the Subsidiary:
c/o Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Fax: 516-694-0918
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Attn: Dominic Chang
with copies to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Fax: 212-697-6686
Attn: Kenneth R. Koch, Esq.
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
(f) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to its
principles of conflicts of law..
(g) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
(h) Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction thereof.
IN WITNESS WHEREOF, the Company, Parent and the Subsidiary have caused this
Agreement to be duly executed on the day and year first above written.
METROGOLF INCORPORATED
By: /s/ Charles Tourtellotte
----------------------------------
FAMILY GOLF CENTERS, INC.
By: /s/ Dominic Chang
----------------------------------
FAMILY GOLF ACQUISITION, INC.
By: /s/ Dominic Chang
----------------------------------
6
<PAGE>
Exhibit A
PURCHASE AGREEMENT
by and between
MetroGolf Incorporated,
Seller,
and
FAMILY GOLF ACQUISITION, INC.,
Purchaser
PREMISES:
Fremont, California
<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
EXHIBIT A PERSONAL PROPERTY
EXHIBIT B CONTRACTS
EXHIBIT C PERMITTED EXCEPTIONS
<PAGE>
PURCHASE AGREEMENT
PURCHASE AGREEMENT, made as of the __th day of December, 1997
(this "Agreement"), by and among MetroGolf, Incorporated, a Colorado
corporation having an address at 1999 Broadway, Suite 2435, Denver,
Colorado 80202 ("Seller"), and Family Golf Acquisition, Inc., a
Colorado 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 leases certain real property (the "Land")
located at the Golf Driving Range Complex of the City of Fremont,
California pursuant to that certain lease agreement (the "Lease"),
dated as of April 2, 1997 between Seller and the City of Fremont
California ("Landlord") and owns 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 "Fremont Golf Center" (the
"Business");
WHEREAS, Purchaser and Seller have entered into an Option
Agreement dated as of even date herewith (the "Option Agreement")
pursuant to which Parent has granted Purchaser an option (the
"Option") to acquire the Premises and the Business pursuant to this
Purchase Agreement and to acquire certain equity interests with
respect to a facility in Chicago, Illinois pursuant to another
Purchase Agreement of even date herewith (the "Related Purchase
Agreement"), and of which the entering into of this Agreement is a
condition; and
WHEREAS, Seller wants to sell the Premises and the Business to
Purchaser, and Purchaser wants to purchase the Premises and the
Business from Seller, on the terms, and subject to the conditions,
set forth herein.
NOW, THEREFORE, in consideration of TEN DOLLARS ($10.00), the
mutual premises, covenants and agreements contained in the Option
Agreement and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, 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. Upon the
exercise of the Option, 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 Lease and the Improvements;
<PAGE>
1.1.2 the easements, rights of way, appurtenances and
other rights and benefits of Seller in connection with 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
A 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 Business (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 Lease or
the Improvements (collectively, the "Permits");
1.1.6 the contracts, leases and other agreements of or
relating to the Business described on Exhibit B attached hereto and
made a part hereof, (including the Lease) 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 the Closing Date (as
hereinafter defined);
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 Closing Date;
1.2.2 any rights of Seller with respect to insurance
policies owned by Seller or for which Seller is the named insured;
and
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1.2.3 all cash, funds in bank accounts and cash
equivalents existing as of the Closing Date hereof.
1.3 Assumption of Certain Liabilities. Purchaser shall
assume and agree to pay and discharge when due (i) all liabilities
and obligations of Seller under the Contracts to the extent the same
arise from and after the Closing Date and (ii) indebtedness related
to the Property, together with liabilities assumed under the Related
Purchase Agreement, not to exceed $4,000,000 (such indebtedness to be
specified by Seller) (collectively, 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 Lease, the Improvements or the Business other than the Assumed
Liabilities (collectively, the "Retained Liabilities"). The Retained
Liabilities shall include no liability, the non-payment of which
would give rise to the recording of an "Encumbrance" (defined below)
against the Property.
2. Consideration. In consideration for the Property, at the
Closing Purchaser shall pay to Seller the sum of TEN DOLLARS
($10.00), payable in cash, in addition to all sums payable in
accordance with the terms of the Option Agreement.
3. Title; Permitted Exceptions. 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 C
attached hereto and made a part hereof (the "Permitted Exceptions").
4. Apportionments.
4.1 The parties hereto agree that (i) except to the extent
included in the Assumed Liabilities, all operating expenses of Seller
relating to the Premises (i.e., real estate taxes, utilities, cost of
inventories advertising, collections, fees, hired services, insurance
if assumed by Purchaser, 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 Closing
Date based on the portion of each such expense or revenue
attributable to the period falling on or before the Closing 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 Closing Date, on the other hand, which
Purchaser shall bear the responsibility and benefit of (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 Closing
Date, or either party discovers any errors in or omissions in respect
of
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<PAGE>
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.
5. The Closing.
5.1 The closing of the transaction provided for in this
Agreement (the "Closing") shall take place on the date and at the
time and place specified in the Option 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 (which
shall be delivered to the Escrow Agent (as defined in the Option
Agreement) as described below and which shall be dated by the Escrow
Agent (where appropriate and customary) as of the Closing Date or (if
not appropriate or customary) as of the date of delivery to the
Escrow Agent with an undertaking by the appropriate party to deliver,
or cause to be delivered, a copy of such document dated the Closing
Date, on the Closing Date):
5.2.1 an assignment and assumption agreement
relating to the Lease assigning to Purchaser all right, title and
interest in and to the Lease, duly executed and acknowledged by
Seller and consented to by Landlord ("Assignment and Assumption of
Lease");
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 and
assuming by Purchaser the Assumed Liabilities;
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 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 the opinion of Brownstein, Hyatt, Farber &
Strickland or their counsel in a form acceptable to Purchaser;
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 2.1 hereof;
5.3.2 the Assignment and Assumption Agreement,
duly executed and acknowledged by Purchaser;
5.3.3 the Settlement Statement, duly executed and
acknowledged by Purchaser;
5.3.4 the Assignment and Assumption of Lease,
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.
5.4 The closing documents contemplated by Sections 5.2.2,
5.2.3, 5.2.5, 5.2.6, 5.2.7, 5.2.8, 5.3.3 and 5.3.4 shall be executed
and delivered to the Escrow Agent on or before the close of business
on January 9, 1998, provided that if the parties shall be unable to
agree on the form of such documents within such time period, then
such documents shall be in form and substance customary for the type
of transaction contemplated hereby and the parties agree to submit
such documents to a law firm with experience in transaction of the
type contemplated hereby
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<PAGE>
mutually picked by such parties (or if the parties are unable to agree on
such law firm within 10 business days, picked by an arbitrator selected by
the American Arbitration Commission in accordance with the Commercial
Arbitration Rules thereof), and the determination of such law firm as to the
form and substance of such documents shall be binding upon the parties (the
expenses of the procedure contemplated by the foregoing shall be borne 50% by
the Purchaser and 50% by the Seller).
6. Representations and Warranties.
6.1 Seller hereby represents and warrants to Purchaser as
of the date hereof, as of the date of the exercise of the Option and
as of the Closing Date, 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 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.
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 procedural 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. Except as set forth in Schedule
6.1.3, 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. Except as set
forth in Schedule 6.1.4, Seller is not engaging in any activity or
omitting to take any 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. 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, orders or requirements issued by any
building department or other governmental agency or subdivision
having jurisdiction.
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<PAGE>
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. Except as set forth in Schedule 6.1.5, 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. To the best of Seller's knowledge, 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 Property.
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.
6.1.7 Contracts. Except as set forth on Exhibit B,
Seller is not a party to any leases, contracts, orders or agreements
(including the Lease) relating to the Property or the Business,
(written or otherwise) other than the Contracts. Exhibit B 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 material 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 Act of 1980 ("CERCLA"), 42 U.S.C. Section 9601(33);
(ii) any "pollutant or contaminant" as defined in 42 U.S.C. Section
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
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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 in violation of law.
6.1.10.3 To the best of Seller's knowledge,
Seller has no outstanding unfulfilled 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, 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 Except as set forth in Schedule 6.1.10,
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. Section
9601(9), or any comparable list maintained by any foreign, state or
local government authority.
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, 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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6.1.13 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 relating to or affecting
the Premises. To the best of Seller's knowledge, all roads bounding
the Premises are public roads and the Assignment and Assumption of
Lease 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 California 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. Seller has insurance
coverage for the Premises and the Property that it believes is
adequate. All policies of insurance carried by Seller or pursuant to
which Seller is a named beneficiary or pursuant to which the Property
and Premises are insured are in full force and effect; all premiums
due and payable in respect of such policies have been paid in full;
and there exists no material default or other circumstance which
would create the substantial likelihood of the cancellation or
non-renewal of any such policy; provided, however, each such
representation with respect to policies maintained by others for
Seller's benefit is limited to the best of Seller's knowledge.
Seller has notified such insurers of any material claim know to
Seller which it believes is covered by any such insurance policy.
6.1.15 Litigation. Except as set forth in Schedule
6.1.15, 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. Except as set forth in Schedule
6.1.16, 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. Except as set forth in
Schedule 6.1.17, 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.
6.1.18 Work at the Premises. Except as set forth in
Schedule 6.1.18, no services, material or work have been supplied to
the Premises for which payment has not been made in full.
6.1.19 Full Disclosure. To the best knowledge of
Seller, none of the information supplied by Seller herein or in the
Schedules hereto contains any untrue statement of a material fact or
omits to state a material fact required to be stated herein or
necessary
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<PAGE>
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 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.
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
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. Conditions to Closing.
7.1 Conditions Precedent to Obligations of Purchaser.
The obligations of Purchaser to consummate the transactions
contemplated hereby are subject to the fulfillment, prior to or at
the Closing, of each of the following conditions (any or all of which
may be waived by Purchaser):
7.1.1. all representations and warranties of Seller
contained in this Agreement shall be true and correct in all material
respects at and as of the Closing Date with the same effect as though
those representations and warranties had been made at and as of that
time;
7.1.2. Seller shall have performed, and complied in
all material respects with, all obligations and covenants required by
this Agreement and the Option Agreement to be performed or complied
with by it prior to or at the Closing;
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7.1.3. Purchaser shall have been furnished with a
certificate dated the Closing Date and executed by an officer of
Seller certifying to the fulfillment of the conditions specified in
Sections 7.1.1. and 7.1.2. hereof;
7.1.4. there shall be no judgment, decree,
injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding which
prohibits, restricts or delays consummation of the transactions
contemplated by this Agreement; and
7.1.5. there shall be no pending lawsuit, claim or
legal action relating to the transactions contemplated by this
Agreement which would materially adversely affect such transactions.
7.2 Conditions Precedent to Obligations of Seller:
The obligations of Seller to consummate the transactions contemplated
hereby are subject to the fulfillment, prior to or at the Closing,
of each of the following conditions (any or all of which may be
waived by Seller):
7.2.1. all representations and warranties of
Purchaser contained in this Agreement shall be true and correct in
all material respects at and as of the Closing Date with the same
effect as though those representations and warranties had been made
at and as of that time;
7.2.2. Purchaser shall have performed, and complied
in all material respects with, all obligations and covenants required
by this Agreement and the Option Agreement to be performed or
complied with by it prior to or at the Closing;
7.2.3. Seller shall have been furnished with a
certificate dated the Closing Date and executed by an officer of
Purchaser certifying to the fulfillment of the conditions specified
in Sections 7.2.1. and 7.2.2. hereof;
7.2.4. there shall be no judgment, decree,
injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding which
prohibits, restricts or delays consummation of the transactions
contemplated by this Agreement; and
7.2.5. there shall be no pending lawsuit, claim or
legal action relating to the transactions contemplated by this
Agreement which would materially adversely affect such transactions.
8. 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.
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9. 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. 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. The provisions of this Article shall survive the
Closing or any termination of this Agreement.
10. Costs and Fees. Documentary stamps for the Deed, deed
transfer or conveyancing taxes, if any, shall be payable by each
party in accordance with the usual practices in the jurisdiction
where the Property are located. 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, (c) a
survey of the Property, and (d) a phase I environmental study. The
Seller shall pay the cost of its own legal expenses. 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 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 (determined for
this purpose as if all references to knowledge and materiality
contained in Article 6 are deleted); 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 officers, directors, shareholders, members, employees, agents and
affiliates, 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 (determined for this purpose as
if all references to knowledge and materiality contained in Article 6
are deleted); and (iii) any and all actions, suits, proceedings,
claims, demands, assessments, judgments, costs and expenses
(including without
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<PAGE>
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 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.
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.
11.5 No claim for indemnity shall be made by an
Indemnified Party hereunder unless and until its Losses exceed
$5,000, provided, however, that in the event such a claim is
permitted under this Section 11.3, such Indemnified Party's Losses
shall be inclusive of the $5,000 threshold amount referred to above.
12. Bulk Sales. The parties agree to waive the requirements,
if any, of all applicable bulk sales laws, unless Purchaser otherwise
determines, in which case Seller will fully cooperate with Purchaser
in complying with the 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
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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.
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
Brownstein, Hyatt, Farber & Strickland, P.C., 410 17th Street,
Denver, Colorado Attention: Brent Slosky, 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. Conduct of Business. Seller hereby covenants and agrees
that, prior to the earlier of the Closing Date or termination of the
Option Agreement in accordance with its terms, it shall not, sell or
dispose of, or enter into any agreement for the sale or disposition
of, all or any part of the Property (except pursuant to the Option in
all respects), and it will conduct its business and the operations at
the Premises according to its ordinary and usual course of business
in a manner consistent with past practice and use its best efforts to
ensure that the representations and warranties made herein as of the
date hereof remain true and correct until the Closing Date.
15. Miscellaneous.
15.1 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.
15.2 This Agreement shall be governed by, interpreted
under and construed and enforced in accordance with, the laws of the
State of Colorado.
15.3 The captions or article headings in this Agreement
are for convenience only and do not constitute part of this
Agreement.
15.4 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.
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<PAGE>
15.5 This Agreement, (including the Exhibits annexed
hereto) together with the Option 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.
15.6 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.
15.7 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.
15.8 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.
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IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
METROGOLF INCORPORATED
By:______________________
Name:
Title:
FAMILY GOLF ACQUISITION, INC.
By: _____________________
Name:
Title:
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EXHIBIT A
PERSONAL PROPERTY
<PAGE>
EXHIBIT B
CONTRACTS
<PAGE>
EXHIBIT C
PERMITTED EXCEPTIONS
<PAGE>
Exhibit B
PURCHASE AGREEMENT
among
METROGOLF, INCORPORATED,
Seller,
FAMILY GOLF ACQUISITION, INC.,
Purchaser,
METROGOLF ILLINOIS CENTER, INC.
and
ILLINOIS CENTER GOLF PARTNERS L.P.,
the Companies
December __, 1997
<PAGE>
PURCHASE AGREEMENT
AGREEMENT, dated as of December __, 1997, among Family Golf Acquisition,
Inc., a Colorado corporation (the "Purchaser"), MetroGolf Illinois Center,
Inc., a Colorado corporation (the "General Partner"), Illinois Center Golf
Partners L.P., an Illinois limited partnership (the "Partnership" and,
together with the General Partner, the "Companies"), and MetroGolf
Incorporated, a Colorado corporation ("Seller"), the holder of 90% of the
issued and outstanding capital stock of the General Partner and 93.6% of the
issued and outstanding partnership interests of the Partnership.
WHEREAS, Seller is the beneficial and record owners of 900 shares,
representing 90% of the issued and outstanding shares of capital stock (the
"Stock") of the General Partner, and the beneficial and record owner of 93.6%
of the issued and outstanding limited partnership interests (the "Partnership
Interests," and, together with the Stock, the "Shares") of the Partnership;
WHEREAS, General Partner is the managing general Partner of the
Partnership;
WHEREAS, Seller has entered into an Option Agreement dated as of even
date herewith (the "Option Agreement") pursuant to which Seller has granted
Purchaser an option (the "Option") to acquire the Shares pursuant to this
Purchase Agreement and to acquire certain assets with respect to a facility
located in Fremont, California pursuant to another Purchase Agreement of even
date herewith (the "Related Purchase Agreement"), and of which the entering
into of this Agreement is a condition; and
WHEREAS, the Seller wishes to sell the Shares, and the Purchaser wishes
to purchase the Shares upon the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of TEN DOLLARS ($10.00), the mutual
premises, covenants and agreements contained in the Option Agreement and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Sale and Purchase of the Shares; Assumption of Liabilities.
1.1 Sale of the Shares; Assumption of Liabilities. Upon the
exercise of the Option and at the closing provided for in Section 2 hereof
(the "Closing"): (i) Seller shall sell the Shares to the Purchaser, and shall
deliver to the Purchaser certificates or other documentary evidence
representing such Shares, duly endorsed in blank or with duly executed
assignment documents attached, in proper form for transfer, free and clear of
any lien, claim or other encumbrance of any kind or nature, whatsoever; (ii)
the Purchaser shall purchase the Shares; and (iii) Purchaser shall assume
liabilities of the Companies related to their golf facility located in
Chicago, Illinois, together with assumed indebtedness under the Related
Purchase Agreement, not to exceed $4,000,000 (such liabilities, herewith the
"Assumed Liabilities" to be specified by the Seller). All of the remaining
liabilities of the Partnership not so assumed shall be equal to or less
<PAGE>
than the net cash proceeds received by Seller at the Closing under the
Related Purchase Agreement and shall be paid by Purchaser for the account of
Seller with such proceeds according to a schedule of such remaining
liabilities to be prepared and substantiated by Seller to the reasonable
satisfaction of Purchaser for such Closing.
1.2 Purchase Price. In consideration for the sale to the Purchaser
of the Shares, at the Closing the Purchaser shall pay to Seller the sum of
TEN DOLLARS ($10.00), payable in cash, in addition to all sums payable in
accordance with the terms of the Option Agreement.
1.3 The parties hereto agree that (i) except to the extent included
in the Assumed Liabilities, all operating expenses of Seller relating to the
Property (i.e., real estate taxes, utilities, cost of inventories
advertising, collections, fees, hired services, insurance if assumed by
Purchaser, 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 Closing Date based on the portion of each such
expense or revenue attributable to the period falling on or before the
Closing 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 Closing Date, on the other hand, which Purchaser
shall bear the responsibility and benefit of (the "Adjustment").
1.4 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 Closing 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.
1.5 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.
2. Closing. The Closing of the sale and purchase of the Shares shall
take place on the date and at the time and place specified in the Option
Agreement. The date upon which the Closing occurs is hereinafter referred to
as the "Closing Date."
3. Representations and Warranties of Seller and the Companies.
Seller and the Companies represent and warrant to the Purchaser as
follows as of the date hereof, as of the date of the exercise of the Option
and as of the Closing Date:
3.1 Due Incorporation and Qualification. The General Partner is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Colorado, and has all corporate power and authority to
own, lease and operate its assets, properties and business and to carry on
its business as now conducted. The Partnership is a limited partnership duly
organized, validly existing and in good standing under the laws of the State
of
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Colorado, and has all requisite partnership power and authority to own, lease
and operate its assets, properties and business and to carry on its business
as now conducted. Each of the General Partner and the Partnership is duly
qualified to transact business and is in good standing in each jurisdiction
in which the nature of its business or location of its properties requires
such qualification.
3.2 Capitalization. The General Partner is authorized to issue
1,000,000 shares of common stock, no par value, of which, 1,000 shares are
issued and outstanding. All of the Stock and the Partnership Interests are
duly authorized and legally and validly issued, fully paid and nonassessable.
The record and beneficial owners of all of the issued and outstanding Stock
and Partnership Interests are as follows: 900 shares owned by Seller; 100
shares owned by Jack Berquist.
