<PAGE>
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities and Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
July 25, 1997
FAMILY GOLF CENTERS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-25098 11-3223246
- --------------- ---------------- -------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
225 Broadhollow Road
Melville, New York 11747
----------------------------------------
(Address of principal executive offices)
Registrant's Telephone Number, including
area code: (516) 694-1666
(Former Address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
------------------------------------
A. Leisure Complexes, Inc. and The Ponds Golf Center
-------------------------------------------------
On July 25, 1997, Family Golf Centers, Inc. (the "Company")
acquired, by means of a merger, Leisure Complexes, Inc., a New York corporation
("LCI"). LCI owns and operates a new 170,000 square-foot state-of-the-art
family entertainment complex, in Lake Grove, New York, which includes, among
other things, an ice hockey rink, bowling lanes, a virtual reality batting
cage, an Iwerks Motion Master Theatre, a variety of indoor amusements,
restaurants and a conference center. LCI also owns and operates seven bowling
centers throughout Long Island, New York.
Pursuant to the Agreement and Plan of Merger (the "LCI Merger
Agreement"), dated as of July 25, 1997, among the Company, Lake Grove Family
Golf Centers, Inc., a New York corporation and a wholly-owned subsidiary of the
Company ("Merger Sub") and LCI, LCI merged with and into Merger Sub, whereupon
the separate corporate existence of LCI ceased and Merger Sub continued as the
surviving corporation. The merger consideration consisted of (i) an aggregate
of 509,090 shares of the common stock, $.01 par value per share, of the Company
(the "Common Stock")(40,000 shares of which have been placed in escrow for one
year to satisfy indemnification claims of the Company, if any, under the Merger
Agreement), and (ii) warrants to purchase an aggregate of 55,537 of the
Company's Common Stock at an exercise price of $27.50 per share. Immediately
prior to the merger, Merger Sub funded the redemption of LCI's outstanding
Convertible Redeemable Preferred Stock in the amount of approximately $2
million. The Merger Sub also assumed approximately $30 million of LCI's
existing indebtedness. Approximately $2 million of such assumed debt was
satisfied at closing and $27 million of which was refinanced with The Chase
Manhattan Bank.
The Company also entered into a long term lease with LCI's
affiliate, Three Grove Partners, a New York limited partnership ("Three Grove")
to lease the property on which there is an 18-hole executive golf course,
driving range and related facilities previously operated as "The Ponds at Lake
Grove Golf Center." The Company also acquired certain assets from Three Grove.
The acquired assets included (i) certain leasehold improvements on the leased
property, and (ii) certain equipment, fixtures, personal property and contracts
used in connection with the operation of the golf center (the "Lake Grove
Assets").
Pursuant to the Purchase Agreement, dated as of June 1, 1997,
between the Company and Three Grove, the Company purchased the Lake Grove
Assets for $2,000,000.00 in cash ($100,000.00 of which was placed in escrow for
one year to satisfy indemnification claims of the Company, if any, under the
Purchase Agreement). The source of funds for the acquisition was derived from
the Company's working capital and the draw down of $2.4 million from the
Company's Credit Facility with The Chase Manhattan Bank.
-2-
<PAGE>
The Company intends to continue operating LCI's business
operations and The Ponds at Lake Grove Golf Center in substantially the same
manner as previously conducted and to add certain additional amenities, such
as batting cages and miniature golf, to the golf center.
B. Other Acquisitions
------------------
Palm Royale Golf Club
---------------------
On June 30, 1997, the Company acquired certain assets from Palm
Lake Partners, Ltd., a Colorado limited partnership. The acquired assets
included (i) approximately 25 acres of real property in Palm Desert, California
on which there is an 18-hole, par 3 golf course, pro-shop and related
facilities previously operated as the "Palm Royale Golf Club" and (ii) certain
equipment, fixtures, personal property and contracts used in connection with
the operation of the golf course.
The Company intends to continue operating the golf course in
substantially the same manner as previously conducted.
-3-
<PAGE>
Supersports Family Fun Park
---------------------------
On June 30, 1997, the Company acquired certain assets from Carver
Golf Enterprises, Inc., a Massachusetts corporation (the "Seller"). The
acquired assets included (i) the Seller's leasehold interest in approximately
19 acres of real property in Carver, Massachusetts on which there is a driving
range, miniature golf course, bumper boats, batting cages, go-cart track and
video arcade game room previously operated as the "Supersports Family Fun Park"
and (ii) certain equipment, fixtures, personal property and contracts used in
connection with the operation of the fun park. The ground lease includes an
option to purchase the property within the next five years.
The Company intends to continue operating the fun park in
substantially the same manner as previously conducted.
Divot City Golf Center
----------------------
On June 26, 1997, the Company acquired certain assets from Divot
City, a California limited partnership (the "Seller"). The acquired assets
included (i) the Seller's leasehold interest in approximately 16 acres of real
property in Milpitas, California on which there is a driving range, miniature
golf course, pro shop and related facilities previously operated as the "Divot
City Golf Center" and (ii) certain equipment, fixtures, personal property and
contracts used in connection with the operation of the golf center.
The Company intends to continue operating the golf center in
substantially the same manner as previously conducted.
Southampton Golf Center
-----------------------
On June 5, 1997, the Company acquired, by means of a merger,
Pinley Enterprises, Ltd., a Pennsylvania corporation ("PEL"). PEL owns 12 acres
of real property on which there is a driving range, miniature golf course, pro
shop and related facilities previously operated as the "Southampton Golf
Center" by an affiliate of PEL, Southampton Family Golf Center, Inc., a
Pennsylvania corporation ("SFGC").
-4-
<PAGE>
Simultaneously with the merger, the Company acquired certain assets of SFGC.
The acquired assets included certain equipment, fixtures, personal property and
contracts used in connection with the operation of the Southampton Golf Center.
The Company intends to continue operating the golf center in
substantially the same manner as previously conducted.
Rio Salado Golf Course
----------------------
On April 25, 1997, the Company acquired certain assets from
LaSalle National Bank, a national banking association, as trustee under that
certain Trust Indenture dated February 20, 1990 (the "Seller"). The acquired
assets included (i) the Seller's leasehold interest in approximately 70 acres
of real property in Tempe, Arizona on which there is a 9-hole executive golf
course, driving range, pro shop and related facilities previously operated as
the "Rio Salado Golf Course" and (ii) certain equipment, fixtures, personal
property and contracts used in connection with the operation of the golf
course.
The Company intends to continue operating the golf course in
substantially the same manner as previously conducted.
-5-
<PAGE>
San Bruno Golf Center
---------------------
On April 23, 1997, the Company acquired certain assets from
American Golf Corporation, a California corporation (the "Seller"). The
acquired assets included (i) the Seller's leasehold interest in approximately
15 acres of real property in San Bruno, California on which there is a driving
range, pro shop and related facilities previously operated as the "San Bruno
School District Golf Center" and (ii) certain equipment, fixtures, personal
property and contracts used in connection with the operation of the golf center
(the "San Bruno Assets").
The Company intends to continue operating the golf center in
substantially the same manner as previously conducted.
Colorado Beach and Sport Center
-------------------------------
On April 11, 1997, the Company purchased certain assets from
Clifford E. Eley, as trustee of the chapter 7 bankruptcy estate of Colorado
Beach and Sport Limited Partnership (the "Seller"). The acquired assets
included (i) the Seller's leasehold interest in approximately 5 acres of real
property in Englewood, Colorado on which there is a domed sports facility
previously operated as the "Colorado Beach and Sport Center," (ii) the
leasehold improvements, and (iii) certain equipment, fixtures, personal
property and contracts used in connection with the operation of the sports
facility.
The Company intends to continue operating the sports facility
in substantially the same manner as previously operated.
Green Oak Golf Practice Center
------------------------------
On April 2, 1997, the Company purchased all of the outstanding
stock of Green Oak Golf Practice Center, Inc., a Texas corporation (the
"Acquired Corporation") from the sole stockholder (the "Seller"). The Acquired
Corporation owns and operates a golf driving range, miniature golf course and
pro shop on 29 acres of property which it leases in Arlington, Texas.
-6-
<PAGE>
The Company intends to continue operating the assets of the
Acquired Corporation in substantially the same manner as previously conducted.
Randall's Island Golf Center and the Darlington Driving Range
-------------------------------------------------------------
On March 21, 1997, the Company acquired certain assets from
American Golf Corporation, a California corporation (the "Seller"). The
acquired assets included (i) the Seller's rights under that certain concession
license agreement with the Department of Parks and Recreation of the City of
New York to operate the golf center on Randall's Island, New York consisting of
approximately 20 acres of real property on which there is a driving range,
miniature golf course, pro shop and related facilities, (ii) the Seller's
rights under that certain concession license agreement with Bergen County to
operate the Darlington driving range consisting of approximately 14 acres of
real property in Mahwah, New Jersey on which there is a driving range, pro shop
and related facilities and (ii) certain equipment, fixtures, personal property
and contracts used in connection with the operation of the Randall's Island
Golf Center and the Darlington Driving Range.
The Company intends to continue operating each of the Randall's
Island Golf Center and the Darlington Driving Range in substantially the same
manner as previously conducted. The Company intends, however, to shelter and
double tier a portion of the tee line at the Randall's Island facility.
Capital Sports Golf Center
--------------------------
On March 12, 1997, the Company entered into a long term lease
with, and acquired certain assets from, Carolina Capital Ventures, Ltd., a
North Carolina corporation. The ground lease covers approximately 20 acres of
real
-7-
<PAGE>
property in Raleigh, North Carolina on which there is a driving range,
miniature golf course, pro shop and related facilities previously operated
as "Capital Sports Golf Center". The acquired assets included certain
equipment, fixtures, personal property and contracts used in connection with
the operation of the golf center.
The Company intends to continue operating the golf center in
substantially the same manner as previously conducted.
College of the Desert Practice Center
-------------------------------------
On February 26, 1997, the Company entered into a sublease with,
and acquired certain assets from, College Golf Center Partnership, a California
general partnership (the "Seller"). The Suboccupancy Agreement related to the
Seller's leasehold interest in approximately 17 acres of real property in Palm
Desert, California on which there is a driving range and related facilities
operated as the "College of the Desert Practice Center." The acquired assets
included certain equipment, fixtures, personal property and contracts used
in connection with the operation of the golf center.
The Company intends to continue operating the golf center in
substantially the same manner as previously conducted.
Active Sports Marketing, LLC
----------------------------
On July 29, 1997, the Company acquired certain assets from Active
Sports Marketing, LLC, a Colorado limited liability company. The acquired
assets (the "ASM Assets") included (i) the right to distribute in the United
States soft golf spikes manufactured by MacNeill Engineering pursuant to a
distribution agreement; and (ii) certain equipment, fixtures, personal property
and contracts used in connection with the distribution of soft spikes.
The Company intends to continue operating the ASM Assets in
substantially the same manner as previously conducted.
The aggregate cost of the 12 acquisitions described above
was approximately $13,200,000.00 in cash and 158,000 shares of the Company's
Common Stock. Of this amount, $575,000.00 in cash and 19,917 shares of the
Company's Common Stock were placed in escrow, for periods of no more than
1 year nor less than six months, to satisfy indemnification claims of the
Company, if any, under the transaction documents. The source of funds for
these acquisitions was derived from the Company's working capital.
The foregoing summary of acquisitions and related transactions is
incomplete and is qualified in its entirety by reference to copies of the
material transaction documents and certain other ancillary documents filed as
Exhibits hereto.
-8-
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Businesses Acquired
In accordance with Item 7(a)(4) of Form 8-K, attached hereto
as Exhibits are the financial statements of Palm Royale
Country Club, Carver Golf Enterprises, Inc., Pinley
Enterprises, Ltd., Southampton Family Golf Center, Inc.,
San Bruno Practice Center, Green Oak Golf Practice Center,
Inc., Randall's Island Practice Center, Darlington Driving
Range, and Carolina Capital Ventures, Ltd. pursuant to
Regulation S-X. It is impractical to file financial
statements of Leisure Complexes, Inc., Active Sports
Marketing, LLC and Divot City at this time. The required
financial statements of Leisure Complexes, Inc., Active
Sports Marketing, LLC and Divot City will be filed under
cover of a form 8-K/A within 60 days of August 11, 1997.
The financial statements for the Rio Salado Golf Course,
College of the Desert Golf Driving Range and Colorado Beach
and Sport Limited Partnership are not included as financial
statements covering the substantial majority of the
businesses acquired have been furnished.
(b) Pro Forma Financial Information
It is impractical to file pro forma financial information at
this time. The required pro forma financial information will
be filed under cover of a form 8-K/A within 60 days of
August 11, 1997.
(c) Exhibits
1. Agreement and Plan of Merger, dated as of July 25, 1997,
among Family Golf Centers, Inc., Lake Grove Family Golf
Centers, Inc. and Leisure Complexes, Inc.
2. Escrow Agreement, dated as of July 25, 1997, among Family
Golf Centers, Inc., Leisure Complexes, Inc. and Continental
Stock Transfer and Trust Company.
3. Registration Rights Agreement, dated as of July 25, 1997, by
and between Family Golf Centers, Inc., Arthur J. Calace,
Jr., as stockholder representative and the Selling
Stockholders.
-9-
<PAGE>
4. Asset Purchase Agreement, dated as of June 1, 1997, by and
between Three Grove Partners and Lake Grove Family Golf
Centers, Inc.
5. Ground Lease Agreement, dated as of June 1, 1997, by and
between Three Grove Partners and Lake Grove Family Golf
Centers, Inc.
6. Escrow Agreement, dated as of July 25, 1997, by and among
Three Grove Partners, Family Golf Centers, Inc. and
Continental Stock Transfer and Trust Company.
7. Asset Purchase Agreement, dated as of July 29, 1997, by and
between Active Sports Marketing, LLC and Golden Spikes,
Inc., a wholly-owned subsidiary of Family Golf Centers, Inc.
8. Indemnity Escrow Agreement, dated as of July 29, 1997, among
Active Sports Marketing, LLC, Family Golf Centers, Inc. and
Continental Stock Transfer and Trust Company.
9. Escrow Agreement, dated as of July 29, 1997, among Active
Sports Marketing LLC, Family Golf Centers, Inc. and
Continental Stock Transfer and Trust Company.
10. Registration Rights Agreement, dated as of July 29, 1997, by
and between Family Golf Centers, Inc. and Active Sports
Marketing, LLC.
11. Purchase Agreement, dated as of June 30, 1997, by and
between Palm Lake Partners, Ltd. and Palm Family Golf
Centers, Inc.
12. Cash Escrow Agreement, dated as of June 30, 1997, by and
between Palm Lake Partners, Ltd., Palm Family Golf Centers,
Inc. and Continental Stock Transfer & Trust Company.
13. Assignment and Assumption Agreement, dated as of June 30,
1997, between Carver Golf Enterprises, Inc., Carver Family
Golf Centers, Inc. and Family Golf Centers, Inc.
-10-
<PAGE>
14. Escrow Agreement, dated as of June 30, 1997, among Carver
Family Golf Centers, Inc., Family Golf Centers, Inc., Carver
Golf Enterprises, Inc. and Continental Stock Transfer and
Trust Company.
15. Registration Rights Agreement, dated as of June 30, 1997, by
and between Family Golf Centers, Inc. and Carver Golf
Enterprises, Inc.
16. Assignment and Assumption of Lease, dated as of June 10,
1997, by and among Divot City, D.C. Management, Inc. and
Milpitas Family Golf Centers, Inc.
17. Cash Escrow Agreement, dated as of June 26, 1997, by and
among Divot City, Milpitas Family Golf Centers, Inc. and
Santa Clara Land Title Company.
18. Agreement and Plan of Merger, dated as of June 5, 1997,
among Family Golf Centers, Inc., Philadelphia Family Golf
Centers, Inc., Pinley Enterprises, Ltd. and each of the
Stockholders of Pinley Enterprises, Ltd.
19. Escrow Agreement, dated as of June 5, 1997, among Family
Golf Centers, Inc., Robert Finley, Daniel Pinciotti and
Continental Stock Transfer and Trust Company.
20. Asset Purchase Agreement, dated as of June 5, 1997, by and
between Southampton Family Golf Center, Inc. and
Philadelphia Family Golf Centers, Inc.
21. Purchase Agreement and Escrow Instruction, dated as of March
21, 1997, by and between LaSalle National Bank, as trustee
and Tempe Family Golf Centers, Inc.
22. Assignment and Assumption of Lease, dated as of April 23,
1997, by and between American Golf Corporation and San Bruno
Family Golf Centers, Inc.
23. Guaranty, made by Family Golf Centers, Inc., in favor of
American Golf Corporation.
24. Purchase and Sale Agreement, dated as of February 17, 1997,
between Clifford E. Eley, as trustee and Englewood Family
Golf Centers, Inc.
-11-
<PAGE>
25. Stock Purchase Agreement, dated as of April 2, 1997, by and
between Margo Massahos, Green Oak Golf Practice Center, Inc.
and Family Golf Centers, Inc.
26. Cash Escrow Agreement, dated as of April 2, 1997, by and
among Margo Massahos, Family Golf Centers, Inc. and
Continental Stock Transfer and Trust Company.
27. Assignment and Assumption of Concession Licenses, dated as
of March 21, 1997, by and between American Golf Corporation,
Randall's Island Family Golf Centers, Inc. and Darlington
Family Golf Centers, Inc.
28. Guaranty, made by Family Golf Centers, Inc. in favor of
American Golf Corporation.
29. Asset Purchase Agreement, dated as of March 12, 1997, by and
between Carolina Capital Ventures, Ltd. and Raleigh Family
Golf Centers, Inc.
30. Ground Lease Agreement, dated as of March 12, 1997, by and
between Carolina Capital Ventures, Ltd. and Raleigh Family
Golf Centers, Inc.
31. Guaranty, made by Family Golf Centers, Inc. in favor of
Carolina Capital Ventures, Ltd.
32. Cash Escrow Agreement, dated as of March 12, 1997, by and
among Carolina Capital Ventures, Ltd., Raleigh Family Golf
Centers, Inc. and Continental Stock Transfer and Trust
Company.
33. Asset Purchase Agreement, dated as of February 26, 1997, by
and between College Golf Center Partnership and Palm Desert
Family Golf Centers, Inc.
34. Suboccupancy Agreement, dated as of February 26, 1997, by
and between College Golf Center Partnership and Palm Desert
Family Golf Centers, Inc.
35. Audited Financial Statements of Palm Royale Country Club
Operations owned and operated by Palm Lake
-12-
<PAGE>
Partners, Ltd. for and as of the year ended December 31,
1996.
36. Audited Financial Statements of Carver Golf Enterprises,
Inc. for and as of the year ended December 31, 1996.
37. Audited Financial Statements of Pinley Enterprises, Ltd. for
and as of the year ended December 31, 1996.
38. Audited Financial Statements of Southampton Family Golf
Center, Inc., for and as of the year ended December 31,
1996.
39. Audited Financial Statements of the San Bruno Practice
Center, a division of American Golf Corporation for and as
of the year ended December 31, 1996.
40. Audited Financial Statements of Green Oak Golf Practice
Center, Inc. for and as of the year ended December 31, 1996.
41. Audited Financial Statements of Randall's Island Practice
Center, a division of American Golf Corporation, for and as
of the year ended December 31, 1996.
42. Audited Financial Statements of Darlington Driving Range, a
division of American Golf Corporation, for and as of the
year ended December 31, 1996.
43. Audited Financial Statements of Carolina Capital Ventures,
Ltd. d/b/a Capital Sports, for and as of the year ended
December 31, 1996.
-13-
<PAGE>
INDEX TO EXHIBITS
Exhibits Page Numbers
-------- ------------
1. Agreement and Plan of Merger, dated as of July 25, 1997,
among Family Golf Centers, Inc., Lake Grove Family Golf
Centers, Inc. and Leisure Complexes, Inc.
2. Escrow Agreement, dated as of July 25, 1997, among Family
Golf Centers, Inc., Leisure Complexes, Inc. and Continental
Stock Transfer and Trust Company.
3. Registration Rights Agreement, dated as of July 25, 1997, by
and between Family Golf Centers, Inc., Arthur J. Calace,
Jr., as stockholder representative and the Selling
Stockholders.
4. Asset Purchase Agreement, dated as of June 1, 1997, by and
between Three Grove Partners and Lake Grove Family Golf
Centers, Inc.
5. Ground Lease Agreement, dated as of June 1, 1997, by and
between Three Grove Partners and Lake Grove Family Golf
Centers, Inc.
6. Escrow Agreement, dated as of July 25, 1997, by and among
Three Grove Partners, Family Golf Centers, Inc. and
Continental Stock Transfer and Trust Company.
7. Asset Purchase Agreement, dated as of July 29, 1997, by and
between Active Sports Marketing, LLC and Golden Spikes,
Inc., a wholly-owned subsidiary of Family Golf Centers, Inc.
8. Indemnity Escrow Agreement, dated as of July 29, 1997, among
Active Sports Marketing, LLC, Family Golf Centers, Inc. and
Continental Stock Transfer and Trust Company.
9. Escrow Agreement, dated as of July 29, 1997, among Active
Sports Marketing LLC, Family Golf Centers, Inc. and
Continental Stock Transfer and Trust Company.
-14-
<PAGE>
10. Registration Rights Agreement, dated as of July 29, 1997, by
and between Family Golf Centers, Inc. and Active Sports
Marketing, LLC.
11. Purchase Agreement, dated as of June 30, 1997, by and
between Palm Lake Partners, Ltd. and Palm Family Golf
Centers, Inc.
12. Cash Escrow Agreement, dated as of June 30, 1997, by and
between Palm Lake Partners, Ltd., Palm Family Golf Centers,
Inc. and Continental Stock Transfer & Trust Company.
13. Assignment and Assumption Agreement, dated as of June 30,
1997, between Carver Golf Enterprises, Inc., Carver Family
Golf Centers, Inc. and Family Golf Centers, Inc.
14. Escrow Agreement, dated as of June 30, 1997, among Carver
Family Golf Centers, Inc., Family Golf Centers, Inc., Carver
Golf Enterprises, Inc. and Continental Stock Transfer and
Trust Company.
15. Registration Rights Agreement, dated as of June 30, 1997, by
and between Family Golf Centers, Inc. and Carver Golf
Enterprises, Inc.
16. Assignment and Assumption of Lease, dated as of June 10,
1997, by and among Divot City, D.C. Management, Inc. and
Milpitas Family Golf Centers, Inc.
17. Cash Escrow Agreement, dated as of June 26, 1997, by and
among Divot City, Milpitas Family Golf Centers, Inc. and
Santa Clara Land Title Company.
18. Agreement and Plan of Merger, dated as of June 5, 1997,
among Family Golf Centers, Inc., Philadelphia Family Golf
Centers, Inc., Pinley Enterprises, Ltd. and each of the
Stockholders of Pinley Enterprises, Ltd.
19. Escrow Agreement, dated as of June 5, 1997, among Family
Golf Centers, Inc., Robert Finley, Daniel Pinciotti and
Continental Stock Transfer and Trust Company.
-15-
<PAGE>
20. Asset Purchase Agreement, dated as of June 5, 1997, by and
between Southampton Family Golf Center, Inc. and
Philadelphia Family Golf Centers, Inc.
21. Purchase Agreement and Escrow Instruction, dated as of March
21, 1997, by and between LaSalle National Bank, as trustee
and Tempe Family Golf Centers, Inc.
22. Assignment and Assumption of Lease, dated as of April 23,
1997, by and between American Golf Corporation and San Bruno
Family Golf Centers, Inc.
23. Guaranty, made by Family Golf Centers, Inc., in favor of
American Golf Corporation.
24. Purchase and Sale Agreement, dated as of February 17, 1997,
between Clifford E. Eley, as trustee and Englewood Family
Golf Centers, Inc.
25. Stock Purchase Agreement, dated as of April 2, 1997, by and
between Margo Massahos, Green Oak Golf Practice Center, Inc.
and Family Golf Centers, Inc.
26. Cash Escrow Agreement, dated as of April 2, 1997, by and
among Margo Massahos, Family Golf Centers, Inc. and
Continental Stock Transfer and Trust Company.
27. Assignment and Assumption of Concession Licenses, dated as
of March 21, 1997, by and between American Golf Corporation,
Randall's Island Family Golf Centers, Inc. and Darlington
Family Golf Centers, Inc.
28. Guaranty, made by Family Golf Centers, Inc. in favor of
American Golf Corporation.
29. Asset Purchase Agreement, dated as of March 12, 1997, by and
between Carolina Capital Ventures, Ltd. and Raleigh Family
Golf Centers, Inc.
30. Ground Lease Agreement, dated as of March 12, 1997, by and
between Carolina Capital Ventures, Ltd. and Raleigh Family
Golf Centers, Inc.
31. Guaranty, made by Family Golf Centers, Inc. in favor of
Carolina Capital Ventures, Ltd.
-16-
<PAGE>
32. Cash Escrow Agreement, dated as of March 12, 1997, by and
among Carolina Capital Ventures, Ltd., Raleigh Family Golf
Centers, Inc. and Continental Stock Transfer and Trust
Company.
33. Asset Purchase Agreement, dated as of February 26, 1997, by
and between College Golf Center Partnership and Palm Desert
Family Golf Centers, Inc.
34. Suboccupancy Agreement, dated as of February 26, 1997, by
and between College Golf Center Partnership and Palm Desert
Family Golf Centers, Inc.
35. Audited Financial Statements of Palm Royale Country Club
Operations owned and operated by Palm Lake Partners, Ltd.
for and as of the year ended December 31, 1996.
36. Audited Financial Statements of Carver Golf Enterprises,
Inc. for and as of the year ended December 31, 1996.
37. Audited Financial Statements of Pinley Enterprises, Ltd. for
and as of the year ended December 31, 1996.
38. Audited Financial Statements of Southampton Family Golf
Center, Inc., for and as of the year ended December 31,
1996.
39. Audited Financial Statements of the San Bruno Practice
Center, a division of American Golf Corporation for and as
of the year ended December 31, 1996.
40. Audited Financial Statements of Green Oak Golf Practice
Center, Inc. for and as of the year ended December 31, 1996.
41. Audited Financial Statements of Randall's Island Practice
Center, a division of American Golf Corporation, for and as
of the year ended December 31, 1996.
-17-
<PAGE>
42. Audited Financial Statements of Darlington Driving Range, a
division of American Golf Corporation, for and as of the
year ended December 31, 1996.
43. Audited Financial Statements of Carolina Capital Ventures,
Ltd. d/b/a Capital Sports, for and as of the year ended
December 31, 1996.
-18-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: August 11, 1997.
FAMILY GOLF CENTERS, INC.
By: /s/ Dominic Chang
-------------------------------
Dominic Chang,
President and Chief
Executive Officer
-19-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AMONG
FAMILY GOLF CENTERS, INC.,
LAKE GROVE FAMILY GOLF CENTERS, INC.
AND
LEISURE COMPLEXES, INC.
DATED AS OF JULY 25, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
THE MERGER...................................................................1
Section 1.1 The Merger...........................................1
Section 1.2 Closing..............................................1
Section 1.3 Effective Time; Effect of Merger.....................1
Section 1.4 Conversion of Securities.............................2
Section 1.5 Exchange Ratio.......................................3
Section 1.6 Exchange of Securities...............................3
Section 1.7 Dissenting Shares....................................4
ARTICLE II
CERTAIN MATTERS RELATING TO THE SURVIVING CORPORATION........................5
Section 2.1 Certificate of Incorporation of the Surviving
Corporation........................................5
Section 2.2 Bylaws of the Surviving Corporation..................5
Section 2.3 Directors and Officers of the Surviving
Corporation........................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................6
Section 3.1 Existence, Good Standing, Corporate Authority........6
Section 3.2 Charter Documents; Corporate Records.................6
Section 3.3 Authorization and Validity of Agreement..............6
Section 3.4 No Approvals or Notices Required; No Conflict
With Instruments...................................7
Section 3.5 Capitalization.......................................8
Section 3.6 No Subsidiaries......................................9
Section 3.7 Financial Condition..................................9
Section 3.8 No Undisclosed Liabilities..........................10
Section 3.9 Absence of Certain Changes or Events................10
Section 3.10 Tax Matters.........................................11
Section 3.11 Compliance With Laws................................12
Section 3.12 Licenses............................................12
Section 3.13 Legal Proceedings...................................13
Section 3.14 Intellectual Property...............................13
Section 3.15 Real Property.......................................13
Section 3.16 Tangible Personal Property; Sufficiency of Assets...15
Section 3.17 Material Contracts; Debt Instruments................16
Section 3.18 Employee Benefit Plans..............................18
Section 3.19 Labor Matters.......................................19
Section 3.20 Environmental Compliance............................19
Section 3.21 Insurance...........................................21
i
<PAGE>
Section 3.22 Interests of Officers and Directors.................21
Section 3.23 Brokers or Finders..................................22
Section 3.24 Restricted Shares...................................22
Section 3.25 Full Disclosure.....................................22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FAMILY GOLF AND MERGER SUB................22
Section 4.1 Existence, Good Standing, Corporate Authority.......22
Section 4.2 Authorization, Validity and Effect of Agreements....22
Section 4.3 Capitalization......................................23
Section 4.4 Family Golf SEC Filings; Financial Statements......23
Section 4.5 No Approvals or Notices Required; No Conflict
With Instruments..................................24
Section 4.6 Brokers or Finders..................................24
Section 4.7 Full Disclosure.....................................24
ARTICLE V
CONDITIONS TO THE MERGER....................................................25
Section 5.1 Conditions to the Obligations of Each Party.........25
Section 5.2 Conditions to the Obligations of Family Golf
and Merger Sub....................................25
Section 5.3 Conditions to the Obligations of the Company........26
ARTICLE VI
INDEMNIFICATION.............................................................26
Section 6.1 Survival............................................26
Section 6.2 Indemnification.....................................27
Section 6.3 Third-Party Claims..................................27
ARTICLE VII
MISCELLANEOUS...............................................................28
Section 7.1 Notices.............................................28
Section 7.2 Severability........................................29
Section 7.3 Governing Law.......................................29
Section 7.4 No Adverse Construction.............................29
Section 7.5 Counterparts........................................29
Section 7.6 Legal Fees and Expenses.............................29
Section 7.7 Successors and Assigns..............................29
Section 7.8 Amendment...........................................30
Section 7.9 Waiver..............................................30
Section 7.10 Entire Agreement....................................30
Section 7.11 Definition of Subsidiary and Affiliate..............30
Section 7.12 Definition of Knowledge of the Company..............30
Section 7.13 Stockholders are Third Party Beneficiaries..........30
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 25, 1997 (this
"Agreement"), among FAMILY GOLF CENTERS, INC., a Delaware corporation ("Family
Golf"), LAKE GROVE FAMILY GOLF CENTERS, INC., a New York corporation and a
wholly-owned subsidiary of Family Golf ("Merger Sub"), and LEISURE COMPLEXES,
INC., a New York corporation (the "Company").
WITNESSETH:
-----------
WHEREAS, the parties wish to provide for the terms and conditions upon
which a merger of the Company with and into Merger Sub would be consummated;
and
WHEREAS, it is intended that the merger constitute a tax-free
reorganization under Section 368(a)(1)(A) of the Internal Revenue Code of 1986,
as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.3(a) below) the
Company shall be merged with and into Merger Sub (the "Merger") in accordance
with the provisions of the New York Business Corporation Law (the "NYBCL"),
whereupon the separate corporate existence of the Company shall cease and
Merger Sub shall continue as the surviving corporation of the Merger (the
"Surviving Corporation") under the laws of the State of New York.
Section 1.2 Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger shall take place at the law offices of
Wingate, Kearney & Cullen, 445 Broadhollow Road, Melville, New York 11747, on
the date hereof (the "Closing Date").
Section 1.3 Effective Time; Effect of Merger. (a) As soon as
practicable after all the conditions to the Merger set forth in Article VII of
this Agreement have been fulfilled or, if permissible, waived, the parties
hereto shall cause the Merger to be consummated by filing a
<PAGE>
certificate of merger with the New York Department of State and making any
related filings required under the NYBCL. The Merger shall become effective at
such time as the certificate of merger is duly filed with the New York
Department of State, or at such later time as is specified in the certificate
of merger (the "Effective Time").
(b) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities, liabilities and duties of the Company and
Merger Sub, and the Merger shall have the effects provided in Article 9 of the
NYBCL.
Section 1.4 Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Family Golf, Merger Sub,
the Company or the holders of any of the following securities:
(a) Company Common Stock. (i) Subject to Section 1.7, each share of
Common Stock, par value $.01 per share ("Company Common Stock"), of the Company
issued and outstanding immediately prior to the Effective Time (other than any
shares of Company Common Stock to be canceled pursuant to Section 1.4(b)) shall
be converted into and represent the right to receive 0.1018 of a share of
Common Stock, par value $.01 per share ("Family Golf Common Stock"), of Family
Golf and warrants (the "Warrants") to purchase 0.0111 of a share of Family Golf
Common Stock (the "Merger Consideration"). No fractional shares of Family Golf
Common Stock and no fractional Warrants shall be issued in the Merger. Instead,
the number of shares of Family Golf Common Stock and the number of Warrants
receivable by a holder of Company Common Stock pursuant to the preceding
sentence shall in each case be rounded to the nearest whole number. Set forth
on Exhibit A hereto is the number of whole shares of Family Golf Common Stock
and the number of whole Warrants to be received by each holder of Company
Common Stock on the date hereof, after giving effect to the foregoing
provisions of this Section 1.4(a).
(ii) At the Effective Time, all issued and outstanding shares of
Company Common Stock shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each certificate previously
evidencing any such shares shall thereafter represent solely the right to
receive, upon the surrender of such certificate in accordance with the
provisions of Section 1.6 below, the Merger Consideration. The holders of
certificates previously evidencing shares of Company Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Company Common Stock, except as otherwise provided
herein or by law.
(b) Treasury Stock. Each share of Company Common Stock held in
treasury by the Company, immediately prior to the Effective Time, shall be
automatically canceled and extinguished without any conversion thereof and no
payment or other consideration shall be made or delivered with respect thereto.
2
<PAGE>
(c) Stock of Merger Sub. Each share of Common Stock, par value $.01
per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and become one share of common stock of
the Surviving Corporation with the same rights, powers and privileges as the
shares so converted and shall constitute the only outstanding shares of capital
stock of the Surviving Corporation.
Section 1.5 Exchange Ratio. Family Golf covenants and agrees with the
Company that it will not, subsequent to the execution of this Agreement and
prior to the Effective Time, effect any change to the outstanding shares of
Family Golf Common Stock, including without limitation by means of a stock
split, reverse stock split, stock dividend or other similar transaction.
Section 1.6 Exchange of Securities.
(a) Mechanics of Exchange. Promptly after the Effective Time and
subject to Section 1.6(b) below, Family Golf shall, or shall cause its transfer
agent to, upon surrender of each stock certificate formerly representing issued
and outstanding shares of Company Common Stock immediately prior to the
Effective Time (each a "Certificate"), deliver in accordance with the
instructions of the person in whose name such Certificate shall have been
issued (x) from the number of whole shares of Family Golf Common Stock into
which the shares previously represented by the Certificate shall have been
converted at the Effective Time in accordance with Section 1.4(a) above, (i) a
certificate, registered in the name of Ruskin, Moscou, Evans & Faltischek,
P.C., as escrow agent (the "Stockholder Escrow Agent"), the number of whole
shares of Family Golf Common Stock specified in such instructions as being
deliverable to such escrow agent (which, in the aggregate from all
stockholders, shall equal 10,000 shares) and (ii), subject to Section 1.6(b), a
certificate, registered in the name of such person, representing the balance of
the shares of Family Golf Common Stock issuable to such person, and (y) a
Common Stock Purchase Warrant, registered in the name of such person,
representing the number of whole Warrants into which the shares previously
represented by the Certificate shall have been converted at the Effective Time
in accordance with Section 1.4(a) above. Each Certificate so surrendered shall
forthwith be canceled. The number of shares of Family Golf Common Stock to be
issued to the Stockholder Escrow Agent and the Indemnity Escrow Agent (as
defined below) by the former stockholders of the Company are intended to be pro
rata among such stockholders based on the number of shares of Company Common
Stock owned by them immediately prior to the Effective Time. Set forth on
Exhibit A hereto is (i) the number of whole shares of Family Golf Common Stock
and Warrants issuable to each holder of Company Common Stock, (ii) the number
of whole shares of Family Golf Common Stock issuable to each such holder to be
delivered to, and registered in the name of, the Stockholder Escrow Agent and
(iii) the number of whole shares of Family Golf Common Stock issuable to each
such holder to be delivered to, and registered in the name of, the Indemnity
Escrow Agent in accordance with Section 1.6(b) below.
(b) Escrowed Shares. Immediately prior to the Effective Time, Family
Golf shall deliver to Continental Stock Transfer & Trust Company, as escrow
agent (the "Indemnity Escrow Agent"), in accordance with the terms of an Escrow
Agreement, to be dated as of the Closing Date
3
<PAGE>
(the "Escrow Agreement"), among the Indemnity Escrow Agent, Family Golf, the
Company and Arthur J. Calace Jr., as the representative of the holders of the
Company Common Stock (the "Stockholder Representative") (the form of which is
annexed to this Agreement as Exhibit B), a certificate representing 40,000
shares of Family Golf Common Stock (the "Escrowed Shares"). The Escrowed Shares
shall be registered in the name of the Indemnity Escrow Agent and deducted from
the shares of Family Golf Common Stock otherwise deliverable to the holders of
Company Common Stock in accordance with Sections 1.4(a) and 1.6(a) above, and
shall be disposed of in accordance with the terms of the Escrow Agreement. The
Escrowed Shares are being deposited in the Escrow Account for the purposes of
satisfying any indemnifiable Losses (as defined in Section 6.2) of Family Golf,
the Surviving Corporation and their respective successors, directors and
officers pursuant to Article VI hereof.
(c) Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed satisfactory to Family Golf, Family Golf will cause to be
delivered to such person, the Shareholder Escrow Agent and the Indemnity Escrow
Agent, in respect of such lost, stolen or destroyed Certificate, the Merger
Consideration deliverable in respect thereof as determined in accordance with
Sections 1.4(a), 1.6(a) and 1.6(b) above.