3.3 Other Securities. Other than the Stock and the Partnership
Interests, there are no outstanding options, warrants, convertible
securities, subscriptions or other commitments or rights of any nature or
kind whatsoever to acquire, sell, convert or issue any securities of the
Companies.
3.4 Articles of Incorporation, By-Laws and General Partnership
Agreement. The copies of the Articles of Incorporation and By-laws of the
General Partner and of the Limited Partnership Agreement of the Partnership,
and all amendments thereto, which have been delivered to the Purchaser are
true, correct and complete. No amendments, other than those delivered, have
been adopted by the Companies or are contemplated.
3.5 Financial Statements. The unaudited balance sheets of the
Companies as at September 30, 1997, and the related statements of income,
which have been delivered to the Purchaser, fairly present (subject to
year-end auditors adjustments) the financial position and results of
operations of the Companies as at such date. (The foregoing financial
statements of the Company as at September 30, 1997 and for the period then
ended being sometimes called the "Interim Financials", the balance sheet
included in the Interim Financials being sometimes herein called the "Interim
Balance Sheet", and September 30, 1997 being sometimes herein called the
"Interim Balance Sheet Date"). There are no liabilities (whether absolute,
accrued, contingent or otherwise) ("Liabilities") of the Companies of a type
required to be disclosed in a financial statement prepared in accordance with
generally accepted accounting principles consistently applied other than: (i)
Liabilities accrued or reserved against in the Interim Financials or
disclosed in the notes thereto; (ii) Liabilities described on any Schedule to
this Agreement; and (iii) Liabilities incurred in the ordinary course of
business since the Interim Balance Sheet Date.
3.6 No Material Adverse Change. Since the Balance Sheet Date,
there has been no change material to the Companies or to the business in
which they operate (the "Business"); provided, however, a material adverse
change shall not be deemed to have occurred as a result of a decline in the
financial performance or operation of the Companies provided that the
Companies have operated in accordance with Section 5.1 and otherwise
consistent with its past practices.
3.7 No Defaults Under Agreements. Except as provided in Schedule
3.7, neither of the Companies is in default under any contract or other
agreement to which it is a party or by which it or its assets or properties
are bound, nor does any condition exist which with notice
3
<PAGE>
or lapse of time or both would constitute such a default, which default would
have a material adverse effect to the Business, and each such contract or
other agreement is in full force and effect and neither the execution of this
Agreement nor the consummation of the transactions contemplated hereby will
result in any breach or acceleration of, or constitute (or with notice or
lapse of time or both would constitute) such a default under any such
contract or other agreement.
3.8 Contracts. Attached as Schedule 3.8 is a true, complete and
correct list of all contracts, agreements and understandings with third
parties to which the Companies are parties. Each of the contracts, agreements
and understandings listed on Schedule 3.8 is in full force and effect and is
enforceable in accordance with its terms against the Companies.
3.9 Third Party Consents. Except as provided in Schedule 3.9, all
consents, permits and approvals from parties to contracts or other agreements
with the Companies, and any other material consent, permit or approval
required in connection with the performance by the Seller of its obligations
under this Agreement, or to assure the consummation of the transactions
contemplated by this Agreement, or the continuance of such contracts or other
agreements with the Companies after the Closing, shall have been obtained.
3.10 Title to Properties; Assets; Etc. Attached as Schedule 3.10 is
a true, complete and correct list of all real property and fixed assets owned
by the Companies as of the Balance Sheet Date; except as set forth in such
Schedule, the Companies has good and marketable title to all such property
and assets, free and clear of any lien, claim or encumbrance of any kind or
nature, whatsoever.
3.11 Patents, Trademarks, Trade Names, Etc. Schedule 3.11 lists, as
of the date hereof: (i) all patents, and all trademarks, trade names and
registered copyrights, owned by the Companies and all licenses and other
agreements relating thereto; and (ii) all agreements relating to third party
technology, know-how and processes which the Companies is licensed or
authorized to use. Either the General Partner or the Partnership holds free
from contractual restrictions and any other restriction, except those
restrictions imposed by law or governmental regulation, all such scheduled
patents, trademarks, trade names, copyrights, technology, know-how and
processes. No claims have been asserted by any person: (i) against either
Company with respect to the use by such Company of any of such scheduled
trademarks, trade names, copyrights, technology, know-how or processes; or
(ii) for patent infringement and the Seller otherwise have no knowledge of
any facts which could form the basis of any such claim. To Seller's
knowledge, no person is infringing any of the Companies' patents, trademarks,
copyrights, technology, know-how or processes.
3.12 Subsidiaries. For purposes of this Agreement, a "Subsidiary"
shall mean a person as to which either Company, directly or indirectly, owns
or has the power to vote, or to exercise a controlling influence with respect
to, 50% or more of the securities of any class of such person the holders of
which class are entitled to vote for the election of directors (or persons
performing similar functions) of such person. Schedule 3.12 sets forth: (i)
the name, date and jurisdiction of organization of each Subsidiary, and the
percentage and number of outstanding securities or other ownership interests
(legal or beneficial) owned by the Companies in their respective
Subsidiaries. Each Company has valid title to all of the shares of stock and
other ownership interests stated to be owned by such Company listed on
Schedule 3.12, free and clear of any lien, claim or encumbrance of any kind
or nature, whatsoever (other than those granted to
4
<PAGE>
Parent and pursuant to an Assignment of Proceeds, dated March 17, 1992, as
amended by Settlement Agreement dated December 13, 1995 (the "Vulcan
Assignment"). Each Subsidiary of the Companies is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it
was formed and has all corporate power and authority to own, lease and
operate its assets, properties and business and to carry on its business as
now conducted. Each Subsidiary is qualified to transact business and is in
good standing in each jurisdiction in which the nature of its business or
location of its properties requires such qualification and in which the
failure to so qualify would have an adverse effect material to the Business.
3.13 Full Disclosure. All documents and other papers delivered by
or on behalf of the Sellers in connection with this Agreement and the
transactions contemplated hereby and listed on any Schedule annexed to this
Agreement are true, complete and authentic. The information furnished by or
on behalf of the Seller to the Purchaser in connection with this Agreement
and the transactions contemplated hereby and listed on any Schedule annexed
to this Agreement does not contain any untrue statement of a material fact
and does not omit to state a material fact required to be stated therein or
necessary to make the statements made, in the context in which made, not
false or misleading in any material respect.
3.14 Title to Shares. The Seller owns beneficially and of record,
free and clear of any lien, claim or encumbrance of any kind or nature
whatsoever (other than those granted to Purchaser and the Vulcan Assignment),
and has full power and authority to convey free and clear of any lien, claim
or encumbrance of any kind or nature whatsoever, the Shares, and, upon the
Closing, the Purchaser will acquire good and valid title thereto, free and
clear of any lien, claim or encumbrance of any kind or nature, whatsoever.
3.15 Authority to Execute and Perform Agreements. Seller and each
Company has full legal right and power and all authority and approval
required to enter into, execute and deliver this Agreement and to perform
fully its and their respective obligations hereunder. This Agreement has
been duly executed and delivered and constitutes a legal, valid and binding
obligation of the Seller and the Companies enforceable in accordance with its
terms. The execution and delivery of this Agreement by the Seller and the
Companies and the consummation of the transactions contemplated hereby by the
Seller and the Companies in accordance with its terms and conditions will
not: (i) except as provided in Schedule 3.15(i), require the approval or
consent of any federal or state governmental or regulatory body or the
approval or consent of any other person; (ii) conflict with or result in any
breach or violation of any of the terms and conditions of, or constitute (or
with notice or lapse of time or both would constitute) a default under, any
certificate of incorporation, by-law, statute, regulation, order, judgment,
partnership agreements or decree applicable to Seller, the Companies or to
the Shares held by any Seller, or any instrument, contract or other agreement
to which Seller or the Companies is a party or by, or to which, any Seller,
the Companies or the Shares held by any Seller, is bound or subject,
including, without limitation, the limited partnership agreement of the
Partnership; or (iii) result in the creation of any lien or other encumbrance
on the Shares held by any Seller.
3.16 The Partnership. The Partnership is the subtenant and
sublicensee under that certain Ground Sublease and Sublicense Agreement dated
July 14, 1993 with Illinois Center Plaza Ventures, as amended on May 31,
1994; August 1, 1994; September 14, 1994; October 17,
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1994 and January 31, 1996 (collectively, the "Lease"), covering certain
property in Chicago, Illinois (the "Property").
3.17 Consents. Except as set forth in Schedule 3.17, 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.
3.18 Compliance with Applicable Laws. Except as set forth in
Schedule 3.18, the Partnership is not engaging in any activity or omitting to
take any action as a result of which the Partnership 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, 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. The Partnership is in compliance with all material requirements
imposed in writing by any insurance carrier of the Partnership to the extent
such carrier is an insurer or indemnitor of the Property. The Property 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.
3.19 Permits. To the best of Seller's knowledge all consents,
authorizations, variances, waivers, licenses, certificates, permits and
approvals held by or granted to the Partnership in connection with the
ownership of the Lease or the Improvements (below defined) required by any
federal, state, or local law, rule or regulation and necessary for the
operation of the Property as currently being conducted (collectively, the
"Permits") have been obtained and are currently in effect. Except as set
forth in Schedule 3.19, 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 Property.
3.20 Title to Assets. The Partnership has good and marketable title
to the Lease and the Property is 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 on Exhibit B attached
hereto and made a part hereof (the "Permitted Exceptions").
3.21 Contracts. Except as set forth on Exhibit C, the Partnership
is not a party to any leases, contracts, orders or agreements relating to the
Property (written or otherwise) other
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than the 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. 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 material default, or has sent or received notice of default, in any
respect of any such Contract.
3.22 Condition of the Improvements. There are no material
structural or mechanical defects in the building and improvements located on
the Property (the "Improvements"), and there are no leaks in any roof on any
Improvement.
3.23 Condition of Personal Property. To the best of Seller's
knowledge the personal property used in connection with the 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.
3.24 Environmental Matters.
3.24.1 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. Section 9601(33); (ii) any "pollutant or contaminant"
as defined in 42 U.S.C. Section 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.
3.24.2 To the best of Seller's knowledge, there is no
Hazardous Material at, under or on the Property 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 in
violation of law.
3.24.3 To the best of Seller's knowledge, Seller has no
outstanding unfulfilled 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, storage,
7
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generation, disposal, transport or handling of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes
(hereinafter collectively referred to as "Environmental Laws").
3.24.4 The Partnership 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.
3.24.5 Except as set forth in Schedule 6.1.10.5 the Property
is 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. Section 9601(9), or any comparable list maintained by any foreign,
state or local government authority.
3.25 Tax Proceedings. There are no proceedings pending regarding
the reduction of real estate taxes or assessments in respect of the Property.
3.26 Utilities. All water, storm and sanitary sewer, gas,
electricity, telephone and other utilities adequately service the Property,
and the Property is furnished by facilities of public utilities and the cost
of installation of such utilities has been fully paid.
3.27 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 Property which could materially
restrict or change access from any such highway or road to the Property or
any pending or threatened condemnation or eminent domain proceedings relating
to or affecting the Property. To the best of Seller's knowledge, all roads
bounding the Property are public roads.
3.28 Insurance Requirements. The Partnership has insurance coverage
for the Property that it believes is adequate. All policies of insurance
carried by the Partnership or pursuant to which it is a named beneficiary or
pursuant to which the Property are insured are in full force and effect; all
premiums due and payable in respect of such policies have been paid in full;
and there exists no material default or other circumstance which would create
the substantial likelihood of the cancellation or non-renewal of any such
policy; provided, however, each such representation with respect to policies
maintained by others for the Partnership's benefit is limited to the best of
Seller's knowledge. The Partnership has notified such insurers of any
material claim know to the Partnership which it believes is covered by any
such insurance policy.
3.29 Litigation. Except as set forth in Schedule 3.29, there is no
action or proceeding (zoning or otherwise) or governmental investigation
pending, or, to the best of the Partnership's knowledge, threatened against,
or relating to, the Partnership (insofar as it relates to the Property), or
the transactions contemplated by this Agreement, nor is there any basis for
any such action, proceeding or investigation.
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3.30 Assessments. Except as set forth in Schedule 3.30, there are
no special or other assessments for public improvements or otherwise now
affecting the Property nor does Seller know of (a) any pending or threatened
special assessments affecting the Property or (b) any contemplated
improvements affecting the Property that may result in special assessments
affecting the Property.
3.31 Employee Agreements. Except as set forth in Schedule 3.31,
there are no union or employment contracts or agreements (written or oral)
involving employees of the Partnership or its affiliates affecting the
Property which will survive the Closing.
3.32 Work at the Premises. Except as set forth in Schedule 3.32, no
services, material or work have been supplied to the Property for which
payment has not been made in full.
3.33 Full Disclosure. To the best knowledge of Seller, none of the
information supplied by Seller herein or in the Schedules or 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.
3.34 There exists a valid Certificate of Occupancy or Certificates
of Occupancy for all Improvements.
4. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Sellers as follows:
4.1 Due Incorporation. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Colorado, and has all corporate power and authority to own, lease and
operate its assets, properties and business and to carry on its business as
now conducted.
4.2 Corporate Power of the Purchaser. The Purchaser has the full
legal right, power and authority and each has taken all necessary corporate
action required to enter into, execute and deliver this Agreement and to
perform fully its obligations hereunder. This Agreement has been duly
executed and delivered and constitutes a legal, valid and binding obligation
of the Purchaser enforceable in accordance with its terms.
4.3 Authority to Execute and Perform Agreements. The Purchaser has
full legal right and power and all authority and approval required to enter
into, execute and deliver this Agreement and to perform fully its obligations
hereunder. This Agreement has been duly executed and delivered and
constitutes a legal, valid and binding obligation of the Purchaser
enforceable in accordance with its terms (subject only to applicable federal
bankruptcy and insolvency laws, and the principals of creditors' rights,
generally). To the best knowledge of Purchaser, the execution and delivery of
this Agreement by the Purchaser and the consummation of the transactions
contemplated hereby by the Purchaser in accordance with its terms and
conditions will not (i) require the approval or consent of any federal or
state governmental or regulatory body or the approval or consent of any other
person (ii) conflict with or result in any breach or violation of any
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of the terms and conditions of, or constitute (or with notice or lapse of
time or both would constitute) a default under, any certificate of
incorporation, by-law, statute, regulation, order, judgment or decree
applicable to the Purchaser, or any material instrument, contract or other
agreement to which the Purchaser is a party or by, or to which, the Purchaser
is bound or subject.
5. Covenants and Agreements.
The parties covenant and agree as follows:
5.1 Conduct of Business. From the date hereof through the Closing
Date, the Seller shall cause the Companies to conduct their business in the
ordinary course, and not to enter into any extraordinary actions including,
but not limited to, the sale of material assets of either Company or the
execution of any agreements which are not in the ordinary course of business,
and to use all reasonable efforts to maintain and preserve their business
organization intact, retain their present employees and maintain their
relationships with agents, suppliers and clients.
5.2 Litigation. The Seller shall promptly notify the Purchaser of
any lawsuits, claims, proceedings or investigations of which any of them has
knowledge which after the date hereof are threatened or commenced against the
Companies or against any officer, director, employee, consultant, agent,
partner or stockholder thereof with respect to the affairs of the Companies.
5.3 Reasonable Efforts. The Seller and the Purchaser shall each
use all reasonable efforts to: (i) fulfill the conditions set forth in this
Agreement; and (ii) cause the representations and warranties contained in
this Agreement to remain true and correct to the extent necessary to comply
with Sections 6.1 and 7.1, hereof, as the case may be.
5.4 Expenses. Whether or not the transactions contemplated hereby
are consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
5.5 Corporate Examinations and Investigations. Prior to the
Closing Date, the Purchaser shall be entitled, through their employees and
representatives, to make such investigation of the assets, properties,
business and operations of the Companies, and such examination of the books,
records and financial condition of the Companies as the Purchaser may
reasonably request. Any such investigation and examination shall be
conducted at reasonable times and under reasonable circumstances and the
Companies and the Sellers shall cooperate fully therein.
6. Conditions Precedent to the Obligation of the Purchaser to Close.
The obligation of the Purchaser to enter into and complete the
Closing is subject to the fulfillment on or prior to the Closing Date of the
following conditions, any one or more of which may be waived by it:
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6.1 Representations and Covenants. The representations and
warranties of the Seller contained in Section 3 of this Agreement shall be
true and correct on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date. The Seller and the Companies
shall have performed and complied in all material respects with all covenants
and agreements required by this Agreement to be performed or complied with by
the Sellers and the Companies on or prior to the Closing Date.
6.2 Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body or instituted
or threatened by any governmental or regulatory body seeking to restrain or
prevent the consummation of the transactions contemplated hereby or seeking
damages in connection with such transactions, or which has or would have, if
successful, singly or in the aggregate, an adverse effect material to the
Business.
6.3 Third Party Consents. All consents, permits and approvals from
parties to contracts or other agreements with Seller and the Companies, and
any other material consent, permit or approval, that to Seller's knowledge
may be required in connection with the performance by Seller and the
Companies of their obligations under this Agreement, or to assure the
consummation of the transactions contemplated by this Agreement, or the
continuance of such contracts or other agreements with the Purchaser after
the Closing, shall have been obtained.
7. Conditions Precedent to the Obligation of the Sellers to Close. The
obligation of the Sellers to enter into and complete the Closing is subject
to the fulfillment on or prior to the Closing Date of the following
conditions, any one or more of which may be waived:
7.1 Representations and Covenants. The representations and
warranties of the Purchaser contained in Section 4 of this Agreement shall be
true and correct on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date. The Purchaser shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by it
on or prior to the Closing Date.
8. Indemnification.
8.1 Definitions. For purposes of this Section 8, "Indemnified
Party" or "Indemnified Parties" shall mean that person or persons who is or
will be indemnified under the terms of this Agreement. "Indemnifying Party"
or "Indemnifying Parties" shall mean that person or persons who is or shall
be obligated to indemnify the Indemnified Party under the terms of this
Agreement. An "Affiliate" shall mean an entity controlling, controlled by,
or under common control with a specified entity. The right to exercise
voting power, directly or indirectly, with respect to more than five percent
(5%) of the ownership interest of any person shall be deemed to constitute
control.
8.2 Obligation of Sellers to Indemnify. The Seller agrees to pay
promptly and to indemnify and hold harmless each of the Purchaser, its
Affiliates and their directors, officers and employees from and against, and
to reimburse each Indemnified Party with respect to any and all claims,
demands, causes of action, proceedings, losses, damages, expenses,
liabilities, fines,
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penalties, deficiencies, judgments or costs, including, without limitation,
accountants' and attorneys' fees, court costs, amounts paid in settlement and
costs and expenses of investigations (collectively, "Claims") at any time and
from time to time asserted against or incurred by any such Indemnified Party
insofar as such Claims arise out of or relate to: (i) any breach of any
representation or warranty or any covenant or agreement of any Seller
contained in this Agreement; or (ii) any potential liabilities and claims of
any kind or nature arising out of the actions or the operations of, the
Company or the Sellers' prior to the Closing Date (other than the Assumed
Liabilities).
8.3 Obligation of the Purchaser to Indemnify. The Purchaser agrees
to pay promptly and to indemnify and hold harmless the Seller from and
against, and to reimburse each Indemnified Party with respect to any Claims
at any time and from time to time asserted against or incurred by any such
Indemnified Party insofar as such Claims arise out of or relate to any breach
of any representation or warranty or any covenant or agreement of the
Purchaser contained in this Agreement.
8.4 Defense of Actions. Each Indemnified Party will give each
Indemnifying Party written notice of any Claim, subject to the provisions of
this Section, as soon as practicable and in any event within 15 business days
after such Indemnified Party shall have had actual notice thereof, and the
Indemnifying Party shall be entitled to defend such action, provided it
employs counsel reasonably satisfactory to such Indemnified Party; provided,
however, that the failure to give any such notice shall not impair the rights
of each Indemnified Party hereunder unless such failure materially impairs
the ability of the Indemnifying Party to defend such action. Each
Indemnified Party shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be borne by such
Indemnified Party unless:
(i) the employment of such counsel has been expressly authorized in
writing by the Indemnifying Party; or
(ii) the Indemnifying Party has not, within a reasonable time after
receipt of written notice from the Indemnified Party, employed
counsel reasonably satisfactory to such Indemnified Party to
defend such action; or
(iii) the Indemnified Party shall reasonably conclude, upon the
advice of its counsel, that there are defenses available to it
which conflict with defenses available to the Indemnifying
Party, which conflict prevents Indemnifying Party's counsel
from representing the Indemnified Party.
In the event of either (i), (ii) or (iii), counsel to the
Indemnifying Party shall not be entitled to direct the defense of the
Indemnified Party and the fees and expenses of counsel employed by the
Indemnified Party shall be borne jointly and severally and advanced by the
Indemnifying Party. The Indemnifying Party shall be liable to the
Indemnified Party in respect of any settlement effected by the Indemnifying
Party without the written consent of the Indemnified Party.
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8.5 Other Remedies. The right of an Indemnified Party to be
indemnified under this Section shall not limit, reduce or otherwise affect
the rights and remedies of such Indemnified Party with respect to the matters
indemnified hereunder.
8.6 Limitation on Indemnity. No claim for indemnity shall be made
by an Indemnified Party hereunder unless and until its Claims exceed $5,000,
provided, however, that in the event such a claim is permitted under this
Section 8.6, such Indemnified Party's Claims shall be inclusive of the $5,000
threshold amount referenced above.
9. Miscellaneous.
9.1 Notices. Any notice or other communication required or which
may be given hereunder shall be in writing and shall be delivered personally,
telegraphed or telexed, or sent by certified, registered, or express mail,
postage prepaid, and shall be deemed given when so delivered personally,
telegraphed or telexed, or if mailed, two days after the date of mailing, as
follows:
if to the Purchaser, to:
Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Fax: 516-694-0918
Attention: Dominic Chang
with a copy to:
Squadron, Ellenoff, Plesent
& Sheinfeld, LLP
551 Fifth Avenue
New York, NY 10176
Fax: 212-697-6686
Attention: Kenneth R. Koch, Esq.
if to the Seller, to:
MetroGolf Incorporated
1999 Broadway
Suite 2435
Denver, CO 80202
Fax: 303-294-9300
Attention: Charles D. Tourtellotte
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with a copy to:
Brownstein, Hyatt, Farber & Strickland
410 17th Street
Denver, Colorado 80202
Fax: 303-623-1956
Attention: Brent T. Slosky, Esq.
9.2 Entire Agreement. This Agreement, together with the Option
Agreement (including the Exhibits and Schedules hereto), contains the entire
agreement among the parties with respect to the purchase of the Shares and
related transactions and supersedes all prior agreements, written or oral,
with respect thereto.
9.3 Waiver and Amendments. This Agreement may be amended,
modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No
delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part
of any party of any right, power or privilege hereunder, nor any single or
partial exercise of any right, power or privilege hereunder, preclude any
other or further exercise thereof or the exercise of any other right, power
or privilege hereunder. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies which any party
may otherwise have at law or in equity.
9.4 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Colorado applicable to agreements
made and to be performed entirely within such State.
9.5 No Assignment. This Agreement is not assignable except by
operation of law, except that the Purchaser may assign its right to purchase
all or a portion of the Shares to one or more of its direct or indirect
wholly owned subsidiaries, but in no event will any such assignment relieve
the Purchaser of any of its obligations and liabilities hereunder.
9.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
9.7 Schedules and Exhibits. The Schedules and Exhibits to this
Agreement are a part of this Agreement as if set forth in full herein.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
METROGOLF INCORPORATED
By:____________________________
Name:
Title:
FAMILY GOLF ACQUISITION, INC.
By:____________________________
Name:
Title:
METROGOLF ILLINOIS CENTER, INC.
By:____________________________
Name:
Title:
ILLINOIS CENTER GOLF PARTNERS L.P.
By:____________________________
Name:
Title:
15
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Exhibit A
Record and Beneficial Owners of the Companies
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EXHIBIT 99(C)(4)
CONSOLIDATED SECURED CONVERTIBLE PROMISSORY NOTE
$500,000 New York, New York
Dated: As of December 23, 1997
FOR VALUE RECEIVED, the undersigned, MetroGolf Incorporated ("Maker"),
having an address at 1999 Broadway Suite 2435 Denver, Colorado 80202, hereby
promises to pay to the order of Family Golf Centers, Inc. ("Payee" or "Holder"),
having an address at 225 Broadhollow Road, Melville, New York 11747, the
principal amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) or so much
thereof as may hereafter be advanced pursuant to Section 6 hereof, which
principal amount shall be payable with interest at the rate of 8% per annum
(except as provided in Sections 2 and 4 below), to be due and payable, upon the
terms and conditions set forth below, in one lump sum, subject to Section 4, on
the first to occur of (i) the date of the "Closing" after the exercise of the
"Option" as both terms are defined in the Option Agreement dated as of December
23, 1997, among Maker, Payee and Family Golf Acquisition, Inc. ("Acquisition"),
(ii) the date of the effectiveness of the merger between Maker and Acquisition
pursuant to the Agreement and Plan of Merger, dated as of December 23, 1997 (the
"Merger Agreement") among Maker, Payee and Acquisition, (iii) if the Merger
Agreement is terminated or breached by Maker and such breach causes a "MGI
Material Adverse Affect" (as defined in the Merger Agreement) to occur, the date
of such termination or breach, and (iv) the latter to occur of (a) the
termination of the "Offer" (as defined in the Merger Agreement) and (b) April
21, 1998.
This Note consolidates, modifies and restates the $150,000 Secured
Promissory Note dated as of December 18, 1997 by Maker to Payee (collectively,
the "EXISTING NOTE"), and is not in payment, novation, satisfaction or
cancellation of the Existing Note or of the indebtedness evidenced thereby, such
indebtedness being herein ratified and confirmed, and is also given to evidence
an additional $350,000 of indebtedness pursuant to an additional $350,000 loan,
or so much thereof as may be advanced as aforesaid, being made by Payee on the
date hereof. It is expressly understood and agreed that, except for such
$350,000 additional loan being made by Payee, this Note is executed and
delivered in substitution of the Existing Note and that no part of the
indebtedness evidenced by the Existing Note shall be disturbed, discharged,
canceled or impaired by the execution and delivery of this Note, it being the
intention of Maker and Payee that, except for such additional $350,000 loan
being made by Payee, such execution and delivery shall create no new or further
principal indebtedness other than the principal indebtedness evidenced by the
Existing Note.
<PAGE>
Maker further covenants to and agrees with Payee as follows:
1. This Note is that Consolidated Secured Convertible Promissory Note
referred to in the fifth "WHEREAS" clause of the Preliminary Statement of that
certain First Amended Pledge and Security Agreement Illinois Center Golf
Partners L.P. Limited Partnership Interest and MetroGolf Illinois Center, Inc.
Shares between Maker and Payee dated as of December 23, 1997 (the "Pledge
Agreement").
2. If this Note is not paid in full on or prior to the due date, the
principal amount hereof shall bear interest, commencing from the date hereof, at
the rate of 12% per annum and all sums payable hereunder shall be due and
payable upon demand.
3. An event of default (a "Default Event") shall occur pursuant to this
Note upon notice from Payee (a), if Maker defaults in making any payment
hereunder when due or in performing any of Maker's other obligations hereunder,
or (b) if an "Event of Default" as defined in the Pledge Agreement occurs.
4. If a Default Event shall occur, then the outstanding balance then due
hereunder shall accelerate and become due and payable on demand and the
principal amount hereof shall bear interest at the rate of 12% per annum,
commencing from the date hereof.
5. To secure payment of this Note, Maker has granted to Payee a security
interest under the Uniform Commercial Code, and under the terms of the Pledge
Agreement in all the "Collateral" as defined in the Pledge Agreement.
6. Maker has requested that the loans evidenced by this Note
(collectively, the "Loan") be made only for the purpose of paying the operating
expenses of Maker's business owed to any of those set forth on EXHIBIT A to the
Pledge Agreement (collectively, the "RECIPIENTS"). The proceeds of the Loan
shall be made available to Maker solely for the purpose of so paying the
Recipients. On the condition that Maker substantiates, to the reasonable
satisfaction of Payee, that the proceeds of the $150,000 Loan have been
prudently used by Maker for payment of certain of the Recipients, Payee shall
make additional advances to Maker, not to exceed $350,000, to be used for the
same purpose of paying the Recipients. Maker shall submit a draw request to
Payee for each such additional advance. Each draw request shall specify the
purpose of the request and the amount requested. Each draw request shall be
signed by the Chief Executive Officer or Chief Financial Officer of Maker.
Provided Maker has substantiated to the reasonable satisfaction of Payee the
above-required use of any prior amounts advanced to Maker and the payment of any
applicable payroll taxes with respect to any payments to employees, Maker may
approve or disapprove any such request, which approval or disapproval shall not
be unreasonably withheld or delayed. (Inasmuch as the two executive officers of
Maker, Charles D. Tourtelotle and
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<PAGE>
J.D. Finley, are deriving substantial benefits from the use of the proceeds
of the Existing Note and will derive substantial benefits from the use of
additional advances of the proceeds of this Note, the proceeds of this Note
may be used to pay their salaries through January 31, 1998, and thereafter
only if cash flow from the operations of Maker and its available cash are, in
the reasonable judgment of Maker and Payee, adequate to pay all current
obligations of Maker through the date Acquisition shall have accepted for
purchase and paid for the shares of Maker tendered pursuant to the "Offer" as
such term is defined in the Merger Agreement.) Any request for an additional
advance shall be deemed approved if Payee fails to reject such request within
three (3) days after delivery of such request together with submission of all
documentation required hereunder. In the event Payee disapproves of a
request for an additional advance, Payee shall provide (a) the reasons for
its disapproval and (b) the changes to such request necessary to cause Payee
to approve it. Maker may thereafter submit its revised request for Payee's
approval, which revised request shall be approved or disapproved in
accordance with the foregoing procedure. In the event Payee approves such
request, Payee shall fund the amount requested within two (2) days after the
date of such approval.
7. Conversion
a. This Note shall be convertible into a number of shares (the
"Shares") of Common Stock equal to the principal amount of this Note divided by
the then-effective Conversion Price. The Initial Conversion Price shall equal
$1.00. The number of shares of Common Stock issuable upon conversion of the
Note (the "Shares") and the Conversion Price may be adjusted from time to time
as hereinafter set forth. This Note may be converted at the option of the
Holder at any time prior to its payment as to the whole or any lesser number of
whole Shares, by the surrender of this Note (together with written notice as to
the principal amount of the Note to be converted) to the Borrower at its office
at 1999 Broadway Suite 2435 Denver, Colorado 80202, or at such other place as is
designated in writing by the Borrower. This Note may not be prepaid.
b. Upon each exercise of the Holder's rights to purchase Shares, the
Holder shall be deemed to be the Holder of record of the Shares issuable upon
such exercise, notwithstanding that the transfer books of the Company shall not
then have been actually delivered to the Holder. As soon as practicable after
conversion of this Note, the Company shall issue and deliver to the Holder a
certificate or certificates for the Shares issuable upon such exercise,
registered in the name of the Holder or its designee. If this Note should be
exercised in part only, the Company shall, upon surrender of this Note for
cancellation, execute and deliver a new Note evidencing the right of the Holder
to purchase the balance of the Shares (or portions thereof) subject to purchase
hereunder.
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<PAGE>
c. The Borrower shall at all times reserve and keep available out of
its authorized and unissued Common Stock, solely for the purpose of providing
for the exercise of the rights to purchase all Shares issuable upon conversion
of the Notes, such number of shares of Common Stock as shall, from time to time,
be sufficient therefor. The Company covenants that all shares of Common Stock
issuable upon conversion of this Note, upon such conversion, shall be validly
issued, fully paid, nonassessable, and free of preemptive rights.
d. In case the Company shall at any time after the date this 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, or
(iii) combine the outstanding Common Stock into a smaller number of shares,
then, in each case, the Conversion Price, and the number of Shares issuable upon
conversion of this Note, in effect at the time of the record date for such
dividend or of the effective date of such subdivision, or combination, shall be
proportionately adjusted so that the Holder after such time shall be entitled to
receive the aggregate number and kind of shares for such consideration which, if
such Note had been converted immediately prior to such time at the then-current
Conversion Price, Holder would have owned upon such conversion and been entitled
to receive by virtue of such dividend, subdivision, or combination. Such
adjustment shall be made successively whenever any event listed above shall
occur.
e. In case the Company shall issue or fix a record date for the
issuance to all holders of Common Stock of rights, options, or warrants to
subscribe for or purchase Common Stock (or securities convertible into or
exchangeable for Common Stock) at a price per share (or having a conversion or
exchange price per share, if a security convertible into or exchangeable for
Common Stock) less than the then-effective Conversion Price per share of Common
Stock on such record date, then, in each case, such Conversion Price shall be
adjusted by multiplying the Conversion Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding on such record date plus the number of shares of
Common Stock which the aggregate offering price of the total number of shares of
Common Stock so to be offered (or the aggregate initial conversion or exchange
price of the convertible or exchangeable securities so to be offered) would
purchase at such then-effective Conversion Price and the denominator of which
shall be the number of shares of Common Stock outstanding on such record date
plus the number of additional shares of Common Stock to be offered for
subscription or purchase (or into which the convertible or exchangeable
securities so to be offered are initially convertible or exchangeable);
provided, however, that no such adjustment shall be made which results in an
increase in the Conversion Price. Such adjustment shall become effective at the
close of business on such record date provided, however, that, to the extent the
shares of Common Stock (or securities convertible into or exchangeable for
shares of Common Stock) are not delivered, the
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<PAGE>
Conversion Price shall be readjusted after the expiration of such rights,
options, or warrants (but only with respect to Notes converted after such
expiration), to the Conversion Price which would then be in effect had the
adjustments made upon the issuance of such rights, options, or warrants been
made upon the basis of delivery of only the number of shares of Common Stock
(or securities convertible into or exchangeable for shares of Common Stock)
actually issued. In case any subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the board
of directors of the Company, whose determination shall be conclusive absent
manifest error. Shares of Common Stock owned by or held for the account of
the Company or any majority-owned subsidiary shall not be deemed outstanding
for the purpose of any such computation.
f. In case the Company shall distribute to all holders of Common
Stock (including any such distribution made to the stockholders of the Company
in connection with a consolidation or merger in which the Company is the
continuing corporation) evidences of its indebtedness, cash (other than any cash
dividend which, together with any cash dividends paid within the 12 months prior
to the record date for such distribution, does not, on a per share basis, exceed
3% of the then-effective Conversion Price at the record date for such
distribution) or assets (other than distributions and dividends payable in
shares of Common Stock), or rights, options, or warrants to subscribe for or
purchase Common Stock, or securities convertible into or exchangeable for shares
of Common Stock (excluding those with respect to the issuance of which an
adjustment of the Conversion Price is provided pursuant to section 7(b) hereof),
then, in each case, the Conversion Price shall be adjusted by multiplying the
Conversion Price in effect immediately prior to the record date for the
determination of stockholders entitled to receive such distribution by a
fraction, the numerator of which shall be the then effective Conversion Price
per share of such class of Common Stock on such record date, less the fair
market value (as determined in good faith by the board of directors of the
Company, whose determination shall be conclusive absent manifest error) of the
portion of the evidences of indebtedness or assets so to be distributed, or of
such rights, options, or warrants or convertible or exchangeable securities, or
the amount of such cash, applicable to one share, and the denominator of which
shall be such then-effective Conversion Price per share of Common Stock. Such
adjustment shall become effective at the close of business on such record date.
g. In case the Company shall issue shares of Common Stock or rights,
options, or warrants to subscribe for or purchase Common Stock, or securities
convertible into or exchangeable for Common Stock (excluding shares, rights,
options, warrants, or convertible or exchangeable securities issued or issuable
(i) in any of the transactions with respect to which an adjustment of the
Conversion Price is provided pursuant to Sections 7(d), (e) or (f) above, (ii)
upon conversion of this Note or (iii) upon
5
<PAGE>
adjustment of the number of shares of Common Stock issuable upon conversion
of this Note pursuant to Section 7(d) above), at a price per share lower than
the then-effective Conversion Price per share of Common Stock in effect
immediately prior to such issuance, then the Conversion Price shall be
reduced on the date of such issuance to a price calculated to the nearest
cent) determined by multiplying the Conversion Price in effect immediately
prior to such issuance by a fraction, (l) the numerator of which shall be an
amount equal to the sum of (A) the number of shares of Common Stock
outstanding immediately prior to such issuance plus (B) the quotient obtained
by dividing the consideration received by the Company upon such issuance by
such the then-effective Conversion Price, and (2) the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
after such issuance; provided, however, that no such adjustment shall be made
which results in an increase in the Conversion Price. For the purposes of
such adjustments, the maximum number of shares which the holders of any such
rights, options, warrants, or convertible or exchangeable securities shall be
entitled to initially subscribe for or purchase or convert or exchange such
securities into shall be deemed to be issued and outstanding as of the date
of such issuance, and the consideration received by the Company therefor
shall be deemed to be the consideration received by the Company for such
rights, options, warrants, or convertible or exchangeable securities, plus
the minimum, aggregate consideration or premiums stated in such rights,
options, warrants, or convertible or exchangeable securities to be paid for
the shares covered thereby. No further adjustment of the Conversion Price
shall be made as a result of the actual issuance of shares of Common Stock on
exercise of such rights, options, or warrants or on conversion or exchange of
such convertible or exchangeable securities. On the expiration or the
termination of such rights, options, or warrants, or the termination of such
right to convert or exchange, the Conversion Price shall be readjusted (but
only with respect to Notes converted after such expiration or termination) to
such Conversion Price as would have obtained had the adjustments made upon
the issuance of such rights, options, warrants, or convertible or
exchangeable securities been made upon the basis of the delivery of only the
number of shares of Common Stock actually delivered upon the exercise of such
rights, options, or warrants or upon the conversion or exchange of any such
securities; and on any change of the number of shares of Common Stock
deliverable upon the exercise of any such rights, options, or warrants or
conversion or exchange of such convertible or exchangeable securities or any
change in the consideration to be received by the Company upon such exercise,
conversion, or exchange, including, without limitation, a change resulting
from the antidilution provisions thereof. In case the Company shall issue
shares of Common Stock or any such rights, options, warrants, or convertible
or exchangeable securities for a consideration constituting, in whole or in
part, of property other than cash or its equivalent, then the price per
share, and the consideration received by the Company for purposes of the
first sentence of this Section 7(g) shall be as determined in good faith by
the board of directors of the Company, whose determination shall be
conclusive absent manifest error. Shares of Common Stock owned by or held for
the account of
6
<PAGE>
the Company or any majority-owned subsidiary shall not be deemed outstanding
for the purpose of any such computation.
h. No adjustment in the Conversion Price shall be required if such
adjustment is less than $.01; provided, however, that any adjustments which by
reason of this Section 7 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 7 shall be made to the nearest cent or to the nearest one-thousandth of
a share, as the case may be.