(d) No Further Ownership Rights in Company Common Stock. At the
Effective Time, the stock transfer books of the Company shall be closed and
there shall be no further registration of transfers of shares of Company Common
Stock thereafter on the records of the Company. Any Certificates presented to
the Surviving Corporation for any reason on or after the Effective Time shall
be converted into the Merger Consideration specified in Section 1.4(a) above.
The Merger Consideration issued upon the surrender of a Certificate for
exchange shall be deemed to have been issued in full satisfaction of all rights
pertaining to the shares of Company Common Stock formerly represented by such
Certificate.
(e) No Dividends Before Surrender of Certificates. No dividends or
other distributions (whether in cash or in kind) declared or made with respect
to Family Golf Common Stock shall be paid to the holder of any unsurrendered
Certificate, which after the Effective Time represents the right to receive
shares of Family Golf Common Stock and Warrants, with respect to such Family
Golf Common Stock until the holder of record of such Certificate shall
surrender the same as provided herein. Subject to the effect of applicable
laws, following surrender of any such Certificate there shall be paid to the
record holder of the certificates representing whole shares of Family Golf
Common Stock issued in exchange therefor, without interest, (i) at the time of
surrender, the amount of dividends or other distributions (whether in cash or
in kind), if any, theretofore payable by Family Golf with respect to such whole
shares of Family Golf Common Stock the payment date for which was on or after
the date of the Effective Time and prior to such surrender, and (ii) at the
appropriate payment date, the amount of dividends or other distributions
(whether in cash or in kind), if any, with a record date prior to such
surrender and with a payment date subsequent to such surrender payable with
respect to such whole shares of Family Golf Common Stock.
4
<PAGE>
Section 1.7 Dissenting Shares. (a) Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock which are issued and
outstanding immediately prior to the Effective Time and which are held by a
Company stockholder who is entitled to appraisal rights pursuant to Section 910
of the NYBCL, who, on a timely basis, makes and perfects a demand for appraisal
of such shares in accordance with all requirements and provisions of Section
623 of the NYBCL, and who does not effectively withdraw or lose the right to
such appraisal (the "Dissenting Shares") shall not be converted as described in
Section 1.4(a), but shall, from and after the Effective Time, represent only
the right to receive such consideration as may be determined to be due to such
Company stockholder with respect to such Dissenting Shares pursuant to Section
623 of the NYBCL; provided, however, that Dissenting Shares held by any Company
stockholder who, after the Effective Time, withdraws his demand for appraisal
or loses his right of appraisal with respect to such shares, in either case
pursuant to Section 623 of the NYBCL, shall be deemed to have been converted,
as of the Effective Time, into the right to receive the Merger Consideration
specified in Section 1.4(a), without interest.
(b) The Company shall give Family Golf prompt notice of any demands
for appraisal received by it, withdrawals of such demands, and any other
instruments served pursuant to Section 910 or Section 623 of the NYBCL and
received by the Company relating thereto.
ARTICLE II
CERTAIN MATTERS RELATING TO
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation of the Surviving Corporation.
The Certificate of Incorporation of Merger Sub, as in effect at the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended as provided by law; provided, that there shall be such
other changes made to such Certificate of Incorporation as shall be reasonably
acceptable to the parties hereto as shall be necessary or appropriate in order
to effectuate the transactions contemplated by this Agreement or to otherwise
comply with applicable law.
Section 2.2 Bylaws of the Surviving Corporation. The Bylaws of Merger
Sub, as in effect at the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
Section 2.3 Directors and Officers of the Surviving Corporation. The
directors of Merger Sub immediately prior to the Effective Time shall be the
directors of the Surviving Corporation and all such directors will hold office
from the Effective Time until their respective successors are duly elected or
appointed and qualify in the manner provided in the Certificate of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided
by applicable law. The officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation and all such
officers will hold office until their respective successors are duly
5
<PAGE>
appointed and qualify in the manner provided in the Bylaws of the Surviving
Corporation, or as otherwise provided by applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Family Golf as follows:
Section 3.1 Existence, Good Standing, Corporate Authority. The Company
is a corporation duly organized, validly existing and in good standing under
the laws of the State of New York and Genprop LLC, a New York limited liability
company ("Gen Prop"), is a limited liability company, duly formed, validly
existing and in good standing under the laws of the State of New York (except
that the notice to be published pursuant to Section 206 of the New York Limited
Liability Company Law has not been published by or on behalf of Gen Prop). Each
of the Corporation and Gen Prop has all requisite power and authority to own,
lease and operate its properties and to carry on its business as it is now
being conducted. The Company and Gen Prop are duly qualified or licensed as a
foreign corporation (in the case of the Company) or as a foreign limited
liability company (in the case of Gen Prop) to transact business, and is in
good standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so qualified, licensed or in good standing has not had, and will not have,
singly or in the aggregate, a material adverse effect on the business,
financial condition or results of operations (a "Material Adverse Effect") of
either the Company or Gen Prop, taken as a whole.
Section 3.2 Charter Documents; Corporate Records. The Company has
delivered to Family Golf true and correct copies of the Company's restated
certificate of incorporation (the "Restated Certificate of Incorporation") and
by-laws, and Gen Prop has delivered to Family Golf true and correct copies of
Gen Prop's articles of organization and operating agreement, all as amended
through and in effect on the date hereof. The minute books of the Company, as
made available to Family Golf, contain true records of all meetings of, or
written consents in lieu of meetings executed by, the Company's board of
directors (and all committees thereof) and the stockholders of the Company. All
material actions and transactions taken or entered into by the Company or Gen
Prop, as the case may be, requiring, with respect to the Company, action by the
Company's board of directors or stockholders, and with respect to Gen Prop, its
members, were duly authorized or ratified as necessary. The stock certificate
books and stock records of the Company, and the membership books and records of
Gen Prop, as made available to Family Golf, are true and complete.
Section 3.3 Authorization and Validity of Agreement. The Company has
all requisite corporate power and authority to execute and deliver this
Agreement and, subject to its obtaining the requisite vote or consent of its
shareholders, to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by the Company
6
<PAGE>
and the consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of the Company and by all other all
requisite corporate action on the part of the Company, subject, in the case of
the consummation of the Merger, to obtaining the requisite vote or consent of
the holders of the outstanding shares of Company Common Stock. This Agreement
has been duly executed and delivered by the Company and is a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms (except insofar as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by principles governing the availability of
equitable remedies).
Section 3.4 No Approvals or Notices Required; No Conflict With
Instruments. The execution and delivery by the Company of this Agreement do
not, and the performance by the Company of its obligations hereunder and the
consummation of the transactions contemplated hereby will not:
(i) assuming approval of the Merger by the requisite vote or consent
of the Company's stockholders, conflict with or violate the Restated
Certificate of Incorporation or by-laws of the Company or the articles of
organization or the operating agreement of Gen Prop;
(ii) require any consent, approval, order or authorization of or other
action by any Governmental Entity (as defined clause (v) of this Section
3.4) (a "Government Consent") or any registration, qualification,
declaration or filing with or notice to any Governmental Entity (a
"Governmental Filing"), in each case on the part of or with respect to the
Company or Gen Prop, except for (A) the filing of an appropriate
certificate of merger with the New York Department of State; (B) those
Government Consents and Governmental Filings (the "Local Approvals") with
state and local governmental authorities required with respect to Licenses
(as defined in Section 3.13(a)) held by the Company and identified on
Schedule 3.4; and (C) the Governmental Filings required pursuant to the
pre-merger notification requirements of the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act");
(iii) require, on the part of the Company or Gen Prop, any consent by
or approval of (a "Contract Consent") or notice to (a "Contract Notice")
any other person or entity (other than a Governmental Entity), whether
under any License or other Contract (as defined in clause (iv) of this
Section 3.4) or otherwise, except as and to the extent specified on
Schedule 3.4;
(iv) assuming that all Government Consents, Government Filings,
Contract Consents and Contract Notices described in clause (ii) of this
Section 3.4 or on Schedule 3.4 are obtained, made and given, conflict with,
result in any violation or breach of or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or the loss of any material
benefit under or the
7
<PAGE>
creation of a Lien (as defined in Section 3.16(a)) or other encumbrance on
any assets pursuant to (any such conflict, violation, breach, default,
right of termination, cancellation or acceleration, loss or creation, a
"Violation"), any Contract (which term shall mean and include any note,
bond, indenture, mortgage, deed of trust, lease, franchise, permit,
authorization, license, contract, instrument, employee benefit plan or
practice, or other agreement, obligation, commitment or concession of any
nature) to which the Company, Gen Prop, or any Affiliate of the Company or
Gen Prop is a party, by which the Company, Gen Prop or any Affiliate of the
Company or Gen Prop or any of their respective assets or properties is
bound or affected or pursuant to which the Company, Gen Prop, or any
Affiliate of the Company or Gen Prop is entitled to any rights or benefits
(including the Licenses); and
(v) assuming (x) that the Merger is approved by the requisite vote or
consent of the Company's stockholders and (y) the Government Consents and
Governmental Filings specified in clause (ii) of this Section 3.4 or on
Schedule 3.4 are obtained, made and given, result in a Violation of, under
or pursuant to any law, rule, regulation, order, judgment or decree
applicable to the Company or Gen Prop or, to the knowledge of the Company,
any Affiliate of the Company or Gen Prop, or by which any of their
respective properties or assets are bound or affected. As used herein, the
term "Governmental Entity" means and includes any court, administrative
agency, regulatory body, commission or other governmental authority,
department or instrumentality, Federal, state, local or foreign, or other
entity exercising executive, legislative or judicial functions.
Section 3.5 Capitalization. (a) The authorized capital stock of the
Company consists of 10,000,000 shares of Company Common Stock and 60,000 shares
of Convertible Preferred Stock, par value $1.00 per share (the "Company
Preferred Stock"). As of the date hereof, there are 5,000,000 shares of Company
Common Stock issued and outstanding and 17,500 shares of Company Preferred
Stock issued and outstanding. No shares of Company Common Stock or shares of
Company Preferred Stock are held in the treasury of the Company. All issued and
outstanding shares of Company Common Stock and Company Preferred Stock are duly
authorized, validly issued, fully paid and nonassessable, are not subject to
and have not been issued in violation of any preemptive rights and have not
been issued in violation of any federal or state securities laws. There are no
issued or outstanding bonds, debentures, notes or other indebtedness of the
Company the holders of which have the right to vote (or which are convertible
into or exercisable for securities having the right to vote) on any matter on
which stockholders may vote ("Voting Debt"). There are no authorized or
outstanding options, warrants, calls, subscriptions, convertible securities or
other rights, agreements, arrangements or commitments of any character to or by
which the Company is a party or is bound which, directly or indirectly,
obligate the Company to issue, deliver or sell or cause to be issued, delivered
or sold any additional shares of Company Common Stock or Company Preferred
Stock or any other capital stock or Voting Debt of the Company 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 the Company to grant, extend or enter into any such option, warrant,
call, subscription or other right. Immediately after the Effective Time, there
will be no subscriptions, options, warrants, calls, rights, commitments or
agreements which will entitle
8
<PAGE>
(conditionally or unconditionally) any person or entity to purchase or
otherwise acquire, or will obligate (conditionally or unconditionally) the
Surviving Corporation (as the Company'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 (other than such as may be created by Family Golf, Merger Sub or any
of their respective Affiliates). The Company 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 the
Company, 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.
(b) The Company has complied with all of the terms of the Restated
Certificate of Incorporation relating to Company Preferred Stock, and under the
Restated Certificate of Incorporation the Company is required to redeem all
outstanding shares of Company Preferred Stock immediately prior to the Merger.
The aggregate redemption price (consisting of the "Call Price," as such term
is defined in the Restated Certificate of Incorporation, and any premium)
payable to the holders of all outstanding shares of Company Preferred Stock is
$2,210,194.42. As of the time of the redemption of the Company Preferred Stock,
and assuming satisfaction of the conditions to the obligation of the Company
to consummate the Merger set forth in Sections 5.3(iii), (iv) and (v) hereof,
the Company will have sufficient stated capital or surplus to redeem all of
the outstanding shares of Company Preferred Stock in compliance with Section
513 of the NYBCL.
Section 3.6 No Subsidiaries. Other than Gen Prop, the Company has no
Subsidiaries (as defined in Section 7.11), and does not own, directly or
indirectly, any interest or investment (whether equity or debt) in any
corporation, partnership joint venture, trust or other legal entity.
Section 3.7 Financial Condition. (a) The Company has delivered to
Family Golf correct and complete copies of the following: (i) an unaudited
statement of assets, liabilities, and shareholders equity (deficit) of the
Company as of March 31, 1997 (the "Last Balance Sheet"), and the related
statements of revenues and expenses, accumulated deficit and retained earnings
(deficit) and cash flows for the quarter then ended; (ii) unaudited statements
of assets, liabilities, and shareholders' equity (deficit) - income tax basis
of the Company as of December 31, 1996, and the related statements of revenues
and expenses, accumulated deficit and retained earnings (deficit) and cash
flows for the year then ended; and (iii) audited statements of assets,
liabilities, and shareholders' equity (deficit) - income tax basis of the
Company as of December 31, 1995, and the related statements of revenues and
expenses, accumulated deficit and retained earnings (deficit) and cash flows
for each of the years ended December 31, 1995 and 1994 (the financial
statements referred to in clauses (i), (ii) and (iii) are referred to
collectively herein as the "Company Financial Statements"). The Company
Financial Statements were prepared on the income tax basis of accounting
applied on a consistent basis throughout the period indicated. The Company
Financial Statements fairly present the financial position, results of
operations and
9
<PAGE>
cash flows of the Company as at the respective dates thereof and for the
respective periods indicated therein, subject, in the case of the
interim financial statements, to normal year-end audit adjustments. Since
December 31, 1996, there has been no change in any of the significant
accounting (including tax accounting) policies, practices or procedures of the
Company, except that Company has determined to change from the income tax to
the GAAP basis of reporting effective with the quarter ended June 30, 1997.
(b) The books of account of the Company are true and complete, have
been maintained in accordance with good business practices and accurately and
fairly reflect all of the properties, assets, liabilities and transactions of
the Company in accordance with generally accepted accounting principles
consistently applied. All fees, charges, costs and expenses associated with the
ownership, leasing, operation, maintenance and management of the Company's
business that are required by generally accepted accounting principles to be
charged and reflected in the Company Financial Statements and on the Company's
books and records have been properly charged and reflected, and such financial
statements and books and records do not, because of the provision of services
or the bearing of costs and expenses by any other person or entity or for any
other reason, materially understate the true costs and expenses of conducting
the business of the Company.
(c) The unaudited statement of assets, liabilities and shareholders
equity (deficit) of Gen Prop as of June 30, 1997, fairly presents the financial
position of Gen Prop as at that date.
Section 3.8 No Undisclosed Liabilities. Except as set forth on
Schedule 3.8 and except for liabilities and obligations incurred in the
ordinary course of business since the date of the Last Balance Sheet, which are
not, singly or in the aggregate, material, the Company does not have any
liabilities or obligation (absolute, accrued, contingent or otherwise) which,
under generally accepted accounting principles, should be fully reflected,
reserved against or disclosed in the Last Balance Sheet that are not so
reflected, reserved against or disclosed.
Section 3.9 Absence of Certain Changes or Events. (a) Since March 31,
1997 and subject to Schedule 3.9, there has not been any change in the
condition (financial or otherwise) of the assets, liabilities, earnings or
business of the Company, other than changes in the ordinary course of business,
none of which has been or will be (singly or in the aggregate) materially
adverse.
(b) Without limiting the generality of the foregoing, since March 31,
1997, and except as set forth on Schedule 3.9, the Company has not:
(i) incurred or become subject to or made any commitment with respect
to any obligation or liability (absolute or contingent) which commits the
Company to pay an amount, in any single transaction or series of related
transactions, in excess of $25,000, except current liabilities incurred,
and obligations under Contracts entered into, by the Company in the
ordinary course of business and on terms consistent with past practices;
10
<PAGE>
(ii) discharged or satisfied any Lien, or paid, canceled, compromised
or otherwise satisfied any obligation, indebtedness or liability (absolute
or contingent), other than the payment in the ordinary course of business
of current liabilities;
(iii) declared or made any payment of any dividend or other
distribution (whether in cash, securities, properties or otherwise) in
respect of the Company Common Stock or the Company Preferred Stock or
purchased or redeemed (except to the extent contemplated by Section 5.1(ix)
hereof) any of the Company Common Stock or Company Preferred Stock;
(iv) mortgaged, pledged, subjected to or (except for the Liens
described on Schedule 3.15 and Schedule 3.16) suffered to exist any Liens
upon any of its properties or assets, except Permitted Liens (as such term
is defined in Section 3.16 hereof);
(v) sold or transferred any portion of its assets, other than
immaterial assets sold or transferred in the ordinary course of business,
or canceled or agreed to cancel any debts or claims;
(vi) suffered any material loss or damage to any of its assets or
properties, whether or not covered by insurance, or waived or released, or
agreed to waive or release, any rights of substantial value;
(vii) entered into any transaction other than in the ordinary course
of business and on terms consistent with past practices;
(viii) (A) increased the rate of compensation payable or to become
payable by the Company to any of its officers or directors, or (B) granted,
made or accrued any bonus, incentive compensation, service award or other
like benefit, contingently or otherwise, to or for the credit of any of its
officers, directors, employees or agents, except pursuant to the existing
plans described in Schedule 3.18 or (C) made any employee welfare, pension,
retirement, profit-sharing or similar payment or arrangement except
pursuant to the existing plans and arrangements described in Schedule 3.18
or (D) paid or granted any right to receive any severance or termination
pay to any officer, director, employee or agent;
(ix) terminated, rescinded, modified, amended or renewed, or waived or
released in writing any term, condition or provision of, any Material
Contract (as such term is defined in Section 3.18(a) hereof);
(x) purchased, leased or acquired any additional assets other than in
the ordinary course of business and on terms consistent with past practices
or made any extraordinary capital or operating expenditure, capital
addition or improvement not contemplated by the capital or operating
budgets provided to the Company; or
11
<PAGE>
(xi) entered into any contractual arrangement or understanding
(written or oral, express or implied) to do any of the foregoing.
Section 3.10 Tax Matters. Except as set forth on Schedule 3.10, (i)
there has been duly filed by or on behalf of each of the Company (and its
predecessors), or filing extensions from the appropriate federal, state, local
and foreign Governmental Entities have been obtained with respect to, all
federal, state, local and foreign tax returns and reports required to be filed
on or prior to the date hereof and (ii) payment in full of all taxes required
to be paid in respect of the periods covered by such tax returns and reports
has been made. Prior to the date hereof, Gen Prop has not been required to file
any federal, state, local or foreign tax return. None of (x) the federal income
tax returns filed by or on behalf of the Company and its predecessors (the
"Company Federal Returns") under the Code, or (y) the New York State income tax
returns filed by or on behalf of the Company and its predecessors (the "Company
State Returns") under Article 9-A of the New York Tax Law are currently under
examination by the Internal Revenue Service ("IRS") or with the State of New
York Department of Taxation and Finance (the "NY Dept. of Taxation"),
respectively. There have not been any deficiencies or assessments asserted in
writing by the IRS or the NY Dept. of Taxation with respect to the Company
Federal Returns or the Company State Returns, respectively. Except as set forth
on Schedule 3.11, none of the Company, Gen Prop nor any of their respective
predecessors has, with regard to any assets or property held, acquired or to be
acquired by any of them, filed a consent pursuant to Section 341(f) of the Code
or any predecessor statute. For the purposes of this Agreement, the term "tax"
(including, with correlative meaning, the terms "taxes" and "taxable") shall
include all federal, state, local and foreign income, profits, franchise, gross
receipts, payroll, sales, employment, use, property, withholding, excise and
other taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts.
Section 3.11 Compliance With Laws. (a) Each of the Company and Gen
Prop is in substantial compliance with all Laws (as such term is defined in
Section 3.11(c) below) in respect to the conduct of its business and the
ownership, possession, maintenance and operation of its assets and properties,
except any such noncompliance which, singly or in the aggregate, would not have
a Material Adverse Effect on (i) the Company and Gen Prop, taken as a whole, or
(ii), except as set forth on Schedule 3.11 the business conducted by the
Company at any of the Owned Property or the Leased Real Estate. No claims or
investigations by any Governmental Entity alleging any violation by the
Company of any such Laws have at any time been made or settled during the last
two years.
(b) The Company has not, nor has any director, officer, agent or
employee of the Company: (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
12
<PAGE>
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 Entity or court.
Section 3.12 Licenses. (a) Each of the Company and Gen Prop holds all
licenses (including without limitation liquor licenses), franchises,
registrations, ordinances, authorizations, permits, certificates, variances,
qualifications, exemptions, orders, approvals and waivers of any Governmental
Entity (federal, state and local) (collectively, "Licenses") which are required
for the conduct of its business operations as currently conducted. All of the
Licenses (including without limitation all liquor licenses) are in full force
and effect, and no action, complaint, claim, prosecution, indictment, suit,
arbitration, investigation or proceeding (an "Action") by or before any
Governmental Entity is pending or, to the knowledge of the Company, threatened,
seeking the revocation or limitation of any of the Licenses. Schedule 3.12
lists all Licenses (including all liquor licenses) that are material to the
business of the Company and/or Gen Prop. Except as indicated on Schedule 3.12,
no License will terminate as a result of the Merger.
(b) Schedule 3.12 lists all entities ("Concession Entities") other
than the Company that hold licenses to serve or sell alcoholic beverages in
locations on the premises of or associated with or contiguous to the facilities
operated by the Company in connection with the business of the Company.
Section 3.13 Legal Proceedings. Except as set forth on Schedule 3.13,
neither the Company nor Gen Prop has been served with notice of any pending
Action and, to the knowledge of the Company, there is no Action threatened
against the Company (other than claims against the Company of a type routinely
incurred in the ordinary course of the business conducted by the Company, which
claims are fully covered by insurance (other than the first $125,000 in the
aggregate of such claims during any policy year) or Gen Prop nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or any
arbitrator outstanding against the Company or Gen Prop. To the knowledge the
Company, there is no Action pending against any Affiliate of the Company, or
against any officer, director or shareholder of the Company or any such
Affiliate which, if adversely resolved against such Affiliated, officer or
director, could be reasonably expected to have a Material Adverse Effect on the
Company or the Surviving Corporation.
Section 3.14 Intellectual Property. The ownership, operation and
conduct by the Company of its business, as presently owned, operated, and
conducted, does not, to the knowledge of the Company, infringe upon or conflict
in any respect with any patent, copyright, trademark, trade name, service mark,
brand name or other intellectual property rights (collectively, "Intellectual
Property") of any other person and, to the knowledge of the Company and except
as set forth on Schedule 3.14, no other person is infringing upon any
Intellectual Property of the Company.
13
<PAGE>
Schedule 3.14 sets forth an accurate and complete list of the Intellectual
Property owned or used by the Company in the conduct of its business. The
Company has filed a trademark application for the name "SPORTS PLUS," and as of
the date hereof the Company has no knowledge of any objections being filed in
response to such application, except as described on Schedule 3.14.
Section 3.15 Real Property. (a) Schedule 3.15 sets forth a list of all
real property owned in fee by the Company and Gen Prop (individually, an
"Owned Property" and, collectively, the "Owned Properties"). Except as set
forth on Schedule 3.15, either the Company or Gen Prop 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, purchases 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 ("Permitted Liens"). There are no
condemnations or eminent domain (which term, as used herein, shall include all
compulsory acquisitions or takings by Governmental Entities) proceedings
pending or, to the knowledge of the Company and Genprop, threatened against any
Owned Property or any material portion thereof. Neither the Company nor Genprop
has received any notice from any city, village or other Governmental Entity 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 relating to the
improvements on the Owned Property at which the Sports Plus complex is located
and, to the knowledge of the Company, there are no material structural defects
relating to any of the improvements at any of the other Owned Properties. There
are no improvements on the Owned Property of Gen Prop.
(b) Schedule 3.15 lists all real property (including all land and
buildings) which is leased by Company as lessee or sublessee (the "Leased Real
Estate"). Gen Prop does not lease any real property. The Company has delivered
or caused to be delivered to Family Golf complete and accurate copies of the
written leases and subleases which are listed in Schedule 3.15. The Company has
not received written notice of condemnation or eminent domain proceedings
pending or threatened against any Leased Real Estate. The Company has not
received any notice from any city, village or other Governmental Entity 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. To the knowledge of the Company, there are no material structural
defects relating to any Leased Real Estate. Except as set forth on Schedule
3.15:
(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 the Company, valid and binding on the
lessor or sublessor and enforceable in accordance with its terms (except
insofar as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights
14
<PAGE>
generally or by principles governing the availability of equitable
remedies), and all consents required under any Lease in connection with the
Merger have been obtained;
(ii) no amount payable under any Lease is past due;
(iii) the Company is in compliance in all material respects with all
commitments and obligations on its part to be performed or observed under
each Lease and is not aware of the failure by any other party to such Lease
to comply in all material respects with all of its commitments and
obligations;
(iv) the Company has not 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 the Company to comply with any provision
of any Lease or asserting noncompliance, or asserting the Company 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 Company 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 the Company;
(v) the Company has not assigned, mortgaged, pledged or otherwise
encumbered its interest, if any, under any Lease; and
(vi) the Company 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 Company in
the manner in which such business was conducted during the fifteen-month period
ended March 31, 1997 and since such time. Except as set forth on Schedule 3.15,
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. Except
as set forth on Schedule 3.15, none of the Leased Real Estate is owned, in
whole or in part, by any director, officer or stockholder of the Company, by
any Affiliate of the Company or by any entity created for the benefit of any
family member(s) of any of the foregoing persons.
Section 3.16 Tangible Personal Property; Sufficiency of Assets. (a)
Except as disclosed on Schedule 3.16, the Company 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 the Company, except (x) for personal property leased
(exclusive of capitalized leases) by the Company pursuant to a written
agreement identified on Schedule 3.16 and (y) 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,
15
<PAGE>
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 3.16; and (iv)
other Liens, if any, set forth in Schedule 3.16. Except as set forth in
Schedule 3.16, none of the tangible personal property which is used in the
business of the Company is leased by the Company. The tangible personal
property owned or used in the operation of the business of the Company are in
good working order, reasonable wear and tear excepted, and are suitable for the
use for which they are intended in all material respects.
(b) Schedule 3.16 sets forth a list, as of July 14, 1997, of the
video, amusement and arcade games owned or leased by the Company at each Owned
Property and Leased Real Estate. Since July 14, 1997, none of such games have
been removed or replaced, except that certain leased games may have been
replaced or removed in the ordinary course of business in accordance with the
terms of the applicable lease agreements. Except as set forth on Schedule 3.16,
the Company owns all such video, amusement and arcade games, free and clear of
all Liens. All of the inventory of the Company consists of a quality and
quantity reasonably usable and saleable in the ordinary course of business
consistent with past practice, subject to normal and customary allowances for
spoilage, damage and outdated items reflected on the books and records of the
Company. All items included in the inventory of the Company are the property of
the Company, free and clear of all Liens, are not held by the Company on
consignment from others and conform in all material respects to all standards
applicable to such inventory or its use or sale imposed by Law.
(c) Except as set forth on Schedule 3.16, the tangible personal
property of the Company 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 15 month period
ended March 31, 1997 and since such time, except for additions thereto and
deletions therefrom in the ordinary course of business and consistent with past
practice which could not reasonably be expected to have a Material Adverse
Effect on the Company.
Section 3.17 Material Contracts; Debt Instruments. (a) Except as
disclosed on Schedule 3.17, the Company is not a party or subject to any of the
following (collectively, "Material Contracts"):
(i) any collective bargaining or other agreements with labor unions,
trade unions, employee representatives, work committees, guilds or
associations representing employees of the Company;
(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 or which in any case is not terminable by the Company
or
16
<PAGE>
its subsidiaries 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 agreements, lease or other significant agreement
or arrangement between the Company and any Concession Entity;
(v) any lease for real or personal property in which the amount of
payments which the Company 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 this
Agreement, the closing of the Merger, or the consummation of the other
transactions contemplated hereby;
(vii) any agreement, contract, policy, License, document, instrument,
arrangement or commitment that materially limits the freedom of the Company
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 Family Golf or any of its 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 the Company.
(b) Set forth on Schedule 3.17 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 the Company is outstanding or
may be incurred (collectively, "Loan Agreements") and (y) the respective
principal amounts outstanding thereunder at June 30, 1997. Except as set forth
on Schedule 3.17, 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 3.17,
17
<PAGE>
"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 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 the Company
(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 arises 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 on Schedule 3.17, 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 the Company and, to the knowledge of the
Company and Gen Prop, the other parties thereto. Except as set forth on
Schedule 3.17, the Company is not in default under any Material Contract or
Loan Agreement in any material respect, nor does any condition exist that with
notice or lapse of time or both would constitute a material default thereunder.
To the knowledge of the Company, no other party to any Material Contract or
Loan Agreement is in material default thereunder. The Company has no reason to
believe that any of the Material Contracts or Loan Agreements that are
renewable will not be renewed on reasonable terms, nor does the Company 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 the Company in the future. Except as set forth on
Schedule 3.17, 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 3.18 Employee Benefit Plans. (a) The names of and the IRS
identification numbers of (i) all "employee pension benefit plans," as defined
in Section 3(2) and subject to Title IV of the Employee Retirement Income
Security Act of 1984, as amended ("ERISA"), which have been maintained or
contributed to by the Company during any of the last five years (the "Pension
Plans"), (ii) all other "employee pension benefit plans" as defined in Section
3(2) of ERISA which have been maintained or contributed to by the Company
during any of the last five (5) years, and (iii) all other employee benefit
plans (including all "employee welfare benefit plans" as defined in Section
3(1) of ERISA and all other "employee benefit plans" as defined in Section 3(3)
of ERISA) which have been maintained or contributed to by the Company and (A)
which currently exist or (B) for which any continuing liabilities exist (all of
which plans described in clauses (i), (ii) and (iii) are referred to
collectively as the "Company Plans"), are listed on Schedule 3.18. Except as
otherwise indicated on Schedule 3.18, none of the Pension Plans is a
"multi-employer plan" as defined in
18
<PAGE>
Section 4001(a)(3) of ERISA or single-employer plan subject to Section 4063 of
ERISA, and the Company has not incurred and is not expected to incur any
withdrawal liability under ERISA with respect to any "multi-employer plan" or
any single-employer plan subject to Section 4063 of ERISA. Gen Prop has no
benefit plans for its members, managers or employees.
(b) Favorable determination letters from the IRS with respect to the
status of each Pension Plan which is intended to qualify under Section 401 of
the Code have been received. The Company is not aware of any facts which would
adversely affect the qualified status of any Pension Plan that is intended to
so qualify.
(c) The Company has not incurred in connection with the termination of
a Pension Plan, and has no knowledge of any event or condition which would be
reasonably likely to cause, any liability to the Pension Benefit Guaranty
Corporation (the "PBGC") or otherwise under ERISA. Except as set forth in
Schedule 3.19, were any Pension Plan to terminate on the date hereof the
Company would not incur any material liability to the PBGC or otherwise under
ERISA, nor be required to contribute any material additional amounts to any
Pension Plan in order to terminate such Pension Plan.
(d) The Company has not been served with any Action against the assets
of any of the trusts under the Company Plans or against the Company or any
fiduciary.
(e) The Company Plans have been maintained and administered in all
material respects in accordance with their terms and with all provisions of
ERISA and the Code or any predecessor statute (including rules and regulations
under ERISA, the Code and any predecessor statute) applicable thereto and
neither the Company nor any "party in interest" or "disqualified person"
(within the meaning of Section 4975 of the Code or Title I, Part 4 of ERISA)
within the control of the Company with respect to the Company Plans has engaged
in a "prohibited transaction" within the meaning of Section 4975 of the Code or
Title I, Part 4 of ERISA. Without limiting the generality of the foregoing,
none of the Pension Plans has incurred a material "accumulated funding
deficiency" within the meaning of Section 302 of ERISA or Section 412 of the
Code whether or not waived; no Pension Plan has been the subject of a
"reportable event" as defined in Section 4043 of ERISA, as to which notices
would be required to be filed with the PBGC, and all required contributions
under each Pension Plan for all periods through and including the date hereof
have been made.
(f) At the Effective Time, each of the Company Plans will be fully
funded with assets available for allocation to the appropriate participants and
former participants.
Section 3.19 Labor Matters. Except as set forth on Schedule 3.19, the
Company is not a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization, and there are no unfair labor practices or labor arbitration
proceedings pending or, to the knowledge of the Company, threatened against the
Company relating to its business. Other than as disclosed on Schedule 3.19: (i)
there are no
19
<PAGE>
organization efforts with respect to the formation of a collective bargaining
unit presently being made or threatened involving employees of the Company;
(ii) there is no labor strike, dispute, slowdown or work stoppage pending or,
to the knowledge of the Company, threatened against the Company nor has the
Company experienced any of the same within the past five years; and (iii) all
employees of the Company are employed at will. A list of the Company's
employees, together with each employee's job title and salary, as of June 22,
1997, is set forth on Schedule 3.19.
Section 3.20 Environmental Compliance. (a) For purposes of this
Section 3.20, (A) "Hazardous Substance" means any pollutant, contaminant,
hazardous or toxic substance or waste, solid waste, petroleum or any fraction
thereof, or any other chemical, substance or material listed or identified or
regulated by or under any Environmental Law; (B) "Environmental Law" means the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 et seq., the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act, 42 U.S. C. Section 6901 et seq., the
Clean Water Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C.
Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq., the Safe Drinking Water Act, 42 U.S.C. Section 300 et seq., the
Emergency Planning and Community Right to Know Act, 42 U.S.C. Section 11001 et
seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.,
the Oil Pollution Act, 33 U.S.C. Section 2701 et seq., in each case as amended
from time to time and all regulations promulgated thereunder, and any other
state or federal statute, law regulation, ordinance, bylaw, rule, judgment,
order, decree or directive of any Governmental Entity dealing with the
pollution or protection of natural resources or the indoor or ambient
environment or with the protection of human health or safety; and (C) "RCRA
Hazardous Waste" means a solid waste that is listed or classified as hazardous
waste, as that term is defined in or pursuant to the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. Section 6901 et seq.
(b) Except as set forth on Schedule 3.20, there are no claims pending
against the Company relating to a Hazardous Substance or arising under an
Environmental Law, nor has the Company received any form of notice that the
Company or any Owned Property or Leased Real Estate or any real property
previously owned or operated by the Company is, has been or may be in
noncompliance with or subject to liability under any Environmental Law.
(c) Except as set forth on Schedule 3.20, no Hazardous Substances are
now present in amounts, concentrations or conditions requiring investigation,
removal, remediation or any other response action or corrective action under,
or forming the basis of a claim pursuant to, any Environmental Law, in, on,
from or under any Owned Property or Leased Real Estate or any real property
previously owned or operated by the Company.
(d) Except as set forth on Schedule 3.20, none of the Owned Property
or Leased Real Estate is being, and, to the knowledge of the Company, has not
been during the period of time such property has been owned or leased by the
Company, used in connection with the business of manufacturing, storing or
transporting Hazardous Substances, and no RCRA Hazardous Wastes are
20
<PAGE>
being or, to the knowledge of the Company, have been during the period of time
owned or operated by the Company treated, stored or disposed of there in
violation of any Environmental Law.
(e) Except as set forth on Schedule 3.20, there neither are nor, to
the knowledge of the Company, have been during the period of time they have
been owned or operated by the Company any asbestos-containing materials,
polychlorinated biphomyl ("PCB")-containing materials or equipment,
underground storage tanks, lagoons or other containment facilities of any kind
which contain or contained any Hazardous Substances on any of the Owned
Property or Leased Real Estate.
(f) Except as set forth on Schedule 3.20, there are no locations,
facilities or properties at which Hazardous Substances originating at the
Company, the Owned Property or the Leased Real Estate were treated, stored,
recycled or disposed so as to give rise to liability on the part of the Company
under an Environmental Law.
(g) The Company has made available to Family Golf true and correct
copies of, all environmental audits or assessments, analyses of soil,
groundwater, indoor and outdoor air, sediment, surface water and
asbestos-containing materials conducted on or after January 1, 1992 relating in
whole or in part to the Company, any Owned Property or any Leased Real Estate
undertaken by or on behalf of the Company, and any written communications
received by the Company since January 1, 1992 relating in whole or in part to
the existence of Hazardous Substances at any Owned Property or Leased Real
Estate or any real property previously owned or operated by the Company or the
compliance of the Company with respect to any Environmental Law.
Section 3.21 Insurance. Schedule 3.21 sets forth all policies or
binders of fire, liability, workmen's compensation, vehicular or other
insurance held by or on behalf of the Company (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 this Agreement and
the aggregate limit of any of the insurer's liability thereunder). Such
policies and binders are in full force and effect and insure against risks and
liabilities customary for companies of similar size, financial condition and
engaged in the business in which the Company is engaged. The Company is not in
default with respect to payment of any premium or any provision contained in
any such policy or binder and has not failed to give any notice or present any
claim under any such policy or binder in due and timely fashion. Except for
claims set forth on Schedule 3.21, there are no outstanding unpaid claims under
any such policy or binder, and the Company has not been advised of any defense
to coverage in connection with any claim to coverage asserted or noticed by the
Company under or in connection with any of its extant insurance policies. The
Company has not received any written notice from or on behalf of any insurance
carrier issuing policies or binders relating to or covering the Company 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 the Company, purchase of additional equipment or
assets, or material modification of any of the methods of doing business, will
be required. The Company has no knowledge of any inaccuracy in any application
for
21
<PAGE>
such policies or binders, any failure to pay premiums when due or any
similar state of facts which might form the basis for termination of any such
insurance.
Section 3.22 Interests of Officers and Directors. Except as set forth
on Schedule 3.22, none of the Company's officers, directors or stockholders has
any interest in any property, real or personal, tangible or intangible, used in
or pertaining to the business of the Company, or in any supplier to or
distributor or customer of the Company. Except as set forth on Schedule 3.22,
the Company does not hold, and has not guaranteed, any indebtedness of any of
the Company's officers, directors or stockholders or any of their respective
Affiliates.
Section 3.23 Brokers or Finders. No agent, broker, investment banker,
financial advisor or other person or entity is or will be entitled, by reason
of any agreement, act or statement by the Company, to any financial advisory,
broker's, finder's or similar fee or commission in connection with any of the
transactions contemplated by this Agreement.