i. In any case in which this Section 7 shall require that an
adjustment in the Conversion Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, issuing to the Holder, if the Holder exercised this Note after such
record date, the shares of Common Stock, if any, issuable upon such exercise
over and above the shares of Common Stock, if any, issuable upon such exercise
on the basis of the Conversion Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to the Holder a due bill or
other appropriate instrument evidencing the Holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
j. Upon each adjustment of the Conversion Price as a result of the
calculations made in Section 7 hereof, this Note shall thereafter evidence the
right to purchase, at the adjusted Conversion Price, that number of shares
(calculated to the nearest thousandth) obtained by dividing (A) the product
obtained by multiplying: (i) the number of shares purchasable upon conversion
of this Note prior to adjustment of the number of shares by (ii) the Conversion
Price in effect prior to adjustment of the Conversion Price by (B) the
Conversion Price in effect after such adjustment of the Conversion Price.
k. Whenever there shall be an adjustment as provided in this Section
7, the Company shall promptly cause written notice thereof to be sent by
certified mail, postage prepaid, to the Holder, at its address, which notice
shall be accompanied by an officer's certificate setting forth the number of
Shares purchasable upon the conversion of this Note and the Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment and the computation thereof, which officer's certificate shall
be conclusive evidence of the correctness of any such adjustment absent manifest
error.
l. The Company shall not be required to issue fractions of shares of
Common Stock or other capital stock of the Company upon the conversion of this
Note. If any fraction of a share would be issuable on the conversion of this
Note (or specified portions thereof), the Company shall purchase such fraction
for an amount in cash
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<PAGE>
equal to the same fraction of the then-effective Conversion Price of such
share of Common Stock on the date of conversion of this Note.
m. In case of any consolidation with or merger of the Company with
or into another corporation (other than a merger or consolidation in which the
Company is the surviving or continuing corporation), or in case of any sale,
lease or conveyance to another corporation of the property and assets of any
nature of the Company as an entirety or substantially as an entirety, such
successor, leasing or purchasing corporation, as the case may be, shall (i)
execute with the Holder an agreement providing that the Holder shall have the
right thereafter to receive upon conversion of this Note solely the kind and
amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such consolidation, merger, sale lease, or
conveyance by a Holder of the number of shares of Common Stock for which this
Note might have been converted immediately prior to such consolidation, merger,
sale lease, or conveyance and (ii) make effective provision in its certificate
of incorporation or otherwise, if necessary to effect such agreement. Such
agreement shall provide for adjustments which shall be as nearly equivalent as
practicable to the adjustments in Section 7.
n. In case of any reclassification or change of the shares of Common
Stock issuable upon conversion of this Note (other than a change in par value or
from no par value to a specified par value, or as a result of a subdivision or
combination but including any change in the shares into two or more classes or
series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the shares of Common Stock (other
than a change in par value, or from no par value to a specified par value, or as
a result of a subdivision or combination, but including any change in the shares
into two or more classes or series of shares) the Holder shall have the right
thereafter to receive upon conversion of this Note solely the kind and amount of
shares of stock and other securities, property, cash, or any combination thereof
receivable upon such reclassification, change, consolidation, or merger by a
Holder of the number of shares of Common Stock for which this Note might have
been converted immediately prior to such reclassification, change,
consolidation, or merger. Thereafter, appropriate provision shall be made for
adjustments which shall be as nearly equivalent as practicable to the
adjustments in Section 7.
o. The above provisions of this Section 7 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers sales, leases, or conveyances.
p. In case at any time the Company shall propose to:
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<PAGE>
i. pay any dividend or make any distribution on shares of
Common Stock in shares of Common Stock or make any other distribution (other
than regularly scheduled cash dividends which are not in a greater amount per
share than the most recent such cash dividend) to all holders of Common Stock;
or
ii. issue any rights, warrants, or other securities to all
holders of Common Stock entitling them to purchase any additional shares of
Common Stock or any other rights, warrants, or other securities; or
iii. effect any reclassification or change of outstanding shares
of Common Stock, or any consolidation, merger, sale, lease, or conveyance of
property, described in Section 7 hereof; or
iv. effect any liquidation, dissolution, or winding-up of the
Company; or
v. take any other action which would cause an adjustment to the
Conversion Price;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by certified mail, postage prepaid, to the Holder at the
Holder's address mailed at least 10 days prior to (i) the date as of which the
holders of record of shares of Common Stock to be entitled to receive any such
dividend, distribution, rights, warrants, or other securities are to be
determined, (ii) the date on which any such reclassification, change of
outstanding shares of Common Stock, consolidation, merger, sale, lease,
conveyance of property, liquidation, dissolution, or winding-up is expected to
become effective, and the date as of which it is expected that holders of record
of shares of Common Stock shall be entitled to exchange their shares for
securities or other property, if any deliverable upon such reclassification,
change of outstanding shares, consolidation, merger, sale, lease, conveyance of
property, liquidation, dissolution, or winding-up, or (iii) the date of such
action which would require an adjustment to the Conversion Price.
q. The issuance of any shares or other securities upon the
conversion of this Note, and the delivery of certificates or other instruments
representing such shares or other securities, shall be made without charge to
the Holder for any tax or other charge in respect of such issuance. The Company
shall not, 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 Holder and the Company shall not 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.
9
<PAGE>
8. Maker hereby waives presentment, demand, protest and notice of any
kind, except as provided herein. No failure on the part of Payee to exercise,
and no delay in exercising, and no course of dealing with respect to, any right
hereunder shall operate as a waiver hereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise hereof or
the exercise of any other right. Maker agrees to pay all costs and expenses of
collection when incurred, including, without limitation, attorneys' fees and
expenses.
9. This Note shall be binding upon Maker and its successors and may not
be assigned by Maker and shall inure to the benefit of Payee and its successors
and assigns. This Note shall be construed and enforced in accordance with the
laws of the State of New York, without regard to its principles of conflicts of
laws. Any legal action, suit or proceeding arising out of or relating to this
Note or the transactions contemplated hereby may be instituted in any court
located in the county of New York in the state of New York, and each party
agrees not to assert, by way of motion, as a defense, or otherwise, in any such
action, suit or proceeding, any claim that it is not subject personally to the
jurisdiction of such courts, that its property is exempt or immune from
attachment or execution, that the action, suit or proceeding is brought in an
inconvenient forum and that the venue of the action, suit or proceeding is
improper or that this Note or the subject matter hereof may not be enforced in
or by such court. Each party further irrevocably submits to the jurisdiction of
any such court in any such action, suit or proceeding. Any and all service of
process and any other notice in any such action, suit or proceeding shall be
effective against any party if given in the method specified herein as
appropriate for any notice hereunder. Nothing herein contained shall be deemed
to affect the right of any party to serve process in any manner permitted by law
or to commence legal proceedings or otherwise proceed against any other party in
any jurisdiction other than New York, in connection with actions initiated by
third parties in such other jurisdictions. This Note may not be amended, waived
or terminated orally. This Note represents the entire agreement between the
parties with respect to the subject matter hereof and supersedes any and all
other agreements, whether oral or written, with respect thereto.
10. Any notice hereunder shall be sent via certified or registered mail,
return receipt requested, by hand or by recognized overnight courier service to
Maker or Payee at the address set forth above or at such other address as Maker
or Payee may designate to the other by notice pursuant to this Section. Notice
shall be deemed effective upon receipt.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has executed, issued and delivered this
Note on the day and year first above written.
METROGOLF INCORPORATED
By: /s/ Charles Tourtellotte
------------------------------------
Name: Charles Tourtellotte
Title:
ACKNOWLEDGED:
FAMILY GOLF CENTERS, INC.
By: /s/ Dominic Chang
------------------------------------
Name: Dominic Chang
Title:
<PAGE>
FIRST AMENDED PLEDGE AND SECURITY AGREEMENT
ILLINOIS CENTER GOLF PARTNERS L.P. LIMITED PARTNERSHIP INTEREST
AND
METROGOLF ILLINOIS CENTER, INC. SHARES
THIS FIRST AMENDED PLEDGE AND SECURITY AGREEMENT, dated as of the 23rd
day of December, 1997 (this "Pledge"), is made by METROGOLF INCORPORATED, a
Colorado corporation, with offices at 1999 Broadway, Suite 2435, Denver,
Colorado 80202 ("Pledgor") to FAMILY GOLF CENTERS, INC., a Delaware
corporation having an office at 225 Broadhollow Road, Suite 106E, Melville,
New York 11747 ("Lender").
PRELIMINARY STATEMENT
WHEREAS, the Lender has made a loan (the "$150,000 Loan") to Pledgor in
the principal sum of ONE HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS
($150,000.00);
WHEREAS, the $150,000 Loan is evidenced by a certain Note dated as of
December 17, 1997 from the Pledgor to Lender (the "$150,000 Note") and is or
shall be secured by a Deed of Trust (the "$150,000 Deed of Trust"). (The
$150,000 Deed of Trust, the Note and all other documents executed and
delivered or to be executed and delivered in connection with the Loan
$150,000 are hereinafter collectively referred to as the "$150,000 Loan
Documents");
WHEREAS, the Pledgor has entered into an Agreement and Plan of Merger
(the "Merger Agreement") and an Option Agreement (the "Option Agreement"),
each dated as of even date herewith, with Lender and Pledgor.
WHEREAS, simultaneously with the entering into of the Merger Agreement
and the Option Agreement, Lender has made an additional loan of Three Hundred
Fifty Thousand and 00/100 Dollars ($350,000.00) to Pledgor (the "$350,000
Loan");
WHEREAS, the $150,000 Note has been consolidated into, and the $350,000
Loan is evidenced by, a single Consolidated Secured Convertible Promissory
Note of even date herewith (the "Note") evidencing the aggregate $500,000
loan (the "Loan), and is or shall be secured by an unrecorded deed of trust
(the "Deed of Trust") which consolidates the $150,000 Deed of Trust. (The
Deed of Trust, the Note, the $150,000 Loan Documents and all the other
documents executed and delivered or to be executed and delivered in
connection with the Loan are hereafter referred to as the "Loan Documents.")
WHEREAS, Lender has declined to make the Loan and enter into the Merger
Agreement unless this Pledge of Pledgor's limited partnership interests in
Illinois Center Golf Partners L.P. (the "Partnership") and its shares of
MetroGolf Illinois Center, Inc.
<PAGE>
(the "Corporation") is duly executed, acknowledged and delivered by Pledgor
to Lender to secure Pledgor's obligations under the Loan Documents;
WHEREAS, Pledgor has requested that the proceeds of the Loan be used only
for the purpose of paying the operating expenses of Pledgor's business owed
to any of those set forth on Exhibit A hereto;
WHEREAS, this Pledge amends and supersedes the Pledge and Security
Agreement Illinois Center Golf Partners L.P. Limited Partnership Interest and
MetroGolf Illinois Center, Inc. Shares dated as of December 18, 1997.
WHEREAS, Pledgor will derive substantial benefit from the making of the
Loan; and
WHEREAS, in order to induce Lender to make the Loan, Pledgor wishes to
execute, acknowledge and deliver to Lender this Pledge.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Pledgor hereby covenants and agrees with Lender to the
foregoing and as follows:
1. Definitions. For the purposes of this Pledge, the following terms
shall have the meanings set forth herein below:
"Business Day" shall mean any day other than a Saturday, Sunday or
legal holiday on which banks in New York, New York are authorized or
obligated, by law, governmental decree or executive order, to be
closed.
"Collateral" shall have the meaning set forth in Paragraph 2(a).
"Corporation" shall mean MetroGolf Illinois Center, Inc.
"Distributions" shall mean any and all payments and distributions,
whether in cash or in kind, paid or payable to Pledgor in connection
with Pledgor's Interest in the Partnership and the Corporation.
"Event of Default" shall have the meaning set forth in Paragraph 10.
"Initial Transaction Statement" shall have the meaning set forth in
Paragraph 3.
"Interest" shall mean any direct or indirect ownership, equity, record
or beneficial interest of any kind or nature whatsoever in the
Partnership and the Corporation, including, without limitation,
partnership, membership, stock and joint venture interests, and any
right, including without limitation any option, put, call or warrant
and rights to vote and receive Distributions relating to such
interest, and any and all rights to principal, interest and
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<PAGE>
other sums due under any loans by Pledgor to the Partnership, the
Corporation or any other partner in the Partnership or shareholder of
the Corporation, and shall include without limitation, the percentage
of limited partnership interests in the Partnership and Shares set
forth on Schedule 1 hereto.
"Lender" shall have the meaning set forth in the preamble to this
Pledge.
"Loan Documents" shall have the meaning set forth in the Preliminary
Statement.
"Merger Agreement" shall have the meaning set forth in the Preliminary
Statement.
"Note" shall have the meaning set forth in the Preliminary Statement.
"Notice of Default" shall have the meaning set forth in Paragraph 10.
"Obligations" shall have the meaning set forth in Paragraph 2.
"Option Agreement" shall have the meaning set forth in the Preliminary
Statement.
"Partnership" shall mean Illinois Center Golf Partners L.P., a
Delaware limited partnership.
"Partnership Agreement" shall mean the Agreement of Limited
Partnership of the Partnership dated as of May 28, 1993, as amended as
of October 21, 1996 and December 17, 1997, and as the same may be
further amended, restated and/or supplemented from time to time.
"Partnership Certificate" shall mean any and all certificate(s) issued
to and owned by Pledgor and representing Pledgor's ownership, equity,
record and beneficial interest in the Partnership.
"Pledge" shall have the meaning set forth in the preamble to this
Pledge.
"Pledgor" shall have the meaning set forth in the preamble to this
Pledge.
"Shares" shall mean any and all certificate(s) issued to and owed by
Pledgor and representing Pledgor's ownership, equity, record and
beneficial interest in the Corporation.
"UCC-1s" shall mean the financing statements described in Paragraph
3(b) hereof.
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2. Pledge.
(a) As security for the prompt and complete payment and performance
of any and all indebtedness and/or other liabilities, obligations, covenants
or agreements of Pledgor to Lender, now or hereafter arising from, out of or
relating to the Loan Documents or the Option Agreement whether direct,
indirect, contingent or otherwise (hereinafter referred to collectively as
the "Obligations"), Pledgor hereby pledges, assigns and hypothecates to
Lender and grants to Lender a continuing, perfected and first priority lien
upon and security interest in, to and under all of Pledgor's right, title and
interest in and to the following (collectively, the "Collateral"), whether
now existing or hereafter from time to time acquired:
(i) any Interest in the Partnership and the Corporation;
(ii) one hundred percent (100%) of any and all Distributions of
any kind or nature whatsoever attributable or allocable to
Pledgor's Interest in the Partnership and the Corporation
including, without limitation, the right to receive proceeds
(whether cash, instruments, property or otherwise)
therefrom) plus (a) any stock dividend or distribution in
connection with any increase or reduction of capital,
reclassification, merger, consolidation, sale of assets,
combination of shares, stock split, spin-off or split-off;
(b) any option or other rights, whether as an addition to,
in substitution of or in exchange for any Collateral, of
otherwise; (c) dividends payable in property; (d) dividends
or distributions of dissolution, or in partial or total
liquidation, or from capital, capital surplus, or paid in
surplus; (e) any and all proceeds of causes and rights of
action or settlements thereof payable to Pledgor from time
to time with respect to the collateral and (f) any and all
other amounts from time to time paid or payable under or in
connection with the Collateral;
(iii) all certificates representing (i) or (ii) above;
(iv) all additional certificates or other evidence of Interests
in the Partnership or Corporation received by Pledgor
pursuant to any reclassification, reorganization, or
increase or reduction of capital attributable to any
certificate described in (iii) above or in substitution of
or in exchange of any certificate described in (iii) above;
(v) any loans to the Partnership, Corporation, any other partner
of the Partnership or shareholder of the Corporation by
Pledgor, including the full principal balance thereof, and
all interest and other sums due thereon; and
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(vi) all present and future proceeds of, from and relating to any
of the foregoing.
(b) The hypothecation, pledge and assignment made pursuant to this
Pledge shall be in addition to, and shall in no way limit or impair, any
rights of Lender in, to and under the Collateral or any of the Loan Documents.
3. Delivery and Registration of Pledged Collateral.
(a) All Collateral shall, at the Lender's sole option, be delivered
by delivery of all certificates or instruments representing or evidencing
such Collateral in suitable form for transfer by delivery or accompanied by
duly executed instruments of transfer or assignment, undated and in blank,
all in form and substance satisfactory to Lender in its sole and absolute
discretion. Upon the issuance of any such certificate or instrument, the same
shall be so assigned, delivered and endorsed to Lender immediately without
the need for any request therefor by Lender. Lender shall have the right, at
any time and from time to time, in its discretion and without notice to
Pledgor, to transfer to or to register in its name or in the name of any of
its nominees any or all of the Collateral.
(b) In addition to and not in limitation of the foregoing, Pledgor
upon request by Lender shall deliver to Lender the "Initial Transaction
Statement" in the form of Exhibit B hereto confirming that the Partnership
has registered the pledge effected by this Agreement on its books, has
delivered the Partnership Certificate to Lender, and concurrently with the
execution of this Agreement, shall deliver to Lender fully completed and duly
executed UCC-1 financing statements in form suitable for filing in the
jurisdictions listed on Schedule 2 (the "UCC-1's"), attached hereto and made
a part hereof, appropriately describing Pledgor's Interest in the Partnership
and corporation as security for the Obligations.
4. Lender's Duty of Care. Lender shall exercise reasonable care in the
custody of any Collateral but shall be deemed to have exercised reasonable
care (a) if such Collateral is accorded treatment substantially equal to that
which Lender accords its own property (it being understood that Lender shall
have no responsibility for ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other matters relative
to any Collateral and whether or not Lender has or is deemed to have
knowledge of such matters), or (b) if Lender takes such action with respect
to the Collateral as Pledgor shall request, but no failure to comply with any
such request nor any omission to do any such act requested by Pledgor shall
be deemed a failure to exercise reasonable care, nor shall Lender's failure
to take necessary steps to preserve rights against any parties with respect
to any Collateral in its possession be deemed a failure to exercise
reasonable care.
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5. Representations and Warranties. Pledgor does hereby represent and
warrant to Lender as follows:
(a) Except as set forth in Schedule 5(a), Pledgor is the sole
beneficial owner and holder of the Interest of Pledgor in the Partnership and
the Corporation. No party other than Pledgor has any option, warrant, call,
commitment or other right with respect to Pledgor's Interest in the
Partnership and the Corporation.
(b) Pledgor is, and as to all Collateral acquired after the date
hereof shall be, the true, legal and lawful owner and holder of the
Collateral, free and clear of any liens, pledges, security interests or
encumbrances whatsoever except for the security interest of Lender created by
this Pledge and the other Loan Documents.
(c) Pledgor is a corporation, duly formed, validly existing and in
good standing under the laws of the State of Colorado, is qualified to do
business in any other jurisdiction in which it conducts its business (other
than with respect to jurisdictions with which it has only di minimus business
contacts) and has all requisite power and authority to conduct its business
as now conducted, to own its assets and properties, and to execute, deliver
and perform all of its obligations set forth in the Loan Documents.
(d) Pledgor has full power and lawful right to make the
hypothecation, assignment and pledge contemplated in this Pledge and to vest
in Lender the security interest created hereby, and the rights and interests
assigned and pledged hereunder constitute valid and subsisting rights and
interests of Pledgor.
(e) Upon the filing of the UCC-1's and taking the actions described
in Paragraph 3(b), this Pledge shall create a valid first priority lien on
and a perfected first priority security interest in the Collateral,
enforceable as such against the rights of creditors of and purchasers from
Pledgor. The filing of the UCC-1's and taking the actions described in
Paragraph 3(b) will constitute all actions necessary to protect and perfect
such lien on and security interest in each item of the Collateral.
(f) This Pledge constitutes the legal, valid and binding obligation
of Pledgor, enforceable in accordance with its terms.
(g) The execution, delivery and performance by Pledgor of this
Pledge, the exercise by Lender of the voting or other rights provided in this
Pledge and the remedies in respect of the Collateral under this Pledge (i)
have been duly authorized; (ii) do not require the approval of any
governmental authority or other third party or require any action of, or
filing with, any governmental authority or other third party to authorize
same (other than the UCC-1's); (iii) shall not, (A) violate or result in the
breach of any provision of law or regulation, any order or decree of any
court or other governmental authority, (B) violate, result in the breach of
or constitute a default under the Partnership Agreement, any agreement among
the shareholders of the Corporation, any indenture, mortgage, deed of trust,
agreement or any other instrument to which Pledgor is a party or by which any
of Pledgor's assets (including, without limitation, the
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Collateral) are bound, including without limitation the Partnership
Agreement, or (C) be in conflict with any such indenture, mortgage, deed of
trust, agreement or other instrument and (iv) shall not result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of Pledgor except as
contemplated by the provisions of this Pledge and the other Loan Documents.
(h) There is not now pending or, to the best of Pledgor's
knowledge, threatened any action, or proceeding at law or in equity or by or
before any administrative agency which if adversely determined would impair
or affect Pledgor's or Lender's interest in the Collateral or the value
thereof or Pledgor's aggregate financial condition or operations.
(i) The financial statements furnished by Pledgor in connection
with the Loan and this Pledge are true, correct and complete in all respects
and do not contain any omission or misstatement of fact which would make the
statements contained therein false, misleading or incomplete in any respect.
(j) There is no financing statement (or similar statement or
registration under the law of any jurisdiction) now on file or registered in
any public office covering any interest of Pledgor in the Collateral or
intended so to be other than any in favor of Lender. There are no set-offs,
counterclaims or defenses with respect to the Collateral and no agreement has
been made with any other person or party with respect thereto.
(k) Pledgor has obtained all necessary consents to this Pledge.
(l) The Partnership is a limited partnership duly formed, validly
existing and in good standing under the laws of the State of Illinois and is
authorized to do business in each state where its property is located and has
all requisite power and authority to conduct its business as now conducted
and to own its assets and properties, and is qualified to do business in any
other jurisdictions in which it conducts business (other than with respect to
jurisdictions with which it has only di minimus business contacts).
(m) The Corporation is a corporation, duly formed, validly existing
and in good standing under the laws of the State of Colorado, is qualified to
do business in any other jurisdiction in which it conducts it business (other
than with respect to jurisdictions with which it has only di minimus business
contacts) and has all requisite power and authority to conduct its business
as now conducted, to own its assets and properties, and to execute, deliver
and perform all of its obligations set forth in the Loan Documents.
(n) The principal place of business of Pledgor is located at its
address first set forth above. Pledgor shall not change such principal place
of business without first notifying Lender of its intention to do so, and
furnishing Lender with any UCC-1's or amendments thereto as may be requested
by Lender in connection therewith.
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(o) None of the Collateral has been issued or transferred in
violation of the securities registration, securities disclosure or similar
laws of any jurisdiction to which such issuance or transfer may be subject.
6. Further Assurances. Upon the request of Lender, Pledgor, at
Pledgor's sole cost and expense, shall execute and deliver all such further
financing statements, continuation statements, assurances and assignments of
the Collateral and consents with respect to the pledge of the Collateral and
the execution of this Pledge, and shall execute and deliver such further
instruments, agreements and other documents and do such further acts and
things, as Lender may request in order to more fully effectuate the purposes
of this Pledge and the assignment of the Collateral and obtain the full
benefits of this Pledge and the rights and powers herein created.
7. Attorney-in-fact. Pledgor hereby authorizes Lender at any time to
take any action and to execute any instrument, including without limitation
to file one or more financing statements and/or continuation statements, to
evidence and perfect the security interest created hereby and irrevocably
appoints Lender as its true and lawful attorney-in-fact, which power of
attorney shall be coupled with an interest, with full authority in the place
and stead of Pledgor and in the name of Pledgor or otherwise, from time to
time, in Lender's sole and absolute discretion, including without limitation
(a) for the purpose of executing such statements in the name of and on behalf
of Pledgor, and thereafter filing any such financing and/or continuation
statements and (b) to receive, endorse and collect all instruments made
payable to Pledgor representing any interest payment or other distribution in
respect of the Collateral or any part thereof and to give full discharge for
the same. Nothing contained in this Paragraph 7 shall result in the expansion
of the obligations, or the reduction of the rights, of Pledgor hereunder or
under the Loan Documents.
8. Covenants and Agreements. In addition to any and all other
covenants and agreements by Pledgor under this Pledge, Pledgor further
covenants and agrees that:
(a) Pledgor shall defend the Collateral against the claims and
demands of all persons whomsoever and Pledgor shall likewise defend Lender's
right, title and interest thereto and security interest therein against all
claims and demands of any other person or party at any time claiming the same
or any interest therein adverse to Lender.
(b) Pledgor will only conduct business (other than de minimus
business) in jurisdictions in which it is qualified to conduct business.
(c) Pledgor shall not directly or indirectly assign, pledge,
hypothecate, transfer, exchange, grant any option or security interest in and
with respect to, or otherwise dispose of or encumber, the Collateral or any
beneficial or other interest therein, except as provided in the Loan
Documents.
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<PAGE>
(d) Pledgor shall be liable for and shall from time to time pay and
discharge, all taxes, assessments and governmental charges imposed on the
Collateral by any federal, state or local authority.
(e) Pledgor shall give Lender prompt notice of (i) the occurrence
of any default under this Pledge and (ii) any action or proceeding to which
Pledgor is a party, or affecting Pledgor, an adverse determination of which
would affect Pledgor in any materially adverse manner or the Collateral in an
adverse manner.
(f) Pledgor covenants that appropriate financing statements,
continuation statements or other appropriate instruments will be delivered to
Lender at its request for filing under the Uniform Commercial Code of each
jurisdiction as may be necessary or desirable to create, perfect and/or
continue the security interest created by this Pledge to the extent such
perfection may be accomplished in whole or in part by filing. All such
financing statements shall describe the Collateral as it is defined in
Paragraph 2 hereof. In addition, Pledgor shall deliver to Lender at its
request any and all certificates evidencing Interests of Pledgor or other
Collateral or evidence of the Collateral, the delivery and possession of
which are necessary or desirable in order to create, maintain and/or perfect
a security interest therein.
(g) Pledgor shall deliver to Lender any and all Distributions
payable to Lender pursuant to the terms of this Pledge and/or the Loan
Documents and shall deliver to Lender all principal, interest and other sums
due under any loans by Pledgor to the Partnership, the Corporation, the other
partners in the Partnership or shareholder of the Corporation. Pledgor shall
promptly deliver to Lender all notes or other evidence of indebtedness with
respect to such loans.
(h) Pledgor shall perform all of its obligations under the
Partnership Agreement.
(i) Pledgor shall (i) not amend, modify or change the Partnership
Agreement and (ii) enforce all of its rights and remedies thereunder in the
exercise of its prudent business judgment.
(j) Pledgor shall not, with respect to Pledgor, the Partnership or
the Corporation, without the express prior written consent of Lender, (i)
file a voluntary petition in bankruptcy or a petition or answer seeking or
acquiescing in any reorganization or for an arrangement, imposition,
readjustment, composition, liquidation, dissolution, winding-up or any other
relief for itself or with respect to its debts pursuant to the United States
Bankruptcy Code or any similar law or regulation of any Governmental
Authority relating to any other relief for debtors, now or hereafter in
effect; (ii) make an assignment for the benefit of creditors or admits in
writing its inability to pay or fails or is generally unable to pay its debts
as they become due; (iii) seek, consent to or acquiesce in the appointment of
a receiver, trustee, custodian, conservator, liquidator or other similar
official of such party, for all or any part of the Collateral; (iv) commit
any voluntary "act of insolvency" as such term is defined in the United
States Bankruptcy Code or any state law or similar law or regulation of any
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federal, state, domestic, foreign or other jurisdiction (v) take any action
in furtherance of the foregoing or; (vi) fail to deny in a timely manner the
material allegations of a filing of any petition or answer described in
Paragraph 10(a)(vi) below.
(k) Pledgor shall not permit the liquidation, dissolution, winding
up or discontinuation, in whole or in part, of Pledgor, the Partnership or
the Corporation without the express prior written consent of Lender.
9. Indemnification. Pledgor shall and does hereby agree to indemnify
Lender for and to hold Lender harmless from and against any and all loss,
cost, damage, liability or expense (including without limitation attorneys'
fees and distributions) which in any way arise from, out of or with respect
to (a) Pledgor's failure to comply with any of its obligations hereunder
and/or (b) any and all claims and demands whatsoever which may be asserted
against Lender by reason of any alleged obligations or undertakings on its
part to perform or discharge any of the terms, covenants or agreements
contained in the Pledge except for the consequences of its own willful
misconduct. Should Lender incur any such liability, loss or damage, the
amount thereof shall be deemed part of the Loan and secured hereby and
Pledgor shall reimburse Lender therefor promptly upon demand. This Pledge
shall not operate to make Lender responsible or liable in any manner for any
matter arising out of or in any way related to the Collateral.
10. Events of Default; Remedies.
(a) Any of the following events shall be deemed an "Event of
Default" hereunder:
(i) If any representation or warranty by Pledgor herein or any
representation or warranty in any writing furnished in
connection with or pursuant to this Pledge, the Loan
Documents or the Option Agreement shall be determined by
Lender to be false or misleading in any material respect on
the date as of which made;
(ii) If Pledgor materially defaults in the performance or
observance of any agreement, covenant, term or condition
contained in this Pledge;
(iii) If Pledgor should be in default after the expiration of
any cure period under any of the Loan Documents or
Option Agreement
(iv) If Pledgor uses the proceeds of the Loan for any purpose
other than the purpose of paying the operating expenses of
Pledgor's business owed to any of those set forth on Exhibit
A hereto;
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<PAGE>
(v) If Pledgor fails to withhold payroll taxes from any such
payment to employees; or
(vi) If Pledgor shall have filed against it in any proceeding or
other action an involuntary petition, arrangement,
imposition, readjustment composition, liquidation,
dissolution, winding-up or an answer proposing an
adjudication of it as bankrupt or insolvent, or, an action
seeking to appoint a trustee, receiver, custodian, or
conservator or liquidator, or any similar law or regulation,
federal, state, domestic or foreign now or hereafter in
effect is subject to a reorganization pursuant to the United
States Bankruptcy Code, and any such filing, answer, action
or other proceeding is approved by any court of competent
jurisdiction and the order approving the same shall not be
vacated, stayed, set aside or discharged within ninety (90)
days from entry.
(b) Upon the occurrence of an Event of Default, Lender shall have all
of the following remedies:
(i) Lender shall have all of the rights and remedies provided
under this Pledge and to a secured party by the Uniform
Commercial Code in effect in the State of Colorado, the
State of Illinois, State of California and any other
jurisdiction in which the Collateral may be located at that
time;
(ii) Lender, except to the extent prohibited by law, without in
any manner waiving such Event of Default, may, at its
option, without further notice and without regard to the
adequacy of any security for the Loan, either in person or
by agent, with or without bringing any action or proceeding,
collect and receive all distributions, payments, income,
principal, interest and earnings arising, accruing or
becoming due to Pledgor with respect to the Collateral;
(iii) Lender, except to the extent prohibited by law, without
further act or the necessity for demand of performance or
any other demand, advertisement or notice of any kind of
time and place of transfer, may cause the Collateral to be
transferred to its name or to the name of its nominee, and
thereafter exercise as to the Collateral all of the rights,
provisions and duties of an owner.
(iv) Lender, except to the extent prohibited by law, without the
necessity for demand of performance or other demand,
advertisement or notice of any kind of time and place of
public or private sale to or upon any other person (all and
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<PAGE>
each of which demands, advertisements and/or notices are
expressly waived by Pledgor) shall have the right to
forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, transfer and register in
its name or in the name of its nominee the whole or any part
of the Collateral, exchange certificates or instruments
representing or evidencing Collateral for certificates or
instruments of smaller or larger denominations, and
exercising the voting rights thereto, and/or may forthwith
sell, assign, give an option or options to purchase,
contract to sell or otherwise dispose of and deliver the
Collateral or any part thereof, in one or more portions at
public or private sale or sales, upon such terms and
conditions as it may deem advisable and at such prices as it
may deem best (and without any requirements for
"installing"), for cash, for credit or for future delivery
without assumption of any credit risk, with the right of
Lender upon any such sale or sales, public or private, to
purchase the whole or any part of the Collateral so sold.
In connection with any such sale, assignment, option,
contract, disposition or delivery:
(A) The sale of Collateral shall have been made in a
commercially reasonable manner if conducted in
conformity with reasonable commercial practices of
banks disposing of similar property, but in any event,
Lender may sell on such terms as Lender may choose,
without assuming any credit risk and without any
obligations to advertise. Pledgor hereby waives any
claims against Lender arising by reason of the fact
that the price at which any of the Collateral may have
been sold at any private sale was less than the price
that might have been obtained at a public sale, even if
Lender accepts the first offer received and does not
offer the Collateral to more than one offeree;
(B) Lender may apply the proceeds of any such sale or
disposition to the satisfaction of Lender's attorneys'
fees and expenses and other costs and expenses incurred
in connection with Lender's retaking, holding,
preparing for sale, and selling of the Collateral;
(C) In the event that notice is necessary, written notice
mailed to Pledgor at the address given below five (5)
Business Days prior to the date of public sale of the
Collateral subject to the lien and security interest
created herein or prior to the date after which private
sales or any other disposition of said Collateral
will be
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<PAGE>
made shall constitute reasonable notice, but notice
given in any other reasonable manner or at any other
reasonable time shall be sufficient;
(iv) Lender may, in its sole and absolute discretion, make any
compromise or settlement deemed desirable by Lender and/or
extend the time of payment or delivery, arrange for payment
or delivery in installments, or otherwise modify the terms
of, or release, any of the Collateral, and without otherwise
discharging or affecting the Obligations, the Collateral or
the security interest granted herein;
(v) Upon notice to Pledgor, the Partnership and the Corporation
by Lender stating that an Event of Default has occurred (the
"Notice of Default"), all rights of Pledgor to exercise the
voting and other rights which Pledgor would otherwise be
entitled to exercise pursuant to Paragraph 11(a) and all
other rights of Pledgor with respect to the Collateral shall
cease, all such rights shall thereupon become vested in
Lender and Lender shall thereupon have the sole right to
exercise such voting and other rights;
(vi) All rights of Pledgor to receive Distributions which Pledgor
would otherwise be authorized to receive and retain pursuant
to Paragraph 11(b) herein shall cease, and all such rights
shall thereupon become vested in Lender, which shall
thereupon have the sole right to receive and hold such
Distributions as part of the Collateral;
(vii) All Distributions which are received by Pledgor contrary to
the provisions of Paragraph 10(b)(vi) shall be received in
trust for the benefit of Lender, segregated from other funds
of Pledgor and forthwith paid over to Lender as part of the
Collateral in the form received (with any necessary
indorsement); and
(viii) In order to permit Lender to exercise the voting and other
rights which Lender may be entitled to exercise pursuant to
Paragraph 10(b)(v), (vi) and (vii), and to receive all
Distributions, payments, income, principal, interest and
earnings which Lender may be entitled to receive under such
subparagraphs, Pledgor shall, if necessary, upon written
notice from Lender, from time to time, execute and deliver
to Lender any instruments as Lender may request and in form
satisfactory to Lender in all respects.
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<PAGE>
11. Voting Rights; Distributions; Etc. As long as no default or Event
of Default shall have occurred under this Pledge or any of the Loan Documents:
(a) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Collateral or any part thereof for
any purpose not inconsistent with the terms hereof or the Loan Agreement;
provided, however, that Pledgor shall not exercise (or shall refrain from
exercising) any such right if, in the Lender's sole judgment, such action
would have an adverse effect on the value of the Collateral or any part
thereof or the Lender's interests therein and, provided, further, that
Pledgor shall give Lender at least five (5) days' prior written notice of the
manner in which Pledgor intends to exercise, or the reasons for refraining
from exercising, such rights.
(b) Pledgor shall be entitled to receive and retain any and all
Distributions, other than any and all:
(i) Distributions paid or payable other than in cash in respect
of, and instruments and other property received, receivable
or otherwise distributed in respect of, or in exchange for,
any of the Collateral;
(ii) Distributions paid or payable in cash in respect of any of
the Collateral in connection with a partial or total
liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in surplus; and
(iii) cash paid, payable or otherwise distributed in redemption
of, or in exchange for, any of the Collateral,
all of which shall be, and all of which shall be forthwith delivered
to Lender to hold as, part of the Collateral and, if received by Pledgor,
shall be received in trust for the benefit of the Lender, segregated from the
other property or funds of Pledgor, and forthwith delivered to Lender as part
of the Collateral in the form received (with any necessary endorsement).
12. Lender's Rights. Lender may, at any time, acting in each instance in
Lender's sole and absolute discretion:
(a) extend or change the time of payment and/or the manner, place
or terms of payment of all or any of the Obligations;
(b) exchange, release and/or surrender all or any of the
Collateral, by whomsoever deposited, which is now or may hereafter be held by
Lender in connection with the Obligations;
(c) sell and/or purchase all or any such Collateral and dispose of
the proceeds thereof, as the owner(s) thereof have authorized or may
authorize.
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<PAGE>
(d) transfer to or register in the name of Lender or Lender's
nominee all or any part of the Collateral at any time, and to do so before or
after the maturity of all or any part of the Obligations, and with or without
notice to Pledgor; and
(e) assign or transfer this Pledge, or an instrument evidencing all
or any part of the Obligations, and Lender may deliver all or any of the
Collateral to the transferee, who shall thereupon become vested with all the
powers and rights in respect thereto given to Lender hereby, and Lender shall
thereafter be forever relieved and fully discharged from any liability or
responsibility with respect thereto, but Lender shall retain all rights and
powers hereby given with respect to any and all instruments, rights or
property not so transferred.
13. Release. Lender may release or surrender at any time all or any of
the Collateral or other security under the Loan, release any party primarily
or secondarily liable thereon and may apply any other security held by it in
satisfaction of the Loan without prejudice to its rights under this Pledge.
14. Continuing Security Interest; Termination.
(a) This Pledge shall create a continuing security interest in the
Collateral and, unless terminated by operation of law, shall remain in full
force and effect and be binding upon Pledgor and the legal representatives,
successors and assigns of Pledgor until the payment and performance in full
of the Obligations and shall be reinstated, as applicable, if at any time
payment of the Obligations, or any part thereof, is rescinded or reduced in
amount or must otherwise be restored or returned by any obligee of the
Obligations all as through such payment or performance had not been made.
(b) Upon the payment and performance in full of the Obligations,
the security interest in the Collateral shall terminate and all rights to the
Collateral shall revert to Pledgor. Upon any such termination, Lender will
return to Pledgor such of the Collateral as shall not have not been sold or
otherwise applied pursuant to the terms hereof. In addition, Lender will
execute, acknowledge (where applicable) and deliver such satisfactions,
releases and termination statements as Pledgor shall reasonably request.
15. Notices. All notices, requests and other communications provided
for herein shall be given or made in writing via certified or registered
mail, return receipt requested, by hand or by recognized overnight courier
service to Maker or Payee at the address set forth above or such other
address as Maker or Payee may designate to the other by notice pursuant to
this Section. Notice shall be effective upon receipt.