Section 3.24 Restricted Shares. The Company acknowledges and
understands that (i) the shares of Family Golf Common Stock to be issued in the
Merger to the stockholders of the Company in exchange for their shares of
Company Common Stock have not been, and as of the Effective Time will not have
been, registered under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities laws and (ii) such shares of Family Golf Common
Stock may not be sold except pursuant to an effective registration statement
filed by the Company under the Securities Act or pursuant to an applicable
exemption from the registration requirements of the Securities Act and any
state securities laws.
Section 3.25 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 the Company contains or will contain any untrue
statement of a material fact concerning the Company or any of its Affiliates,
or omits or will omit to state a material fact necessary in order to make the
statements made herein or therein concerning the Company or any of its
Affiliates, in light of the circumstances under which they were made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
FAMILY GOLF AND MERGER SUB
Family Golf and Merger Sub, jointly and severally, hereby represent
and warrant to the Company as follows:
Section 4.1 Existence, Good Standing, Corporate Authority. Each of
Family Golf and Merger Sub is a corporation duly organized, validly existing
and in good standing under the laws of the state of Delaware and have all
requisite power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted. Each of Family Golf and
22
<PAGE>
Merger Sub is duly qualified or licensed as a foreign corporation to transact
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so qualified or licensed or in good standing, individually or
in the aggregate, would not have a Material Adverse Effect on Family Golf and
its Subsidiaries, taken as a whole.
Section 4.2 Authorization, Validity and Effect of Agreements. Each of
Family Golf and Merger Sub has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Family
Golf and Merger Sub and the consummation of the transactions contemplated
hereby has been duly authorized by the Board of Directors or each of Family
Golf and Merger Sub, respectively, and by all other requisite corporate action
on the part of Family Golf and Merger Sub. This Agreement has been duly
executed and delivered by each of Family Golf and Merger Sub and is a valid and
legally binding obligation of each of Family Golf and Merger Sub, enforceable
against them in accordance with its terms.
Section 4.3 Capitalization. The authorized capital stock of Family
Golf consists of 50,000,000 shares of Family Golf Common Stock and 1,000,000
shares of "blank check" preferred stock, par value $.10 per share (the "Family
Golf Preferred Stock"). As of May 12, 1997, there were 11,878,617 shares of
Family Golf Common Stock and no shares of Family Golf Preferred Stock issued
and outstanding. No shares of Family Golf Common Stock are held in the treasury
of the Company. All issued and outstanding shares of Family Golf Common Stock
are duly authorized, validly issued, fully paid, nonassessable, are not subject
to and have not been issued in violation of any preemptive rights and have not
been issued in violation of any federal or state securities laws. As of June
25, 1997, 1,075,600 shares of Family Golf Common Stock were reserved for
issuance upon exercise of options and warrants issued by the Company.
Section 4.4 Family Golf SEC Filings; Financial Statements. (a) Family
Golf has timely filed all forms, reports and documents required to be filed by
it with the Securities and Exchange Commission (the "SEC") since December 31,
1995, and has heretofore made available to the Company, in the form filed with
the SEC (excluding any exhibits thereto), its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Family Golf Annual Report") and
its Quarterly Report on Form 10-Q for the three-months ended March 31, 1997
(the "Family Golf Quarterly Report"). The Family Golf Annual Report and the
Family Golf Quarterly Report, and any other forms, reports and other documents
filed by Family Golf with the SEC since December 31, 1995 and on or before the
date hereof, (x) were prepared in accordance with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the SEC thereunder and (y) did not, at the time they were
filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading.
23
<PAGE>
(b) The consolidated financial statements (including the notes
thereto) contained in the Family Golf Annual Report and the Family Golf
Quarterly Report were prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position, results of operations and cash flows of Family
Golf and its consolidated subsidiaries as at the respective dates thereof and
for the respective periods indicated therein, subject, in the case of the
unaudited interim financial statements included in the Family Golf Form 10-Q,
to normal year-end audit adjustments. Since March 31, 1997, (i) there has been
no change in any of the significant accounting (including tax accounting)
policies, practices or procedures of the Company and (ii) there has not been
any material adverse change in the business, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole.
Section 4.5 No Approvals or Notices Required; No Conflict With
Instruments. The execution and delivery by Family Golf and Merger Sub of this
Agreement do not, and the performance by Family Golf and Merger Sub of their
respective obligations hereunder and the consummation of the transactions
contemplated hereby will not:
(i) conflict with or violate the certificate of incorporation or
bylaws of Family Golf or Merger Sub;
(ii) require any Government Consent or Governmental Filing, in each
case on the part of or with respect to Family Golf or any of its
Subsidiaries, except for (A) the filing of certificates of merger with the
New York Department of State; (B) such Government Approvals as may be
required with respect to the Licenses held by the Company; and (C) the
Governmental Filings required pursuant to the HSR Act;
(iii) require, on the part of Family Golf or Merger Sub, a Contract
Consent from, or a Contract Notice to, any other person or entity (other
than a Governmental Entity), whether under any License or other Contract or
otherwise;
(iv) result in any Violation of or under any Contract to which Family
Golf or any of its Subsidiaries is a party, by which Family Golf or any of
its Subsidiaries or any of their respective assets or properties is bound
or affected or pursuant to which Family Golf or any of its Subsidiaries is
entitled to any rights or benefits; or
(v) assuming that the Government Consents and Governmental Filings
specified in clause (ii) of this Section 4.5 are obtained, made and given,
result in a Violation of, under or pursuant to any law, rule, regulation,
order, judgment or decree applicable to Family Golf or any of its
Subsidiaries or by which any of their respective properties or assets are
bound or affected.
Section 4.6 Brokers or Finders. No agent, broker, investment banker,
financial advisor or other person or entity is or will be entitled, by reason
of any agreement, act or statement
24
<PAGE>
by Family Golf or Merger Sub, to any financial advisory, broker's, finder's or
similar fee or commission in connection with any of the transactions
contemplated by this Agreement.
Section 4.7 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 Family Golf or Merger Sub contains or will contain
any untrue statement of a material fact concerning Family Golf, Merger Sub or
any of their Affiliates, or omits or will omit to state a material fact
necessary in order to make the statements made herein or therein concerning
Family Golf, Merger Sub or any of their Affiliates, in the light of the
circumstances under which they were made, not misleading.
ARTICLE V
CONDITIONS TO THE MERGER
Section 5.1 Conditions to the Obligations of Each Party. The
obligation of the Company, Family Golf and Merger Sub to consummate the Merger
and the other transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions:
(i) Shareholder Approval. The plan of merger contemplated by this
Agreement shall have been approved and adopted by either (x) the requisite
vote of the holders of the outstanding shares of the Company Common Stock
under the NYBCL or (y) the unanimous written consent of all of the holders
of the Company Common Stock, in each case in accordance with Section 903 of
the NYBCL.
(ii) HSR Act. The waiting period under the HSR Act relating to the
Merger shall have expired or been terminated.
(iii) Escrow Agreement. The Indemnity Escrow Agent, the Company,
Merger Sub, Family Golf and the Stockholder Representative shall have
executed and exchanged the Escrow Agreement, and Family Golf shall have
delivered to the Escrow Agent, to hold in accordance with the terms of the
Escrow Agreement, 40,000 shares of Family Golf Common Stock registered in
the name of the Indemnity Escrow Agent.
(iv) Registration Rights Agreement. Family Golf and each stockholder
of the Company who is to receive shares of Family Golf Common Stock in the
Merger shall have executed and exchanged a registration rights agreement,
dated the date hereof, in the form of Exhibit B hereto.
(v) Release of Pledged Company Common Stock. The 2,550,000 shares of
Company Common Stock pledged to The Chase Manhattan Bank (as successor to
Chemical Bank) shall have been delivered to Arthur J. Calace, as the
representative of the stockholders of the Company who pledged such shares.
25
<PAGE>
(vi) Redemption of Company Preferred Stock. The Company Preferred
Stock shall have been duly and validly redeemed prior to the Effective
Time.
Section 5.2 Conditions to the Obligations of Family Golf and Merger
Sub. The obligations of Family Golf and Merger Sub to consummate the Merger and
the other transactions contemplated by this Agreement are further subject to
the satisfaction of the following conditions, each of which may, to the extent
legally permissible, be waived by Family Golf and Merger Sub:
(i) Opinion of Counsel for the Company. Family Golf and Merger Sub
shall have received from Ruskin, Moscou, Evans & Faltischek, counsel to the
Company, an opinion, dated the date hereof, in form and substance
satisfactory to Family Golf, Merger Sub and their counsel.
(ii) Dissenting Shares. On the Closing Date none of the shares of
Company Common Stock shall be Dissenting Shares.
(iii) Receipt of Licenses, Permits and Consents. All Government
Consents and Contract Consents in respect of the Company as are required in
connection with the consummation of the transactions contemplated hereby
shall have been obtained and shall be in full force and effect (including,
without limitation, all consents required under the Loan Agreements), all
Governmental Filings and Contract Notices in respect of the Company or its
business as are required in connection with the consummation of such
transactions shall have been made, and all Licenses of the Company that are
required to be transferred in connection with the consummation of such
transactions shall have been transferred. Each Contract Consent received
from a lessor under the terms of any Lease shall include estoppel language
acceptable to Family Golf.
Section 5.3 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger and the other transactions
contemplated by this Agreement are further subject to the satisfaction of the
following conditions, each of which may, to the extent legally permissible, be
waived by the Company:
(i) Opinion of Counsel for Family Golf and Merger Sub. The Company
shall have received from Baker & Botts, L.L.P., counsel to Family Golf and
Merger Sub, an opinion, dated the date hereof, in form and substance
satisfactory to the Company and its counsel.
(ii) Capital Contribution by Family Golf. Family Golf shall have made
a contribution of capital to the Company in the amount of $3.13 million
(the "Capital Contribution"). The Company shall apply the proceeds from the
Capital Contribution, prior to the Effective Time, (x) to the redemption of
all of the outstanding shares of Company Preferred Stock, (y) to the
repayment of all outstanding stockholder loans and (z) to the payment of
all past-due rent for any Leased Properties.
26
<PAGE>
ARTICLE VI
INDEMNIFICATION
Section 6.1 Survival. All representations, warranties, covenants and
agreements contained herein shall survive until the first anniversary of the
Closing Date; provided, however, that the indemnification liability as set
forth in this Article VI shall not terminate as to the breach of any
representation or warranty of the Company which occurs, and with respect to
which an Indemnified Party gives notice to the Stockholder Representative,
within such one-year period.
Section 6.2 Indemnification. (a) Subject to Section 6.1, Family Golf,
the Surviving Corporation and their respective successors, directors and
officers (each an "Indemnified Party" and collectively, the "Indemnified
Parties") shall be indemnified against and held harmless from any and all
demands,claims, losses, costs, fines, liabilities, damages (excluding
consequential damages), judgments, settlements and expenses, including
reasonable fees and expenses incurred in the investigation and defense of
claims and actions (collectively, "Losses"), arising out of the breach of any
representation or warranty of the Company contained herein. Payment in respect
of any indemnifiable Losses hereunder shall be available solely from the 40,000
shares of Family Golf Common Stock held by the Escrow Agent under the Escrow
Agreement. Each share of Family Golf Common Stock held pursuant to the Escrow
Agreement shall be deemed to have a cash value of $27.50.
(b) Notwithstanding anything to the contrary herein, the Indemnified
Parties shall not be entitled to indemnification under Section 6.2(a) with
respect to the first $50,000 of Losses (the "Threshold Amount"); provided,
however, that if the Threshold Amount is surpassed, than thereafter all Losses
(including such first $50,000) shall be subject to the indemnification
provisions of Section 6.2.
Section 6.3 Third-Party Claims. Subject to Section 6.1, if any claim
or assertion of liability is made or asserted against any Indemnified Person by
any person or legal entity who is not a party to this Agreement (a "Third Party
Claim"), and such claim or assertion of liability arises out of the breach of
any representation or warranty of the Company contained herein for which
indemnification is available pursuant to Section 6.2, then the Indemnified
Person shall give the Stockholder Representative prompt written notice of such
claim or assertion (an "Indemnification Notice"), or of any event or proceeding
by or in respect of a third party of which it has knowledge, concerning any
liability or damage as to which such Indemnified Person may request
indemnification hereunder. The Stockholder Representative may elect to defend,
with its separate counsel and at no cost to the Indemnified Person, any such
Third Party Claim unless (i) the Third Party Claim seeks an injunction or other
equitable or declaratory relief against the Indemnified Party or (ii) the
Indemnified Party, after consultation with its counsel, shall have reasonably
concluded that there is a conflict of interest between the Indemnified Person
and the Stockholder Representative with respect to the defense of such Third
Party Claim. If the Stockholder Representative elects to defend any Third Party
Claim, he shall, within thirty days after receipt of the Indemnification
27
<PAGE>
Notice, notify the Indemnified Person of his intent to do so, and the
Indemnified Person shall cooperate in the defense of such claim. If the
Stockholder Representative does not defend the Third Party Claim, is not
permitted to defend by reason of the second sentence of this Section 6.3, or
fails to timely notify the Indemnified Party of its election as herein
provided, the Indemnified Person may pay, compromise or defend such claim or
assertion at the expense of the Stockholder Representative (in his capacity as
such, and not in his individual capacity). If the Stockholder Representative
elects not to defend any Third Party Claim, the Indemnified Person shall cause
its counsel to promptly provide to the Stockholder Representative notice of all
proceedings and a copy of all correspondence and papers with respect to such
Third Party Claim. Notwithstanding the foregoing, neither the Stockholder
Representative nor the Indemnified Person may settle or compromise any Third
Party Claim unless (x) the other is first notified of any such proposed
settlement or compromise and (y) any such settlement or compromise includes a
complete release of each of the Indemnified Persons and the Stockholder
Representative, if they so request. No Indemnified Person shall settle any
claim for which indemnification is sought hereunder without the prior consent
of the Stockholder Representative, which consent shall not be unreasonably
withheld.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Notices. All notices or other communications hereunder
shall be in writing and shall be deemed to have been duly given or made if (i)
delivered in person, on the date actually delivered, (ii) by United States
mail, certified or registered, with return receipt requested, on the date which
is two business days after the date of mailing, or (iii) if sent by facsimile
transmission, with a copy mailed on the same day in the manner provided in (iv)
above, on the date transmitted provided receipt is confirmed by telephone:
If to the Company :
110 New Moriches Road
Lake Grove, New York 11755
Attention: Bill Reitzig
Telecopy No.: 516-737-8704
with copies to:
Ruskin, Moscou, Evans & Faltischek
170 Old Country Road
Mineola, New York 11501
Attention: Raymond S. Evans
Telecopy No.: 516-663-6641
28
<PAGE>
If to Family Golf or Merger Sub:
225 Broadhollow Road
Melville, New York 11747
Attention: Pamela S. Charles
Telecopy No.: 516-694-1935
with a copy to:
Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
Attention: Robert W. Murray Jr.
Telecopy No.: 212-705-5125
or at such other address as may have been furnished by a party in writing to
the other parties.
Section 7.2 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other terms and provisions of this Agreement shall
nonetheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon any such determination that a term or
other provision is invalid, illegal or incapable of being enforced, the parties
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
Section 7.3 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of law.
Section 7.4 No Adverse Construction. The rule that a contract is to be
construed against the party drafting the contract is hereby waived, and shall
have no applicability in construing this Agreement or any provision hereof.
Section 7.5 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section 7.6 Legal Fees and Expenses. Family Golf or the Surviving
Corporation shall pay the fees and disbursements of Ruskin, Moscou, Evans &
Faltischek, counsel to the Company, up to a maximum of $175,000.
29
<PAGE>
Section 7.7 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns, but neither this Agreement nor any of the rights,
interests or other obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties.
Section 7.8 Amendment. This Agreement may not be amended without the
written consent of Family Golf, the Company, Merger Sub and, after the
Effective Time only, the Stockholder Representative.
Section 7.9 Waiver. Any party hereto may (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties of
the other parties contained herein or in any document delivered pursuant
hereto, and (iii) waive compliance by the other parties with any of the
agreements or conditions contained herein. Any such extension or waiver shall
be valid only if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
Section 7.10 Entire Agreement. This Agreement (including the Exhibits
and Schedules attached hereto and other documents referred to herein and which
form a part hereof) constitutes the entire agreement among the parties hereto
and supersedes all prior agreements and understandings, oral and written, among
the parties with respect to the subject matter hereof.
Section 7.11 Definition of Subsidiary and Affiliate. As used in this
Agreement, (i) a "Subsidiary" of any person means any corporation, partnership,
joint venture or other legal entity of which such person (either alone or
together with one or more other Subsidiaries) (x) is a general partner or (y)
owns, directly or indirectly, 50% or more of the stock or other equity
interests, the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or other
legal entity, and (ii) an "Affiliate" of any person means any individual,
corporation or other organization, whether incorporated or unincorporated,
which directly or indirectly controls, or is controlled by, or is under common
control with, such first mentioned person. The term "control" (including the
terms "controlled," "controlled by" and "under common control with" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a person, corporation or other
entity, whether through the ownership of voting securities, by contract or
otherwise.
Section 7.12 Definition of Knowledge of the Company. As used in this
Agreement, "knowledge of the Company" or words to similar effect shall mean the
knowledge of any or all of the following persons: Arthur J. Calace, Jr., Mark
Calace and William Reitzig, and, solely for purposes of Section 3.15 (insofar
as such Section relates to SPORTS PLUS and the Syosset Bowl), Joseph Poprocky
Jr.
Section 7.13 Stockholders are Third Party Beneficiaries. This
Agreement is for the sole benefit of the parties hereto and their permitted
assigns, except that the representations and warranties of Family Golf and
Merger Sub set forth in Article IV of this Agreement shall also inure
30
<PAGE>
to the benefit of the holders (and their respective heirs, personal
representatives and successors) of the Company Common Stock immediately
prior to the Effective Time.
NOW THEREFORE, the parties hereto have executed and delivered this Agreement as
of the date first above written.
LEISURE COMPLEXES, INC.
By:
--------------------------------
Name:
Title:
FAMILY GOLF CENTERS, INC.
By:
--------------------------------
Name:
Title:
LAKE GROVE FAMILY GOLF CENTERS, INC.
By:
--------------------------------
Name:
Title:
Arthur J. Calace Jr. is executing this Agreement in the space provided
below solely in his capacity as Stockholder Representative, and not in his
individual capacity, and solely with respect to the provisions of Article VI
and Section 7.8 of this Agreement.
--------------------------------
Arthur J. Calace, Jr.
31
<PAGE>
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of _________, 1997 (this "Agreement"),
among FAMILY GOLF CENTERS, INC., a Delaware corporation with executive offices
at 225 Broadhollow Road, Melville, New York 11747 ("FGC"), ARTHUR J. CALACE
JR., having an address at ______________________ (the "Shareholder") and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, incorporated under the laws of the
United States of America with executive offices at 2 Broadway, New York, New
York 10004 (the "Escrow Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, simultaneously with the execution hereof, FGC, Lake Grove
Family Golf Centers, Inc., a New York corporation and a wholly-owned subsidiary
of FGC ("Merger Sub"), Leisure Complexes, Inc., a New York corporation ("LCI"),
and the Shareholder are consummating the transactions contemplated by that
certain Agreement and Plan of Merger, dated as of ____ __, 1997 (the "Merger
Agreement"), pursuant to which, among other things, LCI is merging with and
into Merger Sub; and
WHEREAS, pursuant to the Merger Agreement, 40,000 shares (the
"Escrowed Shares") of Common Stock, par value $1.00 per share, of FGC ("FGC
Common Stock") are required to be placed into an escrow account (the "Escrow
Account") to be maintained by the Escrow Agent against any claims for indemnity
under the Merger Agreement; and
WHEREAS, this is the Escrow Agreement referred to in the Merger
Agreement.
NOW, THEREFORE, it is agreed as follows:
I. ESCROW.
SECTION 1.01 APPOINTMENT OF ESCROW AGENT. The Shareholder and FGC
hereby appoint the Escrow Agent, and the Escrow Agent hereby agrees to serve,
as Escrow Agent in accordance with, and pursuant to, this Agreement.
SECTION 1.02 OPERATION OF ESCROW ACCOUNT. The parties hereto agree
that, subject to Section 1.03 hereof, the Escrow Account shall operate as
follows:
(a) Immediately after the Effective Time, FGC shall deposit into
the Escrow Account the Escrowed Shares, which constitute part of the Merger
Consideration to be paid to the Shareholder pursuant to the Merger Agreement,
by delivering to the Escrow Agent a stock certificate in the Shareholder's name
evidencing such Escrowed Shares, together with a stock power duly endorsed in
blank by the Shareholder.
<PAGE>
(b) At any time and from time to time on or prior to the first
anniversary of the date of this Agreement, FGC shall be entitled to give one or
more notices to the Escrow Agent, signed by its President or any Vice President
(with a copy to the Shareholder), to the effect that there has been an event
entitling FGC to indemnification from the Shareholder pursuant to the Merger
Agreement. Each such notice shall specify the amounts owed by the Shareholder
pursuant to the Merger Agreement, the calculation of such amounts and, in
reasonable detail, the basis therefor.
(c) Twenty (20) days after the Escrow Agent has received a notice
pursuant to Section 1.02(b) (of, if not a buisness day, on the next business
day following such twentieth day), the Escrow Agent shall deliver to FGC
Escrowed Shares having a value, determined as set forth in Section 1.02(e),
equal to the amount specified in such notice unless the Shareholder shall have
given written notice to the Escrow Agent (with a copy to FGC) before such date
that the Shareholder disagrees with FGC's determination that FGC is entitled to
indemnification with respect to the Merger Agreement, which notice shall set
forth in reasonable detail the basis for such disagreement.
(d) Should any dispute arise with respect to the delivery,
ownership or right of possession of the Escrowed Shares, the Escrow Agent, as
more fully set forth in paragraph (xi) of Article III, is authorized and
directed to retain in its possession, without liability to anyone, all or any
part of the Escrowed Shares until such dispute shall have been settled either
by mutual agreement by the parties concerned or by a final order, decree, or
judgment of a court of competent jurisdiction in the United States of America
for which time for appeal has expired and no appeal has been perfected, but the
Escrow Agent shall be under no duty whatsoever to institute or defend any such
proceedings, and may, in its discretion, deposit such Escrowed Shares with the
court which is hearing such dispute.
(e) For purposes of this Agreement, in the event Escrowed Shares
are required to be delivered to FGC pursuant to this Agreement, the value of
each Escrowed Share shall be deemed equal to the average of the daily Closing
Prices per shares of FGC Common Stock during the period of 10 consecutive
trading days commencing 20 trading days prior to the date of delivery of such
Escrowed Shares. The "Closing Price" of a share of FGC Common Stock on any day
means the last sale price (or, if no last sale is reported, the average of the
high bid and low asked prices) for a share of FGC Common Stock on such day (or,
if such day is not a trading day, on the next preceding trading day) as
reported on Nasdaq or, if not reported on Nasdaq, as quoted by the National
Quotation Bureau Incorporated, or if the FGC Common Stock is listed on an
exchange, on the principal exchange on which the FGC Common Stock is listed. If
for any day the Closing Price of a share of FGC Common Stock is not
determinable by any of the foregoing means, then the Closing Price for such day
shall be determined in good faith by the Escrow Agent on the basis of such
quotations and other considerations as it may deem appropriate.
(f) In the event that an indemnification claim is made in
accordance with Section 1.02(b) hereof and such claim is not disputed by the
Shareholder within the 20-day period referred to in Section 1.02(c) hereof,
then the Shareholder shall have the right to satisfy such indemnification
2
<PAGE>
claim in cash rather than in Escrowed Shares being held by the Escrow Agent,
provided that the full amount of such claim is paid to FGC within such 20-day
period. In the event the Shareholder satisfies a claim with the requisite
amount of cash, the Escrowed Shares that would have otherwise been distributed
to FGC in payment of such claim shall be distributed to the Shareholder.
SECTION 1.03 DISTRIBUTION OF ESCROWED SHARES. Unless a notice under
Section 1.02(b) has been given and Escrowed Shares in satisfaction of such
notice has not been delivered to FGC, either because the 20-day period has not
yet run out or because a dispute relating to the claim made by such notice is
then pending, the Escrowed Shares or such portion of it as at the time remains
in escrow, together with all dividends and distributions received by the Escrow
Agent with respect thereto, shall be returned to the Shareholder on the first
anniversary of the date of this Agreement.
SECTION 1.04 TERMINATION OF ESCROW ACCOUNT. This Agreement and the
Escrow Account will terminate at 5:00 P.M., New York City local time, on the
date on which all of the Escrowed Shares contained in the Escrow Account shall
be distributed in accordance with this Agreement.
SECTION 1.05 VOTING. The FGC Shares held in the Escrow Account shall
be voted by the Shareholder.
II. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be (a) delivered by hand, (b) sent by
certified mail, return receipt requested, with proper postage prepaid, (c) sent
by prepaid over-night delivery or (d) sent by confirmed facsimile, and
addressed as follows:
If to FGC to it at:
225 Broadhollow Road
Melville, New York 11747
Attention: General Counsel
Facsimile: 516-694-1935
with a copy to:
Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
Attention: Robert W. Murray Jr.
Facsimile: 212-705-5125
3
<PAGE>
If to the Shareholder to him at:
Arthur J. Calace Jr.
------------------------------
------------------------------
Facsimile:
with a copy to:
Ruskin, Moscou, Evans & Faltischek, P.C.
170 Old Country Road
Mineola, New York 11501
Attention: Raymond S. Evans
Facsimile: 516-663-6641
If to the Escrow Agent, to it at:
2 Broadway
New York, New York 10004
Attention: Steve Nelson
Facsimile: (212) 509-4000
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. Except as
otherwise provided herein, no notice or communication shall be effective until
received or refused.
III. CONCERNING THE ESCROW AGENT.
To induce the Escrow Agent to act hereunder, it is further agreed by
the Shareholder and FGC that:
(i) The Escrow Agent shall not be under any duty to give the
Escrowed Shares held by it hereunder any greater degree of care than it gives
its own similar property and shall not be required to invest any funds held
hereunder except as directed in this Agreement.
(ii) This Agreement expressly sets forth all the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. No implied
duties or obligations shall be read into this Agreement against the Escrow
Agent. The Escrow Agent shall not be bound by the provisions of any agreement
among the other parties hereto except this Agreement.
4
<PAGE>
(iii) The Escrow Agent shall not be liable, except for its own
gross negligence, willful misconduct or breach of any representations,
warranties or covenants contained in this Agreement, and, except with respect
to claims based upon such gross negligence, willful misconduct or breach that
are successfully asserted against the Escrow Agent, the other parties hereto
shall jointly and severally indemnify and hold harmless the Escrow Agent (and
any successor Escrow Agent) from and against any and all losses, liabilities,
claims, actions, damages, and expenses, including reasonable attorneys' fees
and disbursements, arising out of, and in connection with, this Agreement.
(iv) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument, or other writing delivered
to it hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. The Escrow Agent may act in reliance upon any instrument or
signature believed by it in good faith to be genuine and may assume, if in good
faith, that any person purporting to give notice or receipt or advice or make
any statement or execute any document in connection with the provisions hereof
has been duly authorized to do so.
(v) The Escrow Agent may act pursuant to the advice of counsel
with respect to any matter relating to this Agreement and shall not be liable
for any action taken or omitted in good faith and in accordance with such
advice.
(vi) The Escrow Agent does not have any interest in the Escrowed
Shares deposited hereunder, but is serving as escrow holder only. Any payments
of income from the Escrow Account shall be subject to withholding regulations
then in force with respect to United States taxes. This paragraph (vi) and
paragraph (iii) of this Article III shall survive notwithstanding any
termination of this Agreement or the resignation of the Escrow Agent.
(vii) The Escrow Agent makes no representation as to the
validity, value, genuineness, or the collectibility of any security or other
documents or instrument held by, or delivered to, it.
(viii) The Escrow Agent shall not be called upon to advise any
party as to the wisdom in selling or retaining or taking or refraining from any
action with respect to any securities or other property deposited hereunder.
(ix) The Escrow Agent (and any successor escrow agent) at any
time may be discharged from its duties and obligations hereunder by the
delivery to it of notice of termination signed by the Shareholder and FGC or at
any time may resign by giving written notice to such effect to the Shareholder
and FGC. Upon any such termination or resignation, the Escrow Agent shall
deliver the Escrowed Shares to any successor escrow agent jointly designated by
the other parties hereto in writing, or to any court of competent jurisdiction
if no such successor escrow agent is agreed upon, whereupon the Escrow Agent
shall be discharged of and from any and all further obligations arising in
connection with this Agreement. The termination or resignation of the Escrow
5
<PAGE>
Agent shall take effect on the earlier of (A) the appointment of a successor
(including a court of competent jurisdiction) or (B) the day that is 30 days
after the date of delivery: (1) to the Escrow Agent of the other parties'
written notice of termination or (2) to the other parties hereto of the Escrow
Agent's written notice of resignation. If at that time the Escrow Agent has not
received a designation of a successor escrow agent, the Escrow Agent's sole
responsibility after that time shall be to keep the Escrowed Shares safe until
receipt of a designation of successor escrow agent or a joint written
disposition instruction by the other parties hereto or an enforceable order of
a court of competent jurisdiction.
(x) The Escrow Agent shall have no responsibility for the
contents of any writing of any third party contemplated herein as a means to
resolve disputes and may rely without any liability upon the contents thereof.
(xi) In the event of any disagreement among or between the other
parties hereto resulting in adverse claims or demands being made in connection
with the Escrowed Shares, or in the event that the Escrow Agent in good faith
is in doubt as to what action it should take hereunder, the Escrow Agent shall
be entitled to retain the Escrowed Shares until the Escrow Agent shall have
received (A) a final and non-appealable order of a court of competent
jurisdiction directing delivery of the Escrowed Shares or (B) a written
agreement executed by the other parties hereto directing delivery of the
Escrowed Shares, in which event the Escrow Agent shall disburse the Escrowed
Shares in accordance with such order or agreement. Any court order referred to
in (A) above shall be accompanied by a legal opinion by counsel for the
presenting party satisfactory to the Escrow Agent to the effect that said court
order is final and non-appealable. The Escrow Agent shall act on such court
order and legal opinions without further question.
(xii) As consideration for its agreement to act as Escrow Agent
as herein described, FGC shall pay the Escrow Agent fees determined in
accordance with the terms set forth on Exhibit A hereto (and made a part of
this Agreement as if herein set forth). In addition, FGC and the Shareholder
agree to reimburse the Escrow Agent for all reasonable expenses, disbursements,
and advances incurred or made by the Escrow Agent in performance of its duties
hereunder (including reasonable fees, expenses, and disbursements of its
counsel) and to share equally the costs thereof.
(xiii) No publicly distributed material or other matter in any
language (including, without limitation, notices and reports) which mentions
the Escrow Agent's name or the rights, powers, or duties of the Escrow Agent
shall be issued by the other parties hereto or on such parties' behalf unless
the Escrow Agent shall first have given its specific written consent thereto.
IV. MISCELLANEOUS.
SECTION 4.01 BINDING EFFECT. This Agreement shall be binding upon, and
inure solely to the benefit of, the parties hereto and their respective
successors and assigns, heirs, administrators,
6
<PAGE>
and representatives, and shall not be enforceable by, or inure to the benefit
of, any other third party, except as provided in paragraph (ix) of Article III
with respect to the termination of, or resignation by, the Escrow Agent. No
party may assign any of its rights or obligations under this Agreement without
the written consent of the other parties.
SECTION 4.02 CHOICE OF LAW. This Agreement shall be construed in
accordance with, and governed by, the internal law of the State of New York
(without reference to its rules as to conflicts of law).
SECTION 4.03 MODIFICATION; WAIVERS. This Agreement may only be
modified by a writing signed by all of the parties hereto. No waiver shall be
effective against a party unless in a writing signed by such party.
SECTION 4.04 HEADINGS. The section headings herein are for convenience
only and shall not affect the construction thereof. Unless otherwise indicated,
references to Sections and Articles are to Sections and Articles, respectively,
contained herein.
SECTION 4.05 COUNTERPARTS. This Agreement may be executed in one or
more counterparts but all such separate counterparts shall constitute but one
and the same instrument; provided that, although executed in counterparts, the
executed signature pages of each such counterpart may be affixed to a single
copy of this Agreement which shall constitute an original.
SECTION 4.06 CAPITALIZED TERMS. Capitalized terms used in this
Agreement and not otherwise defined herein shall have the respective meanings
given to them in the Merger Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
------------------------------
ARTHUR J. CALACE JR.
FAMILY GOLF CENTERS, INC.
BY:
--------------------------------
NAME:
TITLE:
7
<PAGE>
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
BY:
--------------------------------
NAME:
TITLE:
8
<PAGE>
EXHIBIT A
ESCROW AGENT FEES: [$100.00 PER MONTH]
9
<PAGE>
B&B DRAFT 7/22/97
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT, dated as of July 25, 1997 (this
("Agreement"), by and between FAMILY GOLF CENTERS, INC., a Delaware corporation
(the "Company"), Arthur J. Calace Jr., as stockholders representative (in such
capacity, the "Stockholders Representative"), and the other persons identified
on the signature pages hereto (the "Selling Stockholders").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company, Lake Grove Family Golf Centers, Inc., a New York
corporation and a wholly-owned subsidiary of the Company ("LGFGC") and Leisure
Complexes, Inc., a New York corporation ("LCI") are parties to an Agreement and
Plan of Merger, dated as of July 25, 1997 (the "Merger Agreement"), pursuant to
which, among other things, the Selling Stockholders will receive, as the
consideration for their shares of LCI common stock in the merger (the "Merger")
contemplated by the Merger Agreement, an aggregate of 509,090 shares of Common
Stock, par value of $1.00 per share, of the Company (the "Common Stock") and
warrants (the "Warrants") to purchase an additional 55,537 shares of Common
Stock.
WHEREAS, the shares of Common Stock are, and the shares of Common
Stock issuable upon exercise of the Warrants will be, "restricted securities"
(as defined in Rule 144 under the Securities Act of 1933, as amended), and the
Company has agreed to provide the Selling Stockholders with the registration
rights set forth herein with respect to the shares of Common Stock issuable in
the Merger and the shares of Common Stock issuable upon exercise of the
Warrants;
WHEREAS, Arthur J. Calace Jr. has agreed to act as representative of
all of the Selling Stockholders for all purposes of this Agreement, and the
Selling Stockholders desire that he act in such capacity; and
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the obligation of the Company to consummate the Merger and the
other transactions contemplated by the Merger Agreement.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, the parties hereto agree as
follows:
1. Certain Definitions.
Business Day: Any day other than a Saturday, Sunday or holiday on
which banking
<PAGE>
institutions located in New York, New York are authorized or obligated by law,
regulation or executive order to close.
Commission: The Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act and the Exchange
Act.
Common Stock: As defined in the first recital above.
Company: As defined in the preamble of this Agreement.
Company Indemnified Parties: As defined in Section 5(b).
Escrow Agreement: The Escrow Agreement referred to in the Merger
Agreement, as the same may be amended in accordance with its terms.
Exchange Act: The Securities and Exchange Act of 1934, as amended, or
any successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, as they each may, from time to time, be in effect.
Losses: As defined in Section 5(a) hereof.
Merger Agreement: As defined in the first recital above.
Stockholders Representative: As defined in the first recital above.
Prospectus: The prospectus included in the Registration Statement as
of the date it becomes effective under the Securities Act and, in the case of
references to the Prospectus as of a date subsequent to the effective date of
the Registration Statement, as amended or supplemented as of such date,
including all documents incorporated by reference therein, as amended, and each
prospectus supplement relating to the offering and sale of any of the
Registrable Shares.
Registrable Shares: Shares of Common Stock issued to the Selling
Stockholders (i) as part of the merger consideration in the Merger and (ii)
upon exercise of the Warrants issued as part of the merger consideration in the
Merger, and any other shares of capital stock of the Company issued in respect
of such Registrable Shares as a result of stock splits, stock dividends,
reclassification, recapitalizations, mergers, consolidations or similar events.
Any Registrable Share will cease to be a Registrable Share when (x) a
registration statement covering such Registrable Share has been declared
effective by the Commission and such Registrable Share has been disposed of
pursuant to such effective registration statement, (y) such Registrable Share
may be publicly resold without registration pursuant to Rule 144 promulgated by
the Commission under the Securities Act or (z) such Registrable Share is no
longer beneficially owned by a Selling Stockholder.
2
<PAGE>
Registration Statement: A "shelf" registration statement of the
Company on any form for which the Company then qualifies which permits the
secondary resale thereunder of the Registrable Shares on a delayed or
continuous basis under Rule 415 of the Commission under the Securities Act, or
any successor rule that may be promulgated by the Commission under the
Securities Act, as they each may, from time to time, be in effect. The term
"Registration Statement" shall also include all exhibits and financial
statements and schedules and documents incorporated by reference in such
Registration Statement when it becomes effective under the Securities Act, and
in the case of references to the Registration Statement as of a date subsequent
to the effective date, as amended as of such date.
Securities Act: The Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, as they each may, from time to time, be in effect.
Selling Stockholders: As defined in the preamble above.
Special Counsel: Ruskin, Moscou, Evans & Faltischek, P.C.
Stockholder Indemnified Parties: As defined in Section 5(a).
2. Shelf Registration.
(a) The Company shall:
(i) file, within the period commencing 90 days and ending 120 days,
inclusive, after the date hereof, the Registration Statement covering all
Registrable Shares. The section of the Registration Statement entitled
"Plan of Distribution" shall provide that the Selling Stockholders may
distribute Registrable Shares pursuant to the Registration Statement only
in the manner set forth on Exhibit A hereto.
(ii) use its commercially reasonable efforts to cause the Registration
Statement to be declared effective by the Commission as promptly as
practicable after filing; and
(iii) use its commercially reasonable efforts to keep the Registration
Statement continuously effective under the Securities Act until the sooner
to occur of (x) the sale of all Registrable Shares under the Registration
Statement and (y) the first anniversary of the Merger.