16. Miscellaneous.
(a) Severability. In the event any one or more of the provisions
contained in this Pledge or their application to any person or circumstance
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity,
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illegality or unenforceability shall not affect any other provision hereof,
but this Pledge shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
(b) Successors and Assigns. This Pledge is binding upon and inures
to the benefit of Pledgor and Lender and their respective successors and
permitted assigns. Pledgor shall not voluntarily, or by operation of law,
assign or transfer any interest which it may have hereunder without the prior
written approval of Lender. Lender may assign or otherwise transfer all or
any portion of its rights hereunder to any other person or entity, and such
other person or entity shall thereupon become vested with all of the benefits
granted to Lender herein.
(c) Entire Agreement; Amendment. This Pledge and the other Loan
Documents embody the final, entire agreement among the parties hereto and
supersede any and all prior commitments, agreements, representations, and
understandings, whether written or oral, relating to the subject matter
hereof and thereof and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto. All prior or contemporaneous agreements and understandings,
oral or written, are merged into this Pledge and the other Loan Documents.
No provision of this Pledge may be changed, waived, discharged or terminated
orally or by any other means except an instrument in writing signed by the
party against whom enforcement of the change, waiver, discharge or
termination is sought.
(d) Captions. The caption or headings of the paragraphs in this
Pledge are for convenience of reference only and shall not control or affect
the meaning or construction of any of the terms or provisions hereof.
convenience of reference only and do not constitute a part of this Pledge for
any purpose.
(e) Jurisdiction. Pledgor irrevocably consents to the
jurisdiction of the Courts of New York, or the United States District Court
for the Southern District of New York (a "New York Forum") in any and all
actions and proceedings whether arising hereunder or under any other Loan
Document, and irrevocably agrees to service or process by certified mail,
return receipt requested, to the address of Pledgor set forth herein. Pledgor
waives and shall not interpose any objection of forum non conveniens, or to
venue, and waives any right to seek to remove any proceedings commenced by
Lender in any New York Forum to any other venue and waives any right to
object to Lender seeking to remove to a New York Forum any proceeding
commenced by Pledgor in any forum or venue other than a New York Forum and
Pledgor consents to any and all relief ordered by any such New York Forum.
(f) No Waiver. No failure or delay on the part of Lender in
exercising any power or right hereunder shall operate as a waiver thereof or
a waiver of any other term, provision or condition hereof, nor shall any
single or partial exercise of any such right or power preclude any other or
further exercise thereof or the exercise of any other right or power
hereunder. All rights and remedies of Lender hereunder are cumulative
16
<PAGE>
and shall not be deemed exclusive of any other rights or remedies provided by
law, or in any other Loan Document.
(g) Counterparts. This Pledge may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original, and all such counterparts shall together constitute one and the
same instrument. Facsimile signatures shall be deemed to be originals for all
purposes hereunder.
(h) Governing Law. This Pledge shall be construed and enforced in
accordance with the laws of the State of New York, without regard to
conflicts of laws principles.
(i) Security Agreement. This Pledge is intended to be and is a
"security agreement" under the Uniform Commercial Code of the State of New
York.
(k) Costs and Expenses. Pledgor agrees to pay any and all costs
and expenses incurred by Lender in enforcing any rights or remedies under
this Pledge, including, without limitation, court costs, attorneys' fees and
disbursements.
(l) Certain Rights and Remedies. In the event Lender shall have
proceeded to enforce any such right, remedy or power and such proceedings
shall have been determined adversely to Lender, then in each such event
Pledgor and Lender shall be restored to their former positions as if no such
proceedings had been taken. Lender may exercise its rights and remedies
under the Uniform Commercial Code and/or otherwise under this Pledge or
pursuant to law or equity, it being expressly agreed that Lender may, at its
sole option, exercise such right with respect to less than all of the
Collateral, as Lender elects in its sole discretion, leaving unexercised its
rights with respect to the remainder of the Collateral and in such order as
Lender shall determine in its sole discretion; provided, however, that such
partial exercise (or priority of exercise) shall in no way restrict or
jeopardize Lender's right to exercise its right with respect to all or
another portion of the remainder of the Collateral at a later time or times.
(m) Application. If Lender either receives any amounts in
connection with the sale of the Collateral or any proceeds of the Collateral,
such sums shall be applied as provided in the Note.
IN WITNESS WHEREOF, this Pledge has been executed by Pledgor as of the
date first above written.
METROGOLF INCORPORATED
By:
----------------------------
Title:
-------------------------
17
<PAGE>
STATE OF COLORADO )
) ss.:
COUNTY OF _______ )
On the ___ day of December, 1997, before me personally came ___________,
to me known, who, being by me duly sworn, did depose and say that he resides
at __________, that he is _________ of MetroGolf Incorporated, a _______
corporation, the corporation described herein 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
<PAGE>
EXHIBIT A
ALLOWABLE RECIPIENTS
(ON FOLLOWING PAGES)
19
<PAGE>
EXHIBIT B
FORM OF
INITIAL TRANSACTION STATEMENT
December ___, 1997
Family Golf Centers, Inc.
225 Broadhollow Road
Suite 2435
Melville, New York 80202
This statement is to advise you that a pledge of the following limited
partnership interests in Illinois Center Golf Partners L.P. (the
"Partnership") has been registered in the name of Family Golf Centers, Inc.,
as follows:
1. Security ___% limited partnership interest in the Partnership.
2. Registered Owner: MetroGolf Incorporated.
3. Registered Pledgee: Family Golf Centers, Inc.
4. Other than the security interest described herein, there are no liens or
restrictions on such partnership interests and there are no adverse claims
to which the Partnership interest is or may be subject.
5. The pledge was registered on ___________, 1997.
Very truly yours,
METROGOLF INCORPORATED
by:
---------------------------
its:
--------------------------
<PAGE>
Schedule 1
LIMITED PARTNERSHIP INTEREST
AND
SHARES
1. 900 Shares of MetroGolf Illinois Center, Inc. representing 90% of its
issued and outstanding shares.
2. Limited Partnership Interest representing 93.6% of the recorded and
beneficial ownership of the issued and outstanding limited partnership
interests in Illinois Center Golf Partners L.P.
2
<PAGE>
Schedule 2
UCC Filing Jurisdictions
1. Colorado, California and Illinois
3
<PAGE>
Payments due under (a) those Leases set forth on Schedule 3.07 of the Merger
Agreement and (b) those mortgage loans and deed of trust loans encumbering
"Owned Real Properties" or "Leased Real Estate" as defined in the Merger
Agreement as set forth on Schedule 3.12 of the Merger Agreement.
Fatima Curly
Ruth McCarthy
Marianne Hawkins
Kathleen Rush
Judy Begin
Kim Wermuth
Steve Dyer
Andy Schroeder
Craig Sloan
<PAGE>
Illinois Center Golf Partners L.P.
Vendor Balance Summary
All Transactions
12/16/97
ABA Section of Taxation
Accounting Quest
Ace Limousine
Active Propane
Adcom Express
Added Touch Embroidery
Ahead Headgear, Inc.
AllRite Graphics, Inc.
Altheimer & Gray
American Compressed Gas
Ameritech
Amoco
Armour Golf
Armour Sawan Marketing
Art of Barter
Arthur Clesen
Associated Bank
AT & T
AT & T Credit Corporation
Atlas Forms and Graphics
Audio Video Reporting Services
BDO Seidman, LLP
Ben Hogan Company
BFI
Billy Casper Golf Management
Black Rock Golf Corporation
Blue Cross/Blue Shield
Bobby Grace Golf Design
Bojo Turf Supply Company
Braun Enterprises
Brave New Ways, Inc.
Bridgestone
Brown Cullen
Burrelles
Callaway Golf
Cannonball
Central Newspaper
Century Rain Aid
Certified Business Supply, Inc.
Chamber of Commerce
Checker Taxi Association, Inc.
Chicago Sun-Times
Chicago Dept of Revenue
Chicago District Golf Association
Chicago Floral Consultant
Chicago Life
Chicago Messenger Service Inc.
Chicago Motor Coach Company
Chicago Tribune
Chicago Vision
Chicagoland Golf
City of Chicago-Dept of Water
Citypost
Cleveland Golf
Cobra Golf
Cole Grower Service
Collins Backflow Specialists, Inc.
ComEd
Comet Delivery Service
Communication Links
Competitive Media Reporting
Corc Ran
Cozzini
Crain Communications Inc.
Crittenden Golf
CT Systems
<PAGE>
Metro Golf Harborside Center
Vendor Balance Summary
All Transactions
12/16/97
Tower Tee
Union Tribune
Vintage Sports
West Coast Community Newspapers
Wilson Sporting Goods, Co.
Winner Mate Sportswear
Yellow Quick Pages
Zakarian Golf Cars
TOTAL
<PAGE>
Metro Golf Fremont Park
Vendor Balance Summary
All Transactions
12/16/97
Added Touch Embroidery
Affinity Graphics
Alamada County Office of Treasurer/Tax Co
Alameda County Water District
Aptos Golf Company
Bay Area Beverage Company
Bay Marketing Corp
BFI
Black Rock Golf Corporation
Burke Beverage of California
California Sanitary Supply, Inc.
City of Fremont
Continental Satellite Co.
County of Alameda Health Care Service Age
Datrek Professional Bags, Inc.
Derone Enterprises
Design Contract
Dial One Assoc Air Condition & Refrigerat
Eagle One Golf Products, Inc.
Easy Picker Golf Products Inc.
Etonic-Tretorn
Evergreen Environmental Services
Federal Express Revenue Recovery
Golf Shops of America, Inc.
Grafx Designs
Hereld & Ayres Architects
HK Company
IZZO
Jenkin Machinery
Jenkins Marketing Company
Jones Sports Company, Inc.
Karsten Manufacturing Corporation
Kasco Corp. of America
Kleinfelder, Inc.
Lynx Golf, Inc.
Mail Boxes Etc
MPI
Nike Inc.
Odyssey Golf
Orlimar
Outer Banks Reserve
Pacific Bell
Pacific Gas & Electric Company
PayAmerica
Phoenix Custom Golf Ball Co.
Pierce Sign & Display
Post, Sun & Bulletin Newspapers, Inc.
Potpourri
Prime Star
Pro To Pro
Range Land USA, Inc.
RyKoff
San Jose Mercury News Acct #R62066
San Jose Mercury News Acct #7901919FRE
Security Link
Shotgun Delivery
Sierra Pacific Turf Supply, Inc.
Spalding
St. Andrews Products, Co.
Taylor Made
The Booklegger
Tommy Amour Golf
United Parcel Service
Watkins Landscape
Westech Corporation
Western Golf, Inc.
<PAGE>
Metro Golf Fremont Park
Vendor Balance Summary
All Transactions
12/16/97
Wilbur Ellis
Wilson Golf
Winner Mate Sportswear
TOTAL
<PAGE>
Goose Creek Golf Partners, L.P.
Vendor Balance Summary
All Transactions
12/16/97
AAA Commercial, Inc.
Alien Sports
All Golf Products
American Air Conditioning
American Business Capital
Amorous Andi's
Annandale Alternator & Starter
Apex, Inc.
Arcom
Arctech, Inc.
AT&T
BDO Seidman, LLP
Bell Atlantic--VA
Ben Hogan
Black Rock Golf Corporation
Boast
Burco
Burton Golf, Inc.
Callaway Golf
Chesapeake Industrial
Cleveland Golf
Commercial Pump
Connection Newspapers
County of Loudon
Crittendan Golf, Inc.
Cutter & Buck
Dalwa Golf Company
Dan Daniels Printing
Datrek Professional Bags, Inc.
David Goeffrey & Assc.
Dexter Shoe Company
Diamond Management System
Donald B. Rice Tire Co. Inc.
Dualco Plumbing, Inc.
Duckster
Dunlop
Egypt Farms, Inc.
Etonic-Tretorn
F & L Plumbing & Heating
Finch Turf Equipment, Inc.
Focus Golf Systems Inc.
Foot-Joy
Forrester's
Four Star Printing
G.L. Cornell Company
Georgetown Hospital
Golf Ocean City, Inc.
Grayson's Refuse Service
Hadeed & Sexauer
Hall, Monahan, Engle, Mahan & Mitchell
Heider Nursery, L.G.
HK Company
Homung's Pro Golf
Humana/Employers Health
I.M.M.E., Inc.
Iliah California, Inc.
Industrial & Commercial Prod.
Insty-Prints
Intercoastal Manufacturing
Izod Club Golf & Tennis
Jenkins Marketing Company
Karsten Mfg. Corp.
Kasco Corp. of America
L. Rodgers Design Group
La Mode
Lanier Worldwide, Inc.
Lawson Products, Inc.
<PAGE>
Goose Creek Golf Partners, L.P.
Vendor Balance Summary
All Transactions
12/16/97
Leesburg Today
Line-Up For Sport
Loudon Easterner
Loudon Electric Company
Loudoun City Chamber
Luck Stone
Maxfli Golf
MCI
Mid-Atlantic Equipment, Co.
National Industrial Supplies
National Publishers Network
Nichols Appliance Center, Inc.
Orlimar
Outer Banks Reserve
Overall Supply
Pal Joey Golf
PARS Courier, Inc.
PayAmerica
Pepsi-Cola of Central VA
Pro-Seed Turf Supply, Inc.
QTI Sports, Inc.
Ray Cook Golf, Co.
Reebok
Resun Leasing, Inc.
Reuben H. Donnelley
Safety-Kleen
Shot Selector
Southern States
Spalding
Spikes
St. Andrews Products, Co.
STX
Sysco
Taylor Made
Terra International, Inc.
Textron-EZ Go
Textron-Jacobsen
Textron Financial Corp.
The Banner
The Journal Newspapers
The One Book
The Rug Barn
Thomas C. Payne Service, Inc.
Time Community Newspapers
Titleist
Tommy Armour Golf
Town Talk Manufacturing Co.
TS&R, Inc. (Ramada)
U.S. Glove Company
United Parcel Service
USGA
Valley Discount Fuel
Valley Industrial Distributors
Vector Security
Virginia Handicap Program
Virginia Power
Virginia State Golf Assc.
W.D.F.
Warner Plumbing of Reston
Washington Business Journal
Washington Gas
Washington Post
Wausau Insurance Co.
West Potomac Designs
Westech Corporation
Western Termite & Pest
<PAGE>
Goose Creek Golf Partners, L.P.
Vendor Balance Summary
All Transactions
12/16/97
Winner Mate Sportswear
WTEM (Sports Radio)
York Distributors
TOTAL
<PAGE>
Metro Golf Harborside Center
Vendor Balance Summary
All Transactions
12/16/97
Tower Tee
Union Tribune
Vintage Sports
West Coast Community Newspapers
Wilson Sporting Goods, Co.
Winner Mate Sportswear
Yellow Quick Pages
Zakarian Golf Cars
TOTAL
<PAGE>
Hitter's Haven
Vendor Balance Summary
All Transactions
12/16/97
Action Rentals
Black Rock Golf Corporation
City of Colorado Springs-Sales Tax Divisi
Colorado Springs Utilities
Custom Lock & Security
FastSigns
Gazette
Henderson Electric
Heritage Tractor Co LLC
Jenkins Marketing Company
Pepsi-Cola Bottling Co.
Pro to Pro
Respond First Aid Systems of Colo.
U.S. West Communications
Waste Mgt of CO Springs
Wheeler Landscape $330
TOTAL
<PAGE>
Illinois Center Golf Partners L.P.
Vendor Balance Summary
All Transactions
12/16/97
Custom Order Products
Cutter & Buck
D & F Consulting, Ltd.
D'Waters Interior
Dames & Moore
Dann Dee Display Fixtures
David L. Lowans
Department of the Treasury
Design Solutions
Di Meo Rosen
Dinn Brothers
Earthsafe Systems, Inc.
Eastman Kodak Co.
Eco-Fresh
Edelman
Etonic-Tretom
Federal Express
FirstNet Corporation
Fore Better Golf
Front Range Laser
Futal USA Inc
Gift Garden/Executive Treasures
GNMAA
Golf Chicago
Golf Core
Golf Course Management Systems, Inc.
Golf Digest
Golf Ocean City, Inc.
Golf Shops of America, Inc.
GolfWorks
Greater North Avenue Association
Greg Norman Division
Handy Andy-Beneficial Natnl. Bank
Haymaker Public Relations
Helix/Wolk
HK Company
Hornung's Pro Golf Sales, Inc.
Howard Decorating
Humana/Employers Health
Illinois Lawn Equipment
Illinois Restaurant Association
Illinois Trade Association
Illinois Turfgrass Foundation
Imagetec, L.P.
In The News, Inc
Intercon Security
Izod Golf
Jenkins Marketing Company
John David Cousart
John Robertson Insurance
Karsten Manufacturing
Kasco Corp. of America
Law Bulletin
Lawnskeeper
Lasco
Lynx
M G M
Magic Lantern Images
Maxfli
McGinty
McMaster-Carr
Monty Levenson Pro Shop
Mr. Mat
MRI
MTA
National Employment Advertising
<PAGE>
Illinois Center Golf Partners L.P.
Vendor Balance Summary
All Transactions
12/16/97
National Publishers Network
North Loop News
Northwestern Golf Company
NTCE Educational Session
NYX Golf, Inc.
Orlimar
Outer Banks Reserve
Paper Direct
Parkway Photo Lab
PayAmerica
People's Gas
Pepsi
Pete's Office Machine Co.
Pogo-on-Board
Polo Ralph Lauren
Pro Golf Premiums, Inc.
Pro to Pro
R2
Raburn
Ram Golf
Ranlee Marketing
Reebok
Republic Factors Corporation
Resun
S. L. Gilbert Company, Inc.
Schain, Firsel & Birney
Schindler Elevator
Score Radio
Screen Print Design
Seko
Sidley & Austin
Signs By Tomorrow
SKB Corporation
Soil Systems
Sonnenschein Nath & Rosenthal
Spalding
SPRINT Yellow Pages
Steamatic
Steve Gardner
Streeterville
Studio K Designs
Sullivan Office Supply
Sun Signs
Swissotel
Telecom USA
Terra Cotta
Textron - EZ Go
Textron - Jacobsen
Textron Financial Corporation
The Greater North Michigan Avenue Associa
The Publishing Group
The Yellow Pages
Tommy Armour
Tritz Beverage Systems, Inc.
TSI Sports
Turf Products
Union Liquor
United Horticultural Supply
United Parcel Service
unknown
USAE
USGA
V.J. Zolman
Vantage Custom Classics
Warehouse Direct
WCKG
<PAGE>
Illinois Center Golf Partners L.P.
Vendor Balance Summary
All Transactions
12/16/97
Westech Corporation
Where Magazine
Wind Radio
Winner Mate Sportswear
World's Printing
Yellow Pages
TOTAL
<PAGE>
MetroGolf Incorporated
Vendor Balance Summary
All Transactions
12/16/97
A.I. Credit Corp.
Accounting Quest
Accounting Solutions
Ace Limousine
Adcom Express
ADP
AlphaGraphics
AmeriCopy Printing, Inc.
American Business Lists
AT&T #020 441 6867 001
AT&T #P09 023 6000 821
AT&T #054 067 0701 001
AT&T Credit Corporation
AT&T Wireless Services
Bay Tact Corporation
BDO Seidman, LLP
BMW Financial Services
Boyers Coffee
Brownstein Hyatt Farber & Strickland, P.C.
Business Discount Plan
Business Wire
Buyside
C T Corporation Systems
Charles D. Tourtellotte
Chester Boyd Ltd
Cimarron International, Inc.
Clanahan, Tanner, Downing & Knowlton
Colorado Business Bank
Colorado Car Service
Continental Stock Transfer & Trust Co.
Corporate Express Delivery Systems
Credit Card Center-Corporate Acct
Critteriden
Deep Rock
DKA
Dorsey & Whitney
Federal Express
Front Range Laser
Gensler
Golf Economic Services, Inc.