(b) The Company shall amend the Registration Statement or supplement
the related Prospectus from time to time as necessary to comply with applicable
rules and regulations promulgated by the Commission under the Securities Act or
the instructions applicable to the form used for the Registration Statement.
3
<PAGE>
3. Obligations with Respect to Registration.
(a) In connection with the obligations of the Company pursuant to
Section 2 hereof, the Company shall:
(i) prepare and file with the Commission the Registration Statement;
provided, however, that before filing the Registration Statement and the
related Prospectus or any amendments thereto the Company shall afford the
Stockholders Representative (as representative of the Selling Stockholders)
and Special Counsel an opportunity to review copies thereof. The Company
shall not file the Registration Statement or any amendments thereto if the
Stockholders Representative or Special Counsel shall reasonably object on a
timely basis;
(ii) notify the Stockholders Representative (as representative of the
Selling Stockholders) and Special Counsel (A) of the receipt of any
comments from the Commission on the Registration Statement prior to its
becoming effective, and the Company's responses thereto, (B) when the
Registration Statement becomes effective, (C) when the filing of a
post-effective amendment to the Registration Statement or a supplement to
the Prospectus is required, when the same is filed, and in the case of a
post-effective amendment, when the same becomes effective, (D) of any
request by the Commission or any state securities authority for any
amendment of or supplement to the Registration Statement or the Prospectus
relating thereto or for additional information, (E) of the entry of any
stop order suspending the effectiveness of the Registration Statement or of
the initiation of any proceedings for that purpose, (F) of the happening of
any event or the failure of any event to occur or the discovery of any
facts or otherwise that makes any statement made in the Registration
Statement or the Prospectus relating thereto untrue in any material respect
or that causes such Registration Statement or Prospectus to omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading and (G) of the
reasonable determination by the Company that a post-effective amendment to
the Registration Statement would be appropriate;
(iii) use commercially reasonable efforts to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement as
soon as reasonably practicable;
(iv) furnish to the Stockholders Representative (as representative of
the Selling Stockholders) and Special Counsel a conformed copy of the
Registration Statement as declared effective by the Commission and each
post-effective amendment thereto, and such number of copies of the final
Prospectus and of each supplement thereto as may reasonably be required to
facilitate the distribution of the Registrable Shares by the Selling
Stockholders in accordance with the methods of distribution described in
the Registration Statement;
(v) cooperate with the Selling Stockholders to facilitate the timely
preparation and delivery of certificates representing Registrable Shares to
be sold under the Registration
4
<PAGE>
Statement and not bearing any restrictive legends and in such denominations
and registered in such names as any Selling Stockholder may reasonably
request at least one Business Days prior to the closing of any sale of
Registrable Shares by such Selling Stockholder pursuant to the Registration
Statement;
(vi) prepare and file, as soon as reasonably practicable, an
appropriate post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or file a Form 8-K or other report
that will be incorporated by reference into the Prospectus so that,
following the occurrence of any circumstance requiring such a filing, the
Prospectus included in the Registration Statement, as thereafter delivered
to the purchasers of Registrable Shares, will not include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(vii) make generally available to its securityholders earning
statements satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of the 12-month period
(or 90 days after the end of any 12-month period if such period is a fiscal
year), commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which
statements shall cover said 12-month period;
(viii) register or qualify the Registrable Shares covered by the
Registration Statement under such securities or blue sky laws in the United
States as may be requested by the Stockholders Representative, and do any
and all other acts and things which may be necessary to enable the Selling
Stockholders to consummate the disposition in such jurisdictions of
Registrable Shares in accordance with a method of distribution described in
such Registration Statement; provided, however, that the Company shall in
no event be required to qualify to do business as a foreign corporation or
as a dealer in any jurisdiction where it is not so qualified, to conform
its capitalization or the composition of its assets at the time to the
securities or blue sky laws of such jurisdiction, to execute or file any
general consent to service of process under the laws of any jurisdiction,
to take any action that would subject it to service of process in suits
other than those arising out of the offer and sale of the Registrable
Shares covered by such Registration Statement, or to subject itself to
taxation in any jurisdiction where it has not theretofore done so;
(ix) cause the Registrable Shares covered by the Registration
Statement to be listed on the principal exchange or exchanges or qualified
for trading on the principal over-the-counter market on which the shares of
Common Stock are then listed or traded upon the sale of Registrable Shares
pursuant to the Registration Statement; and
(x) otherwise comply with applicable rules and regulations of the
Commission and use its commercially reasonable efforts to take such other
actions as may be required to
5
<PAGE>
permit unrestricted sales of Registrable Shares under the Registration
Statement in accordance with the methods of distribution described therein.
(b) Notwithstanding anything to the contrary contained herein, if at
any time after the filing of the Registration Statement or after it is declared
effective by the Commission, the Company determines, in its reasonable business
judgment, that such registration and the offering of Registrable Shares
thereunder would require the Company to disclose matters, that otherwise would
not be required to be disclosed at such time, and such disclosure would
interfere with or otherwise adversely affect any financing, acquisition,
corporate reorganization, or other material transaction or development
involving the Company, then the obligation of the Company under Section
2(a)(ii) or 2(a)(iii), as the case may be, shall be suspended upon the giving
of notice to the Stockholders Representative of such suspension; provided,
however, that any such suspension shall not last more than 30 days, or past the
date on which any Quarterly Report on Form 10-Q or Annual Report on Form 10-K
is filed by the Company, following the giving of such notice. Any such notice
need not specify the reasons for such suspension if the Company determines, in
its reasonable business judgment, that doing so would interfere with or
adversely affect such transaction or development or would result in the
disclosure of material non-public information. In the event of a suspension
pursuant to this Section 3(b), the one-year period referred to in Section
2(a)(iii)(y) will be extended by a number of days equal to the total number of
days for which the suspension of the Company's obligations under Section
2(a)(ii) or 2(a)(iii), as the case may be, was in effect.
(c) The Company's obligations under this Agreement to the Selling
Stockholders shall be conditioned upon the compliance by the Selling
Stockholders with the following:
(1) the Selling Stockholders shall cooperate with the Company in
connection with the preparation of the Registration Statement and
related Prospectus and, for so long as the Company is obligated to
keep the Registration Statement effective, the Selling Stockholders
shall provide to the Company, in writing, for use in the Registration
Statement and the Prospectus, all information regarding the Selling
Stockholders and such other information as may be reasonably required
to enable the Company to prepare the Registration Statement and
Prospectus covering the Registrable Shares and to maintain the
currency and effectiveness thereof;
(2) during such time as the Selling Stockholders may be engaged
in a distribution of the Registrable Shares, the Selling Stockholders
shall comply with all applicable laws, including, but not limited to,
Regulation M promulgated by the Commission under the Exchange Act and
pursuant thereto will, among other things: (A) not engage in any
stabilization activity in connection with the securities of the
Company in contravention of such rules; (B) distribute the Registrable
Shares solely in the manner described in the Registration Statement;
and (C) not bid for or purchase any securities of the Company or
attempt to induce any person to purchase any securities of the Company
other than as permitted under the Exchange Act;
6
<PAGE>
(3) at least one Business Day prior to any distribution by a
Selling Stockholder of Registrable Shares, such Selling Stockholder
shall advise the Company in writing of the dates on which the
distribution will commence and, to the best knowledge of such Selling
Stockholders at that time, the date on which the distribution will
terminate, the number of Registrable Shares to be sold, the terms and
the manner of sale (including, to the extent applicable, the purchase
price, the name of any broker-dealer to or through whom such
distribution is being made, and the amount of any selling commissions
or other items constituting compensation to such broker-dealer) and
the number of shares of Common Stock that will be owned beneficially
by such Selling Stockholders after giving effect to such sale;
(4) on notice from the Company of the happening of any of the
events specified in clauses (C), (D), (E), (F) or (G) of Section
3(a)(ii), the Selling Stockholders shall cease offering or
distributing the Registrable Shares until such time as the Company
notifies the Selling Stockholders that offering and distribution of
the Registrable Shares may recommence; and
(5) on notice from the Company that (x) it is about to effect a
primary public offering of shares of Common Stock and (y) the managing
underwriter(s) for such offering have so requested in writing, then
each Selling Stockholder who, as of the date such notice is given,
owns in excess of 5% of the issued and outstanding shares of Common
Stock of the Company shall cease offering or distributing any of such
shares (including Registrable Shares owned by such Selling
Stockholders) during the 7 days prior to, and during the 30-day period
beginning on, the effective date of the registration statement for
such primary public offering.
4. Expenses of Registration.
All expenses in connection with any Registration Statement, any
qualification or compliance with federal or state laws required in connection
therewith, and the distribution of the Registrable Shares shall, as between the
Selling Stockholders and the Company, be borne as follows:
(a) The Company shall pay and be responsible for the registration fee
payable under the Securities Act, blue sky fees and expenses, if applicable
(subject to the limitations set forth in Section 3(a)(viii)), printing fees and
all fees and disbursements of the Company's counsel and accountants. The
Company shall be responsible for fees and disbursements of Special Counsel in
connection with the registration of the Registrable Shares under the
Registration Statement; provided that the amount of such fees and disbursements
payable by the Company shall not exceed $____. Solely at its discretion, the
Company may, in lieu of engaging the services of a financial printing company
with respect to the Registration Statement or the Prospectus, arrange for the
photocopying thereof, in which event the Company will bear the applicable
photocopying costs. The Company shall pay the cost of any legal opinion
required to remove the restrictive legend from the certificates for any
Registrable Shares that are sold by a Selling Stockholder under the
Registration Statement
7
<PAGE>
pursuant to one of the methods of distribution described therein, provided such
Selling Stockholder provides to the Company a broker's letter or other proof,
reasonably satisfactory to the Company, that such Registrable Shares have been
so sold under the Registration Statement.
(b) The Selling Stockholders shall pay all fees and disbursements of
their own counsel (except as otherwise provided in Section 3(a) above) and
advisers, all stock transfer fees (including the cost of all transfer tax
stamps) or expenses, if any, and all other expenses (including brokerage
discounts, commissions and fees) related to the distribution of the Registrable
Shares that have not expressly been assumed by the Company as set forth above.
5. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Selling
Stockholder and each person (if any) who controls such Selling Stockholder
within the meaning of either the Securities Act or the Exchange Act
(collectively, the "Stockholder Indemnified Parties") from and against any
losses, claims, damages or liabilities (collectively "Losses"), joint or
several, to which such Stockholder Indemnified Parties may become subject,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and, subject to
Section 5(c), the Company will reimburse such Stockholder Indemnified Parties
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Losses; provided, however, that the Company
will not indemnify or hold harmless any Stockholder Indemnified Party from or
against any such Losses (i) that arise out of or are based upon any violation
of any federal or state securities laws, rules or regulations committed by any
of the Stockholder Indemnified Parties (or any person who controls any of them
or any agent, or broker-dealer engaged by them) or any failure by such Selling
Stockholder to give any purchaser of Registrable Shares, at or prior to the
written confirmation of sale, a copy of the most recent Prospectus (provided
copies of such Prospectus were previously provided to the Stockholders
Representative) or (ii) if the untrue statement, omission or allegation thereof
upon which Losses or expenses are based (x) was made in reliance upon and in
conformity with the information provided in writing by or on behalf of any
Stockholder Indemnified Party specifically for use or inclusion in the
Registration Statement or any Prospectus, or (y) was made in any Prospectus
used after such time as the Company advised such Selling Stockholder that the
filing of a post-effective amendment or supplement thereto was required, except
the Prospectus as so amended or supplemented, or (z) was made in any Prospectus
used after such time as the Registration Statement ceases to be effective or
current or has been withdrawn or abandoned or the use of any such Registration
Statement or Prospectus or any offering or distribution pursuant thereto shall
have been suspended or delayed hereunder.
(b) Each Selling Stockholder, individually and not jointly, agrees to
indemnify and hold harmless the Company, its directors and officers and each
person, if any, who controls the
8
<PAGE>
Company within the meaning of either the Securities Act or the Exchange Act
(the "Company Indemnified Parties"), from and against any Losses, joint or
several, to which the Company Indemnified Parties may become subject, insofar
as such Losses (or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or the Prospectus, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, if the statement or omission was
made in reliance upon and in conformity with the information provided in
writing specifically by or on behalf of such Selling Stockholder or any person
who controls such Selling Stockholder for use in the Registration Statement or
any Prospectus, (ii) the use of any Prospectus after such time as the Company
has advised such Selling Stockholder that the filing of a post-effective
amendment or supplement thereto is required, except the Prospectus as so
amended or supplemented, (iii) the use of any Prospectus after such time as (x)
the Company has given notice to such Selling Stockholder that the Registration
Statement is not effective or current or has been withdrawn or abandoned or (y)
the Company has given notice to such Selling Stockholder that any offering or
distribution pursuant to the related Registration Statement shall have been
suspended or delayed hereunder or (iv) any violation by such Selling
Stockholder or any person who controls such Selling Stockholder within the
meaning of either the Securities Act or the Exchange Act (or any agent or
broker-dealer engaged by such Selling Stockholder or any such controlling
person) of any federal or state securities law or rule or regulation thereunder
or any failure by such Selling Stockholder to give any purchaser of Registrable
Shares, at or prior to the written confirmation of sale, a copy of the most
recent Prospectus furnished by the Company to the Stockholder Representative;
and, subject to Section 5(c), such Selling Stockholder will reimburse such
Company Indemnified Parties for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such Losses. For
purposes of clause (i) of the preceding sentence and clause (ii) of the last
sentence of Section 5(a), but without limiting the generality thereof, any
information concerning any Shareholder Indemnified Party or plan of
distribution included in any Registration Statement or Prospectus which is
provided to the Selling Stockholder for review within a reasonable period
before filing or use thereof and to which information such Selling Stockholder
has not promptly provided written notice of objection to the Company shall be
deemed to have been provided by such Selling Stockholder specifically for use
in such Registration Statement or Prospectus.
(c) Each party entitled to indemnification under this Section 5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and the Indemnifying Party may participate at its own expense in the defense,
or if it so elects, to assume the defense of any such claim and any action or
proceeding resulting therefrom, including the employment of counsel and the
payment of all expenses. The failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party from its obligations
to indemnify such Indemnified Party, except to the extent the Indemnified
Party's failure to so notify actually prejudices the Indemnifying Party's
ability to defend against such claim, action or proceeding. In the event that
the Indemnifying Party elects to assume the defense in any
9
<PAGE>
action or proceeding, the Indemnified Party shall have the right to employ
separate counsel in any such action or proceeding and to participate in the
defense thereof, but the fees and expenses of such separate counsel shall be
such Indemnified Party's expense unless (i) the Indemnifying Party has agreed
to pay such fees and expenses or (ii) the named parties to any such action or
proceeding (including any impleaded parties) include an Indemnified Party and
the Indemnifying Party, and such Indemnified Party shall have been advised by
counsel in writing that there may be a conflict of interest between such
Indemnified Party and the Indemnifying Party in the conduct of the defense of
such action (in which case, if such Indemnified Party notifies the Indemnifying
Party in writing that it elects to employ separate counsel at the expense of
the Indemnifying Party, the Indemnifying Party shall not assume the defense of
such action or proceeding on such Indemnified Party's behalf, it being
understood, however, that the Indemnifying Party shall not, in connection with
any one such action or proceeding or separate but substantially similar or
related actions or proceedings arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for all Indemnified Parties, which firm
shall be designated in writing by the Selling Stockholder(s) or the Company, as
the case may be). No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of the Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. The Indemnifying Party shall not be liable for any settlement of
any such action or proceeding effected without its written consent, but if
settled with its written consent, or if there be a final judgment for the
plaintiff in any such action or proceeding, the Indemnifying Party shall
indemnify and hold harmless the Indemnified Party from and against any loss or
liability by reason of such settlement or judgment.
(d) If the indemnification provided for under this Section 5 is
unavailable or insufficient to hold the Indemnified Party harmless under
subparagraphs (a) or (b) above in respect of any Losses referred to therein for
any reason other than as specified therein, then the Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one
hand and such Indemnified Party on the other in connection with the statements
or omissions which resulted in such Losses as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by (or omitted to be supplied by) the Company
or the Selling Stockholders, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission
and any other equitable considerations appropriate under the circumstances. The
amount paid or payable by an Indemnified Party as a result of the Losses
referred to above in this subsection (d) shall be deemed to include any legal
or other expenses reasonably incurred by such Indemnified Party in connection
with investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
10
<PAGE>
6. Stockholders Representative's Power of Attorney. Each Selling
Stockholder agrees that the Stockholders Representative shall act as his, her
or its representative for all purposes of this Agreement. In furtherance of the
foregoing, each of the Selling Stockholders hereby makes, constitutes and
appoints the Stockholders Representative as his, her or its true and lawful
attorney-in-fact and agent for such Selling Stockholder, in his, her or its
name, place and stead, to (i) execute on behalf of the Selling Stockholder all
instruments, agreements and documents which are reasonably requested by the
Company or otherwise necessary or required to be executed in connection with
the preparation, filing and effectuation and maintenance of the Registration
Statement and (ii) receive and acknowledge delivery and receipt of any and all
notices, instruments, documents and agreements in connection with this
Agreement and the transactions contemplated hereunder. Such appointment by each
Selling Stockholder shall be deemed to be coupled with an interest hereunder
and accordingly shall be irrevocable until the termination of this Agreement in
accordance with the terms hereunder.
7. Notices. All notices, requests, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed, certified or registered mail with
postage prepaid, or sent by telecopier, as follows:
(a) if to the Company:
Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Attention: General Counsel
Facsimile: 516-694-1935
with a copy to:
Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
Attention: Robert W. Murray Jr., Esq.
Facsimile: 212-705-5125
(b) if to the Stockholders Representative (on behalf of any or
all of the Selling Stockholders):
Arthur J. Calace Jr.
------------------------------
------------------------------
Facsimile:
--------------------
with a copy to:
11
<PAGE>
Ruskin, Moscou, Evans & Faltischek, P.C.
170 Old Country Road
Mineola, New York 11501
Attention: Raymond S. Evans
Facsimile: 516-663-6641
or to such other person or address as any party shall specify by notice in
writing to the other party. All notices and other communications given to a
party in accordance with the provisions of this Agreement shall be deemed to
have been given (i) three Business Days after the same are sent by certified or
registered mail, postage prepaid, return receipt requested, and (ii) when
delivered by hand or transmitted by telecopy (with confirmation received).
Notwithstanding the preceding sentence, notice of change of address shall be
effective only upon actual receipt thereof.
8. Amendment. Any provision of this Agreement may be amended or
modified in whole or in part at any time by an agreement in writing between the
Company and the Stockholders Representative. No consent, waiver or similar act
shall be effective unless in writing.
9. Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto and supersedes all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof.
10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11. Governing Law. This Agreement shall be governed by and interpreted
in accordance with the internal laws of the State of New York, without giving
effect to principles of conflicts of laws.
12. Assignment. A Selling Stockholder may not assign its rights under
this Agreement without the prior written consent of the Company. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
FAMILY GOLF CENTERS, INC.
By:
--------------------------------
Name:
Title:
STOCKHOLDERS REPRESENTATIVE
-----------------------------------
Name:
SELLING STOCKHOLDERS:
*
-----------------------------------
Name:
*
-----------------------------------
Name:
*
-----------------------------------
Name:
*
-----------------------------------
Name:
*
-----------------------------------
Name:
*
-----------------------------------
Name:
13
<PAGE>
*
-----------------------------------
Name:
*
-----------------------------------
Name:
* By Arthur J. Calace Jr., as attorney in fact.
14
<PAGE>
EXHIBIT "A"
PLAN OF DISTRIBUTION
--------------------
The Registrable Shares may be sold by the Selling Stockholders
directly or through agents designated from time to time or to or through
broker-dealers designated from time to time. To the extent required, any such
agent or broker-dealer involved in the offer and sale of the Registrable Shares
and any applicable commissions, discounts or other items constituting
compensation to such agents or broker-dealers will be set forth in a Prospectus
Supplement.
The distribution of the Registrable Shares may be effected from time
to time in one or more transactions at a fixed price or prices, which may be
changed, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at prices determined on a negotiated or
competitive bid basis. Registrable Shares may be sold through a broker-dealer
acting as agent or broker for a Selling Stockholder, or to a broker-dealer
acting as principal. In the latter case, the broker-dealer may then resell such
Registrable Shares to the public at varying prices to be determined by such
broker-dealer at the time of resale.
15
<PAGE>
ASSET
PURCHASE AGREEMENT
BY AND BETWEEN
THREE GROVE PARTNERS
SELLER,
AND
LAKE GROVE FAMILY GOLF CENTERS, INC.,
PURCHASER
PREMISES:
100 NEW MORICHES ROAD
SUFFOLK COUNTY, NEW YORK
i
<PAGE>
INDEX OF EXHIBITS:
EXHIBIT A LEGAL DESCRIPTION OF PREMISES
EXHIBIT B PARTIAL DESCRIPTION OF IMPROVEMENTS AND PERSONAL PROPERTY
EXHIBIT C CONTRACTS
EXHIBIT D GROUND LEASE AGREEMENT
EXHIBIT E ESCROW AGREEMENT
EXHIBIT F PERMITTED EXCEPTIONS
ii
<PAGE>
ASSET
PURCHASE AGREEMENT
------------------
ASSET PURCHASE AGREEMENT (this "Agreement"), made effective as of the
1st day of June, 1997 (the "Effective Date"), by and between THREE GROVE
PARTNERS, a New York limited partnership having an address at c/o Arthur J.
Calace, Jr., 11 George Ct., Miller Place, New York 11764 ("Seller"), and LAKE
GROVE FAMILY GOLF CENTERS, INC., a New York corporation having an address at
225 Broadhollow Road, Suite 106E, Melville, New York 11747 ("Purchaser").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Seller is the owner of certain real property located at 100
New Moriches Road Suffolk County, New York, and more particularly described on
Exhibit A attached hereto and made a part hereof (the "Premises");
WHEREAS, Seller operates a golf course and related facilities at the
Premises under the name "The Ponds at Lake Grove" (the "Business"); and
WHEREAS, Seller wants to lease the Premises (the land only), and sell
the improvements upon and to the Premises and certain other assets, to
Purchaser, and Purchaser wants to lease the Premises (the land only), and
purchase the improvements upon and to the Premises and certain other assets,
from the Seller, on the terms, and subject to the conditions, set forth herein.
NOW, THEREFORE, in consideration of the respective premises, mutual
covenants and agreements of the parties hereto, and other good and valuable
consideration, the receipt and
1
<PAGE>
sufficiency of which are hereby acknowledged, the parties hereto agree to the
foregoing and as follows:
1. Agreement to Sell and Purchase the Improvements and Certain Other
Assets.
1.1 Property to be Purchased by Purchaser. Seller agrees to sell
and convey to Purchaser, and Purchaser agrees to purchase and acquire from
Seller, upon the terms and conditions hereinafter set forth, all of Seller's or
its affiliates' right, title and interest in and to the following property
(collectively, the "Property"):
1.1.1 all buildings, furnishings, fixtures, machinery,
equipment, vehicles, inventories, supplies, sales, marketing and instructional
materials, trade names, logos, and other property and improvements located
upon, attached or appurtenant to, or otherwise used in connection with the
occupancy and operation of the Premises and/or Business, that are owned by
Seller or its affiliates, wherever located, including without limitation the
items described on Exhibit B attached hereto and made a part hereof (the
"Improvements and Personal Property"), but excluding improvements to the golf
course such as cart paths, roadways, greens, sprinkler systems and the like
(the "Golf Course Improvements");
1.1.2 the files, books, notices, records, reports, studies,
plans, drawings, pictures, correspondence, and other records received, used or
maintained by Seller or its affiliates in connection with the ownership and/or
operation of the Premises and the Business (collectively, the "Records");
1.1.3 any consents, authorizations, variances, waivers,
licenses, certificates, permits, approvals or similar items held by or granted
to Seller or its affiliates in connection with
2
<PAGE>
the ownership of the Premises or operation of the Business except permits or
licenses which are not assignable (collectively, the "Permits");
1.1.4 the contracts, leases and other agreements of or
relating to the Premises and/or Business described on Exhibit C attached hereto
and made a part hereof, except to the extent the same relate solely to any
Retained Assets or Retained Liabilities (as hereinafter defined) (the
"Contracts");
1.1.5 all accounts receivable of Seller arising out of the
sale of goods or services rendered in connection with the Business on or after
the Effective Date;
1.1.6 any manufacturers' and vendors' warranties and
guarantees, and all other claims, rights, and actions relating to the Premises,
Property or Business, except to the extent the same relate solely to any
Retained Assets or Retained Liabilities (the "Claims"); and
1.1.7 any other properties and assets of every kind and
nature, real or personal, tangible or intangible, relating in any way
whatsoever to possession, use and operation of 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 fee simple title to the Premises (land only) and all
Golf Course Improvements;
1.2.2 all trade accounts receivable arising out of the sale
of goods or services prior to the Effective Date;
3
<PAGE>
1.2.3 any rights of Seller with respect to insurance
policies owned by Seller or for which Seller is the named insured; and
1.2.4 all cash, funds in bank accounts and cash equivalents
existing as of the Effective Date.
1.3 Assumption of Certain Liabilities. Purchaser shall assume and
agree to pay and discharge when due, all liabilities and obligations of Seller
under the Contracts to the extent the same arise from and after the Closing
Date (as hereinafter defined) (the "Assumed Liabilities"), including equipment
leases for, and financing secured by, equipment transferred to Purchaser.
1.4 Liabilities to be Retained by Seller. Seller shall retain,
indemnify and hold Purchaser harmless against, and Purchaser shall not assume,
perform, discharge or pay, any liabilities or obligations of any nature
whatsoever in connection with or relating to the Property, Premises, Seller or
Business, or any predecessor owner or operator of the Premises, Property or
Business, which liabilities or obligations accrue prior to the Closing Date
(the "Retained Liabilities"). Notwithstanding the foregoing, operating expenses
incurred by Seller in the ordinary and customary course of the possession, use
and operation of the Premises, Property and Business on or after the Effective
Date and prior to the Closing Date shall be included in the Adjustment as
defined and provided below.
2. Lease Of Premises. Concurrently with or prior to the closing of the
transactions described herein (the "Closing"), Seller shall lease the Premises
to Purchaser pursuant to the Ground Lease Agreement attached as Exhibit D
hereto (the "Lease").
3. Consideration. In consideration for the sale and conveyance of the
Property, Purchaser shall pay to Seller at Closing $2,000,000.00 (the "Purchase
Price"), payable in cash,
4
<PAGE>
certified or bank check or wire transfer of funds, $100,000.00 of which shall
be placed in escrow to be held and distributed in accordance with the Escrow
Agreement, attached hereto as Exhibit E (the "Escrow Agreement").
4. Seller will convey the Property to Purchaser, free and clear of any
and all liens, charges, encumbrances, pledges, security interests, agreements
and other interests and adverse claims (collectively, "Encumbrances"), other
than the matters set forth in Exhibit F attached hereto and made a part hereof
(the "Permitted Exceptions").
5. Apportionments.
5.1 Possession and operation of the Premises, Property and
Business shall remain with Seller until the Closing Date; however, the benefits
and burdens of the possession, use and operation of the Premises, Property and
Business shall be apportioned to the Effective Date as hereinafter provided. As
an adjustment to be made at Closing, (i) all operating expenses incurred by
Seller in the ordinary and customary course of the possession, use and
operation of the Premises, Property and Business (i.e., real estate taxes,
utilities, cost of inventories, advertising, collections, hired services,
insurance, miscellaneous expenses, postage, repairs and maintenance, supplies,
taxes and wages, but specifically not including interest or principal on
indebtedness, professional fees and expenses, travel, lodging, or
depreciation), and (ii) all income of Seller relating to the possession, use or
operation of the Premises, Property and Business, shall be apportioned between
Seller and Purchaser as of the Effective Date based on the portion of each such
expense or revenue attributable to the period falling before the Effective Date
on the one hand, for which Seller shall bear the responsibility and receive the
benefit, and the portion of each such expense or revenue attributable to the
period falling on or after the Effective Date, on the other hand, for which
Purchaser shall bear
5
<PAGE>
the responsibility and receive the benefit (the "Adjustment"). Notwithstanding
the foregoing, while all operating expenses incurred by Seller in the ordinary
and customary course of the possession, use and operation of the Premises,
Property and Business incurred on or after the Effective Date shall be included
in the Adjustment, such liabilities and obligations, and all other liabilities
and obligations for which Seller shall be liable pursuant to this Section,
shall be included within the meaning of the term "Retained Liabilities" for
which Purchaser shall not be liable or responsible.
5.2 To the extent that any of the prorations made pursuant to
Section 5.1 are based upon estimates of any expense or revenue incurred or
received prior to Closing, or either party discovers any errors or omissions in
respect of the Adjustment, Seller and Purchaser agree to adjust such prorations
and make any resulting payments promptly upon confirmation by Seller or
Purchaser, as the case may be, of the actual amount of any such expense or
revenue provided notice of such adjustment is given by one party to the other
within one (1) year after Closing.
5.3 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 Closing.
6. The Closing.
6.1 The Closing of the transaction provided for in this Agreement
shall take place simultaneously with the execution and delivery of this
Agreement (the actual date of the Closing being referred to herein as the
"Closing Date").
6.2 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:
6
<PAGE>
6.2.1 a bill of sale conveying, transferring and selling to
Purchaser all right, title and interest of Seller in and to all of the Property
which is personal property, and a deed conveying, transferring and selling to
Purchaser all right, title and interest of Seller in and to all of the Property
which is real property, which bill of sale and deed shall each contain a
warranty that such property is free and clear of all Encumbrances other than
the Permitted Exceptions, duly executed and acknowledged by Seller;
6.2.2 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;
6.2.3 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;
6.2.4 the Escrow Agreement, duly executed and acknowledged
by Seller;
6.2.5 the Lease, duly executed and acknowledged by Seller;
6.2.6 evidence that the Management Agreement between the
Seller and Leisure Complexes, Inc. has been terminated;
6.2.7 a Certificate or Certificates of Occupancy for all
Improvements;
6.2.8 original counterparts of each of the Contracts;
6.2.9 any transfer tax or other return required by any
applicable governmental authority in connection with the sale of the Property,
duly executed and acknowledged by Seller;
6.2.10 keys to all locks relating to the Property,
appropriately labeled;
7
<PAGE>
6.2.11 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
6.2.12 such other documents as may be reasonably required by
Purchaser's counsel in connection with this transaction.
6.3 At Closing, Purchaser shall deliver or cause to be delivered
to Seller the following:
6.3.1 the cash consideration referred to in Section 2
hereof;
6.3.2 the Assignment and Assumption Agreement, duly executed
and acknowledged by Purchaser;
6.3.3 the Settlement Statement, duly executed and
acknowledged by Purchaser;
6.3.4 the Escrow Agreement, duly executed and acknowledged
by Purchaser;
6.3.5 the Lease, duly executed and acknowledged by
Purchaser;
6.3.6 all other instruments and documents to be executed,
acknowledged where appropriate and/or delivered by Purchaser to Seller; and
6.3.7 such other documents as may be reasonably required by
Seller's counsel in connection with this transaction.
7. Representations and Warranties.
7.1 Seller represents and warrants to Purchaser as follows:
8
<PAGE>
7.1.1 Organization; Power and Authority. Seller is a limited
partnership duly formed, validly existing and in good standing under the laws
of the State of New York, and has all requisite power and authority to carry on
its business as it is now being conducted, to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby.
7.1.2 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 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.
7.1.3 Consents. No consent, approval or authorization of,
exemption by, or filing with, any governmental or regulatory authority or any
third party is required in connection with the execution, delivery and
performance by Seller of this Agreement, except for consents, approvals,
authorizations, exemptions and filings, if any, which have been obtained and
except as provided in Schedule 7.1.3 attached hereto and incorporated herein.
7.1.4 Compliance with Applicable Laws. To the best of
Seller's knowledge, Seller is not engaging in any activity or omitting to take
any action as a result of which Seller is in violation of any material law,
rule, regulation, ordinance, statute, order, injunction or decree, or any other
requirement of any court or governmental or administrative body or agency,
applicable to the
9
<PAGE>
Premises, Property or 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. Neither the Premises, Property nor Business are subject to any notice
of violation of law, municipal ordinance, orders or requirements issued by any
building department or other governmental agency or subdivision having
jurisdiction.
7.1.5 Permits. All Permits required by any federal, state,
or local law, rule or regulation and necessary for the operation of the
Premises, Property and Business as currently being conducted have been obtained
and are currently in effect. No registrations, filings, applications, notices,
transfers, consents, approvals, orders, qualifications, waivers or other
actions of any kind are required by virtue of the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby (a)
to avoid the loss of any Permit or the violation of any law, regulation, order
or other requirement of law, or (b) to enable Purchaser to continue the
operation of the Premises, Property and Business as presently conducted after
the Closing, except that Permits listed on Schedule 7.1.5 attached hereto and
incorporated herein are not assignable. The current use and occupation of any
portion of the Premises and Property does not violate any of, and, where
applicable, is in material compliance with, the Permits, any applicable deed
restrictions or other covenants, restrictions or agreements including without
limitation, any of the Permitted Exceptions, site plan approvals, zoning or
subdivision regulations or urban redevelopment plans applicable to the
Premises.
10
<PAGE>
7.1.6 Title to Assets. Seller has good and marketable title
to the Property free and clear of all encumbrances other than the Permitted
Exceptions.
7.1.7 Contracts. Except as set forth on Exhibit C, Seller is
not a party to any leases, contracts, orders or agreements relating to the
Premises, Property or Business (written or otherwise). Exhibit C sets forth a
full and complete description of the Contracts described therein, and none of
such Contracts have been amended or modified except as reflected on said
Exhibits. Seller is not holding any security deposits under any of said
Contracts. Each of the Contracts are in full force and effect and no party
under any such Contract, including Seller, is in default, or has sent or
received notice of default, in any respect of any such Contract.
7.1.8 Condition of the Improvements and Personal Property.
To the best of Seller's knowledge the Improvements and Personal Property are in
good operating condition and repair, ordinary wear and tear excepted, there are
no material structural, mechanical or other defects in the Improvements and
Personal Property, including without limitation any roof leaks.
7.1.9 Environmental Matters.
7.1.9.1 As used in this Agreement "Hazardous Material"
shall mean: (i) any "hazardous substance" as now defined pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), 42 U.S.C. ' 9601(33); (ii) any "pollutant or contaminant" as
defined in 42 U.S.C. ' 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
11
<PAGE>
substance or substances; and (viii) any other pollutant, contaminant, chemical,
or industrial or hazardous, toxic or dangerous waste, substance or material,
defined or regulated as such in (or for purposes of) any Environmental Law (as
hereinafter defined) and any other toxic, reactive or flammable chemicals.
7.1.9.2 To the best of Seller's knowledge, there is no
Hazardous Material at, under or on the Premises and or Property and there is no
ambient air, surface water, groundwater or land contamination within, under,
originating from or relating to the Premises and or Property. To the best of
Seller's knowledge, 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.
7.1.9.3 To the best of Seller's knowledge, Seller has
no obligation or liability imposed or based upon any provision under any
foreign, federal, state or local law, rule, or regulation or common law, or
under any code, order, decree, judgment or injunction applicable to Seller, the
Premises 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").
12
<PAGE>
7.1.9.4 Seller has not been subject to any civil,
criminal or administrative action, suit, claim, hearing, notice of violation,
investigation, inquiry or proceeding for failure to comply with, or received
notice of any violation or potential liability under any Environmental Laws in
respect of the Premises or Property.
7.1.9.5 To the best of Seller's knowledge, the Premises
are not (a) listed or proposed for listing on the National Priority List or (b)
listed on the Comprehensive Environmental Response, Compensation, Liability
Information System List ("CERCLIS") promulgated pursuant to CERCLA, 42 U.S.C. '
9601(9), or any comparable list maintained by any foreign, state or local
government authority.
7.1.9.6 To the best of Seller's knowledge, there
currently are no, nor have there ever been, underground storage tanks within
the Premises or included in the Property.
7.1.10 Tax Proceedings. There are no proceedings pending
regarding the reduction of real estate taxes or assessments in respect of the
Premises.
7.1.11 Utilities. All water, storm and sanitary sewer, gas,
electricity, telephone and other utilities adequately service the Premises,
enter the Premises through lands as to which valid public or private easements
exist that will inure to the benefit of Purchaser, and the Premises are
serviced by facilities of for all such utilities and the cost of installation
of such facilities has been fully paid.
7.1.12 Access. 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
13
<PAGE>
Premises or Property. All roads bounding the Premises are public roads and the
Lease is the only instrument necessary to convey to Purchaser full access to
and the right to use such roads freely, as well as to convey all rights
appurtenant to the Premises in such roads.
7.1.13 Insurance Requirements. All requirements or
recommendations by any insurer or by any board of fire underwriters or similar
body in respect of the Premises and Property have been satisfied.
7.1.14 Litigation. Except as set forth on Schedule 7.1.14
attached hereto and incorporated herein, there is no claim, action or
proceeding (zoning, condemnation, insurance claim/adjustment 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, Property or Business), the Premises, Property or Business or the
transactions contemplated by this Agreement, nor to the best of Seller's
knowledge is there any basis for any such claim, action, proceeding or
investigation. The matters reflected on Schedule 7.1.14 are Retained
Liabilities.
7.1.15 Assessments. There are no special or other
assessments for public improvements or otherwise now affecting the Premises nor
does Seller know of (a) any pending or threatened special assessments affecting
the Premises or Property, or (b) any contemplated improvements affecting the
Premises or Property that may result in special assessments affecting the
Premises or Property.
7.1.16 Employee Agreements. There are no union or employment
contracts or agreements (written or oral) involving any employees of Seller or
its affiliates affecting the Premises, Property or Business which will survive
the Closing.
14
<PAGE>
7.1.17 Work at the Premises. No services, material or work
have been supplied to the Premises or Property for which payment has not been
made in full except in the ordinary course of the Business.
7.1.18 Full Disclosure. None of the information supplied by
Seller herein or in the exhibits hereto contains any untrue statement of a
material fact or omits to state a material fact required to be stated herein or
necessary in order to make the statements herein, in light of the circumstances
under which they are made, not misleading.
7.1.19 Financial Condition. Seller has delivered to
Purchaser, or will promptly upon their becoming available, true and correct
copies of audited year-end financial statements consisting of balance sheets
and income/expense statements for the Business as of December 31, 1996. Seller
has delivered to Purchaser, or will promptly upon execution hereof deliver,
true and correct copies of monthly operating income/expense reports for the
Business for each full calendar month to date in 1997.
7.2 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller as follows:
7.2.1 Organization; Power and Authority. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of New York, and has all requisite power and authority to
carry on its business as it is now being conducted, to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby.
7.2.2 Due Authorization and Execution; Effect of Agreement.
The execution, delivery and performance by Purchaser of this Agreement and the
consummation by
15
<PAGE>
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.
7.3 Survival. The representations and warranties of the parties
made in this Article 7 shall survive the Closing for a period of one (1) year.
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.
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
16
<PAGE>
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 who claims to have dealt with the indemnifying party in
connection with this transaction. The provisions of this Article shall survive
the Closing or any termination of this Agreement.
10. Costs and Fees. Documentary stamps or conveyancing taxes, if any,
shall be payable by Seller, and in no event be payable by Purchaser. 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
17
<PAGE>
contained in this Agreement or in any document or other writing delivered
pursuant to this Agreement; and (iii) any and all actions, suits, proceedings,
claims, demands, assessments, judgments, costs and expenses (including without
limitation, interest, penalties, reasonable legal fees and accounting fees)
incident to the foregoing and the enforcement of the provisions of this Section
11.1.
11.2 Subject to the further provisions of this Article, Purchaser
shall protect, defend, hold harmless and indemnify Seller, its partners,
employees and agents, and its successors and assigns from, against and in
respect of any and all Losses that may be suffered or incurred by any of them
arising from or by reason of (i) any of the Assumed Liabilities on and after
the Closing Date, (ii) the breach of any representation, warranty, covenant or
agreement of Purchaser contained in this Agreement or in any document or other
writing delivered pursuant to this Agreement; and (iii) any and all actions,
suits, proceedings, claims, demands, assessments, judgments, costs and expenses
(including without limitation, interest, penalties, reasonable legal fees and
accounting fees) incident to the foregoing and the enforcement of the
provisions of this Section 11.2.
11.3 Whenever a party hereto (such party and each of its
affiliates which is entitled to indemnification pursuant to any provision of
this Agreement, an "Indemnified Party") shall learn after the Closing of a
claim that, if allowed (whether voluntarily or by judicial or quasi-judicial
tribunal or agency), would give rise to an obligation of another party (the
"Indemnifying Party") to indemnify the Indemnified Party under any provision of
this Agreement, before paying the same or agreeing thereto, the Indemnified
Party shall promptly notify the Indemnifying Party in writing of all such facts
within the Indemnified Party's knowledge with respect to such claim and the
amount thereof (a "Notice of Claim") and, in all events, within one (1) year
after the Closing Date. If, prior
18
<PAGE>
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 Notice of Claim as provided in this Section
11.3 within one (1) year after the Closing Date shall render such claim void.
11.4 Notwithstanding the foregoing provisions of Section 11,
Seller's liability hereunder shall be limited to $100,000.00. In addition,
Seller shall have no liability hereunder until the aggregate of all claims made
by Purchaser hereunder exceed $10,000.00, in which case Seller shall be liable
for all of such claims and not just the amount thereof in excess of $10,000.00.
12. Bulk Sales. The parties agree to waive the requirements, if any,
of all applicable bulk sales laws. As an inducement to Purchaser to enter into
such waiver, Seller represents and warrants
19
<PAGE>
that (a) it will not be rendered insolvent by the transactions contemplated by
this Agreement, (b) all debts, obligations and liabilities relating to the
Property and Business that are not expressly assumed by Purchaser under this
Agreement will be promptly paid and discharged by Seller as and when they
become due, and (c) the sale of the Property pursuant to this Agreement does
not constitute a "bulk sale" within the meaning of applicable law. Seller
agrees to indemnify and hold Purchaser harmless from, and reimburse Purchaser
for, any loss, cost, expense, liability or damage which Purchaser may suffer or
incur by virtue of the noncompliance by Seller or Purchaser with any law
pertaining to fraudulent conveyance, bulk sales or any similar law which might
make the sale or transfer of any part of the Property or Business ineffective
as to creditors of or claimants against Seller.
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 Family Golf Centers, Inc., 225 Broadhollow Road, Melville, New York,
New York 11747, Attention: Pamela Charles, Esq, General Counsel. A copy of any
Notice given by Purchaser to Seller shall simultaneously be given in either
manner provided above to Ruskin, Moscou, Evans & Faltischek, 170 Old Country
Road, Mineola, NY 11501, ATTN: Raymond S. Evans. 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
20
<PAGE>
manner aforesaid. Any Notice required or permitted to be given by either party
may be given by that party's attorney.
14. Miscellaneous.
14.1 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns.
14.2 This Agreement shall be governed by, interpreted under and
construed and enforced in accordance with, the laws of the State of New York.
14.3 The captions or article headings in this Agreement are for
convenience only and do not constitute part of this Agreement.
14.4 This Agreement has been fully negotiated by the parties and
rules of construction construing ambiguities against the party responsible for
drafting agreements shall not apply.
14.5 It is agreed that, except where otherwise expressly provided
in particular Articles or Sections of this Agreement, none of the provisions of
this Agreement shall survive the Closing.
14.6 This Agreement (including the Exhibits annexed hereto)
contains the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior understandings, if any, with respect
thereto.
14.7 This Agreement may not be modified, changed, supplemented or
terminated, nor may any obligations hereunder be waived, except by written
instrument signed by the party to be charged or by its agent duly authorized in
writing or as otherwise expressly permitted herein.
21
<PAGE>
14.8 No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof or of any other agreement or provision herein contained. No extension
of the time for performance of any obligations or acts shall be deemed an
extension of the time for performance of any other obligations or acts.
14.9 This Agreement may be executed in one or more counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which taken together shall constitute but one and the same original.
[signatures appear on following page]
22
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
SELLER:
THREE GROVE PARTNERS, a New York limited
partnership
By: Grayside Partners, Inc., a New York
corporation, general partner
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
PURCHASER:
LAKE GROVE FAMILY GOLF CENTERS, INC., a
New York corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
23
<PAGE>
EXHIBIT E
---------
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of __________________________, 1997 (this
"Agreement"), by and among THREE GROVE PARTNERS, a New York limited partnership
having an address at c/o Arthur J. Calace, Jr., 11 George Ct., Miller Place,
New York 11764 ("Seller"), FAMILY GOLF CENTERS, INC., a Delaware corporation
having an address at 225 Broadhollow Road, Suite 106E, Melville, New York 11747
("Purchaser"), and CONTINENTAL STOCK TRANSFER & TRUST COMPANY, incorporated
under the laws of the United States of America with executive offices at 2
Broadway, New York, New York 10004 (together with its successors, the "Escrow
Agent").
W I T N E S E T H:
- - - - - - - - -
WHEREAS, simultaneously with the execution hereof, Seller and
Purchaser are consummating the transactions contemplated by the Asset Purchase
Agreement dated as of the date hereof (the "Purchase Agreement"), between
Seller and Purchaser;
WHEREAS, pursuant to the Purchase Agreement, Seller is required to
deposit $100,000 into an escrow account to be maintained by Escrow Agent to be
held against any claims for indemnity under Article 11 of the Purchase
Agreement; and
WHEREAS, this is the Escrow Agreement referred to in the Purchase
Agreement. Capitalized terms used in this Escrow Agreement and not otherwise
defined herein shall have the respective meanings given to them in the Purchase
Agreement.
NOW, THEREFORE, it is agreed as follows:
1. Escrow.
1.1 Appointment of Escrow Agent.
1.1.1 Seller and Purchaser hereby appoint Escrow Agent, and
Escrow Agent hereby agrees to serve, as Escrow Agent in accordance with, and
pursuant to, this Agreement.
1.1.2 Escrow Agent shall establish a separate Federally insured,
interest bearing account (the "Escrow Account") for any amounts received by it
hereunder.
1.1.3 All monies, including interest thereon, held by Escrow
Agent in the Escrow Account pursuant to the terms hereof shall be hereinafter
referred to as the "Escrowed Funds".
E-1
<PAGE>
1.1.4 Seller shall be responsible for the payment of any income
taxes payable in connection with any interest earned in the Escrow Account.
1.2 Operation of Escrow Account. The parties hereto agree that the
Escrow Account shall operate as follows:
1.2.1 At the Closing, Seller shall deliver or cause to be
delivered to Escrow Agent $100,000.00. Escrow Agent shall hold such amount as
Escrowed Funds in the Escrow Account.
1.2.2 At any time prior to the one (1) year anniversary of the
Closing Date (the "Escrow Period"), Purchaser shall be entitled to give a
notice to Escrow Agent, signed by Purchaser's President or any Vice President
(with a copy to Seller), to the effect that there has been an event entitling
Purchaser to indemnification from Seller pursuant to Article 11 of the Purchase
Agreement, which notice shall specify the amounts owed by Seller pursuant to
the Purchase Agreement, the calculation of such amounts and the basis
therefore.
1.2.3 Twenty (20) days after Escrow Agent has received a notice
pursuant to Section 1.2.2 hereof (or, if not a business day, on the next
business day following such twentieth day) Escrow Agent shall deliver to
Purchaser such portion of the Escrowed Funds as is specified in such notice
unless Seller shall have notified Escrow Agent (with a copy to Purchaser) in
writing before such date that Seller disagrees with Purchaser's determination
that Purchaser is entitled to indemnification with respect to the Purchase
Agreement, which notice shall be set forth in reasonable detail the basis for
such disagreement.
1.2.4 Should any dispute arise with respect to the delivery,
ownership, or right of possession of any of the Escrowed Funds during the
Escrow Period, Escrow Agent, as more fully set forth in Section 3.11 hereof, is
authorized and directed to retain in its possession without liability to anyone
all or any part of the Escrowed Funds until such dispute shall have been
settled either by mutual agreement by the parties concerned or by a final
order, decree, or judgment of a court of competent jurisdiction in the United
States of America and time for appeal has expired and no appeal has been
perfected, but Escrow Agent shall be under no duty whatsoever to institute or
defend any such proceedings, and may, in its discretion, deposit such Escrowed
Funds with a court of competent jurisdiction in the United States of America
and be relieved of any and all liability to any of the parties hereto upon such
deposit.
1.3 Distribution of Escrowed Funds. Unless a notice under Section
1.2.2 hereof has been given and Escrowed Funds in satisfaction of such notice
have not been delivered to Purchaser, either because the 20-day period has not
yet run out or because a dispute relating to the claim made by such notice is
then pending, the Escrowed Funds or such portion of them as at the time remain
in escrow and is not in dispute, together with all dividends and distributions
received by Escrow Agent with respect thereto, shall be returned to Seller on
the first anniversary of the Closing Date.
E-2
<PAGE>
1.4 Termination of Escrow Account. This Agreement and the Escrow
Account will terminate at 5:00 P.M., New York City local time, on the date on
which all of the Escrowed Funds contained in the Escrow Account shall be
distributed as set forth above.
2. Notices. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be (a) delivered by hand, (b)
facsimile, or (c) over-night delivery with proper postage prepaid, and
addressed as follows:
If to Purchaser to:
Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Attention: Dominic Chang, President
Telephone: (516) 694-1666
Facsimile: (516) 694-0918
with a copy to:
Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Attention: Pamela Charles, General Counsel
Telephone: (516) 694-1666
Facsimile: (516) 694-0918
If to Seller to:
Three Grove Partners
c/o Arthur J. Calace, Jr.
11 George Ct.
Miller Place, NY 11764
Telephone: (516) 737-8881
Facsimile: (516) 737-8704
with a copy to:
Ruskin, Moscou, Evans & Faltischek
170 Old Country Road
Mineola, NY 11501
Facsimile: (516) 663-6641
Telephone: (516) 663-6620
E-3
<PAGE>
If to Escrow Agent, to:
2 Broadway
New York, New York 10004
Telephone: (212) 509-4000
Facsimile: (212) 509-5150
or to such other address as the person to whom notice is to be given
may have previously furnished to the others in the above-referenced
manner. Except as otherwise provided herein, no notice or
communication shall be effective until received.
3. Concerning Escrow Agent. To induce Escrow Agent to act hereunder, it is
further agreed by each of Seller and Purchaser that:
3.1 Escrow Agent shall not be under any duty to give the Escrowed
Funds held by it hereunder any greater degree of care than it gives its own
similar property and shall not be required to invest any funds held hereunder
except as directed in this Agreement.
3.2 This Agreement expressly sets forth all the duties of Escrow Agent
with respect to any and all matters pertinent hereto. No implied duties or
obligations shall be read into this Agreement against Escrow Agent. Escrow
Agent shall not be bound by the provisions of any agreement among the other
parties hereto except this Agreement.
3.3 Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct, and, except with respect to claims based upon
such gross negligence or willful misconduct that are successfully asserted
against Escrow Agent, the other parties hereto shall jointly and severally
indemnify and hold harmless Escrow Agent from and against any and all losses,
liabilities, claims, actions, damages, and expenses, including reasonable
attorneys' fees and disbursements, arising out of, and in connection with, this
Agreement. Without limiting the foregoing, Escrow Agent shall in no event be
liable in connection with its investment or reinvestment of any cash held by it
hereunder in good faith, in accordance with the terms hereof, including,
without limitation, any liability for any delays (not resulting from gross
negligence or willful misconduct) in the investment or reinvestment of the
Escrowed Funds; or any loss of interest incident to any such delays. This
Section shall survive notwithstanding any termination of this Agreement or the
resignation of Escrow Agent.
3.4 Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument, or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. Escrow Agent may act in reliance upon any instrument or
signature believed by it in good faith to be genuine and may assume, if in good
faith, that any person purporting to give notice or receipt or advice or make
any statement or execute any document in connection with the provisions hereof
has been duly authorized to do so.
E-4
<PAGE>
3.5 Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Escrow Agreement and shall not be liable
for any action taken or omitted in good faith and in accordance with such
advice.
3.6 Escrow Agent does not have any interest in the Escrowed Funds
deposited hereunder, but is serving as escrow holder only. Any payments of
income from the Escrow Account shall be subject to withholding regulations then
in force with respect to United States taxes. This Section shall survive
notwithstanding any termination of this Agreement or the resignation of Escrow
Agent.
3.7 Escrow Agent makes no representation as to the validity, value,
genuineness, or the collectibility of any security or other documents or
instrument held by, or delivered to, it.
3.8 Escrow Agent shall not be called upon to advise any party as to
the wisdom in selling or retaining or taking or refraining from any action with
respect to any securities or other property deposited hereunder.
3.9 Escrow Agent at any time may be discharged from its duties and
obligations hereunder by the delivery to it of notice of termination signed by
Purchaser and Seller or at any time may resign by giving written notice to such
effect to Purchaser and Seller. Upon any such termination or resignation,
Escrow Agent shall deliver the Escrowed Funds to any successor escrow agent
jointly designated by the other parties hereto in writing, or to any court of
competent jurisdiction if no such successor escrow agent is agreed upon,
whereupon Escrow Agent shall be discharged of and from any and all further
obligations arising in connection with this Escrow Agreement. The termination
or resignation of Escrow Agent shall take effect on the earlier of (a) the
appointment of a successor (including a court of competent jurisdiction) or (b)
the day that is thirty (30) days after the date of delivery: (i) to Escrow
Agent of the other parties' notice of termination or (ii) to the other parties
hereto of Escrow Agent's written notice of resignation. If at that time Escrow
Agent has not received a designation of a successor escrow agent, Escrow
Agent's sole responsibility after that time shall be to keep the Escrowed Funds
safe until receipt of a designation of successor escrow agent or a joint
written disposition instruction by the other parties hereto or an enforceable
order of a court of competent jurisdiction.
3.10 Escrow Agent shall have no responsibility for the contents of any
writing of any third party contemplated herein as a means to resolve disputes
and may rely without any liability upon the contents thereof.
3.11 In the event of any disagreement among or between the other
parties hereto resulting in adverse claims or demands being made in connection
with the Escrowed Funds, or in the event that Escrow Agent in good faith is in
doubt as to what action it should take hereunder, Escrow Agent shall be
entitled to retain the Escrowed Funds until Escrow Agent shall have received
(a) a final and non-appealable order of a court of competent jurisdiction in
the United States of America directing delivery of the Escrowed Funds or (b) a
written agreement executed by the other parties hereto directing delivery of
the Escrowed Funds, in which event Escrow Agent shall disburse the Escrowed
E-5
<PAGE>
Funds in accordance with such order or agreement. Any court order referred to
in (a) above shall be accompanied by a legal opinion by counsel for the
presenting party satisfactory to Escrow Agent to the effect that said court
order is final and non-appealable. Escrow Agent shall act on such court order
and legal opinions without further question.
3.12 As consideration for its agreement to act as Escrow Agent as
herein described, Purchaser shall pay the Escrow Agent's fees determined in
accordance with the terms set forth on Exhibit A hereto (and made a part of
this Escrow Agreement as if herein set forth). In addition, Purchaser and
Seller agree to reimburse Escrow Agent (on a 50/50 basis) for all reasonable
expenses, disbursements, and advances incurred or made by Escrow Agent in
performance of its duties hereunder (including reasonable fees, expenses, and
disbursements of its counsel).
4. Miscellaneous.
4.1 Binding Effect. This Escrow Agreement shall be binding upon, and
inure solely to the benefit of, the parties hereto and their respective
successors and assigns, heirs, administrators, and representatives, and shall
not be enforceable by, or inure to the benefit of, any other third party,
except as provided in Section 3.9 hereof with respect to the termination of, or
resignation by, Escrow Agent. No party may assign any of its rights or
obligations under this Agreement without the written consent of the other
parties.
4.2 Choice of Law. This Agreement shall be construed in accordance
with, and governed by, the internal law of the State of New York (without
reference to its rules as to conflicts of law).
4.3 Modification. This Agreement may only be modified by a writing
signed by all of the parties hereto.
4.4 Headings. The section headings herein are for convenience only and
shall not affect the construction thereof. Unless otherwise indicated,
references to Sections and Articles are to Sections and Articles, respectively,
contained herein.
4.5 Counterparts. This Agreement may be executed in one or more
counterparts but all such separate counterparts shall constitute but one and
the same instrument; provided that, although executed in counterparts, the
executed signature pages of each such counterpart may be affixed to a single
copy of this Agreement which shall constitute an original.
E-6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
THREE GROVE PARTNERS
By: Grayside Partners, Inc., a New York
corporation, general partner
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
E-7
<PAGE>
GROUND LEASE AGREEMENT
----------------------
BY AND BETWEEN
THREE GROVE PARTNERS
AS LANDLORD
AND
LAKE GROVE FAMILY GOLF CENTERS, INC.,
AS TENANT
THE PONDS AT LAKE GROVE
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I....................................................................1
Section 1.01. Leased Premises....................................1
Section 1.02. Term...............................................1
Section 1.03. Use................................................1
ARTICLE II...................................................................2
Section 2.01. Base Rent..........................................2
Section 2.02. Percentage Rent....................................2
Section 2.03. Additional Rent....................................4
Section 2.04. Payment of Rent....................................4
ARTICLE III..................................................................5
Section 3.01. Impositions........................................5
Section 3.02. Payment of Impositions.............................6
Section 3.03. Direct Payment and Escrow..........................6
Section 3.04. Payment of Bills...................................6
ARTICLE IV...................................................................7
Section 4.01. Insurance..........................................7
Section 4.02. Evidence of Insurance..............................8
Section 4.03. Right of Landlord to Obtain Insurance..............8
Section 4.04. Indemnification....................................8
ARTICLE V....................................................................8
Section 5.01. Damage to Improvements.............................8
ARTICLE VI..................................................................10
Section 6.01. Alterations.......................................10
Section 6.02. Right to Remove/Demolish..........................11
Section 6.03. Rights to Continue................................11
Section 6.04. Liens; End of Term................................11
ARTICLE VII.................................................................12
Section 7.01. Sublease and Assignment...........................12
Section 7.02. Liens.............................................12
Section 7.03. New/Replacement Tenant............................12
Section 7.04. Estoppel Certificates.............................13
-i-
<PAGE>
ARTICLE VIII................................................................13
Section 8.01. Right of Refusal..................................13
ARTICLE IX..................................................................14
Section 9.01. Tenant Default....................................14
Section 9.02. Remedies..........................................15
Section 9.03. Additional Remedies; Damages......................16
ARTICLE X...................................................................18
Section 10.01. Notice Parties....................................18
Section 10.02. Right of Certain Notice Parties to Obtain
New Lease.......................................18
ARTICLE XI..................................................................19
Section 11.01. Condemnation......................................19
ARTICLE XII.................................................................20
Section 12.01. Peaceful Enjoyment................................20
Section 12.02. Title to Leased Premises..........................20
ARTICLE XIII................................................................20
Section 13.01. Landlord's Mortgagee..............................20
ARTICLE XIV.................................................................21
Section 14.01. Surrender.........................................21
ARTICLE XV..................................................................21
Section 15.01. Notices...........................................21
ARTICLE XVI.................................................................22
Section 16.01. Entire Agreement..................................22
ARTICLE XVII................................................................22
Section 17.01. Landlord Default..................................22
ARTICLE XVIII...............................................................23
Section 18.01. Actions Requiring Consent of Tenant's Mortgagee...23
ARTICLE XIX.................................................................23
Section 19.01. Governing Law.....................................23
-ii-
<PAGE>
ARTICLE XX..................................................................23
Section 20.01. Compliance with Laws..............................23
Section 20.02. Hazardous Materials...............................23
ARTICLE XXI.................................................................24
Section 21.01. Attorney's Fees...................................24
ARTICLE XXII................................................................24
Section 22.01. Recording of Lease................................24
ARTICLE XXIII...............................................................24
Section 23.01. Brokers...........................................24
ARTICLE XXIV................................................................24
Section 24.01. Guaranty..........................................24
ARTICLE XXV.................................................................24
Section 25.01. No Merger of Estates..............................24
Attachments:
- ------------
EXHIBIT A: Leased Premises
EXHIBIT B: Permitted Exceptions
EXHIBIT C: Guaranty Agreement
EXHIBIT D: Non-Disturbance Agreement
-iii-
<PAGE>
GROUND LEASE AGREEMENT
----------------------
THIS GROUND LEASE AGREEMENT (this "Lease") is made and entered into
effective as of the 1st day of June, 1997 (the "Effective Date"), by and
between THREE GROVE PARTNERS, a New York limited partnership (hereinafter
called "Landlord"), and LAKE GROVE FAMILY GOLF CENTERS, INC., a New York
corporation (hereinafter called "Tenant"), as follows:
ARTICLE I
---------
SECTION 1.01. LEASED PREMISES. Subject to the terms, provisions and
conditions hereinafter set forth, and in consideration of the covenants of
payment and performance stipulated herein, Landlord has leased, demised and let
and by these presents does hereby lease, demise and let unto Tenant, for the
uses described in Section 1.03, all those certain premises containing 42.9
acres situated on 100 New Moriches Road in Suffolk County, New York, more
particularly described on Exhibit A attached hereto and for all purposes made a
part hereof and including all improvements and fixtures located thereon except
as specifically excluded below (the "Leased Premises").
TO HAVE AND TO HOLD the Leased Premises, together with any rights,
easements, privileges, both subterranean and vertical, and the appurtenances
and improvements thereunto attaching or in anywise belonging, unto Tenant, and
the successors in interest and permitted assigns of Tenant, for and during the
term hereinafter set forth.
Notwithstanding anything to the contrary herein, the Leased Premises
shall not include any property or improvements sold by Landlord and Purchased
by Tenant pursuant to that Asset Purchase Agreement dated of even date herewith
by and between Landlord and Tenant or any improvements hereafter added to the
Leased Premises, all of which shall be owned by Tenant during the term of this
Lease; provided that upon a termination or expiration of this Lease title to
all improvements then existing on the Leased Premises shall automatically pass
to Landlord.
SECTION 1.02. TERM. Unless sooner terminated under provisions hereof,
the initial term of this Lease (the "Term") shall be and continue in full force
and effect commencing on June 1, 1997 and continuing thereafter for, during and
until 11:59 p.m. on the date that is forty-five (45) years after June 1, 1997.
SECTION 1.03. USE. Tenant may use the Leased Premises for the
operation of a driving range, eighteen (18) hole executive golf course
containing approximately three thousand (3,000) yards, kitchen and/or
clubhouse, pro-shop and similar or related uses and/or purposes. The use of the
Leased Premises should at all times be in accordance with any certificate of
occupancy affecting the Leased Premises and all statutes, laws, codes, permits,
rules and regulations of any federal, state, municipal, or other governmental
agency or authority having jurisdiction over
-1-
<PAGE>
the Leased Premises or any part thereof, whether the same are in force on the
date hereof or may in the future be passed, enacted or directed, and Tenant
shall pay all costs, expenses, liabilities, losses, damages, fines, penalties,
claims and demands, including reasonable attorneys' fees, that may in any
manner arise out of or be imposed because of the failure of Tenant to comply
therewith.
ARTICLE II
----------
SECTION 2.01. BASE RENT. As consideration for the use and occupancy
of, and as rental for, the Leased Premises, Tenant promises and agrees to pay
Landlord, while this Lease remains in force and effect (the "Term"), and in the
manner hereinafter provided, annual lease rentals (the "Base Rent") in the
amount of $250,000 per Lease Year, which sums shall be paid in equal monthly
installments, in advance, on the first day of each calendar month during the
Term; provided, however, that if this Lease expires or terminates on other than
the last day of a calendar month, then the installments of Base Rent for such
month or months shall be prorated and the installment or installments so
prorated shall be paid in advance. Said installments for such prorated month or
months shall be calculated by multiplying the equal monthly installment by a
fraction, the numerator of which shall be the number of days of the term
occurring during said commencement or expiration month, as the case may be, and
the denominator of which shall be the number of days in said month. "Lease
Year" means a period of one (1) year, with the first (1st) Lease Year
commencing on June 1, 1997 and expiring on May 31, 1998 and with each
subsequent Lease Year commencing upon the expiration of the prior Lease Year.
SECTION 2.02. PERCENTAGE RENT. In addition to Base Rent, Tenant
promises and agrees to pay Landlord, while this Lease remains in force and
effect, and in the manner hereinafter provided, and subject to the terms,
provisions and conditions hereinafter set forth, percentage rent ("Percentage
Rent"), which sums shall be paid in quarter-annual installments on or before
the forty-fifth (45th) day after each calendar quarter for the prior calendar
quarter in accordance with the following:
(a) Percentage Rent for a calendar year shall be equal to ten percent
(10%) of the amount by which Gross Revenues, as hereinafter defined, for such
calendar year, minus Cost of Goods Sold, as hereinafter defined, exceeds
$2,000,000. Tenant shall not be obligated to pay Percentage Rent for a calendar
year until Gross Revenues for such calendar year, minus Cost of Goods Sold for
such calendar year, exceeds $2,000,000 and, thereafter Percentage Rent shall be
payable quarterly for such calendar year.
(b) "Gross Revenues" for a calendar year shall be all revenues
received by Tenant from the operation of the Leased Premises. Gross Revenues
shall include the Gross Revenues of sublessees of Tenant determined in the same
manner as for Tenant. Gross Revenues shall not include, and the following
amounts shall be deducted in determining Gross Revenues: (i) any federal,
state, or local taxes or municipal charges now or hereinafter imposed upon
either Tenant or its customers and whether or not collected and/or paid by
Tenant or its customers, (ii) receipts from sales of fixtures, furniture,
equipment or improvements, (iii) condemnation awards, insurance
-2-
<PAGE>
proceeds, loan proceeds or capital contributions, (iv) cash refunds or credits
allowed on returns by customers, (v) fees charged by golf professionals
functioning as independent contractors for teaching of golf lessons and
instruction, except to the extent Tenant receives any portion of such fees and
commissions, provided Tenant's practice of engaging such independent
contractors for such purposes at the Leased Premises is consistent with the
practice of engaging such independent contractors for such purposes at other
properties operated by affiliates of Tenant, (vi) refunds from or the value of
merchandise, supplies or equipment returned to shippers, suppliers or
manufacturers, (vii) volume discounts received from sellers, suppliers or
manufacturers, (viii) receipts from sale of uniforms or clothing required to be
worn by employees, (ix) revenues relating to any fund raising or charity
events, except to the extent such revenues actually received by Tenant from
such events, (x) any uncollectible check, bank draft or charge or credit amount
or other bad debt, (xi) interest or dividend income on investments, and (xii)
receipts from vending machines except to the extent of net revenues actually
received by Tenant.
(c) "Cost of Goods Sold" for a calendar year shall be the cost of
goods sold during such calendar year, including the cost of merchandise,
commissions paid on lessons and cost of food and beverages. Cost of Goods Sold
shall include the foregoing items incurred by sublessees of Tenant determined
in the same manner as for Tenant. Cost of Goods Sold shall take into account
any refunds under Section 2.02(b)(vi) and any discounts under Section
2.02(b)(vii). Except as provided in Sections 2.02(b) and 2.02(c), in no event
will labor or overhead costs be included in the determination of Costs of Goods
Sold.
(d) Percentage Rent shall be computed by Tenant on a cash basis for
each calendar year, provided Percentage Rent shall be payable on a quarterly
basis as provided above. Based on the annual financial statements provided for
below, Percentage Rent for the applicable calendar year shall be determined and
any overpayment or underpayment in Percentage Rent paid quarterly for such
calendar year shall be corrected, by Landlord refunding to Tenant any
overpayment or by Tenant paying to Landlord any underpayment, within thirty
(30) days after Tenant's delivery of such annual financial statements for such
calendar year.
(e) Percentage Rent, and the calculation thereof, including the
$2,000,000 breakpoint, shall be prorated for any partial year occurring during
the Term.
(f) Tenant shall (i) not later than forty-five (45) days following the
end of each calendar quarter during the Term, deliver to Landlord a written
statement certified by Tenant, showing Gross Revenues and the Cost of Goods
Sold during such calendar quarter and a statement of Percentage Rent payable
for the period covered by such statement; and (ii) not later than ninety (90)
days after the end of each calendar year or partial calendar year, deliver to
Landlord a statement of Gross Revenues and the Cost of Goods Sold during such
calendar year, or partial calendar year, and a statement of Percentage Rent
payable for the period covered by such statement certified by a certified
public accounting firm. Landlord shall keep all information received by
Landlord confidential, but may be disclosed in any legal proceedings.
-3-
<PAGE>
(g) Tenant will preserve for at least three (3) years at the Leased
Premises all original books and records disclosing information pertaining to
Gross Revenues and the Cost of Goods Sold and such other information respecting
Gross Revenues and the Cost of Goods Sold as Landlord reasonably requires,
including, but not limited to, cash register tapes, sales slips, sales checks,
gross income and sales tax returns, bank deposit records, sales journals and
other supporting data. Landlord and its agents shall have the right during
normal business hours after reasonable notice to examine and audit such books
and records preserved by Tenant provided Landlord shall not interfere with the
operation of Tenant's business and shall keep all information obtained
confidential. If such examination or audit discloses a liability for Percentage
Rent three percent (3%) or more in excess of the Percentage Rent paid by Tenant
for any period and at least $500.00 of Percentage Rent is owed as a result of
such audit, or if Tenant has failed to keep books and records sufficient to
allow for the reasonable completion of such an audit, Tenant shall promptly pay
Landlord the cost of said audit. Tenant shall, in any event, pay to Landlord
the amount of any deficiency in Percentage Rent which is disclosed by such
audit plus interest per annum at three percent (3%) over the prime rate
announced by Citibank, N.A. from time to time.
SECTION 2.03. ADDITIONAL RENT. (a) In addition to Base Rent and
Percentage Rent, Tenant agrees to pay and discharge as additional rent
("Additional Rent") all costs, expenses and other sums required to be paid by
Tenant under the terms of this Lease, and all other charges and expenses with
respect to the use and occupancy of the Leased Premises together with every
fine, penalty, interest and cost which may be added for non-payment or late
payment, whether or not any are specifically designated as "Additional Rent".
In the event of any non-payment of Percentage Rent or Additional Rent when due,
Landlord shall have all the rights and remedies provided for in this Lease, or
by law, for the non-payment of Base Rent. Notwithstanding the foregoing, Tenant
shall not be obligated to pay any amounts for which Landlord is liable, such as
Landlord's mortgage.
(b) Except as expressly provided to the contrary in this Lease, this
Lease is intended to be, and shall be construed as, an absolutely net lease,
whereby under all circumstances and conditions, the Base Rent and Percentage
Rent shall be a completely net return to Landlord; and Tenant shall pay, and
shall indemnify and hold harmless Landlord from and against, any and all
claims, losses, damages, expenses, costs, fines, penalties, liabilities,
obligations and charges whatsoever (including reasonable attorney's fees and
disbursements) which shall arise or be incurred, shall become due, or which
shall be based upon any act or omission by Tenant occurring during the Term,
with respect to or in connection with the Leased Premises or the ownership,
leasing, operation, management, maintenance, repair, rebuilding, use or
occupation of the Leased Premises, other than debt service payable under any
mortgage or any other obligation or liability arising from Landlord's acts or
omissions.
SECTION 2.04. PAYMENT OF RENT. The rentals described in Section 2.01,
Section 2.02, and Section 2.03 shall be in addition to all other payments to be
made by Tenant as herein provided and shall be paid to Landlord without notice
or demand and without abatement, deduction or set-off, except as may otherwise
be expressly provided in this Lease. If any of the rentals described in Section
2.01, Section 2.02, or Section 2.03 are not paid within five (5) days after the
-4-
<PAGE>
same are due, such past due payments shall bear interest from and after such
five (5) day period until paid at the rate of three percent (3%) per annum over
the prime rate announced by Citibank N.A.
from time to time.
ARTICLE III
-----------
SECTION 3.01. IMPOSITIONS. (a) Except as otherwise provided in Section
3.01(b), Tenant will pay and discharge, as and when the same shall become due
and payable, without penalty, the following (collectively, the "Impositions"):
all real estate taxes, assessments, property taxes, privilege taxes, franchise
taxes, excise taxes, business and occupation taxes, gross sales taxes, gross
receipt taxes, occupational license taxes, and water and sewer charges,
including governmental impositions and charges of every kind and nature
whatsoever, whether extraordinary or ordinary, general or special, unforeseen
or foreseen, or similar or dissimilar to any of the foregoing which, with
respect to any period during the Term, shall be or become due and payable and
which:
(i) shall be levied, assessed or imposed on or against the
Leased Premises or any interest of Landlord or Tenant in
the Leased Premises or under this Lease;
(ii) shall be or become liens on or against the Leased Premises
or any interest of Landlord or Tenant in the Leased
Premises or under this Lease;
(iii) shall be levied, assessed or imposed on or against Tenant
or Landlord by reason of any actual or asserted engagement
by Tenant (but not Landlord), directly or indirectly, in
any business, occupation or other activity in connection
with the Leased Premises; or
(iv) shall be levied, assessed or imposed on in connection with
the ownership, leasing, operation, management, maintenance,
repair, rebuilding, use or occupancy of the Leased Premises
by Tenant.
(b) Nothing in this Lease shall require Tenant to pay any taxes,
assessments or other charges imposed by city, county, state or federal laws or
ordinances upon the income of Landlord, or upon the transfer or passing of any
interest owned by Landlord in the Leased Premises, generally known as income,
inheritance, estate, succession or transfer taxes, or any withholding, profit
or revenue tax or charge levied upon the rents payable to Landlord under the
terms of this Lease, or any franchise tax or license fee; provided, however,
that if at any time during the Term the methods of taxation shall be altered so
that in lieu of, as a supplement to, or a substitute for the whole or part of
any Imposition which Tenant has agreed to pay pursuant to this Section 3.01,
there shall be levied, assessed or imposed (i) a tax, assessment, levy,
imposition or charge, wholly or
-5-
<PAGE>
partially as a capital levy or otherwise, on the rents received under this
Lease or (ii) a license fee measured by the rent payable by Tenant under this
Lease, then Tenant shall pay the same.
SECTION 3.02. PAYMENT OF IMPOSITIONS. As additional rental during the
Term, Tenant will pay or cause to be paid, as and when the same shall become
due, all Impositions, except that:
(i) All Impositions for the fiscal year or tax year in which
the Term of this Lease commences, as well as during the
year in which the Term of this Lease expires or earlier
terminates, shall be apportioned so that the Tenant shall
pay its proportionate share of the Impositions which are
payable in the year in which the Term commences and in the
year in which the Term expires or earlier terminates, and
Landlord shall likewise pay its proportionate share.
(ii) Where any Imposition is permitted by law to be paid in
installments, Tenant may pay such Imposition in
installments as and when such installments become due;
provided, however, that the amount of all installments of
any such Impositions which are to become due and payable
after the expiration or earlier termination of the Term
shall not be apportioned (except as provided in subsection
(i) hereof).
Landlord represents and warrants to Tenant that the Leased Premises
constitute a separate and distinct tax lot for real estate tax purposes.
SECTION 3.03. DIRECT PAYMENT AND ESCROW. Tenant shall pay all such
Impositions to be paid by it directly to the taxing authority; provided that,
upon request of Landlord, Tenant will deposit with Landlord a sum equal to the
Impositions against the Leased Premises for the current year, in monthly
installments prorated on a monthly basis due at the time Base Rent is payable
hereunder sufficient to allow Landlord to pay, prior to delinquency, the next
maturing Impositions. All amounts so deposited with Landlord shall be held in
trust by Landlord for the payment of such Impositions, shall not be commingled
with Landlord's other funds, and shall be deposited in an interest bearing
account. If Landlord is collecting such deposits, Landlord shall pay the
Impositions when due. If Tenant makes payments of Impositions directly to the
applicable authority, Tenant shall deliver to Landlord evidence of such timely
payment within fifteen (15) days of such payment.
SECTION 3.04. PAYMENT OF BILLS. Tenant shall fully and promptly pay
all gas, heat, light, power, telephone, water, sewer and drainage charges and
other charges by public utilities of every kind for services furnished to the
improvements located on the Leased Premises for Tenant's use during the term of
this Lease.