Golf Range Times
Greystone
Humana/Employers Health
Information Decision Systems
Issacson, Rosenbaum, Woods & Levy
Jordy Carter Incorporated
Keyline Graphics
Kim Warmuth
Lippert/Heilshorn & Associates, Inc.
Lucent Technologies
MCI
Mega Bank
Merrill Corporation
Merrill Lynch
Minuteman Press
Monty R. Lamirato, P.C.
Northwestern Title Co.
OfficeMax
Paine Webber
Pastiche Group, Inc.
Paychex
Pitney Bowes, Inc.
Prudential Securities
Purchase Power
Quick Print
Rocky Mountain Records Managers
<PAGE>
MetroGolf Management, Inc.
Vendor Balance Summary
All Transactions
12/16/97
Ruth McCarthy
Schwartz Brothers Insurance
Skyline Credit Ride, Inc.
Skynet Data Systems, Inc.
Smith/Junger/Wellman
Sports & Sponsorship Solutions, Inc.
SR Trade Publications
Steven Dyer
Talent Tree
U.S. West Communications
US Delivery
Wood Capital Associates
Xerox Corporation
Yellow Cab, Inc.
TOTAL
<PAGE>
MetroGolf Management, Inc.
Vendor Balance Summary
All Transactions
12/16/97
Chain Enterprises Inc.
Comprehensive Insurance Services
Jenkins Marketing Company
Kim Wermuth
Sports & Sponsorship Solutions, Inc.
TOTAL
<PAGE>
MetroGolf Palms
Vendor Balance Summary
All Transactions
12/16/97
Added Touch Embroidery
Aramark Coffee
Backroom Cigar
Black Rock Golf Corporation
California-American Water
Cox Communications
Datrek Professional Bags, Inc.
Etonic-Tretom
Golf Shops of America
Imperial Beach Times
Jenkins Marketing Company
John Kastlunger
King Par Corporation
Laidlaw Waste Systems
MD Gold
Mission Janitorial
One Day Signs
Orlimar
Outer Banks Reserve
Pacific Bell
PayAmerica
Pro-Innovative Golf
Range Master
Rudy Kastlunger
San Diego Golf Supply
Schaeffer Ent.
SDG&E
Sentry of San Diego
Spalding
Star-News
Tees Please
Textron Financial Corp.
The City of San Diego - Water Utilities
West Coast Community Newspapers
Wilbur Ellis
Wilson Golf
Winner Mate Sportswear
Yellow Pages Inc.
TOTAL
<PAGE>
Rocky Point Golf Center
Vendor Balance Summary
All Transactions
12/16/97
A T&T
Accelerated Golf, Inc.
All Star Electronic Systems, Inc.
Alley Cat Signs Inc.
AmeriCopy Printing Inc.
Bell Atlantic
Black Rock Golf Corporation
Blue Ribbon Landscape
Bruedan Corp.
Cablevision
Central Outdoor Services
Clipper Magazine
Club Pro Products
Easy Picker Golf Product
Eugene F. Maloney
Federal Express
General
Golf Around The World
Henry Griffitts
Islandwide Emergency Board-up Inc.
Janitoral Plus
Jenkins Marketing Company
Lilco
Meadowbrook Distributing Center
Minuteman Press
Munser Motors Corp
Newsday
North Shore Express
Orlimar
Papel Giftware
Penny Saver News
Power Swing
Pro to Pro
Pro-Innovative Golf
Rocky-Point Drive-In Assoc.
Spalding
Suffolk County Water Auth.
Textron Financial Corp
This Week
Yankee Trader
TOTAL
<PAGE>
Solano Golf Center
Vendor Balance Summary
All Transactions
12/16/97
Ace Hardware
AT&T
Ben Hogan
Black Rock Golf Corporation
California State Employee QTR
City of Sulsun City
Cobra Golf
Datrek
Solano County Dept. of Envir. Mgmt.
Department of Environmental Management
Direct TV
Electric Golf Car Company
Fairfield Publishing
Federal Express
First Colony Life Insurance
Foot Joy
GE Capital
Golf Around The World, Inc.
Golf Magazine
Heller Financial
Home Depot
Jenkins Marketing Co.
John Deere
Karsten
Lynx
MacGregor Golf Company
Master Pitching Machines
Maxfli
Minuteman Press
Mizuno
Odyssey Golf
Orlimar
Pacific Bell
PG&E
Prima
Pro Select Sports
ProActive Sports
Prompt Printing
R&R Products, Inc.
Range Land USA, Inc.
Reporter
Ryobi-Toski
Sierra Air Conditioning
Sierra Pacific Turf Supply
Softspikes
Solano Garbage Company
Spalding
Sulsun City Police Dept.
Sulsun Valley Fruit Growers Assn.
Sun Mountain Sports
Taylor Made Golf
Textron EZ-GO
The Chamber
The Golf Guide
Titleist
Tommy Armour Golf
U.P.S.
Winner Mate Sportswear
Zevo
TOTAL
<PAGE>
Warrant No. ________
Warrant to Purchase 500,000 Shares
SHARE PURCHASE WARRANT
To Purchase Shares of Common Stock (without par value)
of
METROGOLF INCORPORATED.
(Colorado corporation)
Expires June 30, 1999
<PAGE>
Warrant No. ________
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE
TRANSFERRED EXCEPT IN A TRANSACTION REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR WHICH IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THAT ACT.
VOID AFTER 5:00 P.M. NEW YORK TIME, ON JUNE 30, 1999
METROGOLF INCORPORATED
Warrant to Purchase Shares of Common Stock
500,000 Shares
THIS CERTIFIES that, for good and valuable consideration received,
FAMILY GOLF CENTERS, INC. (the "Holder"), is entitled to subscribe for and
purchase from METROGOLF INCORPORATED, a Colorado corporation (the "Company"),
upon the terms and conditions set forth herein, at any time or from time to
time after the date hereof, until 5:00 P.M. New York City time on June 30,
1999 (the "Expiration Date"), all or any portion of 500,000 Shares of common
stock of the Company, without par value per share, subject to adjustment as
provided herein (the "Warrant Shares"), at a price of $1.00 per share,
subject to adjustment as provided herein (the "Exercise Price"). This
Warrant shall not be redeemable by the Company. The term "Shares" as used
herein shall mean the Company's Shares of Common Stock, without par value per
share. This Warrant may be sold, transferred, assigned or hypothecated at
any time and the term the "Holder" as used herein shall include any
transferee to whom this Warrant has been transferred.
1. Method of Exercise. This Warrant may be exercised at any time
prior to the Expiration Date, as to the whole or any lesser number of Warrant
Shares, by the surrender of this Warrant (with the election at the end hereof
duly executed) to the Company at its office at 1999 Broadway, Suite 2435,
Denver, Colorado 80202, or at such other place as may be designated in
writing by the Company, together with a certified or bank cashier's check
payable to the order of the Company in an amount equal to the Exercise Price
multiplied by the number of Warrant Shares for which this Warrant is being
exercised. In lieu of the payment of the Exercise Price, the Holder shall
have the right (but not the obligation), during the Exercise Period, to
require the Company to convert this Warrant, in whole or in part, into the
Warrant Shares as provided for in this Section (the "Conversion Right"). Upon
exercise of the Conversion Right, the Company shall deliver to the Holder
(without payment by the Holder of the Exercise Price) that number of shares
of Common Stock equal to (i) the number of Warrant Shares issuable upon
exercise of the portion of the Warrant being converted, multiplied by (ii)
the quotient obtained by dividing (x) the value of the Warrant (on a per
Warrant Share basis) at the time the Conversion Right is exercised
(determined by subtracting the Exercise Price from the Current Market Price
(as determined
<PAGE>
pursuant to Section 5(e) below), for the shares of Common Stock issuable upon
exercise of the Warrant immediately prior to the exercise of the Conversion
Right) by (y) the Current Market Price of one share of Common Stock
immediately prior to the exercise of the Conversion Right. The Conversion
Rights provided under this Section may be exercised in whole or in part and
at any time and from time to time while any Warrants remain outstanding. In
order to exercise the Conversion Right, the Holder shall surrender to the
Company, at its offices, this Warrant accompanied by a duly completed
cashless exercise form in the form attached hereto. 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 Warrant Shares
being issued upon such exercise of this Warrant. This Warrant (or so much
thereof as shall have been surrendered for conversion) shall be deemed to
have been converted immediately prior to the close of business on the day of
surrender of this Warrant for conversion in accordance with the foregoing
provisions. As promptly as practicable on or after the conversion date, the
Company shall issue and shall deliver to the Holder (i) a certificate or
certificates representing the largest number of whole Warrant Shares which
the Holder shall be entitled as a result of the conversion, and (ii) if such
Warrant is being converted in part only, a new Warrant exercisable for the
number of Warrant Shares equal to the unconverted portion of the Warrant.
Upon any exercise (which term, as used herein, shall include any exercise of
the Conversion Right) of this Warrant, in lieu of any fractional Warrant
Shares to which the Holder shall be entitled, the Company shall pay to the
Holder cash in accordance with the provisions of Section 5(d) hereof.
2. Issuance of Certificates. Upon each exercise of the Holder's
rights to purchase Warrant Shares, the Holder shall, as of the close of
business on such day, be deemed to be the holder of record of the Warrant
Shares issuable upon such exercise, notwithstanding that the transfer books
of the Company shall then be closed or certificates representing such Warrant
Shares shall not then have been actually delivered to the Holder. As soon as
practicable after each such exercise of this Warrant, the Company shall issue
and deliver to the Holder a certificate or certificates for the Warrant
Shares issuable upon such exercise, registered in the name of the Holder or
its designee. If this Warrant should be exercised in part only, upon
surrender of this Warrant for cancellation, the Company shall execute and
deliver a new Warrant evidencing the right of the Holder to purchase the
balance of the Warrant Shares (or portions thereof) subject to purchase
hereunder.
3. Recording of Transfer. Any warrants issued upon the transfer or
exercise in part of this Warrant shall be numbered and shall be registered in
a Warrant Register as they are issued. The Company shall be entitled to treat
the registered holder of any Warrant on the Warrant Register as the owner in
fact thereof for all purposes and shall not be bound to recognize any
equitable or other claim to or interest in such Warrant on the part of any
other person, and shall not be liable for any registration or transfer of
warrants which are registered or to be registered in the name of a fiduciary
or the nominee of a fiduciary unless made with the actual knowledge that a
fiduciary or nominee is committing a breach of trust in requesting such
registration or transfer, or with the knowledge of such facts that its
participation therein amounts to bad faith. This Warrant shall be
transferable only on the books of the Company upon delivery
2
<PAGE>
thereof duly endorsed by the Holder or by his or its duly authorized attorney
or representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. In all cases of transfer by an
attorney, executor, administrator, guardian or other legal representative,
duly authenticated evidence of his or its authority shall be produced. Upon
any registration of transfer, the Company shall deliver a new warrant or
warrants to the person entitled thereto. This Warrant may be exchanged, at
the option of the Holder hereof, for another warrant, or other warrants of
different denominations, of like tenor and representing in the aggregate the
right to purchase a like number of Warrant Shares (or portions thereof), upon
surrender to the Company or its duly authorized agent. Notwithstanding the
foregoing, the Company shall have no obligation to cause this Warrant to be
transferred on its books to any person if counsel to the Company reasonably
requests a legal opinion that such transfer does not violate the provisions
of the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations thereunder, unless such opinion is delivered.
4. Reservation of Shares. The Company shall at all times reserve and
keep available out of its authorized and unissued Shares, solely for the
purpose of providing for the exercise of the warrants, such number of shares
of Shares as shall, from time to time, be sufficient therefor. The Company
covenants that all Shares issuable upon exercise of this Warrant, upon
receipt by the Company of the full payment therefor, shall be validly issued,
fully paid, nonassessable and free of preemptive rights.
5. Exercise Price Adjustments. Subject to the provisions of this
Section 5, the Exercise Price in effect from time to time shall be subject to
adjustment, as follows:
(a) In case the Company shall at any time after the date hereof
(i) declare a dividend or make a distribution on the outstanding Shares
payable in shares of its capital stock or securities convertible into or
exchangeable for capital stock, (ii) subdivide the outstanding Shares, (iii)
combine the outstanding Shares into a smaller number of shares, or (iv) issue
any shares by reclassification of the Shares (other than a change in par
value, or from par value to no par value, or from no par value to par value),
then, in each case, the Exercise Price in effect, and the number of Shares
issuable upon exercise of this Warrant or any additional warrants issued
pursuant to the terms hereof and outstanding (the "Warrants"), at the time of
the record date for such dividend or at the effective date of such
subdivision, combination or reclassification, shall be proportionately
adjusted so that the holders of the Warrants after such time shall be
entitled to receive upon exercise of the Warrants the aggregate number and
kind of shares which, if such Warrants had been exercised immediately prior
to such time, such holders would have owned upon such exercise and
immediately thereafter been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. Such adjustment shall be made
successively whenever any event listed above shall occur.
(b) In case the Company shall distribute to all holders of Shares
(including any such distribution made to the stockholders of the Company in
connection with a consolidation or merger in which the Company is the
surviving or continuing corporation)
3
<PAGE>
evidences of its indebtedness, cash, or assets (other than distributions and
dividends payable as contemplated by Section 5(a) above), or rights, options,
or warrants to subscribe for or purchase Shares or securities convertible
into or exchangeable for Shares, then, in each case, the Exercise Price shall
be adjusted by multiplying the Exercise Price in effect immediately prior to
the record date for the determination of stockholders entitled to receive
such distribution by a fraction, the numerator of which shall be the Current
Market Price (as determined pursuant to Section 5(e) hereof) per Share on
such record date, less the fair market value (as determined in good faith by
the board of directors of the Company, whose determination shall be
conclusive absent manifest error) of the portion of the evidences of
indebtedness or assets so to be distributed, or of such rights, options, or
warrants or convertible or exchangeable securities, or the amount of such
cash, applicable to one Share, and the denominator of which shall be such
Current Market Price per Share. Such adjustment shall become effective at
the close of business on such record date.
(c) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall within 15 days thereafter cause written notice
thereof to be sent by registered mail, postage prepaid, to the Holder, at its
address as it shall appear in the Warrant Register, which notice shall be
accompanied by an officer's certificate setting forth the number of Warrant
Shares issuable hereunder and the exercise price thereof after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment and the computation thereof, which officer's certificate shall be
conclusive evidence of the correctness of any such adjustment absent manifest
error.
(d) The Company shall not be required to issue fractions of Shares
or other shares of the Company upon the exercise of this Warrant. If any
fraction of a share would be issuable upon the exercise of this Warrant (or
specified portions thereof), the Company may issue a whole share in lieu of
such fraction or the Company may purchase such fraction for an amount in cash
equal to the same fraction of the Current Market Price of such Shares on the
date of exercise of this Warrant.
(e) The Current Market Price per Share on any date shall be deemed
to be the average of the daily closing prices for the five (5) consecutive
trading days immediately preceding the date in question. The closing price
for each day shall be the last reported sales price regular way or, in case
no such reported sale takes place on such day, the closing bid price regular
way, in either case on the principal national securities exchange on which
the Common Stock is listed or admitted to trading or, if the Common Stock is
not listed or admitted to trading on any national securities exchange, the
highest reported bid price for the Common Stock as furnished by the National
Association of Securities Dealers, Inc. through NASDAQ or a similar
organization if NASDAQ is no longer reporting such information. If on any
such date the Common Stock is not listed or admitted to trading on any
national securities exchange and is not quoted by NASDAQ or any similar
organization, the fair value of a share of Common Stock on such date, as
determined in good faith by the Board of Directors of the Company, whose
determination shall be conclusive absent manifest error, shall be used.
4
<PAGE>
(f) No adjustment in the Exercise Price shall be required if such
adjustment is less than $0.05; provided, however, that any adjustments which
by reason of this Section 5 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations under this Section 5 shall be made to the nearest cent or to the
nearest thousandth of a share, as the case may be.
(g) Upon each adjustment of the Exercise Price as a result of the
calculations made in this Section 5, the Warrants shall thereafter evidence
the right to purchase, at the adjusted Exercise Price, that number of Shares
(calculated to the nearest hundredth) obtained by dividing (i) the product
obtained by multiplying the number of Shares purchasable upon exercise of the
warrants prior to adjustment of the number of Shares by the Exercise Price in
effect prior to adjustment of the Exercise Price by (ii) the Exercise Price
in effect after such adjustment of the Exercise Price.
6. (a) Consolidations and Mergers. In case of any consolidation with
or merger of the Company with or into another corporation (other than a
merger or consolidation in which the Company is the surviving or continuing
corporation and which does not result in any reclassification of the
outstanding Shares or the conversion of such outstanding Shares into shares
of other stock or other securities or property), or in case of any sale,
lease or conveyance to another corporation of the property and assets of any
nature of the Company as an entirety or substantially as an entirety (such
actions being hereinafter collectively referred to as "Reorganizations"),
there shall thereafter be deliverable upon exercise of this Warrant (in lieu
of the number of Shares theretofore deliverable) the kind and amount of
shares of stock or other securities, cash or other property which would
otherwise have been deliverable to a holder of the number of Shares upon the
exercise of this Warrant upon such Reorganization if this Warrant had been
exercised in full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the
Board of Directors of the Company, shall be made in the application of the
provisions herein set forth with respect to the rights and interests of the
Holder so that the provisions set forth herein shall thereafter be
applicable, as nearly as possible, in relation to any shares or other
property thereafter deliverable upon exercise of this Warrant. Any such
adjustment shall be made by and set forth in a supplemental agreement between
the Company, or any successor thereto, and the Holder and shall for all
purposes hereof conclusively be deemed to be an appropriate adjustment. The
Company shall not effect any such Reorganization unless upon or prior to the
consummation thereof the successor corporation, or if the Company shall be
the surviving corporation in any such Reorganization and is not the issuer of
the shares of stock or other securities or property to be delivered to
holders of Shares outstanding at the effective time thereof, then such
issuer, shall assume by written instrument the obligation to deliver to the
Holder such shares of stock, securities, cash or other property as the Holder
shall be entitled to purchase in accordance with the foregoing provisions.
(b) In case of any reclassification or change of the Shares
issuable upon exercise of this Warrant (other than a change in par value or
from no par value to a specified par value, or as a result of a subdivision
or combination, but including any change in the Shares into
5
<PAGE>
two or more classes or series of shares), or in case of any consolidation or
merger of another corporation into the Company in which the Company is the
continuing corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property) of the
Shares (other than a change in par value, or from no par value to a specified
par value, or as a result of a subdivision or combination, but including any
change in the Shares into two or more classes or series of shares), the
Holder shall have the right thereafter to receive upon exercise of this
Warrant solely the kind and amount of shares of stock and other securities,
property, cash or any combination thereof receivable upon such
reclassification, change, consolidation or merger by a holder of the number
of Shares for which this Warrant might have been exercised immediately prior
to such reclassification, change, consolidation or merger. Thereafter,
appropriate provision shall be made for adjustments which shall be as nearly
equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply
to successive reclassifications and changes of Shares and to successive
consolidations, mergers, sales, leases, or conveyances.
7. Notice of Certain Events. In case at any time any of the following
occur:
(a) The Company shall take a record of the holders of its Shares
for the purpose of entitling them to receive a dividend or distribution
payable otherwise than in cash, or a cash dividend or distribution payable
otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) The Company shall offer to all the holders of its Shares any
additional shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any
option, right or warrant to subscribe therefor; or
(c) The Company shall take any action to effect any
reclassification or change of outstanding Shares or any consolidation,
merger, sale, lease or conveyance of property, described in Section 6; or
(d) The Company shall take any action to effect any liquidation,
dissolution or winding-up of the Company or a sale of all or substantially
all of its property, assets and business;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least
fifteen (15) days prior to (i) the date as of which the holders of record of
Shares to be entitled to receive any such dividend, distribution, rights,
warrants or other securities are to be determined, (ii) the date on which any
such offer to holders of Shares is made,
6
<PAGE>
or (iii) the date on which any such reclassification, change of outstanding
Shares, consolidation, merger, sale, lease, conveyance of property,
liquidation, dissolution or winding-up is expected to become effective and
the date as of which it is expected that holders of record of Shares shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution or winding-up. Nothing herein shall allow a Holder to delay or
prevent any of the foregoing actions.