-6-
<PAGE>
ARTICLE IV
----------
SECTION 4.01. INSURANCE. Tenant shall, at its sole cost and expense:
(a) Keep all Improvements, fixtures and equipment and other property
on, in or appurtenant to the Leased Premises, or used in connection with the
operation and maintenance of the Leased Premises, and all replacements,
alterations and additions of or to the foregoing insured for the benefit of
Landlord, any mortgagee of the Leased Premises, and any other party designated
by Landlord, as their respective interests may appear, against all risk of loss
or damage, including loss or damage by fire and other perils included in the
so-called "extended coverage endorsement", vandalism and malicious mischief,
collapse, lightning, windstorm, hail, explosion, riot, riot attending a strike,
civil commotion, aircraft, vehicles, smoke, and water damage and against such
other risks as are normally or customarily insured against by owners or
operators of similar properties or as Landlord may from time to time reasonably
request, and containing Replacement Cost, Agreed Amount and Demolition and
Increased Cost due to Ordinance endorsements. Such coverage shall be in amounts
at all times sufficient to prevent Landlord or Tenant from becoming a
co-insurer under the terms of the applicable policies, but in any event in
amounts not less than the full replacement value of the improvements. Tenant
shall cause full replacement value to be determined from time to time at the
request of Landlord, but not more frequently than once every four (4) years, by
an insurance appraisal or other valuation method reasonably acceptable to
Landlord;
(b) If a sprinkler system is located in the Leased Premises or any
buildings located thereon, provide sprinkler leakage insurance in amounts
reasonably satisfactory to Landlord;
(c) Provide a Glass and Boiler and Machinery Broad Form insurance
policy covering explosion in respect of steam and pressure boilers and similar
apparatus, if any, located on the Leased Premises in an amount equal to the
full replacement value of insurable improvements upon the Leased Premises;
(d) Provide comprehensive general liability and broad form property
damage insurance, written on an occurrence basis, including elevator, machinery
and contractual liability insurance protecting and indemnifying Landlord,
Tenant and others having an insurable interest, against any and all claims
(including all costs and expenses of defending against same) for personal
injury, disease or death and for damage or injury to or destruction of property
(including loss of the use) occurring on, in or about the Leased Premises, or
any adjoining streets, alleys, passageways, sidewalks, gutters, curbs, vaults
or vault spaces appurtenant to the Leased Premises, which insurance shall have
a combined single limit of not less than $_________ and umbrella coverage of
not less than $_________. The insurance carried pursuant to this paragraph
shall include coverage for contractual liability, owners' protective liability,
independent contractors' liability and completed operations liability with a
personal injury endorsement covering claims arising out of title arrest, false
imprisonment, libel, slander, wrongful eviction, discrimination and invasion of
privacy;
-7-
<PAGE>
(e) Provide automobile liability insurance in amounts reasonably
satisfactory to Landlord covering all vehicles operated, or owned by Tenant in
connection with the Leased Premises;
(f) Provide business interruption insurance in amounts and covering
risks typically insured by Tenant or its affiliates; and
(g) Provide workers' compensation insurance to the extent required by
applicable law.
SECTION 4.02. EVIDENCE OF INSURANCE. Tenant shall deliver to Landlord
duly executed certificates of insurance and copies of the applicable insurance
policies reflecting Tenant's maintenance of the insurance required under
Section 4.01 of this Lease. The insurance required under such sections shall be
cancelable only upon at least sixty (60) days prior written notice to Landlord.
SECTION 4.03. RIGHT OF LANDLORD TO OBTAIN INSURANCE. In the event of
the failure of Tenant to maintain insurance required by this Article IV,
Landlord may give notice of such failure to Tenant, and if such failure
continues for ten (10) days after such notice, Landlord may at its election
(but shall not be obligated to) procure such insurance as may be necessary to
comply with the above requirements, and Tenant agrees to repay the cost of same
to Landlord on demand, with interest thereon at three percent (3%) per annum
plus the prime rate announced by Citibank, N.A., from time to time until paid.
SECTION 4.04. INDEMNIFICATION. Tenant agrees to indemnify and hold
Landlord harmless from all liability and claims for any damage to person or
property arising in connection with the Leased Premises after the date hereof,
except that environmental liabilities shall be covered by Section 20.02. Except
as otherwise expressly provided in this Lease to the contrary, Tenant shall not
be liable to Landlord, or to Landlord's agents, servants or employees for any
damage to person or property caused by the negligence or intentional torts of
Landlord, or its agents, servants or employees, and Landlord agrees to
indemnify and hold Tenant harmless from all liability and claims for any such
damage.
ARTICLE V
---------
SECTION 5.01. DAMAGE TO IMPROVEMENTS. (a) If any improvements located
at the Leased Premises shall be destroyed or damaged by any cause whatsoever,
Tenant shall promptly so notify Landlord and shall, at its sole cost and
expense, to the extent of the net amount of any insurance proceeds (the
"Insurance Proceeds") available for the purpose, restore, repair, replace or
rebuild the same as nearly as possible to its condition and character
immediately prior to the damage or destruction, or, at Tenant's option, to its
condition and character as of the Effective Date. Such restoration, repairs,
replacements or rebuilding (collectively, "Casualty Restoration") shall be
commenced promptly and prosecuted to completion with reasonable diligence. All
insurance
-8-
<PAGE>
proceeds shall be made available by Landlord for the payment of the cost of the
Casualty Restoration. Notwithstanding the foregoing, if damage or destruction
occurs within the last two (2) years of the Term, Tenant may elect not to
restore or repair, but instead may elect to raze such improvements and pay to
Landlord any casualty insurance proceeds receivable by Tenant in excess of the
costs incurred to raze such improvements.
(b) No destruction of or damage to the Leased Premises, or to any
improvement, furniture, furnishings, fixtures, equipment or other property
shall permit Tenant to surrender this Lease or shall relieve Tenant from its
liability to pay the full Base Rent, Percentage Rent and Additional Rent
payable under this Lease or from any of its other obligations under this Lease.
Tenant waives any rights now or hereafter conferred upon it by statute or
otherwise to quit or surrender this Lease or the Leased Premises or to any
suspension, abatement or reduction of any rent on account of any such
destruction or damage.
(c) All Insurance Proceeds paid on account of any damage or
destruction, less the actual cost, fees and expenses, if any, incurred by
Landlord and Tenant in connection with the adjustment of the loss or the
collection of the award (collectively, the "Deposited Funds") shall be
deposited with an escrow agent reasonably acceptable to Landlord and Tenant,
provided that such escrow agent shall agree in writing that it will apply the
Deposited Funds in accordance with the provisions of this Lease. If and so long
as Tenant is not in default under this Lease and is conducting the Casualty
Restoration (a "Restoration") in accordance with this Lease, the Deposited
Funds shall be paid out from time to time as the Restoration progresses, upon
the written request of Tenant, which request shall be accompanied by the
following:
(i) A certificate signed by the architect or engineer in charge of the
Restoration, reasonably satisfactory to Landlord, dated not more than fifteen
(15) days prior to such request, setting forth:
(A) that the sum then requested either has been paid by Tenant or
is justly due to contractors, sub-contractors, materialmen, engineers,
architects or other persons who have rendered services or furnished materials
for the work specified, and stating that no part of such expenditures has been
or is being made the basis of any previous or then pending request for the
withdrawal of the Deposited Funds;
(B) a brief description of the services and materials;
(C) that, except for the amount described in paragraph (i)(A),
there is no outstanding indebtedness known to the persons signing such
certificate, after due inquiry, which is then due for labor, materials, or
services in connection with the Restoration, and
(D) that the cost, as estimated by the persons signing such
certificate, of the work required to complete the Restoration does not exceed
the amount of the remaining Deposited Funds, plus any amount deposited by
Tenant to defray the expenses of Restoration;
-9-
<PAGE>
(ii) Lien waivers, title insurance endorsements or such other
evidence, reasonably satisfactory to Landlord, to the effect that there has not
been filed with respect to the Leased Premises, any vendor's, mechanic's,
laborer's, materialman's or other lien which has not been discharged of record,
except such as will be discharged by payment of the amount then requested; and
(iii) Such other documentation regarding the Restoration as Landlord
shall reasonably require.
(d) Tenant shall, prior to the commencement of the Restoration,
furnish to Landlord an estimate of the total cost of the Restoration certified
by the architect or engineer in charge of the Restoration. If such cost
estimate or any subsequent estimate shall show that the cost of completing the
Restoration is in excess of the amount of the Deposited Funds then available,
Tenant shall promptly deposit with the holder of the Deposited Funds an amount
equal to such excess. The amount so deposited shall be included in the
Deposited Funds for all purposes of this Article V.
(e) Upon compliance by Tenant with the foregoing provisions of this
Article, the holder of the Deposited Funds shall pay to Tenant or the persons
named in the certificate referred to in Section 5.01(c)(i), from the Deposited
Funds, an amount equal to ninety percent (90%) of the cost of the Restoration
which is evidenced by the request. At the completion of the Restoration, the
balance of the Deposited Funds, to the extent of and as required to complete
the payment of Restoration costs, shall be paid to Tenant and Tenant shall
provide to Landlord reasonable evidence that the Restoration has been paid for
in full.
(f) If the amount of any Deposited Funds shall exceed the entire cost
of the Casualty Restoration, such excess, upon completion of the Casualty
Restoration, shall be paid to and retained by Tenant.
(g) If prior to the completion of any Restoration, this Lease shall
terminate or expire for any reason other than by reason of an Event of Default,
then Landlord shall have the right to receive and retain any Deposited Funds to
the extent that they shall not have been applied to the payment or
reimbursement of the costs and expenses of the Restoration, and Tenant shall
thereupon be discharged from any and all obligations to complete such
Restoration provided said Insurance Proceeds are sufficient to complete such
Restoration.
ARTICLE VI
----------
SECTION 6.01. ALTERATIONS. Tenant shall have the right, from time to
time, to make, at its sole cost and expense, additions, alterations and changes
in or to the improvements that are located upon the Leased Premises without
Landlord's consent as long as such additions, alterations and changes (a) are
determined by Tenant to be necessary or appropriate for the conduct of its
business on the Leased Premises, (b) will not diminish the value of the Leased
Premises in any
-10-
<PAGE>
material respect, (c) are constructed in compliance with all applicable laws,
ordinances and similar requirements, and (d) are consistent with the permitted
uses of the Leased Premises. Tenant shall deliver copies of plans and
specifications, if any, for all additions, alterations and changes to Landlord
within thirty (30) days after completion of the work.
SECTION 6.02. RIGHT TO REMOVE/DEMOLISH. Tenant shall have the right,
from time to time, to remove or demolish any improvements now or hereafter
situated on the Leased Premises without the prior written consent of Landlord
as long as such demolition either (a) is necessary to the commencement of
alterations, additions or changes permitted under Section 6.01 or (b) will not
diminish the value of the Leased Premises in any material respect.
SECTION 6.03. RIGHTS TO CONTINUE. The demolition and removal of any
then existing improvements and the construction of new improvements by Tenant
upon the Leased Premises at any time or times pursuant to the terms hereof
shall not exhaust the rights of Tenant to do the same at any future time or
times during the Term, and Tenant may exercise the rights granted to it in
Section 6.01 and 6.02 at any time or times and from time to time during the
Term.
SECTION 6.04. LIENS; END OF TERM. Tenant shall have no right,
authority or power to bind Landlord, or any interest of Landlord in the Leased
Premises, for any claim for labor or material or for any other charge or
expense incurred in the erection and construction of any improvements, or any
change, alteration or addition thereto, nor to render such Leased Premises
liable to any lien or right of lien for any labor or material, and Tenant shall
in no way be considered as the agent of Landlord in the construction, erection
or operation of any improvements. Upon the termination of this Lease, whether
by expiration of the Term or by reason of default on the part of Tenant, or for
any other reason whatsoever, all improvements then located on the Leased
Premises shall then merge with the freehold estate and become the property of
Landlord as a part of the realty, free and clear of any burdens placed upon
Tenant's leasehold estate.
SECTION 6.05. MAINTENANCE AND REPAIR. Tenant shall, at its sole cost
and expense, and subject to its rights as provided in Sections 5.01, 6.01 and
6.02, take good care of the Leased Premises and keep the Leased Premises and
all components of the Leased Premises, including the roof and foundations of
all buildings and improvements now or hereafter located on the Leased Premises,
in good and safe order and condition. Tenant shall neither commit nor permit
any waste or injury to the Leased Premises, and shall, at Tenant's sole cost
and expense, promptly make all needed repairs, restorations and replacements,
interior and exterior, structural and nonstructural, ordinary and
extraordinary, foreseen and unforeseen, in and to any improvements, equipment
and personal property now or hereafter erected or installed in or on the Leased
Premises, including vaults, sidewalks, curbs, water, sewer and gas connections,
meters, pipes and mains, and all other fixtures and equipment now or hereafter
belonging to, adjoining or connected with the Leased Premises or used in its
operations. All repairs, restorations and replacements shall be of good quality
sufficient for the proper maintenance and operation of the Leased Premises and
at least
-11-
<PAGE>
equivalent in quality to the original work or the property replaced and shall
be constructed and installed in compliance with all legal requirements.
ARTICLE VII
-----------
SECTION 7.01. SUBLEASE AND ASSIGNMENT. At any time during the Term,
Tenant shall have and is hereby granted the right freely to sublet all or any
portion of the Leased Premises, subject to the use limitations contained in
this Lease. Tenant shall have the right to assign this Lease to any affiliate
of Tenant or to any entity that purchases all or substantially all of the
assets of Tenant without Landlord's approval or consent. A transfer of less
than a controlling interest in Tenant shall not be deemed an assignment
hereunder requiring Landlord's consent or approval. All other assignments of
Tenant's interest in the leasehold estate created hereby, subject to Section
7.02, may be made only with Landlord's approval or consent, which will not be
unreasonably withheld. Tenant also shall furnish to Landlord a copy of such
instrument of assignment and assumption as herein provided. No such assignment
or subletting by Tenant shall relieve Tenant of any covenants or obligations
under this Lease and Tenant shall remain fully liable hereunder.
SECTION 7.02. LIENS. Notwithstanding anything to the contrary in this
Lease, Tenant shall have the right to assign this Lease to any leasehold
mortgagee or to the designee or nominee of such leasehold mortgagee, without
the consent of Landlord and without the necessity of compliance with Article
VII hereof, in the event leasehold mortgagee or its designee or nominee shall
acquire ownership of the leasehold estate created hereby, either following
foreclosure of the leasehold mortgage or in liquidation of the indebtedness and
in lieu of foreclosure thereof. In such event, leasehold mortgagee or its
designee or nominee shall have the further right, without the consent of
Landlord, to further assign this Lease and upon such assignment leasehold
mortgagee shall be released from the obligations of this Lease thereafter
arising. Subject to the provisions of this Article, any purchase money
leasehold mortgage accepted in connection therewith shall enjoy all rights,
powers and privileges granted herein to a leasehold mortgage. No mortgage,
pledge, lien or encumbrance shall in any way affect or encumber Landlord's fee
title and estate in and to the Leased Premises. As a condition to any such
assignee's assumption of the Lease, all defaults capable of being cured
(excluding bankruptcy of Tenant for example) must be cured.
SECTION 7.03. NEW/REPLACEMENT TENANT. Landlord and Tenant agree that
if leasehold mortgagee shall elect to exercise its rights under the leasehold
mortgage, it is in the mutual best interests of Landlord, Tenant and leasehold
mortgagee that a replacement tenant be promptly located to assume the
obligations of Tenant under this Lease or to become tenant under a new lease
under Section 10.02 hereof, and to serve as the operator of the recreational
facility at the Leased Premises. Accordingly, and in such event, Landlord
agrees to cooperate with leasehold mortgagee by not unreasonably withholding
its consent to any new tenant (whether a nominee of leasehold mortgagee or
otherwise) proposed by leasehold mortgagee to assume unconditionally tenant's
obligations hereunder or as a new tenant under a new lease made under
-12-
<PAGE>
Section 10.02 hereof or as the purchaser of Tenant's leasehold estate under a
proceeding to foreclose the leasehold mortgage. Such replacement tenant's
unconditional assumption of this Lease shall not operate as a release of
Tenant's obligations hereunder. As a condition to any such assignee's
assumption of the Lease, all defaults capable of being cured (excluding
bankruptcy of Tenant for example) must be cured. Landlord agrees to consent to
and recognize the granting to leasehold mortgagee by a replacement tenant or
new tenant of a security interest in such tenant's personal property used and
located and the Leased Premises. Landlord further agrees to subordinate
unconditionally any lien, charge or encumbrance at any time held by it in such
personal property to the lien therein in favor of leasehold mortgagee and
agrees that leasehold mortgagee may, without notice to or consent of Landlord,
enter upon the Leased Premises from time to time to inspect and or maintain or
remove any or all of such personal property.
SECTION 7.04. ESTOPPEL CERTIFICATES. Landlord and Tenant shall, from
time to time, without additional consideration, execute and deliver (x) an
estoppel certificate consisting of statements, if true (and if not true,
setting forth the true state of facts as Landlord or Tenant views them), that
(i) this Lease is in full force and effect, with rental paid through the date
of such estoppel; (ii) this Lease has not been modified or amended; (iii)
Landlord and Tenant are not then in default; (iv) Tenant and Landlord have
fully performed all of Tenant's and Landlord's obligations thereunder; and (v)
such other statements as reasonably may be required by Tenant or by Tenant's
mortgagee, or by Landlord or by Landlord's mortgagee, and (y) and such further
certificates and instruments of a similar nature setting forth factual matters
and/or evidencing the agreement of Landlord or Tenant to the mortgage or other
hypothecation by the Tenant or Landlord of the interest created hereby as may
be reasonably requested by Tenant or any mortgagee of Tenant or Landlord or any
mortgagee of Landlord.
ARTICLE VIII
------------
SECTION 8.01. RIGHT OF REFUSAL. Landlord hereby grants to Tenant a
right of first refusal (the "Right of Refusal") during the Term to purchase the
fee simple title to the Leased Premises, including all rights, title, and
interest of Landlord under this Lease, upon the terms, provisions, and
conditions of this Section 8.01. Landlord shall not convey, assign or otherwise
transfer the fee simple title to the Leased Premises or any portion thereof to
any third party without first complying with the provisions of this Section
8.01. If during the Term Landlord receives a bona fide written offer from an
independent third party to purchase all or a portion of the Leased Premises
from Landlord (any such offer being referred to herein as an "Offer"), then
Landlord shall offer to Tenant in writing (the "Refusal Notice") the right to
purchase the Leased Premises or the applicable portion thereof on the terms set
forth in the Offer. The Refusal Notice shall include a copy of the Offer.
Tenant shall exercise its Right of Refusal, if at all, by written notice to
Landlord within ten (10) days after the date the Refusal Notice is received by
Tenant (the "Refusal Election Period"). If Tenant does not exercise its Right
of Refusal prior to the expiration of the Refusal Election Period, Tenant shall
be deemed to have not exercised the Right of Refusal and Landlord may
thereafter sell all or the applicable portion of the Leased Premises on the
terms set forth in the Offer to the party that submitted the Offer without
regard to Tenant's rights under
-13-
<PAGE>
this Section 8.01; provided, however, that if Landlord does not consummate any
such sale within one hundred eighty (180) days after the end of the Refusal
Election Period, then Landlord may not consummate any such sale without again
making an offer to Tenant as contemplated by this Section 8.01. Nothing
contained in this Section 8.01 limits or impairs Tenant's other rights
hereunder as tenant of the Leased Premises for the Term.
ARTICLE IX
----------
SECTION 9.01. TENANT DEFAULT. This Lease and the term and estate
granted by this Lease are subject to the limitation that if any one or more of
the following events (each, an "Event of Default") shall occur:
(a) Tenant shall default in the payment when due of any Base Rent,
Percentage Rent, or Additional Rent, and Tenant shall fail to remedy such
default within ten (10) days after notice by Landlord to Tenant of such
default;
(b) Tenant shall default in the observance or performance of any term,
covenant or condition of this Lease on Tenant's part to be observed or
performed (other than the covenants for the payment of Base Rent, Percentage
Rent and Additional Rent) and Tenant shall fail to remedy such default within
thirty (30) days after notice by Landlord to Tenant of such default, or if such
default is of such a nature that it cannot reasonably be remedied within thirty
(30) days, Tenant shall not proceed in good faith and with due diligence to
remedy and correct such default and such default is not, in fact, cured on or
before one hundred eighty (180) days after such notice of said default has been
given to Tenant;
(c) Tenant shall file a voluntary petition in bankruptcy or shall be
adjudicated a bankrupt or insolvent or shall file any petition or answer
seeking any reorganization, arrangement, liquidation, dissolution or similar
relief under the present or any future federal bankruptcy act or any other
present or future applicable federal, state or other statute or law (foreign or
domestic) (collectively, the "Bankruptcy Laws") or shall make an assignment for
the benefit of creditors or shall seek or consent to or acquiesce in the
appointment of any trustee, custodian, receiver or liquidator of Tenant or of
all or any part of Tenant's property;
(d) Any proceeding is commenced seeking a reorganization, arrangement,
liquidation, dissolution of Tenant or similar relief under Bankruptcy Laws or
shall make an assignment for the benefit of creditors or shall seek or consent
to or acquiesce in the appointment of any trustee, custodian, receiver or
liquidator of Tenant or all or any part of Tenant's property, without the
consent or acquiescence of Tenant, and such preceding shall not have been
vacated or otherwise discharged within sixty (60) days after the commencement
of a proceeding, or any execution or attachment shall be issued against Tenant
or any of Tenant's property pursuant to which the Leased Premises shall be
taken or occupied or attempted to be taken or occupied;
-14-
<PAGE>
(e) Tenant shall abandon the Leased Premises and fail to operate its
business at the Leased Premises for a period in excess of thirty (30)
consecutive days, unless such failure to operate results from casualty,
condemnation, adverse weather conditions, alterations or demolition, or any
other factor beyond Tenant's reasonable control;
(f) Any default by Tenant, after the giving of notice and the
expiration of applicable cure periods under the lease dated May 13, 1994,
between Landlord, as landlord, and Leisure Complexes, Inc., as tenant;
then in any of such events Landlord may give to Tenant notice ("Termination
Notice") of Landlord's intention to terminate this Lease and the Term at the
expiration of ten (10) days from the date of the giving of the Termination
Notice, this Lease and the Term shall terminate upon the expiration of ten (10)
days with the same effect as if that day were the expiration of this Lease, but
Tenant shall remain liable as set forth in this Article.
An Event of Default arising from a default in the payment of rent
shall not, unless Landlord so elects, create a conditional limitation under
this Lease. On the occurrence of such an Event of Default, Landlord may elect
to commence a summary proceeding for failure to pay rent or a plenary action
for the recovery of unpaid rent rather than seeking a termination of this Lease
on the basis of conditional limitation.
SECTION 9.02. REMEDIES. If this Lease shall terminate as provided in
this Article IX, then:
(a) Landlord and Landlord's agents may, after the date of termination,
re-enter the Leased Premises, without notice, either by summary proceeding or
by any other applicable action or proceeding, or by force or otherwise (without
being liable to indictment, prosecution or damages), and may repossess the
Leased Premises and dispossess Tenant and any other persons from the Leased
Premises and remove any and all of its or their property and effects from the
Leased Premises, without liability for damage, and in no event shall re-entry
be deemed an acceptance of surrender of this Lease; and
(b) Landlord may relet the Leased Premises from time to time, either
in the name of Landlord or otherwise, to such tenant or tenants, for such term
or terms ending before, on or after the expiration of this Lease, at such
rental or rentals and on such other conditions, which may include concessions
and free rent periods, as Landlord, in it sole discretion, may determine.
Landlord shall have no obligation to relet the Leased Premises and shall not be
liable for refusal or failure to relet the Leased Premises, or, in the event of
any such reletting, for refusal or failure to collect any rent due upon any
such reletting, and no such refusal or failure shall operate to relieve Tenant
of any liability under this Lease or otherwise to affect any such liability.
Landlord may make any repairs, replacements, alterations, additions,
improvements, decorations and other physical changes in the Leased Premises as
Landlord, in its sole discretion, considers advisable or necessary
-15-
<PAGE>
in connection with any reletting, without relieving Tenant of any liability
under this Lease or otherwise affecting any such liability.
SECTION 9.03. ADDITIONAL REMEDIES; DAMAGES. If this Lease shall
terminate as provided in this Article IX, then:
(a) Tenant shall pay to Landlord all Base Rent, Percentage Rent and
Additional Rent to the date of termination;
(b) Landlord shall be entitled to retain all monies, if any, paid by
Tenant to Landlord, whether as Base Rent, Percentage Rent, Additional Rent,
Security Deposit or otherwise, but such monies shall be credited by Landlord
against any Base Rent, Percentage Rent, or Additional Rent due at the time of
such termination or, at Landlord's option, against any damages payable by
Tenant;
(c) Tenant shall be liable for and shall pay to Landlord, as damages,
any deficiency between the Base Rent, Percentage Rent and Additional Rent
payable for the period which otherwise would have constituted the unexpired
portion of the Term (conclusively presuming the Percentage Rent and Additional
Rent to be equal to the annual average of the Percentage Rent and Additional
Rent payable for the three (3) years immediately preceding such termination or
re-entry) and the net amount, if any, of rents ("Net Rent") collected under any
reletting for any part of such period or under any subleases with subtenants
which attorn to Landlord, after first deducting from the rents collected all of
Landlord's expenses in connection with the termination of this Lease or
Landlord's re-entry upon the Leased Premises and in connection with such
reletting including all repossession costs, advertising costs, brokerage
commissions, legal expenses, attorneys' fees, architect's fees, alteration
costs and other expenses of preparing the Leased Premises for such reletting;
(d) Any deficiency under Section 9.03(c) shall be paid in monthly
installments by Tenant on the days specified in this Lease for the payment of
installments of Base Rent. Landlord shall be entitled to recover from Tenant
each monthly deficiency as the same shall arise and no suit to collect the
amount of the deficiency for any month shall prejudice Landlord's right to
collect the deficiency for any prior or subsequent month by a similar
proceeding. Alternatively, suits for the recovery of such deficiencies may be
brought by Landlord from time to time at its election;
(e) Whether or not Landlord shall have collected any monthly
deficiencies, Landlord shall be entitled to recover from Tenant, and Tenant
shall pay Landlord, on demand, as and for liquidated and agreed final damages
and not as a penalty, a sum equal to the amount by which the Base Rent,
Percentage Rent and Additional Rent payable for the period to the Expiration
Date from the latest of the date of termination of this Lease or the date
through which monthly deficiencies shall have been paid in full (conclusively
presuming the Percentage Rent and Additional Rent to be equal to the annual
average of the Percentage Rent and Additional Rent payable for the three (3)
years immediately preceding such termination) exceeds the then fair and
reasonable rental
-16-
<PAGE>
value of the Leased Premises (including all improvements thereon) for the same
period, both discounted at the rate of 8% per annum to present worth. If,
before presentation of proof of such liquidated damages to any court or
tribunal, the Leased Premises, or any part thereof, shall have been relet by
Landlord for the period which otherwise would have constituted the unexpired
portion of the Term, or any part thereof, the amount of rent upon such
relenting shall be deemed, prima facie, to be the fair and reasonable rental
value for the part or the whole of the premises (as the case may be) so relet
during the term of the reletting;
(f) In no event shall Tenant be entitled (i) to receive any excess of
Net Rent over the sums payable by Tenant to Landlord under, this Article IX or
(ii) in any suit for the collection of damages pursuant to this Article IX to a
credit in respect of any Net Rent from a reletting except to the extent that
such Net Rent is actually received by Landlord prior to the commencement of
such suit;
(g) All of the right, title, estate and interest of Tenant in and to
(i) the Leased Premises, (ii) all buildings, improvements, equipment, fixtures,
machinery and supplies on the Leased Premises, (iii) all rents, issues and
profits of the Leased Premises and the buildings and improvements at the Leased
Premises whether then accrued or to accrue, (iv) all insurance policies and all
insurance proceeds paid or payable and (v) any undisbursed balance of the
Deposited Funds shall automatically terminate and the right, title, estate and
interest of Tenant, its successors in interest and assigns in and to all such
property shall belong to the Landlord, without further action on the part of
either party and without cost or charge to Landlord; and
(h) Landlord shall be entitled to possession of the Leased Premises
free from any estate or interest of Tenant.
In the event of any breach by Tenant or any persons claiming through
or under Tenant of any of the agreements, terms, covenants or conditions
contained in this Lease, Landlord shall be entitled to enjoin such breach and
shall have the right to invoke any right and remedy allowed at law or in equity
or by statute or otherwise.
Tenant, on its own behalf and on behalf of all persons claiming
through or under Tenant, including all creditors, waives any and all rights and
privileges under law which Tenant and all such persons may then have to (a)
redeem the Leased Premises, (b) re-enter or repossess the Leased Premises, or
(c) restore the operation of this Lease, after Tenant shall have been
dispossessed by a judgment or by warrant of any court or judge of competent
jurisdiction, or after any re-entry by Landlord upon expiration or termination
of this Lease and the Term, whether such dispossess, re-entry, expiration or
termination shall be by operation of law or pursuant to the provisions of this
Lease. The words "re-enter" and "re-entry" as used in this Lease shall not be
deemed to be restricted to their technical legal meanings.
If suit shall be brought for recovery of possession of the Leased
Premises, for the recovery of Base Rent, Percentage Rent or Additional Rent or
any other amount due under the
-17-
<PAGE>
provisions of this Lease, or because of any Event of Default, Tenant shall pay
to Landlord all expenses incurred for the suit, including, without limitation,
reasonable attorneys' fees and disbursements.
Landlord and Tenant waive trial by jury in any action, proceeding or
counterclaim brought by either of the parties against the other in any in
matter arising out of or in any way connected with this Lease, the relationship
of Landlord and Tenant, Tenant's use or occupancy of the Leased Premises, any
claim of injury or damage, and any emergency statutory or any other statutory
remedy. Tenant shall not interpose any counterclaim or counterclaims in a
summary proceeding or in any action based on non-payment by Tenant of Base
Rent, Percentage Rent or Additional Rent, unless failure to interpose the
counterclaim would preclude Tenant asserting in a separate action the claim
which is the subject of the counterclaim.
ARTICLE X
---------
SECTION 10.01. NOTICE PARTIES. As used herein, "Notice Party" means
any person or entity (a) which is a mortgagee who holds a mortgage which
burdens all or any part of Tenant's leasehold interest under this Lease or any
improvements upon the Leased Premises which are owned by Tenant, and (b) whose
name and address for notice purposes has been furnished by Tenant to Landlord.
Landlord shall give each Notice Party a duplicate copy of any and all notices
of default or other notices in writing which Landlord may give or serve upon
Tenant pursuant to the terms of this Lease, and any such notice shall not be
effective until said duplicate copy is given to such Notice Party. A different
address may be designated by such Notice Party by written notice delivered to
Landlord from time to time. Any such Notice Party may, at its option, at any
time before the rights of Tenant shall have been forfeited to the Landlord as
provided for in this Lease, cure in full any default by Tenant under this
Lease, any such cure in full shall be as effective to prevent a forfeiture of
the rights of Tenant hereunder as the same would have been if done and
performed by Tenant instead of by any such Notice Party. In no event shall
Landlord be required to accept from a Notice Party partial cure of any default
by Tenant under this Lease and no Notice Party shall have any rights on account
of such partial cure, even if accepted by Landlord.
No such mortgagee or trustee of the rights and interests of Tenant
hereunder shall be or become liable to Landlord as an assignee of this Lease
until such time as said mortgagee or trustee shall by foreclosure or other
appropriate proceedings in the nature thereof, or as the result of any other
action or remedy provided for by such mortgagee or deed of trust, or by proper
conveyance from Tenant, either acquire the rights and interests of Tenant under
the terms of this Lease or actually take possession of the Leased Premises,
whichever occurs earlier, and such liability of said mortgagee or trustee shall
terminate upon such mortgagee's or trustee's assigning such rights and
interests to another party or relinquishing such possession, as the case may
be.
SECTION 10.02. RIGHT OF CERTAIN NOTICE PARTIES TO OBTAIN NEW LEASE.
Upon termination of this Lease pursuant to Section 9.02, the Notice Party, if
any, who holds a first lien on Tenant's leasehold estate under this Lease or
any improvements upon the Leased Premises shall have
-18-
<PAGE>
the option, upon written notice to Landlord given not later than ten (10) days
after receipt of written notice from Landlord of such termination, to elect to
receive, in its own name or in the name of its nominee, from Landlord a new
lease of the Leased Premises for the unexpired balance of the Term, on the same
terms and conditions as in this Lease set forth, and Landlord agrees to execute
such lease provided:
(i) the Notice Party shall forthwith cure any default of
Tenant; and
(ii) the Notice Party or its nominee shall thereafter observe
and perform all covenants and conditions in said lease
contained on the part of Tenant to be observed and
performed.
Any such new lease, by virtue of the recording of this Lease or a memorandum
thereof, shall have priority equal to this Lease.
ARTICLE XI
----------
SECTION 11.01. CONDEMNATION. If all of the Leased Premises shall be
taken for any public or quasi-public use under any statute, or by right of
eminent domain, or if any part of the Leased Premises shall be so taken and the
part not so taken shall be insufficient in the reasonable judgment of Tenant
for the operation of the Leased Premises as a golf course (a "Total Taking"),
then, in either of such events, when possession of the Leased Premises shall
have been taken by the condemning authority, the Term, and all rights of Tenant
under this Lease, shall the immediately terminate, and the Base Rent,
Percentage Rent and any Additional Rent shall be apportioned and paid to the
date of such termination.
If a part of the Leased Premises shall be so taken, and the remainder
of the Leased Premises shall be sufficient in the reasonable judgment of Tenant
for the operation of the Leased Premises as a golf course (a "Partial Taking"),
then this Lease shall continue in full force and effect, and Tenant shall, at
its sole cost and expense, but to the extent of the net amount of any
condemnation award for the Leased Premises so taken (the "Condemnation Award")
available for such purpose, restore, repair, replace or rebuild the same as
nearly as possible to the condition existing prior to the Partial Taking. Such
restoration, repairs, replacements or rebuilding (collectively, "Condemnation
Restoration") shall be commenced promptly and prosecuted to completion with
reasonable diligence. The Condemnation Award shall be made available for the
payment of the cost of the Condemnation Restoration in the same manner as
provided in Article V. Any excess of the Condemnation Award after payment of
the Condemnation Restoration shall be paid to Landlord.
In the event of any taking as above described, Landlord shall be
entitled to all awards, damages, and compensation for such taking except as
such awards may be separately designated for
-19-
<PAGE>
loss of income due to interruption of Tenant's business, loss to improvements
or any award specifically designated to compensate Tenant for any of its loss.
ARTICLE XII
-----------
SECTION 12.01. PEACEFUL ENJOYMENT. Subject to all of the terms and
provisions of this Lease, Landlord covenants and warrants that Tenant, on
paying the rental and other payments herein provided and performing and
observing all of its covenants and agreements herein contained and provided,
shall and may peaceably and quietly have, hold, occupy, use and enjoy, and
shall have the full, exclusive and unrestricted use and enjoyment of, the
Leased Premises during the Term.
SECTION 12.02. TITLE TO LEASED PREMISES. Landlord covenants to Tenant
that Landlord owns good and marketable title to the Leased Premises, subject
only to the matters listed on Exhibit B attached hereto and made a part hereof,
to the extent the same are valid and in force and effect as to the Leased
Premises, and Landlord agrees to warrant and forever defend the title to the
Leased Premises against the claims of any and all persons whomsoever lawfully
(or otherwise) claiming the same or any part thereof.
ARTICLE XIII
------------
SECTION 13.01. LANDLORD'S MORTGAGEE. Any and all mortgages on the fee
title or reversionary interest of Landlord in the Leased Premises shall be
subject and subordinate to this Lease; provided, however, that Tenant hereby
agrees that this Lease is subject and subordinate to mortgages where the
holders of such mortgages deliver to Tenant a non-disturbance agreement in the
form attached hereto as Exhibit D, provided, however, that nothing contained
herein shall restrict or otherwise impair the right of Landlord to transfer,
convey, sell, mortgage or otherwise deal with the fee to the Leased Premises or
affect the right of Landlord to assign this Lease and the rental and other sums
payable hereunder as further collateral security for any such fee mortgage or
otherwise, and Tenant agrees to honor any such assignment from and after
receipt of an executed copy thereof; and Tenant further agrees that while any
such mortgage or other encumbrance is in force, and if Tenant shall have been
given written notice thereof and the name and address of the mortgagee and/or
trustee, Tenant shall give said mortgagee or trustee a duplicate copy of any
and all notices of default or other notices in writing which Tenant may give or
serve upon Landlord pursuant to the terms of this Lease, and any such notice
shall not be effective until said duplicate copy is given to such mortgagee or
trustee. A different address may be designated by such mortgagee or trustee by
written notice delivered to Tenant from time to time. Any such mortgagee and/or
trustee may, at its option, at any time before any rights of the Tenant shall
have accrued as a result of any default of Landlord hereunder, make any payment
or do any other act or thing required of the Landlord by the terms of this
Lease; and all payments so made and all things so done or performed by any such
mortgagee and/or trustee shall be as effective to prevent accrual of any rights
of Tenant hereunder as the same would have been if done
-20-
<PAGE>
and performed by the Landlord instead of by any such mortgagee or trustee. No
such mortgagee or trustee of the rights and interests of the Landlord hereunder
shall be or become liable to Tenant as an assignee of this Lease until such
time as said mortgagee or trustee shall by foreclosure or other appropriate
proceedings in the nature thereof, or as the result of any other action or
remedy provided for by such mortgagee or deed of trust, or by proper conveyance
from Landlord, acquire the rights and interests of the Landlord under the terms
of this Lease, and such liability of said mortgagee or trustee shall terminate
upon such mortgagee's or trustee's assigning such rights and interests to
another party. This Lease shall be conditioned upon all existing mortgagees
giving non-disturbance agreements in the form attached hereto as Exhibit D.
ARTICLE XIV
-----------
SECTION 14.01. SURRENDER. Tenant shall, on or before the expiration of
this Lease or on the sooner termination of this Lease, peaceably and quietly
leave and surrender to Landlord the Leased Premises, in good condition,
reasonable wear and tear excepted, together with all improvements upon the
Leased Premises as of termination (subject to Sections 5.01, 6.01 and 6.02),
except for Tenant's movable furniture, movable personal property or movable
trade fixtures. All property removable by Tenant pursuant to this Article XIV
which shall not be removed by Tenant on or before the date when Tenant shall
vacate and surrender the Leased Premises shall be deemed abandoned by Tenant.
If Tenant remains in possession of the Leased Premises after the termination of
this Lease, Tenant, at the option of Landlord, shall be deemed to be occupying
the Leased Premises as a Tenant from month to month, at a monthly rental equal
to three (3) times the monthly installment of Base Rent payable during the last
month of the Lease Term and subject to all the other conditions, provisions and
obligations of this Lease, including the obligation to pay Percentage Rent and
Additional Rent.
ARTICLE XV
----------
SECTION 15.01. 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 as follows:
If to Landlord, to: Three Grove Partners
110 New Moriches Road
Lake Grove, NY
Attention: Bill Reitzig
With copy to: Ruskin, Moscou, Evans & Faltischek, P.C.
170 Old Country Road
Mineola, New York 11501
Attention: David S. Koffler
-21-
<PAGE>
If to Tenant, to: Family Golf Centers, Inc.
225 Broadhollow Road, Suite 106E
Melville, NY 11747
Attention: General Counsel
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 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.
ARTICLE XVI
-----------
SECTION 16.01. ENTIRE AGREEMENT. This agreement embodies the entire
contract between the parties hereto relative to the subject matter hereof. No
variations, modifications or changes herein or hereof shall be binding upon any
party hereto unless such are in writing and executed by both Landlord and
Tenant. No waiver or waivers of any breach or default or any breaches or
defaults by either party of any term, condition or liability of or performance
by the other party of any duty or obligation hereunder, including without
limitation, the acceptance by Landlord or payment by Tenant of any rentals at
any time or in any manner other than as herein provided shall be deemed a
waiver thereof, nor shall any such waiver or waivers be deemed or construed to
be a waiver or waivers of subsequent breaches or defaults of any kind,
character or description under any circumstances. If any term or provision of
this Lease, or the application thereof to any person or circumstance, shall to
any extent be invalid or unenforceable, the remainder of this Lease, or the
application of such provision to persons or circumstances other than those as
to which it is invalid or unenforceable, shall not be affected thereby, and
each provision of this Lease shall be valid and shall be enforceable to the
extent permitted by law.
ARTICLE XVII
------------
SECTION 17.01. LANDLORD DEFAULT. In the event Landlord defaults in
undertaking the performance of any of Landlord's covenants or obligations
herein contained for a period of thirty (30) days next following the date on
which Landlord receives written notice given by Tenant to Landlord as provided
herein asserting such default of Landlord, Tenant shall have the right (but
shall not be obligated), at Tenant's sole election, to perform Landlord's
covenants or obligations which Tenant asserts to be in default, at the expense
of Landlord, and to make claim against Landlord for an amount equal to the cost
incurred by Tenant in so doing, together with interest thereon at the rate of
three percent (3%) per annum plus the prime rate announced by Citibank, N.A.
from time to time from the date incurred by Tenant until repaid by Landlord.
-22-
<PAGE>
ARTICLE XVIII
-------------
SECTION 18.01. ACTIONS REQUIRING CONSENT OF TENANT'S MORTGAGEE. After
execution and delivery of a leasehold mortgage by the Tenant and the receipt by
Landlord of a true copy thereof, this Lease may not be modified, amended,
canceled, surrendered, or terminated other than pursuant to its express
provisions by agreement between Landlord and Tenant without the prior written
consent of leasehold mortgagee.
ARTICLE XIX
-----------
SECTION 19.01. GOVERNING LAW. This Lease shall be governed by the laws
of the State of New York, and the covenants contained herein shall be deemed
performable in Suffolk County, New York. The proper venue for any suit brought
in connection with this Lease shall be the appropriate local, state or federal
court in Suffolk County, New York.
ARTICLE XX
----------
SECTION 20.01. COMPLIANCE WITH LAWS. As used in this Lease, "Legal
Requirements" shall mean any applicable law, statute, ordinance, order, rule,
regulation, decree or requirement of a Governmental Authority, and
"Governmental Authority" shall mean the United States, the state, county, city
and political subdivisions in which the Leased Premises are located or which
exercise jurisdiction over the Leased Premises, and any agency, department,
commission, board, bureau or instrumentality of any of them which exercise
jurisdiction over the Leased Premises. Throughout the Term, at Tenant's own
cost and expense, Tenant shall conform to and substantially comply with all
Legal Requirements affecting the Leased Premises.
SECTION 20.02. HAZARDOUS MATERIALS. As used in this Lease, "Hazardous
Materials shall mean any substances, materials or wastes subject to regulation
by Legal Requirements from time to time in effect concerning hazardous, toxic
or radioactive materials; and "Release" shall mean any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, or disposing into the environment (including the abandonment
or discarding of barrels, containers and other closed receptacles).
Tenant is accepting the Leased Premises, in their as-is condition,
subject only to the express representations and warranties of Landlord
contained in this Lease. Notwithstanding the foregoing, Tenant is not releasing
any rights of contribution against Landlord or any third parties nor is Tenant
agreeing to assume or indemnify Landlord against any claims arising out of the
presence, suspected presence, Release, or suspected Release of Hazardous
Materials prior to, or existing as of, the date hereof. Tenant shall indemnify,
protect, defend (with counsel reasonably approved by Landlord) and hold
Landlord, and the officers, directors, shareholders, employees and agents of
Landlord, harmless from any and all obligations, claims, administrative
proceedings, judgments, damages, fines, costs and liabilities, including
reasonable attorneys' fees incurred, that arise directly or indirectly from or
in connection with the presence, suspected
-23-
<PAGE>
presence, Release, or suspected Release of Hazardous Materials arising or
accruing after the Effective Date.
ARTICLE XXI
-----------
SECTION 21.01. ATTORNEY'S FEES. If either party hereto commences legal
proceedings against the other party hereto with respect to this Lease, and if
such commencing party prevails in such proceedings, then the non-prevailing
party shall pay the prevailing party's reasonable legal fees and costs of suit.
ARTICLE XXII
------------
SECTION 22.01. RECORDING OF LEASE. Tenant may not record this Lease in
the real property records of Suffolk County, New York. At the request of either
party hereto, both parties hereto shall execute and acknowledge a memorandum of
this Lease to be recorded in the real property records of Suffolk County, New
York, in a form and of a content reasonably acceptable to Landlord and Tenant,
and at the expense of the requesting party, containing such terms as may be
necessary to place third parties on notice of Tenant's rights under this Lease.
ARTICLE XXIII
-------------
SECTION 23.01. BROKERS. Each party hereto warrants and represents that
it has not dealt with a broker or intermediary entitled to any compensation in
connection with this Lease or Tenant's use of the Leased Premises. Each party
hereby agrees to hold the other party, its officers, directors, shareholders,
affiliates, employees, agents and representatives harmless from any and all
claims, liabilities, costs and expenses (including reasonable attorneys' fees)
arising from any claim for any commissions or other fees by any other broker or
agent acting or purporting to have acted on behalf of such party.
ARTICLE XXIV
------------
SECTION 24.01. GUARANTY. Family Golf Centers, Inc., has executed a
Guaranty Agreement of even date herewith in the form attached hereto as Exhibit
C to guaranty to Landlord certain of Tenant's obligations hereunder as more
particularly described therein.
ARTICLE XXV
-----------
SECTION 25.01. NO MERGER OF ESTATES. There shall be no merger of the
leasehold estate created by this Lease with the fee estate in the Leased
Premises or any part thereof by reason of the fact that the same person may own
or hold (i) the leasehold estate created by this Lease or any interest in such
leasehold estate and (ii) the fee estate in the Leased Premises or any part
thereof or any interest in such fee estate; and no such merger shall occur
unless and until all persons, including any leasehold mortgagee, having an
interest in (1) the leasehold estate created by this Lease, and
-24-
<PAGE>
(2) the fee estate in the Leased Premises, shall join in a written instrument
effecting such merger and duly record the same.
IN WITNESS WHEREOF, this Lease is made and entered into in multiple
original counterparts as of the date and year first above written.
THREE GROVE PARTNERS, a New York limited
partnership
By: Grayside Partners, Inc., a New York
corporation, general partner
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
LAKE GROVE FAMILY GOLF CENTERS, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
-25-
<PAGE>
EXHIBIT C
---------
GUARANTY AGREEMENT
------------------
Section 1. Guaranty. For value received, FAMILY GOLF CENTERS, INC., a
Delaware corporation ("Guarantor"), hereby absolutely and unconditionally
guarantees to THREE GROVE PARTNERS, a New York limited partnership
("Beneficiary"), and its successors or assigns, the full, prompt and faithful
payment and performance of each and every obligation of LAKE GROVE FAMILY GOLF
CENTERS, INC., a New York corporation ("Tenant"), under the Lease Agreement
between Beneficiary, as landlord, and Tenant, as tenant, relating to the lease
of certain property located at 100 New Moriches Road, Lake Grove, Suffolk
County, New York (as the same may have been or may be amended, extended or
modified from time to time, the "Lease"). As used in this Guaranty Agreement
(this "Guaranty"), "Guaranteed Obligations" means all obligations of Tenant
guaranteed by Guarantor in this Section 1.
Section 2. Term. The obligations of Guarantor as to the Guaranteed
Obligations shall continue in full force and effect against Guarantor until
Guarantor has performed the Guaranteed Obligations as set forth herein. This
Guaranty covers any and all of the Guaranteed Obligations, whether presently
outstanding or arising subsequent to the date hereof. This Guaranty is binding
upon and enforceable against Guarantor and the assigns and successors of
Guarantor.
Section 3. Representation and Warranty of Guarantor. Guarantor hereby
represents and warrants to Beneficiary that Guarantor has received, or will
receive, direct or indirect benefit from the making of this Guaranty.
Section 4. Waiver of Rights. Guarantor hereby waives (a) notice of
acceptance hereof; (b) grace, demand, presentment and protest with respect to
the Guaranteed Obligations or to any instrument, agreement or document
evidencing or creating same; (c) notice of grace, demand, presentment and
protest; (d) notice of non-payment or other defaults, of intention to
accelerate and of acceleration of the Guaranteed Obligations; (e) notice of
and/or any right to consent or object to the assignment of any interest in the
Lease or the Guaranteed Obligations; (f) notice of the renewal, extension,
amendment and/or modification of any of the terms and provisions of the Lease;
(g) notice of the filing of suit and diligence by Beneficiary in collection or
enforcement of the Guaranteed Obligations; and (h) any other notice regarding
the Guaranteed Obligations.
Section 5. Primary Liability of Guarantor. The liability of Guarantor
shall not be impaired, reduced or in any way affected by: (a) Beneficiary's
failure, refusal, or neglect to collect or enforce the Guaranteed Obligations,
by way of, without limitation, any indulgence, forbearance, compromise,
settlement or waiver of performance which may be extended to Tenant by
Beneficiary or agreed upon by Beneficiary and Tenant; or (b) any termination of
the Lease to the extent that Tenant thereafter continues to be liable. This
Guaranty constitutes a primary obligation of Guarantor. This is an absolute,
unconditional, irrevocable and continuing guaranty of payment and performance
and not of collection and is in no way conditioned upon any attempt to collect
from
C-1
<PAGE>
Tenant or upon any other event or contingency. Guarantor agrees that
Beneficiary is not required, as a condition to establishing Guarantor's
liability hereunder, to proceed against any person (including, without
limitation, Tenant or any other guarantor). Guarantor hereby expressly waives
any right or claim to force Beneficiary to proceed first against Tenant or any
other guarantor as to any of the Guaranteed Obligations or other obligations of
Tenant, and agrees that no delay or refusal of Beneficiary to exercise any
right or privilege which Beneficiary has or may have against Tenant, whether
arising from any documents executed by Tenant, any common law, applicable
statute or otherwise, shall operate to impair the liability of Guarantor
hereunder. The obligations of Guarantor hereunder shall not be reduced,
impaired or in any way affected by: (a) receivership, insolvency, bankruptcy or
other proceedings affecting Tenant or any of Tenant's assets; (b) receivership,
insolvency, bankruptcy or other proceedings affecting Guarantor or any of
Guarantor's assets; and (c) any allegation of fraud, failure of consideration,
forgery or other defense, whether or not known to Beneficiary (even though
rendering all or any part of the Guaranteed Obligations void or unenforceable
or uncollectible as against Tenant or any other guarantor). This Guaranty shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment of any of the Guaranteed Obligations is rescinded or must otherwise
be returned by Beneficiary upon the insolvency, bankruptcy or reorganization of
Tenant or otherwise.
Section 6. Place of Performance; Attorneys' Fees. All payments to be
made and obligations to be performed hereunder shall be paid or performed in
the location for payment or performance (as applicable) set forth in the Lease.
If it becomes necessary for Beneficiary to enforce this Guaranty by legal
action, Guarantor hereby waives the right to be sued in the county or state of
such Guarantor's residence and agrees to submit to the jurisdiction and venue
of the appropriate federal, state or other governmental court in Suffolk
County, New York. Guarantor unconditionally agrees to pay Beneficiary's
collection expenses, including, without limitation, court costs and reasonable
attorneys' fees if enforcement hereof is placed in the hands of an attorney,
including, but expressly not limited to, enforcement by suit or through
probate, bankruptcy or any judicial proceedings.
Section 7. Applicable Law. This Guaranty shall be governed by and
construed in accordance with the laws of the United States of America and the
State of New York, and is intended to be performed in accordance with and as
permitted by such laws.
Section 8. Entire Agreement. This Guaranty constitutes the entire
agreement of the parties with respect to the subject matter hereof, and all
prior correspondence, memoranda, agreements or understandings (written or oral)
with respect hereto are merged into and superseded by this Guaranty. This
Guaranty may not be changed, modified, discharged or terminated in any manner
other than by an agreement in writing signed by Guarantor and Beneficiary.
Section 9. Severability. In case any one or more of the provisions
contained in this Guaranty shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the other provisions
contained herein shall not in any way be affected or impaired thereby.
C-2
<PAGE>
EXECUTED as of the day of , 1997.
GUARANTOR:
FAMILY GOLF CENTERS, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
C-3
<PAGE>
EXHIBIT D
---------
NON-DISTURBANCE AGREEMENT
-------------------------
D-1
<PAGE>
ESCROW AGREEMENT
----------------
ESCROW AGREEMENT, dated as of July 25, 1997 (this "Agreement"), by and
among THREE GROVE PARTNERS, a New York limited partnership having an address at
c/o Arthur J. Calace, Jr., 11 George Ct., Miller Place, New York 11764
("Seller"), FAMILY GOLF CENTERS, INC., a Delaware corporation having an address
at 225 Broadhollow Road, Suite 106E, Melville, New York 11747 ("Purchaser"),
and CONTINENTAL STOCK TRANSFER & TRUST COMPANY, incorporated under the laws of
the United States of America with executive offices at 2 Broadway, New York,
New York 10004 (together with its successors, the "Escrow Agent").
W I T N E S E T H:
- - - - - - - - -
WHEREAS, simultaneously with the execution hereof, Seller and
Purchaser are consummating the transactions contemplated by the Asset Purchase
Agreement dated as of the date hereof (the "Purchase Agreement"), between
Seller and Purchaser;
WHEREAS, pursuant to the Purchase Agreement, Seller is required to
deposit $100,000 into an escrow account to be maintained by Escrow Agent to be
held against any claims for indemnity under Article 11 of the Purchase
Agreement; and
WHEREAS, this is the Escrow Agreement referred to in the Purchase
Agreement. Capitalized terms used in this Escrow Agreement and not otherwise
defined herein shall have the respective meanings given to them in the Purchase
Agreement.
NOW, THEREFORE, it is agreed as follows:
1. Escrow.
1.1 Appointment of Escrow Agent.
1.1.1 Seller and Purchaser hereby appoint Escrow Agent, and
Escrow Agent hereby agrees to serve, as Escrow Agent in
accordance with, and pursuant to, this Agreement.
1.1.2 Escrow Agent shall establish a separate Federally insured,
interest bearing account (the "Escrow Account") for any
amounts received by it hereunder.
1.1.3 All monies, including interest thereon, held by Escrow
Agent in the Escrow Account pursuant to the terms hereof
shall be hereinafter referred to as the "Escrowed Funds".
1
<PAGE>
1.1.4 Seller shall be responsible for the payment of any income
taxes payable in connection with any interest earned in
the Escrow Account.
1.2 Operation of Escrow Account. The parties hereto agree that the
Escrow Account shall operate as follows:
1.2.1 At the Closing, Seller shall deliver or cause to be
delivered to Escrow Agent $100,000.00. Escrow Agent shall
hold such amount as Escrowed Funds in the Escrow Account.
1.2.2 At any time prior to the one (1) year anniversary of the
Closing Date (the "Escrow Period"), Purchaser shall be
entitled to give a notice to Escrow Agent, signed by
Purchaser's President or any Vice President (with a copy
to Seller), to the effect that there has been an event
entitling Purchaser to indemnification from Seller
pursuant to Article 11 of the Purchase Agreement, which
notice shall specify the amounts owed by Seller pursuant
to the Purchase Agreement, the calculation of such amounts
and the basis therefore.
1.2.3 Twenty (20) days after Escrow Agent has received a notice
pursuant to Section 1.2.2 hereof (or, if not a business
day, on the next business day following such twentieth
day) Escrow Agent shall deliver to Purchaser such portion
of the Escrowed Funds as is specified in such notice
unless Seller shall have notified Escrow Agent (with a
copy to Purchaser) in writing before such date that Seller
disagrees with Purchaser's determination that Purchaser is
entitled to indemnification with respect to the Purchase
Agreement, which notice shall be set forth in reasonable
detail the basis for such disagreement.
1.2.4 Should any dispute arise with respect to the delivery,
ownership, or right of possession of any of the Escrowed
Funds during the Escrow Period, Escrow Agent, as more
fully set forth in Section 3.11 hereof, is authorized and
directed to retain in its possession without liability to
anyone all or any part of the Escrowed Funds until such
dispute shall have been settled either by mutual agreement
by the parties concerned or by a final order, decree, or
judgment of a court of competent jurisdiction in the
United States of America and time for appeal has expired
and no appeal has been perfected, but Escrow Agent shall
be under no duty whatsoever to institute or defend any
such proceedings, and may, in its discretion, deposit such
Escrowed Funds with a court of competent jurisdiction in
the United States of America and be relieved of any and
all liability to any of the parties hereto upon such
deposit.
2
<PAGE>
1.3 Distribution of Escrowed Funds. Unless a notice under Section
1.2.2 hereof has been given and Escrowed Funds in satisfaction of
such notice have not been delivered to Purchaser, either because
the 20-day period has not yet run out or because a dispute
relating to the claim made by such notice is then pending, the
Escrowed Funds or such portion of them as at the time remain in
escrow and is not in dispute, together with all dividends and
distributions received by Escrow Agent with respect thereto,
shall be returned to Seller on the first anniversary of the
Closing Date.
1.4 Termination of Escrow Account. This Agreement and the Escrow
Account will terminate at 5:00 P.M., New York City local time, on
the date on which all of the Escrowed Funds contained in the
Escrow Account shall be distributed as set forth above.
2. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be (a) delivered by
hand, (b) facsimile, or (c) over-night delivery with proper postage
prepaid, and addressed as follows:
If to Purchaser to:
Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Attention: Dominic Chang, President
Telephone: (516) 694-1666
Facsimile: (516) 694-0918
with a copy to:
Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Attention: Pamela Charles, General Counsel
Telephone: (516) 694-1666
Facsimile: (516) 694-0918
If to Seller to:
Three Grove Partners
c/o Arthur J. Calace, Jr.
11 George Ct.
Miller Place, NY 11764
Telephone: (516) 737-8881
Facsimile: (516) 737-8704
3
<PAGE>
with a copy to:
Ruskin, Moscou, Evans & Faltischek
170 Old Country Road
Mineola, NY 11501
Facsimile: (516) 663-6641
Telephone: (516) 663-6620
If to Escrow Agent, to:
2 Broadway
New York, New York 10004
Telephone: (212) 509-4000
Facsimile: (212) 509-5150
or to such other address as the person to whom notice is to be given
may have previously furnished to the others in the above-referenced
manner. Except as otherwise provided herein, no notice or
communication shall be effective until received.
3. Concerning Escrow Agent. To induce Escrow Agent to act hereunder, it
is further agreed by each of Seller and Purchaser that:
3.1 Escrow Agent shall not be under any duty to give the Escrowed
Funds held by it hereunder any greater degree of care than it
gives its own similar property and shall not be required to
invest any funds held hereunder except as directed in this
Agreement.
3.2 This Agreement expressly sets forth all the duties of Escrow
Agent with respect to any and all matters pertinent hereto. No
implied duties or obligations shall be read into this Agreement
against Escrow Agent. Escrow Agent shall not be bound by the
provisions of any agreement among the other parties hereto except
this Agreement.
3.3 Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct, and, except with respect to
claims based upon such gross negligence or willful misconduct
that are successfully asserted against Escrow Agent, the other
parties hereto shall jointly and severally indemnify and hold
harmless Escrow Agent from and against any and all losses,
liabilities, claims, actions, damages, and expenses, including
reasonable attorneys' fees and disbursements, arising out of, and
in connection with, this Agreement. Without limiting the
foregoing, Escrow Agent shall in no event be liable in connection
with its investment or reinvestment of any cash held by it
hereunder in good faith, in accordance with the terms hereof,
including, without limitation, any liability for any delays (not
resulting
4
<PAGE>
from gross negligence or willful misconduct) in the investment or
reinvestment of the Escrowed Funds; or any loss of interest
incident to any such delays. This Section shall survive
notwithstanding any termination of this Agreement or the
resignation of Escrow Agent.
3.4 Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument, or other writing
delivered to it hereunder without being required to determine the
authenticity or the correctness of any fact stated therein or the
propriety or validity of the service thereof. Escrow Agent may
act in reliance upon any instrument or signature believed by it
in good faith to be genuine and may assume, if in good faith,
that any person purporting to give notice or receipt or advice or
make any statement or execute any document in connection with the
provisions hereof has been duly authorized to do so.
3.5 Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Escrow Agreement and shall
not be liable for any action taken or omitted in good faith and
in accordance with such advice.
3.6 Escrow Agent does not have any interest in the Escrowed Funds
deposited hereunder, but is serving as escrow holder only. Any
payments of income from the Escrow Account shall be subject to
withholding regulations then in force with respect to United
States taxes. This Section shall survive notwithstanding any
termination of this Agreement or the resignation of Escrow Agent.
3.7 Escrow Agent makes no representation as to the validity, value,
genuineness, or the collectibility of any security or other
documents or instrument held by, or delivered to, it.
3.8 Escrow Agent shall not be called upon to advise any party as to
the wisdom in selling or retaining or taking or refraining from
any action with respect to any securities or other property
deposited hereunder.
3.9 Escrow Agent at any time may be discharged from its duties and
obligations hereunder by the delivery to it of notice of
termination signed by Purchaser and Seller or at any time may
resign by giving written notice to such effect to Purchaser and
Seller. Upon any such termination or resignation, Escrow Agent
shall deliver the Escrowed Funds to any successor escrow agent
jointly designated by the other parties hereto in writing, or to
any court of competent jurisdiction if no such successor escrow
agent is agreed upon, whereupon Escrow Agent shall be discharged
of and from any and all further obligations arising in connection
with this Escrow Agreement. The termination or resignation of
Escrow Agent shall take effect on the earlier of (a) the
appointment of a successor (including a court of competent
jurisdiction) or (b) the day that is thirty (30) days after the
date of delivery: (i) to
5
<PAGE>
Escrow Agent of the other parties' notice of termination or (ii)
to the other parties hereto of Escrow Agent's written notice of
resignation. If at that time Escrow Agent has not received a
designation of a successor escrow agent, Escrow Agent's sole
responsibility after that time shall be to keep the Escrowed
Funds safe until receipt of a designation of successor escrow
agent or a joint written disposition instruction by the other
parties hereto or an enforceable order of a court of competent
jurisdiction.
3.10 Escrow Agent shall have no responsibility for the contents of any
writing of any third party contemplated herein as a means to
resolve disputes and may rely without any liability upon the
contents thereof.
3.11 In the event of any disagreement among or between the other
parties hereto resulting in adverse claims or demands being made
in connection with the Escrowed Funds, or in the event that
Escrow Agent in good faith is in doubt as to what action it
should take hereunder, Escrow Agent shall be entitled to retain
the Escrowed Funds until Escrow Agent shall have received (a) a
final and non-appealable order of a court of competent
jurisdiction in the United States of America directing delivery
of the Escrowed Funds or (b) a written agreement executed by the
other parties hereto directing delivery of the Escrowed Funds, in
which event Escrow Agent shall disburse the Escrowed Funds in
accordance with such order or agreement. Any court order referred
to in (a) above shall be accompanied by a legal opinion by
counsel for the presenting party satisfactory to Escrow Agent to
the effect that said court order is final and non-appealable.
Escrow Agent shall act on such court order and legal opinions
without further question.
3.12 As consideration for its agreement to act as Escrow Agent as
herein described, Purchaser shall pay the Escrow Agent's fees
determined in accordance with the terms set forth on Exhibit A
hereto (and made a part of this Escrow Agreement as if herein set
forth). In addition, Purchaser and Seller agree to reimburse
Escrow Agent (on a 50/50 basis) for all reasonable expenses,
disbursements, and advances incurred or made by Escrow Agent in
performance of its duties hereunder (including reasonable fees,
expenses, and disbursements of its counsel).
4. Miscellaneous.
4.1 Binding Effect. This Escrow Agreement shall be binding upon, and
inure solely to the benefit of, the parties hereto and their
respective successors and assigns, heirs, administrators, and
representatives, and shall not be enforceable by, or inure to the
benefit of, any other third party, except as provided in Section
3.9 hereof with respect to the termination of, or resignation by,
Escrow Agent. No party may assign
6
<PAGE>
any of its rights or obligations under this Agreement without
the written consent of the other parties.
4.2 Choice of Law. This Agreement shall be construed in accordance
with, and governed by, the internal law of the State of New York
(without reference to its rules as to conflicts of law).
4.3 Modification. This Agreement may only be modified by a writing
signed by all of the parties hereto.
4.4 Headings. The section headings herein are for convenience only
and shall not affect the construction thereof. Unless otherwise
indicated, references to Sections and Articles are to Sections
and Articles, respectively, contained herein.
4.5 Counterparts. This Agreement may be executed in one or more
counterparts but all such separate counterparts shall constitute
but one and the same instrument; provided that, although executed
in counterparts, the executed signature pages of each such
counterpart may be affixed to a single copy of this Agreement
which shall constitute an original.
[SIGNATURE PAGE BEGINS ON NEXT PAGE]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
By:
--------------------------------
Name: Robert J. Krause
Title: Senior Vice President
THREE GROVE PARTNERS
By: Grayside Partners, Inc., a
New York corporation, general
partner
By:
--------------------------------
Name: Arthur J. Calace Jr.
Title: President
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
By:
--------------------------------
Name:
Title:
8
<PAGE>
ASSET PURCHASE AGREEMENT
by and between
ACTIVE SPORTS MARKETING, LLC
Seller,
CERTAIN PRINCIPALS OF SELLER,
and
GOLDEN SPIKES, INC.,
Purchaser
<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
EXHIBIT A DISTRIBUTION AGREEMENT
EXHIBIT B PERSONAL PROPERTY
EXHIBIT C CONTRACTS
EXHIBIT D INDEMNITY ESCROW AGREEMENT
EXHIBIT E ESCROW AGREEMENT
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
ASSET PURCHASE AGREEMENT, made as of the 29th day of July, 1997
(this "Agreement"), by and among ACTIVE SPORTS MARKETING, LLC, a Colorado
limited liability company having an address at 233 S. Devinney Street, Golden,
Colorado 80401 ("Seller"), STACEY HART, having an address at 31 Glenmore
Street, Englewood, Colorado 80110 ("Hart"), JOHN SNEAD, having an address at
233 South Devinney Street, Golden, Colorado 80401 ("Snead") (Hart and Snead
collectively referred to herein as "Principals") and GOLDEN SPIKES, INC., a
Delaware corporation having an address at 225 Broadhollow Road, Suite 106E,
Melville, New York 11747 ("Purchaser").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Seller is the holder of the right to distribute in the United
States soft golf spikes manufactured by MacNeill Engineering pursuant to an
oral agreement by and between Seller and MacNeill Engineering (the
"Distribution Agreement") under substantially the same terms and conditions as
contained in the draft Distribution Agreement attached hereto as Exhibit A.
WHEREAS, Seller currently distributes soft spikes throughout the
United States pursuant to the Distribution Agreement ("the Business");
WHEREAS, Seller wants to sell certain assets relating to the Business
to Purchaser, and Purchaser wants to purchase such assets from Seller, on the
terms, and subject to the conditions, set forth herein.
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein contained, and other good and valuable consideration, the
mutual receipt and sufficiency of which are hereby acknowledged, the parties
hereby agree to the foregoing and as follows:
<PAGE>
1. Agreement to Sell and Purchase.
1.1 Property to be Purchased by Purchaser. Seller agrees to sell
and convey to Purchaser, and Purchaser agrees to purchase and acquire from
Seller, upon the terms and conditions hereinafter set forth, all of Seller's
right, title and interest in and to the following property (collectively, the
"Property"):
1.1.1 all furnishings, fixtures, machinery, equipment,
vehicles and personalty attached or appurtenant to or used in connection with
the Business that are owned by Seller, and all inventories, supplies, sales,
marketing and instructional materials of every kind and description relating to
the Business, wherever located, including without limitation, the items
described on Exhibit B attached hereto and made a part hereof (the "Personal
Property");
1.1.2 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");
1.1.3 any consent, authorizations, variances, waivers,
licenses, certificates, permits and approvals held by or granted to Seller in
connection with the operation of the business (collectively, the "Permits");
1.1.4 the contracts, leases and other agreements, including
the Distribution Agreement, of or relating to the Business described on Exhibit
C attached hereto and made a part hereof, except to the extent the same relate
solely to any Retained Assets or Retained Liabilities (as hereinafter defined)
(the "Contracts");
<PAGE>
1.1.5 all accounts receivable of Seller arising out of the
sale of goods or services in connection with the Business on the books of the
Seller as of April 1, 1997 (the "Effective Date") or arising after the
Effective Date;
1.1.6 all cash, funds in bank accounts and cash equivalents
existing as of the Effective Date;
1.1.7 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
1.1.8 any other properties and assets of every kind and
nature, real or personal, tangible or intangible, relating in any way
whatsoever to the Business, including, but not limited to the right to use the
name "Active Sports Marketing", 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 any rights of Seller with respect to insurance
policies owned by Seller or for which Seller is the named insured; and
1.2.2 any patents, trade secrets, designs, trademarks,
trademark registrations, copyrights, copyright registrations, trade names
(other than the name "Active Sports Marketing") and all registrations thereof
and all applications for any of the foregoing, whether issued or pending, if
any, and all goodwill associated with any of the foregoing (the "Intangible
Assets").
1.3 Assumption of Certain Liabilities. Purchaser shall assume and
agree to pay and discharge when due (the "Assumed Liabilities"):
<PAGE>
1.3.1 all liabilities and obligations of Seller under the
Contracts to the extent the same arise from and after the Closing; and
1.3.2 all trade payables of Seller arising out of the
purchase of goods and services in connection with the Business on the books of
Seller on and after the Effective Date.
1.4 Liabilities to be Retained by Purchaser. Seller shall retain,
and Purchaser shall not assume, perform, discharge or pay, and shall not be
responsible for, any and all liabilities or obligations of any nature
whatsoever in connection with or relating to the Property, Seller or the
Business or any predecessor owner of the Property or the Business other than
the Assumed Liabilities (collectively, the "Retained Liabilities").
2. Consideration. In consideration for the Property, Purchaser shall
(i) pay to Seller Five Hundred Thousand Dollars ($500,000.00), subject to
adjustment as hereinafter provided, payable on the date hereof in cash or by
certified or bank check or by the wire transfer of funds $250,000.00 of which
shall be held in escrow under the Escrow Agreement attached hereto as Exhibit
E, and (ii) cause Family Golf Centers, Inc. ("FGC") to issue 16,500 validly
issued, fully paid and non-assessable shares of common stock, $.01 par value
per share, of FGC (the "FGC Shares") and to deliver at Closing, free and clear
of all liens, claims and encumbrances: (A) a certificate representing 1,667
shares of FGC Shares to the Escrow Agent under the Indemnity Escrow Agreement
attached hereto as Exhibit D; (B) a certificate representing 8,250 shares of
FGC Shares to the Escrow Agent under the Escrow Agreement attached hereto as
Exhibit E; and (C) a certificate representing 6,583 shares of FGC Shares
registered in the name of Stacey Hart, as designated by the Seller.
<PAGE>
3. Apportionments.
3.1 The parties hereto agree that (i) all operating expenses of
Seller relating to the Business (i.e., real estate taxes, utilities, cost of
inventories, advertising, collections, fees, hired services, insurance,
miscellaneous expenses, postage, repairs and maintenance, supplies, taxes and
wages, but specifically not including interest on indebtedness, professional
fees and expenses, travel, lodging, or depreciation), and (ii) all income of
Seller, shall be apportioned between Seller and Purchaser as of the Effective
Date based on the portion of each such expense or revenue attributable to the
period falling before the Effective Date on the one hand, which Seller shall
bear the responsibility and benefit of, and the portion of each such expense or
revenue attributable to the period falling on or after the Effective Date, on
the other hand, which Purchaser shall bear the responsibility and benefit of
(the "Adjustment"). The net Adjustment will be paid by the party owing the same
to the other at the Closing. 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".
3.2 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 such prorations, 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.
3.3 Seller and Purchaser shall maintain and make available to
each other any books or records necessary for the adjustment of any item
pursuant to this Article. The provisions of this Article shall survive the
closing of the transactions described herein (the "Closing").
<PAGE>
4. The Closing. The Closing of the transaction provided for in this
Agreement shall take place simultaneously with the execution and delivery of
this Agreement (the actual date of the Closing being referred to herein as the
"Closing Date").
5. Representations and Warranties.
5.1 Seller and each of the Principals, jointly and severally,
hereby represent and warrant to Purchaser as follows:
5.1.1 Organization; Power and Authority. Seller is a limited
liability company 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.
5.1.2 Due Authorization and Execution; Effect of Agreement.
The execution, delivery and performance by Seller of this Agreement and the
consummation by Seller of the transactions contemplated hereby have been duly
authorized by all necessary corporate action required to be taken on the part
of Seller. This Agreement has been duly and validly executed and delivered by
Seller and constitutes the valid and binding obligation of Seller, enforceable
in accordance with its terms, except to the extent that such 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.
5.1.3 Consents. No consent, approval or authorization of,
exemption by, or filing with, any governmental or regulatory authority or any
third party is required in connection with the execution, delivery and
performance by Seller of this Agreement,
<PAGE>
except for consents, approvals, authorizations, exemptions and filings, if any,
which have been obtained.
5.1.4 Compliance with Applicable Laws. Seller is not
engaging in any activity or omitting to take any action as a result of which
Seller is in violation of any 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.
5.1.5 Permits. All Permits required by any federal, state,
or local law, rule or regulation and necessary for the operation of the
Property and the Business as currently being conducted have been obtained and
are currently in effect. No registrations, filings, applications, notices,
transfers, consents, approvals, orders, qualifications, waivers or other
actions of any kind are required by virtue of the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby (a)
to avoid the loss of any Permit or the violation of any law, regulation, order
or other requirement of law, or (b) to enable Purchaser to continue the
operation of the Property as presently conducted after the Closing. The current
use and occupation of any portion of the Property does not violate any of, and,
where applicable, is in material compliance with, the Permits, any applicable
deed restrictions or other covenants,
<PAGE>
restrictions or agreements including without limitation, site plan approvals,
zoning or subdivision regulations or urban redevelopment plans applicable to
the Premises.
5.1.6 Title to Assets. Seller has good and marketable title
to the Property free and clear of all Encumbrances.
5.1.7 Contracts. Except as set forth on Exhibit C, Seller is
not a party to any leases, contracts, orders or agreements relating to the
Property or the Business (written or otherwise) (collectively, "Contracts").
Exhibits C sets forth a full and complete description of the Contracts
described therein, and none of such Contracts have been amended or modified
except as reflected on said Exhibits. Seller is not holding any security
deposits under any of said Contracts. Each of the Contracts are in full force
and effect and no party under any such Contract, including Seller, is in
default, or has sent or received notice of default, in any respect of any such
Contract.
5.1.8 Condition of Personal Property. The Personal Property
is in good operating condition and repair, ordinary wear and tear excepted, and
is adequate, suitable and sufficient to meet the needs of and to operate the
Property as currently conducted.
5.1.9 [INTENTIONALLY OMITTED].
5.1.10 Litigation. There is no action or proceeding or
governmental investigation pending, or, to the best of Seller's knowledge,
threatened against, or relating to, Seller (insofar as it relates to the
Property or the Business), the Property, the Business or the transactions
contemplated by this Agreement, nor is there any basis for any such action,
proceeding or investigation.
<PAGE>
5.1.11 Employee Agreements. There are no union or employment
contracts or agreements (written or oral) involving employees of Seller or its
affiliates affecting the Property or the Business which will survive the
Closing. All employees of Seller will have been terminated as of the date
hereof.
5.1.12 Distribution Agreement. Attached hereto as Exhibit A
is a draft distribution agreement containing substantially the same terms and
conditions of the oral Distribution Agreement. The Distribution Agreement is in
full force and effect; has not been modified or amended in any way and neither
the Seller nor MacNeill Engineering is in default, or sent or received any
notice of default; in respect of the Distribution Agreement. No Event has
occurred or circumstance exists which, with the giving of notice or the passage
of time, or both, would constitute a default under the Distribution Agreement.
Neither Seller nor MacNeill Engineering has exercised any right or option, or
states its intent, to terminate or cancel the Distribution Agreement. Seller
has not assigned, mortgaged, pledged, transferred or conveyed the Distribution
Agreement or any interest therein, or granted any right or option with respect
thereto, to any party other than Purchaser.