8. Taxes. The issuance of any shares or other securities upon the
exercise of this Warrant and the delivery of certificates or other
instruments representing such shares or other securities shall be made
without charge to the Holder for any tax or other charge in respect of such
issuance. The Company shall not, 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 Holder (except for any
tax that is payable in respect of any such transfer and any related exercise
of this Warrant and that would be payable pursuant to the first sentence of
this Section 8 were such certificate to be issued in the name of the Holder)
and the Company shall not 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.
9. Legend. The certificate or certificates evidencing the Warrant
Shares, shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR STATE SECURITIES LAWS, BUT HAVE
BEEN ISSUED OR TRANSFERRED PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE ACT. NO DISTRIBUTION, SALE, OFFER FOR
SALE, TRANSFER, DELIVERY, PLEDGE, OR OTHER
DISPOSITION OF THESE SECURITIES MAY BE
EFFECTED EXCEPT IN COMPLIANCE WITH THE ACT,
ANY APPLICABLE STATE LAWS, AND THE RULES AND
REGULATIONS OF THE SECURITIES AND EXCHANGE
COMMISSION AND STATE AGENCIES PROMULGATED
THEREUNDER."
10. Replacement of Warrants. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant (and upon surrender of any Warrant if
mutilated), and upon reimbursement of the Company's reasonable
incidental expenses
7
<PAGE>
and execution of a reasonable lost security indemnification agreement, the
Company shall execute and deliver to the Holder thereof a new Warrant of like
date, tenor and denomination.
11. No Rights as Stockholder. The Holder of any Warrant shall not
have, solely on account of such status, any rights of a stockholder of the
Company, either at law or in equity, or to any notice of meetings of
stockholders or of any other proceedings of the Company, except as provided
in this Warrant.
12. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt
requested:
(a) If to the registered Holder of this Warrant, to the address of
such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth on the first page
of this Warrant or to such other address as the Company may designate by
notice to the Holder.
13. Successors. All the covenants, agreements, representations and
warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
14. Headings. The Article and Section headings in this Warrant are
inserted for purposes of convenience only and shall have no substantive
effect.
15. Governing Law. This Warrant shall be construed in accordance with
the laws of the State of New York applicable to contracts made and performed
within such State, without regard to principles of conflicts of law.
16. Modification of Agreement. This Warrant shall not otherwise be
modified, supplemented or amended in any respect unless such modification,
supplement or amendment is in writing and signed by the Company and the
Holder of this Warrant and Holders of any portion of the Warrant subsequently
assigned or transferred in accordance with the terms of this Warrant.
17. Consent to Jurisdiction. The Company and the Holder irrevocably
consent to the jurisdiction of the courts of the State of New York and of any
federal court located in such State in connection with any action or
proceeding arising out of or relating to this Warrant, any document or
instrument delivered pursuant to, in connection with or simultaneously with
this Warrant, or a breach of this Warrant or any such document or instrument.
In any such action or proceeding, the Company waives personal service of any
summons, complaint or other process and agrees that service thereof may be
made in accordance with Section 12 hereof.
8
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
the date set forth below.
Dated: December 23, 1997 METROGOLF INCORPORATED
By: /s/ Charles Tourtellotte
---------------------------
Name: Charles Tourtellotte
Title:
9
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the attached Warrant.)
FOR VALUE RECEIVED, hereby sells, assigns, and
-----------------------
transfers unto , having an address at
-----------------
, the attached Warrant to
- --------------------------- -----------------------
the extent of the right to purchase Shares of $0.01 par value
------------
per share, of METROGOLF INCORPORATED (the "Company"), together with all
right, title, and interest therein, and does hereby irrevocably constitute
and appoint as attorney to transfer such Warrant on the
-----------------
books of the Company, with full power of substitution.
Dated: ,
---------------- ----
------------------------------
Print name of holder of Warrant
By:
---------------------------
Name:
Title:
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration
or enlargement or any change whatsoever.
<PAGE>
To:
CASH EXERCISE FORM
The undersigned hereby exercises its rights to purchase
-----------
Warrant Shares covered by the within Warrant and tenders payment herewith in
the amount of $ in accordance with the terms thereof, and
-------------
requests that certificates for such securities be issued in the name of, and
delivered to:
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the
Warrant Shares covered by the within Warrant be registered in the name of,
and delivered to, the undersigned at the address stated below.
Dated: Name:
----------------------- -------------------------
(Print)
------------------------------
(Signature)
(Signature must conform to the name of
the Warrant Holder specified on the face
of the Warrant)
Address:
<PAGE>
To:
CASHLESS EXERCISE FORM
(To be executed upon conversion of the attached Warrant)
The undersigned hereby irrevocably elects to surrender its Warrant for
the number of Warrant Shares as shall be issuable pursuant to the cashless
exercise provisions of Section 1 of the within Warrant, in respect of
Warrant Shares underlying the within Warrant, and requests that
- ----------
certificates for such Warrant Shares be issued in the name of and delivered
to:
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the shares
exchangeable or purchasable under the within Warrant, that a new Warrant for
the balance of the Warrant Shares covered by the within Warrant be registered
in the name of, and delivered to, the undersigned at the address stated below.
Date:
------------------------
Name:
------------------------ (Print)
Address:
-------------------------------------------------------------
- ------------------------ (Signature)
Signature
<PAGE>
Exhibit (c)(7)
FAMILY GOLF CENTERS, INC.
225 Broadhollow Road
Melville, New York 11747
December 23, 1997
Charles D. Tourtellotte
MetroGolf Incorporated
1999 Broadway
Suite 2435
Denver, CO 80202
Dear Mr. Tourtellotte:
We refer to the Agreement and Plan of Merger (the "Merger Agreement"),
dated as of the date hereof, by and among Family Golf Centers, Inc. ("FGI"),
Family Golf Acquisition, Inc. and MetroGolf Incorporated ("MGI"). As an
inducement for MGI to enter into the Merger Agreement, FGI hereby agrees to use
commercially reasonable efforts following consummation of the Offer (as such
term is defined in the Merger Agreement) to obtain releases of all of your
written personal guarantees entered into prior to the date hereof ("Guarantees")
of any indebtedness of MGI or its subsidiaries (the "Guaranteed Debt") that is
set forth on Schedule 3.12 to the Merger Agreement, including without limitation
the following:
Illinois Center -- Loan Agreement dated as of January 31,
1996 between Textron Financial corporation
and Illinois Center Golf Partners, LP (item
a.i in Schedule 3.12);
Promissory Note dated January 31, 1996 for
$2,000,000 (a.ii)
Goose Creek -- Promissory Note dated June 1, 1992 (b.iv)
$4,200,000 Loan Agreement dated June 1,
1992 between Textron Financial
Corporation and Goose Creek Golf Partners
Limited Partnership (b.vii)
Equipment Lease (b.xi);
<PAGE>
Fremont -- Megabank (c.i)
MetroGolf -- Colorado Business Bank (f.i)
Auto Lease (f.iv)
In addition, FGI hereby agrees to indemnify and hold you harmless from
and against any liability you may incur after consummation of the Offer that
arises out of or relates to the Guarantees as a result of a default under the
Guaranteed Debt by MGI and/or any of its subsidiaries.
Please indicate your agreement with the foregoing by signing a copy of
the letter in the space indicated below and returning it to FGI.
Very truly yours
FAMILY GOLF CENTERS, INC.
By: /s/ Dominic Chang
-----------------------------
Name: Dominic Chang
Title:
Accepted and agreed to as of
the date first written above:
/s/ Charles Tourtellotte
- -------------------------------
Charles D. Tourtellotte
<PAGE>
Exhibit 99(C)(8)
Family Golf Centers, Inc
225 Broadhollow Road
Melville, New York 11747
December __, 1997
[EMPLOYEE]
[ADDRESS]
[ADDRESS]
Dear _______________________:
Family Golf Centers, Inc., a Delaware corporation ("Parent"), Family Golf
Acquisition, Inc., a Colorado corporation and wholly-owned subsidiary of
Parent ("Acquisition") and MetroGolf Incororated, a Colorado corporation (the
"Company") intend to enter into an Agreement and Plan of Merger (the "Merger
Agreement"), pursuant to which Acquisition will be merged with and into the
Company (the "Merger") resulting in a new corporation (the "Surviving
Corporation"). Prior to the consummation of the Merger, Parent intends to
conduct a tender offer (the "Tender Offer") for all of the Company's
outstanding common stock. As a result of the proposed transactions, the
Surviving Corporation will become a wholly-owned subsidiary of Parent.
The Board of Directors of Parent is pleased to inform you that Parent has
elected to retain your services on behalf of the Surviving Corporation at
your current level of compensation, including salary and bonuses, for a
period of at least 90 days following the the close of the Tender Offer, in
consideration for your agreement to honor your current employment
arrangements in all respects and devote your full time and attention to your
duties until such time as the 90-day period referenced above has expired.
Upon the conclusion of such 90-day period, Parent intends to cause the
Surviving Corporation to reevaluate its personnel requirements.
Please sign a copy of this letter in the space provided to confirm your
agreement to the terms hereof.
Very truly yours,
FAMILY GOLF CENTERS, INC.
By:_____________________________
Name:
Title:
CONFIRMED:
______________________________
<PAGE>
Exhibit (c)(9)
FAMILY GOLF CENTERS, INC.
225 BROADHOLLOW ROAD
MELVILLE, NEW YORK 11747
December 23, 1997
Charles D. Tourtellotte
MetroGolf Incorporated
1999 Broadway
Suite 2435
Denver, CO 80202
Dear Mr. Tourtellotte:
We refer to (i) Agreement and Plan of Merger (the "Merger Agreement"),
dated as of the date hereof, by and among Family Golf Centers, Inc. ("FGI"),
Family Golf Acquisition, Inc. ("Acquisition") and MetroGolf Incorporated
("MGI"), and (ii) options to acquire an aggregate of 100,000 shares of MGI
Common Stock at an exercise price of $1.25 per share that were granted to you on
December 3, 1997, pursuant to MGI's Senior Executive Stock Option Plan (the
"Options"). Any capitalized term not defined in this letter shall have its
meaning in the Merger Agreement.
This letter will confirm your agreement, as an inducement to FGI and
Acquisition to enter into the Merger Agreement, to terminate the Options if, in
the reasonable discretion of FGI, you have not used your reasonable best efforts
to assist FGI and Acquisition in consummating the Offer, including, without
limitation, using your reasonable best efforts to effect the following prior to
the consummation of the Offer: elimination of the minority shareholder interest
in the general partner of Illinois Center Golf Partners, LP ("ICGP");
elimination of the minority limited partner interests in ICGP and Goose Creek
Golf Partners Limited Partnership; obtaining the consents of Landlords and
Mortgage Lenders referred to in clause (o) of Exhibit A to the Merger Agreement,
and renegotiating the terms of the Leases and the accounts payable in such
manner as FGI shall request. Within two business days following consummation of
the Offer, FGI, if it has determined in its reasonable discretion that you have
not used your reasonable best efforts to accomplish the foregoing, shall send
you written notice of such determination, at which time you agree to terminate
in all respects the Options and
<PAGE>
any rights you may have with respect thereto. In addition, you further agree
that you will not, without the written consent of FGI, exercise the Options
prior to the end of such two business day period.
Please indicate your agreement with the foregoing by signing a copy of
the letter in the space indicted below and returning it to FGI.
Very truly yours,
FAMILY GOLF CENTERS, INC.
By: /s/ Dominic Chang
---------------------------------
Name: Dominic Chang
Title:
Accepted and agreed to as of
the date first written above:
/s/ Charles Tourtellotte
- -------------------------------
Charles D. Tourtellotte
<PAGE>
Exhibit (c)(10)
FAMILY GOLF CENTERS, INC.
225 Broadhollow Road
Melville, New York 11747
December 23, 1997
J. D. Finley
MetroGolf Incorporated
1999 Broadway
Suite 2435
Denver, CO 80202
Dear Mr. Finley:
We refer to (i) the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of the date hereof, by and among Family Golf Centers,
Inc. ("FGI"), Family Golf Acquisition, Inc. ("Acquisition") and MetroGolf
Incorporated ("MGI"), and (ii) options to acquire an aggregate of 75,000
shares of MGI Common Stock at an exercise price of $1.25 per share that were
granted to you on December 3, 1997, pursuant to MGI's Senior Executive Stock
Option Plan (the "Options"). Any capitalized term not defined in this letter
shall have its meaning in the Merger Agreement.
This letter will confirm your agreement, as an inducement to FGI and
Acquisition to enter into the Merger Agreement, to terminate the Options if,
in the reasonable discretion of FGI, you have not used your reasonable best
efforts to assist FGI and Acquisition in consummating the Offer, including,
without limitation, using your reasonable best efforts to effect the
following prior to the consummation of the Offer: elimination of the minority
shareholder interest in the general partner of Illinois Center Golf Partners,
LP ("ICGP"); elimination of the minority limited partner interests in ICGP
and Goose Creek Golf Partners Limited Partnership; obtaining the consents of
the Landlords and Mortgage Lenders referred to in clause (o) of Exhibit A to
the Merger Agreement; and renegotiating the terms of the Leases and the
accounts payable in such manner as FGI shall request. Within two business
days following consummation of the Offer, FGI, if it has determined in its
reasonable discretion that
<PAGE>
you have not used your reasonable best efforts to accomplish the foregoing,
shall send you written notice of such determination, at which time you agree
to terminate in all respects the Options and any rights you may have with
respect thereto. In addition, you further agree that you will not, without
the written consent of FGI, exercise the Options prior to the end of such two
business day period.
Please indicate your agreement with the foregoing by signing a copy
of the letter in the space indicated below and returning it to FGI.
Very truly yours
FAMILY GOLF CENTERS, INC.
By: /s/ Dominic Chang
-----------------------------
Name: Dominic Chang
Title:
Accepted and agreed to as of
the date first written above:
/s/ J. D. Finley
- ----------------------------
J. D. Finley
<PAGE>
Exhibit (c)(11)
To: Family Golf Center, Inc.
The undersigned holder of ______ options (the "Options") to purchase Common
Stock of MetroGolf Incorporated, a Colorado corporation (the "Company) hereby
agrees that, in order to induce Family Golf Centers, Inc. and its subsidiary,
Family Golf Acquisition, Inc. to enter in the Merger Agreement by and among
Family Golf Centers, Inc., Family Golf Acquisitions, Inc. and MetroGolf
Incorporated (the "Merger Agreement") that it will not, without the consent
of Family Golf Centers, Inc., exercise such option prior to consummation of
the Offer (as defined in the Merger Agreement) and that if the Options are
exercised after consummation of the Offer, the undersigned irrevocably agrees
to vote in favor of the Merger.
IN WITNESS WHEREOF the undersigned has executed this letter agreement as
of the 22nd day of December, 1997.
By:_______________________________________
Name:____________________________________
<PAGE>
AMENDMENT AGREEMENT
Reference is made to the Agreement and Plan of Merger ("Merger Agreement"),
dated December 23, 1997, by and among FAMILY GOLF CENTERS, INC. ("Parent"),
FAMILY GOLF ACQUISITION, INC. ("Purchaser") and METROGOLF INCORPORATED (the
"Company"), the schedules to the Merger Agreement and to agreements by and among
Parent, Purchaser and the Company related to the Merger Agreement (collectively,
"Merger Documents").
In order to correct certain ministerial errors in the Merger Documents, the
parties agree to amend the Merger Documents as set forth in Schedule I hereto.
IN WITNESS WHEREOF, the undersign have executed this Amendment Agreement as
of the 23rd day of December, 1997.
FAMILY GOLF CENTERS, INC.
By: /s/ Dominic Chang
------------------------------
Name: Dominic Chang
Title:
FAMILY GOLF ACQUISITION, INC.
By: /s/ Robert J. Krause
------------------------------
Name: Robert J. Krause
Title:
METROGOLF INCORPORATED
By: /s/ Charles Tourtellotte
------------------------------
Name: Charles Tourtellotte
Title:
<PAGE>
Schedule I
To Amendment Agreement
Merger Agreement-
Schedule 3.12-
Solano Balance due Heller should be $482,172.00
Section 3.04- The last sentence should be revised to read:
"The MERGER AGREEMENT, THE note, dated as of even date herewith, in
the principal amount of $500,000 by MGI to Parent; the Option
Agreement ("Option Agreement"), dated as of even date herewith,
between Parent and MGI; the Pledge Agreement (the "Pledge Agreement"),
dated as of even date herewith, between Parent and MGI; and the Escrow
Agreement (the "Escrow Agreement"), dated as of even date herewith,
among Parent, MGI and United States Trust Company of New York (the
"Escrow Agent"), are collectively referred to in this Agreement as the
"Operative Agreements." "
Section 4.11. The first sentence should be revised to read:
"Provided that the Minimum Tender Condition (as such term is defined
in EXHIBIT A) has been satisfied, promptly upon the acceptance for
payment of, and payment by Acquisition for, all MGI Shares tendered
and not withdrawn pursuant to the Offer, Acquisition shall be entitled
to designate such number of directors on the Board of Directors of MGI
as will give Acquisition, subject to compliance with Section 14(f) of
the Exchange Act, a majority of such directors and MGI shall, at such
time, cause Acquisition's designees to be so elected; PROVIDED,
HOWEVER, that in the event that Acquisition's designees are appointed
or elected to the Board of Directors of MGI, until the Effective Time
such Board of Directors shall have at least two directors who are
directors on the date hereof or who are otherwise not officers,
directors or affiliates of Acquisition and are independent directors
under any applicable rules of the Boston Stock Exchange or the NASDAQ
Smallcap Market (the "Independent Directors"); and PROVIDED FURTHER
that, in such event, if the number of Independent Directors shall be
reduced below two for any reason whatsoever, any remaining Independent
Directors (or Independent Director, if there shall be only one
remaining) shall be entitled to designate a person to fill such
vacancy who shall be deemed to be an Independent Director for purposes
of this Agreement or, if no Independent Directors then remain, the
other directors shall designate two persons to fill such vacancies who
shall not be officers, stockholders or affiliates of Acquisition and
who shall be independent directors under the rules of the Boston Stock
Exchange AND THE NASDAQ SMALLCAP MARKET and such persons shall be
deemed to be Independent Directors for purposes of this Agreement."
<PAGE>
Section 5.01. The third sentence should be revised to read:
"Parent shall have the right to match any such Superior Proposal, and
shall have such matching proposal immediately accepted by MGI for five
business days after Parent is informed of the necessary determination
in clauses (i) and (ii) of the SECOND preceding sentence with respect
to such Superior Proposal."
Exhibit A Paragraph (b) should be revised to read:
"there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger, or any other action shall be
taken by the Governmental Entity or court, other than the application
to the Offer or the Merger of applicable waiting periods under the HSR
Act that is reasonably likely to result, directly or indirectly, in
any of the consequences referred to in clause (i) through (vi) of
paragraph (a) above:"
Stock Purchase Agreement
Exhibit A-
685,622 shares owned by Charles D. Tourtelotte, 366 Emerson, Denver,
Colorado, 680,782 shares of which are pledged to Coutts & Co.
Consolidated Secured Convertible Promissory Note
Paragraph 7(a). The second sentence should read:
"The Initial Conversion Price shall equal $1.00."