5.1.13 Financial Condition. Seller will deliver within 30
days from the date hereof true and correct copies of (1) audited financial
statements consisting of balance sheets and income statements of Seller as of
December 31, 1996; (2) unaudited statements for the quarters ended March 31,
1997; (3) internal reports for the months ended April 30, May 31 and June 30,
1997 and for the period commencing July 1, 1997 through the date immediately
prior to the date hereof and (4) a schedule reconciling cash and accounts
receivable from the Effective Date to the Closing Date. Each such balance sheet
presents fairly in all material respects the financial condition, assets and
liabilities of Seller as of its date; each such statement of income
<PAGE>
presents fairly in all material respects the results of operations of Seller
for the period indicated. The financial statements referred to in this Section
are in accordance with the books and records of Seller. Since December 31, 1996
and since March 31, 1997: (a) there has at no time been a material adverse
change in the financial condition, results of operations, businesses,
properties, assets, liabilities or future prospects of Seller, the Property or
Business; (b) the Business has been conducted in all material respects only in
the ordinary course; and (c) Seller has not suffered an extraordinary loss
(whether or not covered by insurance) or waived any right of substantial value.
5.1.14 Effective Date. Seller has operated the Business
since the Effective Date only in the ordinary course of business for the
benefit of the Purchaser, other than any extraordinary transactions which were
consented to by the Purchaser in advance.
5.1.15 Investment Representations of Seller. Seller,
including any designee of Seller, represents and warrants to Purchaser and FGC
that:
a. Seller understands that the FGC Shares it is acquiring pursuant to
this Agreement have not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), nor qualified under any state securities laws,
and that the issuance and delivery of the FGC Shares is intended to be exempt
from such registration and qualification based in part upon the representations
of Seller contained herein. Seller recognizes that an investment in the FGC
Shares may involve a number of risks, and that no federal or state agency has
passed upon the FGC Shares or made any finding or determination as to the
fairness of this investment.
b. Seller has been furnished copies of (i) FGC's 1996 Annual Report;
(ii) Annual Report on Form 10-K for the year ended December 31, 1996; (iii)
Quarterly Report on Form 10-K for the quarter ended March 31, 1997; and (iv)
Proxy Statement, dated
<PAGE>
May 20, 1997, all as filed with the Securities and Exchange Commission (the
"Commission") and such other materials regarding FGC, if any, as it has
requested in writing, and has been given the opportunity to obtain from FGC all
information that it has requested regarding its business and affairs.
c. Seller and its officers and advisors have such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of the investment contemplated by this Agreement. Seller is
able to bear the economic risk of its investment in FGC.
d. Seller understands that it must bear the economic risk of such
investment indefinitely unless the FGC Shares are registered or qualified
pursuant to the Securities Act or applicable state securities laws or an
exemption from such registration and qualification is available, and that FGC
has no obligation to so register or qualify such shares. Seller further
understands that there is no assurance that any exemption will allow Seller to
dispose of or otherwise transfer any or all of the FGC Shares in the amounts or
at the times Seller might propose. Seller will not sell or otherwise transfer
any of the FGC Shares unless they are registered and qualified under the
Securities Act and applicable state laws or unless an exemption from such
registration and qualification. Nothing contained herein shall, however,
adversely affect Seller's right to sell the FGC Shares pursuant to Rule 144
under the Securities Act, to the extent such Rule is then available in
connection with such sale.
e. Seller is acquiring the FGC Shares solely for its own account as
principal for investment and not with a view toward resale, transfer or
distribution thereof or any interest therein, in whole or in part, nor with any
present intention of distributing the FGC Shares.
<PAGE>
f. Seller is not relying on Purchaser or FGC with respect to the tax
and other economic considerations relating to its investment in the FGC Shares.
In regard to such considerations, Seller has relied on the advice of, or has
consulted with, only the Seller's own advisors.
g. Seller has formed an independent judgment concerning the FGC
Shares.
5.1.16 Full Disclosure. To the best knowledge of Seller, none of
the information supplied by Seller herein or in the exhibits hereto contains
any untrue statement of a material fact or omits to state a material fact
required to be stated herein or necessary in order to make the statements
herein, in light of the circumstances under which they are made, not
misleading.
5.2 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller as follows:
5.2.1 Organization; Power and Authority. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite power and authority to
carry on its business as it is now being conducted, to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby.
5.2.2 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
<PAGE>
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.
5.2.3 Capitalization. The authorized capital stock of FGC
consists of 50,000,000 shares of FGC Common Stock and 2,000,000 shares of
Preferred Stock, of which there were on May 12, 1997, a total of 11,878,617
shares of FGC Common Stock and no shares of Preferred Stock issued and
outstanding. All FGC Shares issued and delivered to Seller pursuant to this
Agreement have been duly authorized, validly issued, fully paid, non-assessable
and free of preemptive rights.
5.2.4 Commission Reports. FGC has made all required filings of
reports and forms with the Commission under the Securities Exchange Act of
1934, as amended (the "Exchange Act") since December, 31, 1995. All such
reports and forms (as amended, in the case of any thereof which were amended
after filing) were prepared in all material respects in accordance with the
requirements of the Exchange Act and the rules and regulations thereunder. As
of their respective dates (or as of the date last amended, in the case of any
thereof which were amended after filing), none or such reports or forms
contained any
<PAGE>
untrue statement of a material fact or omitted 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 to the extent corrected by a subsequently filed amendment,
or other report, form or document. The audited consolidated financial
statements and unaudited interim financial statements and schedules of FGC (as
amended, if applicable) contained in such public reports (or incorporated
therein by reference) were prepared in accordance with general accepted
accounting principles applied on a consistent basis, except as noted therein,
and fairly presented the consolidated financial condition and results of
operations of FGC and its consolidated subsidiaries as at the respective dates
thereof and for the periods indicated therein, subject in the case of interim
unaudited financial statements to normal year-end audit adjustments.
5.3 Securities Act Legend. Each certificate or other instrument
evidencing any FGC Shares shall bear a legend in substantially the following
form:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933 and such shares may not be sold or transferred
unless such sale or transfer will be effected in accordance with the
registration requirements of the Securities Act of 1933, as at that time
amended, or in accordance with any exemption from such registration
requirements which may then be available.
Seller understands and acknowledges that FGC will deliver unlegended
certificates in exchange for any certificate bearing such legend only in the
event that (i) (A) Seller transfers shares represented by such certificate
pursuant to and in the manner provided for in an effective registration
statement covering the transfer or sale or such shares or (B) Seller shall have
delivered to FGC an opinion of counsel in form and substance satisfactory to
FGC, to the effect
<PAGE>
that the FGC Shares in question may be transferred without registration under
the Securities Act and (ii) all applicable requirements of applicable state
securities laws have been satisfied
5. Survival. The representations and warranties of the parties made in
this Article 5 shall survive the Closing.
6. 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.
7. 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 who claims to have dealt with the
indemnifying party in connection with this transaction.. The provisions of this
Article shall survive the Closing or any termination of this Agreement.
8. Costs and Fees. The parties shall each pay for their own expenses
(including, but not limited to, all financing, legal, appraisal, accounting and
advisers' expenses) in connection with the consummation of the transaction
contemplated hereby.
<PAGE>
9. Indemnification.
9.1 Subject to the further provisions of this Article, Seller and
each of the Principals 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 Section 5 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 9.1.
9.2 Subject to the further provisions of this Article, Purchaser
shall protect, defend, hold harmless and indemnify Seller, its partners,
employees and agents, and its successors and assigns from, against and in
respect of any and all Losses that may be suffered or incurred by any of them
arising from or by reason of (i) any of the Assumed Liabilities on and after
the date hereof, (ii) the breach of any representation, warranty, covenant or
agreement of Purchaser contained in this Agreement or in any document or other
writing delivered pursuant to this Agreement; and (iii) any and all actions,
suits, proceedings, claims, demands, assessments, judgments, costs and expenses
(including without limitation, interest, penalties, reasonable legal
<PAGE>
fees and accounting fees) incident to the foregoing and the enforcement of the
provisions of this Section 9.2.
9.3 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
<PAGE>
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 9.3 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 9.3.
9.4 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.
9.5 The obligation of Seller under Section 9.1 shall be satisfied
first from the Escrow Account and, if the Escrow Account is inadequate to
provide indemnification to Purchaser, then from Seller and the Principals
directly.
10. Bulk Sales. The parties agree to waive the requirements, if any,
of all applicable bulk sales laws. As an inducement to Purchaser to enter into
such waiver, Seller represents and warrants that (a) it will not be rendered
insolvent by the transactions contemplated by this Agreement, and (b) all
debts, obligations and liabilities relating to the Property and Business that
are not expressly assumed by Purchaser under this Agreement will be promptly
paid and discharged by Seller as and when they become due. Seller agrees to
indemnify and hold Purchaser harmless from, and reimburse Purchaser for, any
loss, cost, expense, liability or damage which Purchaser may suffer or incur by
virtue of the noncompliance by Seller or Purchaser with any laws pertaining to
fraudulent conveyance, bulk sales or any similar law which might make the sale
or
<PAGE>
transfer of any part of the Property or Business ineffective as to creditors
of, or claimants against the Seller.
11. 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 Family Golf Centers, Inc. 225 Broadhollow Road, Melville, New York
11747, Attention: Pamela S. Charles, General Counsel. A copy of any Notice
given by Purchaser to Seller shall simultaneously be given in either manner
provided above to Ireland, Stapleton, Pryor & Pascoe, P.C. 1675 Broadway, Suite
2600, Denver, Colorado 80202, Attention: Joseph G. Webb, Esq. Notices given in
the manner aforesaid shall be deemed to have been given three (3) business days
after the day so mailed, the day after delivery to any overnight express
carrier and on the day so delivered by hand. Either party shall have the right
to change its address(es) for the receipt of Notices by giving Notice to the
other party in either manner aforesaid. Any Notice required or permitted to be
given by either party may be given by that party's attorney.
12. Miscellaneous.
12.1 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns.
13.2 This Agreement shall be governed by, interpreted under and
construed and enforced in accordance with, the laws of the State of New York.
<PAGE>
12.3 The captions or article headings in this Agreement are for
convenience only and do not constitute part of this Agreement.
12.4 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.
12.5 It is agreed that, except where otherwise expressly provided
in particular Articles or Sections of this Agreement, none of the provisions of
this Agreement shall survive the Closing.
12.6 This Agreement (including the Exhibits annexed hereto)
contains the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior understandings, if any, with respect
thereto.
12.7 This Agreement may not be modified, changed, supplemented or
terminated, nor may any obligations hereunder be waived, except by written
instrument signed by the party to be charged or by its agent duly authorized in
writing or as otherwise expressly permitted herein.
12.8 No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof or of any other agreement or provision herein contained. No extension
of the time for performance of any obligations or acts shall be deemed an
extension of the time for performance of any other obligations or acts.
12.9 This Agreement may be executed in one or more counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which taken together shall constitute but one and the same original.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ACTIVE SPORTS MARKETING, LLC
By:
---------------------------
Name:
Title:
GOLDEN SPIKES, INC.
By:
---------------------------
Name:
Title:
---------------------------
STACEY HART
---------------------------
JOHN SNEAD
<PAGE>
INDEMNITY
ESCROW AGREEMENT
INDEMNITY ESCROW AGREEMENT, dated as of July 29, 1997, among FAMILY
GOLF CENTERS, INC., a Delaware corporation with executive offices at 225
Broadhollow Road, Melville, New York 11747 ("FGC"), ACTIVE SPORTS MARKETING,
having an address at 233 S. Devinney Street, Golden, Colorado 80401 (the
"Seller") and CONTINENTAL STOCK TRANSFER & TRUST COMPANY, incorporated under
the laws of the United States of America with executive offices at 2 Broadway,
New York, New York 10004 (the "Escrow Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, simultaneously with the execution hereof, the Seller and
Family Golf Centers, Inc., a Delaware corporation (the "Purchaser") are
consummating the transactions contemplated by the Purchase Agreement, dated as
of July 29, 1997 (the "Purchase Agreement"), among the Seller, certain
principals of the Seller and Purchaser pursuant to which, among other things,
the Purchaser is purchasing certain assets of the Seller; and
WHEREAS, pursuant to Section 2 of the Purchase Agreement, 1,667 shares
(the "Escrowed Property") of the FGC Common Stock are required to be placed
into an
<PAGE>
escrow account (the "Escrow Account") to be maintained by the Escrow Agent
against any claims for indemnity under the Purchase Agreement; and
WHEREAS, this is the Escrow Agreement referred to in Section 2 of the
Purchase Agreement. Capitalized terms used in this Escrow Agreement and not
otherwise defined herein shall have the respective meanings given to them in
the Purchase Agreement.
NOW, THEREFORE, it is agreed as follows:
I. ESCROW.
SECTION 1.01 APPOINTMENT OF ESCROW AGENT. The Seller and FGC hereby
appoint the Escrow Agent, and the Escrow Agent hereby agrees to serve, as
Escrow Agent in accordance with, and pursuant to, this Agreement.
SECTION 1.02 OPERATION OF ESCROW ACCOUNT. The parties hereto agree
that, subject to Section 1.03 hereof, the Escrow Account shall operate as
follows:
(a) As soon as reasonably practicable following the Closing, FGC shall
deposit, in accordance with Section 1.03 hereof, into the Escrow Account an
aggregate of 1,667 shares of FGC Common Stock pursuant to the Purchase
Agreement.
(b) At any time prior to six months from the date of Closing, FGC
shall be entitled to give a notice to the Escrow Agent, signed by its President
or any Vice President (with a copy to the Seller), to the effect that there has
been an event entitling Purchaser to indemnification from the Seller pursuant
to the Purchase Agreement, which notice shall specify the amounts owed by the
Seller pursuant to the Purchase Agreement, the calculation of such amounts and,
in reasonable detail, the basis therefore.
-2-
<PAGE>
(c) Twenty days after the Escrow Agent has received a notice pursuant
to Section 1.02(b) (or, if not a business day, on the next business day
following such twentieth day) it shall deliver to FGC the Escrowed Property
(the "Escrowed Property") to be valued as set forth in Section 1.02(e) in the
amounts specified in such notice unless the Seller shall have notified the
Escrow Agent (with a copy to FGC) in writing before such date that it disagrees
with FGC's determination that it is entitled to indemnification with respect to
the Purchase Agreement, which notice shall be set forth in reasonable detail
the basis for such disagreement.
(d) Should any dispute arise with respect to the delivery, ownership,
or right of possession of the Escrowed Property, the Escrow Agent, as more
fully set forth in Section IV (xi), is authorized and directed to retain in its
possession without liability to anyone all or any part of the Escrowed Property
until such dispute shall have been settled either by mutual agreement by the
parties concerned or by a final order, decree, or judgment of a court of
competent jurisdiction in the United States of America and time for appeal has
expired and no appeal has been perfected, but the Escrow Agent shall be under
no duty whatsoever to institute or defend any such proceedings, and may, in its
discretion, deposit such Escrowed Property with a court of competent
jurisdiction in the United States of America which is hearing such dispute.
(e) For purposes of this Agreement, the value of each share of FGC
Common Stock which is part of the Escrowed Property shall be deemed equal to
$30.00 per share.
-3-
<PAGE>
(f) In the event that an indemnification claim is made by the
Purchaser in accordance with Section 1.02(b) hereof and such claim is not
disputed by the Seller within the 20-day period referred to in Section 1.02(c)
hereof, then the Seller shall have the right to satisfy such indemnification
claim in cash rather than in FGC Common Stock being held by the Escrow Agent
provided that such amount is paid to Purchaser within such 20-day period.
SECTION 1.03 DISTRIBUTION OF ESCROWED PROPERTY. Unless a notice under
Section 1.02(b) has been given and Escrowed Property in satisfaction of such
notice has not been delivered to FGC, either because the 20-day period has not
yet run out or because a dispute relating to the claim made by such notice is
then pending, the Escrowed Property or such portion of it as at the time
remains in escrow, together with all dividends and distributions received by
the Escrow Agent with respect thereto, shall be returned to the Seller six
months from the date of Closing.
SECTION 1.04 TERMINATION OF ESCROW ACCOUNT. This Agreement and the
Escrow Account will terminate at 5:00 P.M., New York City local time, on the
date on which all of the shares of FGC Common Stock contained therein shall be
distributed as set forth above.
SECTION 1.05 VOTING. The shares of FGC Common Stock held in the Escrow
Account shall be voted by the Seller or its designees.
-4-
<PAGE>
II. DEPOSIT OF ESCROWED PROPERTY.
SECTION 2.01 DEPOSIT OF ESCROWED PROPERTY. As soon as reasonably
practicable following the Closing Date (as defined in the Purchase Agreement),
FGC shall, as set forth in Section 1.02, deposit with the Escrow Agent 1,667
shares of FGC Common Stock.
III. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be (a) delivered by hand, (b) sent by
certified mail return receipt requested, with proper postage prepaid, or (c)
sent by over-night delivery and addressed as follows:
If to FGC to:
225 Broadhollow Road
Melville, New York 11747
(516) 694-1666
with a copy to:
225 Broadhollow Road
Melville, New York 11747
Attention: Pamela S. Charles, Esq.,
General Counsel
Tel: (516) 694-1666
Fax: (516) 694-1935
If to Seller to:
Mr. Stacey Hart
Active Sports Marketing
9200 E. Illiff Avenue
Denver, Colorado 80231
-5-
<PAGE>
Tel: (303) 755-5084
Fax: (303) 755-5689
with a copy to:
Ireland, Stapleton, Pryor & Pascoe, P.C.
1675 Broadway, Suite 2600
Denver, Colorado 80202
Attentiion: Joseph G. Webb, Esq.
Tel: (303) 623-2700
Fax: (303) 623-2062
If to the Escrow Agent, to:
2 Broadway
New York, New York 10004
Attention: Steve Nelson
Tel: (212) 509-4000
Fax: (212) 509-5150
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. Except as
otherwise provided herein, no notice or communication shall be effective until
received or refused.
IV. CONCERNING THE ESCROW AGENT.
To induce the Escrow Agent to act hereunder, it is further agreed by
each of the Seller and FGC that:
(i) The Escrow Agent shall not be under any duty to give the Escrowed
Property held by it hereunder any greater degree of care than it gives its own
similar property and shall not be required to invest any funds held hereunder
except as directed in this Agreement.
-6-
<PAGE>
(ii) This Agreement expressly sets forth all the duties of the Escrow
Agent with respect to any and all matters pertinent hereto. No implied duties
or obligations shall be read into this Agreement against the Escrow Agent. The
Escrow Agent shall not be bound by the provisions of any agreement among the
other parties hereto except this Agreement.
(iii) The Escrow Agent shall not be liable, except for its own gross
negligence, willful misconduct or breach of any representations, warranties or
covenants contained in this Agreement, and, except with respect to claims based
upon such gross negligence, willful misconduct or breach that are successfully
asserted against the Escrow Agent, the other parties hereto shall jointly and
severally indemnify and hold harmless the Escrow Agent (and any successor
Escrow Agent) from and against any and all losses, liabilities, claims,
actions, damages, and expenses, including reasonable attorneys' fees and
disbursements, arising out of, and in connection with, this Agreement. Without
limiting the foregoing, the Escrow Agent shall in no event be liable in
connection with its investment or reinvestment of any cash held by it hereunder
in good faith, in accordance with the terms hereof, including, without
limitation, any liability for any delays (not resulting from gross negligence
or willful misconduct) in the investment or reinvestment of the Escrowed Funds,
or any loss of interest incident to any such delays.
(iv) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument, or other writing delivered
to it hereunder without being required to determine the authenticity or the
correctness of any fact stated therein
-7-
<PAGE>
or the propriety or validity of the service thereof. The Escrow Agent may act
in reliance upon any instrument or signature believed by it in good faith to be
genuine and may assume, if in good faith, that any person purporting to give
notice or receipt or advice or make any statement or execute any document in
connection with the provisions hereof has been duly authorized to do so.
(v) The Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Escrow Agreement and shall not be liable
for any action taken or omitted in good faith and in accordance with such
advice.
(vi) The Escrow Agent does not have any interest in the Escrowed Funds
deposited hereunder, but is serving as escrow holder only. Any payments of
income from the Escrow Account shall be subject to withholding regulations then
in force with respect to United States taxes.
This paragraph (vi) and paragraph (iii) of this Article V shall
survive notwithstanding any termination of this Agreement or the resignation of
the Escrow Agent.
(vii) The Escrow Agent makes no representation as to the validity,
value, genuineness, or the collectibility of any security or other documents or
instrument held by, or delivered to, it.
(viii) The Escrow Agent shall not be called upon to advise any party
as to the wisdom in selling or retaining or taking or refraining from any
action with respect to any securities or other property deposited hereunder.
-8-
<PAGE>
(ix) The Escrow Agent (and any successor escrow agent) at any
time may be discharged from its duties and obligations hereunder by the
delivery to it of notice of termination signed by FGC and the Seller or at any
time may resign by giving written notice to such effect to FGC and the Seller.
Upon any such termination or resignation, the Escrow Agent shall deliver the
Escrowed Property to any successor escrow agent jointly designated by the other
parties hereto in writing, or to any court of competent jurisdiction if no such
successor escrow agent is agreed upon, whereupon the Escrow Agent shall be
discharged of and from any and all further obligations arising in connection
with this Escrow Agreement. The termination or resignation of the Escrow Agent
shall take effect on the earlier of (A) the appointment of a successor
(including a court of competent jurisdiction) or (B) the day that is 30 days
after the date of delivery: (1) to the Escrow Agent of the other parties'
notice of termination or (2) to the other parties hereto of the Escrow Agent's
written notice of resignation. If at that time the Escrow Agent has not
received a designation of a successor escrow agent, the Escrow Agent's sole
responsibility after that time shall be to keep the Escrowed Property safe
until receipt of a designation of successor escrow agent or a joint written
disposition instruction by the other parties hereto or an enforceable order of
a court of competent jurisdiction.
(x) The Escrow Agent shall have no responsibility for the contents of
any writing of any third party contemplated herein as a means to resolve
disputes and may rely without any liability upon the contents thereof.
-9-
<PAGE>
(xi) In the event of any disagreement among or between the other
parties hereto resulting in adverse claims or demands being made in connection
with the Escrowed Property, or in the event that the Escrow Agent in good faith
is in doubt as to what action it should take hereunder, the Escrow Agent shall
be entitled to retain the Escrowed Property until the Escrow Agent shall have
received (A) a final and non-appealable order of a court of competent
jurisdiction directing delivery of the Escrowed Property or (B) a written
agreement executed by the other parties hereto directing delivery of the
Escrowed Property, in which event the Escrow Agent shall disburse the Escrowed
Property in accordance with such order or agreement. Any court order referred
to in (A) above shall be accompanied by a legal opinion by counsel for the
presenting party satisfactory to the Escrow Agent to the effect that said court
order is final and non-appealable. The Escrow Agent shall act on such court
order and legal opinions without further question.
(xii) As consideration for its agreement to act as Escrow Agent as
herein described, FGC shall pay the Escrow Agent fees determined in accordance
with the terms set forth on Exhibit A hereto (and made a part of this Escrow
Agreement as if herein set forth). In addition, FGC and the Seller agree to
reimburse the Escrow Agent for all reasonable expenses, disbursements, and
advances incurred or made by the Escrow Agent in performance of its duties
hereunder (including reasonable fees, expenses, and disbursements of its
counsel) and to share equally the costs thereof.
-10-
<PAGE>
(xiii) No publicly distributed material or other matter in any
language (including, without limitation, notices and reports) which mentions
the Escrow Agent's name or the rights, powers, or duties of the Escrow Agent
shall be issued by the other parties hereto or on such parties' behalf unless
the Escrow Agent shall first have given its specific written consent thereto.
V. MISCELLANEOUS.
SECTION 5.01 BINDING EFFECT. This Escrow Agreement shall be binding
upon, and inure solely to the benefit of, the parties hereto and their
respective successors and assigns, heirs, administrators, and representatives,
and shall not be enforceable by, or inure to the benefit of, any other third
party, except as provided in paragraph (ix) of Article V with respect to the
termination of, or resignation by, the Escrow Agent. No party may assign any of
its rights or obligations under this Agreement without the written consent of
the other parties.
SECTION 5.02 CHOICE OF LAW. This Agreement shall be construed in
accordance with, and governed by, the internal law of the State of New York
(without reference to its rules as to conflicts of law).
SECTION 5.03 MODIFICATION. This Agreement may only be modified by a
writing signed by all of the parties hereto.
SECTION 5.04 HEADINGS. The section headings herein are for convenience
only and shall not affect the construction thereof. Unless otherwise indicated,
references to Sections and Articles are to Sections and Articles, respectively,
contained herein.
-11-
<PAGE>
SECTION 5.05 COUNTERPARTS. This Agreement may be executed in one or
more counterparts but all such separate counterparts shall constitute but one
and the same instrument; provided that, although executed in counterparts, the
executed signature pages of each such counterpart may be affixed to a single
copy of this Agreement which shall constitute an original.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
BY:
--------------------------------
NAME:
TITLE:
ACTIVE SPORTS MARKETING
BY:
--------------------------------
NAME:
TITLE:
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
BY:
--------------------------------
NAME:
TITLE:
-13-
<PAGE>
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of July 29th, 1997, among FAMILY GOLF
CENTERS, INC., a Delaware corporation with executive offices at 225 Broadhollow
Road, Melville, New York 11747 ("FGC"), ACTIVE SPORTS MARKETING, having an
address at 233 S. Devinney Street, Golden, Colorado 80401 (the "Seller") and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, incorporated under the laws of the
United States of America with executive offices at 2 Broadway, New York, New
York 10004 (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution hereof, the Seller and
Family Golf Centers, Inc., a Delaware corporation (the "Purchaser") are
consummating the transactions contemplated by the Purchase Agreement, dated as
of July 29, 1997 (the "Purchase Agreement"), among the Seller, certain
principals of the Seller and Purchaser pursuant to which, among other things,
the Purchaser is purchasing certain assets of the Seller; and
WHEREAS, pursuant to Section 2 of the Purchase Agreement, 8,250 shares
of the FGC Common Stock and $250,000.00 in cash (the "Escrowed Property") are
required
<PAGE>
to be placed into an escrow account (the "Escrow Account") to be maintained by
the Escrow Agent until the earlier of delivery of certain notices to the Escrow
Agent relating to the execution of a Distribution Agreement with MacNeill
Engineering or the third anniversary of the date hereof; and
WHEREAS, this is the Escrow Agreement referred to in Section 2 of the
Purchase Agreement. Capitalized terms used in this Escrow Agreement and not
otherwise defined herein shall have the respective meanings given to them in
the Purchase Agreement.
NOW, THEREFORE, it is agreed as follows:
I. ESCROW.
SECTION 1.01 APPOINTMENT OF ESCROW AGENT. The Seller and FGC hereby
appoint the Escrow Agent, and the Escrow Agent hereby agrees to serve, as
Escrow Agent in accordance with, and pursuant to, this Agreement.
SECTION 1.02 OPERATION OF ESCROW ACCOUNT. The parties hereto agree
that, subject to Section 1.03 hereof, the Escrow Account shall operate as
follows:
(a) As soon as reasonably practicable following the Closing, FGC shall
deposit, in accordance with Section 1.03 hereof, into the Escrow Account an
aggregate of 8,250 shares of FGC Common Stock and $250,000.00 in cash pursuant
to the Purchase Agreement (the "Escrowed Property").
(b) The Escrowed Property shall be distributed to the Seller promptly
upon receipt by the Escrow Agent of a notice (the "Seller Release Notice")
executed by both an authorized officer of the Seller and an authorized officer
of the Purchaser stating
-2-
<PAGE>
either: (A) (i) that the Distribution Agreement, in substantially the form
attached as Exhibit B hereto, has been fully executed, (ii) that the Purchaser
is entitled to purchase and distribute Soft Spikes from MacNeill Engineering on
substantially the same or more favorable terms than the Seller had been
purchasing and distributing Soft Spikes, and (iii) that the Escrow Agent is
authorized to deliver the Escrowed Property to Seller, or (B) (i) the Purchaser
has voluntarily elected to terminate its sale of Soft Spikes, which election
was not the result of the failure by MacNeill Engineering to deliver Soft
Spikes to Purchaser at a price and on substantially the same or more favorable
terms than the Seller had been purchasing and distributing Soft Spikes, and
(ii) that the Escrow Agent is authorized to deliver the Escrowed Property to
Seller.
(c) The Escrowed Property shall be distributed to the Purchaser
promptly upon receipt by the Escrow Agent of a notice (the "Purchaser Release
Notice") executed by an authorized Officer of the Purchaser with a copy to the
Seller stating: (i) that the Distribution Agreement in substantially the form
attached as Exhibit B hereto, has not been executed by MacNeill Engineering,
(ii) that the Purchaser has not been, is not or has been advised by MacNeill
Engineering that it will not be, entitled to purchase and distribute Soft
Spikes on substantially the same or more favorable terms than the Seller had
been purchasing and distributing Soft Spikes from MacNeill Engineering, which
cessation was not due to a default by the Purchaser of any of its obligations
to MacNeill Engineering,and (iii) that the Escrow Agent is authorized to
deliver the Escrowed Property to Purchaser.
-3-
<PAGE>
(d) In the event that the Escrow Agent has not received a Seller
Release Notice or a Purchaser Release Notice prior to the third anniversary of
the date hereof, then on such date or as soon as practicable thereafter the
Escrow Agent shall deliver the Escrowed Property to the Seller.
(e) Should any dispute arise with respect to the delivery, ownership,
or right of possession of the Escrowed Property, the Escrow Agent, as more
fully set forth in Section IV (xi), is authorized and directed to retain in its
possession without liability to anyone all or any part of the Escrowed Property
until such dispute shall have been settled either by mutual agreement by the
parties concerned or by a final order, decree, or judgment of a court of
competent jurisdiction in the United States of America and time for appeal has
expired and no appeal has been perfected, but the Escrow Agent shall be under
no duty whatsoever to institute or defend any such proceedings, and may, in its
discretion, deposit such Escrowed Property with a court of competent
jurisdiction in the United States of America which is hearing such dispute.
SECTION 1.03 DISTRIBUTION OF ESCROWED PROPERTY. Escrowed Property
shall also include all dividends and distributions received by the Escrow Agent
with respect thereto, and shall be distributed and delivered together with the
original Escrowed Property, in accordance with the terms of this Agreement.
SECTION 1.04 TERMINATION OF ESCROW ACCOUNT. This Agreement and the
Escrow Account will terminate at 5:00 P.M., New York City local time, on the
date on which all of the shares Escrowed Property shall be distributed as set
forth above.
-4-
<PAGE>
SECTION 1.05 VOTING. The shares of FGC Common Stock held in the Escrow
Account shall be voted by the Seller or its designees.
II. DEPOSIT OF ESCROWED PROPERTY.
SECTION 2.01 DEPOSIT OF ESCROWED PROPERTY. As soon as reasonably
practicable following the Closing Date (as defined in the Purchase Agreement),
FGC shall, as set forth in Section 1.02, deposit with the Escrow Agent the
Escrowed Property.
III. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be (a) delivered by hand, (b) sent by
certified mail return receipt requested, with proper postage prepaid, or (c)
sent by over-night delivery and addressed as follows:
If to FGC to:
225 Broadhollow Road
Melville, New York 11747
(516) 694-1666
with a copy to:
225 Broadhollow Road
Melville, New York 11747
Attention: Pamela S. Charles, Esq.,
General Counsel
Tel: (516) 694-1666
Fax: (516) 694-1935
If to Seller to:
Mr. Stacey Hart
-5-
<PAGE>
Active Sports Marketing
9200 E. Iliff Avenue
Denver, Colorado 80231
Tel: (303) 755-5084
Fax: (303) 755-5689
with a copy to:
Ireland, Stapleton, Pryor & Pascoe, P.C.
1675 Broadway
Denver, Colorado 80202
Attention: Joseph G. Webb, Esq.
Tel: (303) 623-2700
Fax: (303) 623-2062
If to the Escrow Agent, to:
2 Broadway
New York, New York 10004
Attention: Steve Nelson
Tel: (212) 509-4000
Fax: (212) 509-5150
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. Except as
otherwise provided herein, no notice or communication shall be effective until
received or refused.
IV. CONCERNING THE ESCROW AGENT.
To induce the Escrow Agent to act hereunder, it is further agreed by
each of the Seller and FGC that:
(i) The Escrow Agent shall not be under any duty to give the Escrowed
Property held by it hereunder any greater degree of care than it gives its own
similar
-6-
<PAGE>
property and shall not be required to invest any funds held hereunder except as
directed in this Agreement.
(ii) This Agreement expressly sets forth all the duties of the Escrow
Agent with respect to any and all matters pertinent hereto. No implied duties
or obligations shall be read into this Agreement against the Escrow Agent. The
Escrow Agent shall not be bound by the provisions of any agreement among the
other parties hereto except this Agreement.
(iii) The Escrow Agent shall not be liable, except for its own gross
negligence, willful misconduct or breach of any representations, warranties or
covenants contained in this Agreement, and, except with respect to claims based
upon such gross negligence, willful misconduct or breach that are successfully
asserted against the Escrow Agent, the other parties hereto shall jointly and
severally indemnify and hold harmless the Escrow Agent (and any successor
Escrow Agent) from and against any and all losses, liabilities, claims,
actions, damages, and expenses, including reasonable attorneys' fees and
disbursements, arising out of, and in connection with, this Agreement. Without
limiting the foregoing, the Escrow Agent shall in no event be liable in
connection with its investment or reinvestment of any cash held by it hereunder
in good faith, in accordance with the terms hereof, including, without
limitation, any liability for any delays (not resulting from gross negligence
or willful misconduct) in the investment or reinvestment of the Escrowed Funds,
or any loss of interest incident to any such delays.
(iv) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument, or other writing delivered
to it hereunder without
-7-
<PAGE>
being required to determine the authenticity or the correctness of any fact
stated therein or the propriety or validity of the service thereof. The Escrow
Agent may act in reliance upon any instrument or signature believed by it in
good faith to be genuine and may assume, if in good faith, that any person
purporting to give notice or receipt or advice or make any statement or execute
any document in connection with the provisions hereof has been duly authorized
to do so.
(v) The Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Escrow Agreement and shall not be liable
for any action taken or omitted in good faith and in accordance with such
advice.
(vi) The Escrow Agent does not have any interest in the Escrowed Funds
deposited hereunder, but is serving as escrow holder only. Any payments of
income from the Escrow Account shall be subject to withholding regulations then
in force with respect to United States taxes.
This paragraph (vi) and paragraph (iii) of this Article V shall
survive notwithstanding any termination of this Agreement or the resignation of
the Escrow Agent.
(vii) The Escrow Agent makes no representation as to the validity,
value, genuineness, or the collectibility of any security or other documents or
instrument held by, or delivered to, it.
(viii) The Escrow Agent shall not be called upon to advise any party
as to the wisdom in selling or retaining or taking or refraining from any
action with respect to any securities or other property deposited hereunder.
-8-
<PAGE>
(ix) The Escrow Agent (and any successor escrow agent) at any time may
be discharged from its duties and obligations hereunder by the delivery to it
of notice of termination signed by FGC and the Seller or at any time may resign
by giving written notice to such effect to FGC and the Seller. Upon any such
termination or resignation, the Escrow Agent shall deliver the Escrowed
Property to any successor escrow agent jointly designated by the other parties
hereto in writing, or to any court of competent jurisdiction if no such
successor escrow agent is agreed upon, whereupon the Escrow Agent shall be
discharged of and from any and all further obligations arising in connection
with this Escrow Agreement. The termination or resignation of the Escrow Agent
shall take effect on the earlier of (A) the appointment of a successor
(including a court of competent jurisdiction) or (B) the day that is 30 days
after the date of delivery: (1) to the Escrow Agent of the other parties'
notice of termination or (2) to the other parties hereto of the Escrow Agent's
written notice of resignation. If at that time the Escrow Agent has not
received a designation of a successor escrow agent, the Escrow Agent's sole
responsibility after that time shall be to keep the Escrowed Property safe
until receipt of a designation of successor escrow agent or a joint written
disposition instruction by the other parties hereto or an enforceable order of
a court of competent jurisdiction.
(x) The Escrow Agent shall have no responsibility for the contents of
any writing of any third party contemplated herein as a means to resolve
disputes and may rely without any liability upon the contents thereof.
(xi) In the event of any disagreement among or between the other
parties hereto resulting in adverse claims or demands being made in connection
with the
-9-
<PAGE>
Escrowed Property, or in the event that the Escrow Agent in good faith is in
doubt as to what action it should take hereunder, the Escrow Agent shall be
entitled to retain the Escrowed Property until the Escrow Agent shall have
received (A) a final and non-appealable order of a court of competent
jurisdiction directing delivery of the Escrowed Property or (B) a written
agreement executed by the other parties hereto directing delivery of the
Escrowed Property, in which event the Escrow Agent shall disburse the Escrowed
Property in accordance with such order or agreement. Any court order referred
to in (A) above shall be accompanied by a legal opinion by counsel for the
presenting party satisfactory to the Escrow Agent to the effect that said court
order is final and non-appealable. The Escrow Agent shall act on such court
order and legal opinions without further question.
(xii) As consideration for its agreement to act as Escrow Agent as
herein described, FGC shall pay the Escrow Agent fees determined in accordance
with the terms set forth on Exhibit A hereto (and made a part of this Escrow
Agreement as if herein set forth). In addition, FGC and the Seller agree to
reimburse the Escrow Agent for all reasonable expenses, disbursements, and
advances incurred or made by the Escrow Agent in performance of its duties
hereunder (including reasonable fees, expenses, and disbursements of its
counsel) and to share equally the costs thereof.
(xiii) No publicly distributed material or other matter in any
language (including, without limitation, notices and reports) which mentions
the Escrow Agent's name or the rights, powers, or duties of the Escrow Agent
shall be issued by the other
-10-
<PAGE>
parties hereto or on such parties' behalf unless the Escrow Agent shall first
have given its specific written consent thereto.
V. MISCELLANEOUS.
SECTION 5.01 BINDING EFFECT. This Escrow Agreement shall be binding
upon, and inure solely to the benefit of, the parties hereto and their
respective successors and assigns, heirs, administrators, and representatives,
and shall not be enforceable by, or inure to the benefit of, any other third
party, except as provided in paragraph (ix) of Article V with respect to the
termination of, or resignation by, the Escrow Agent. No party may assign any of
its rights or obligations under this Agreement without the written consent of
the other parties.
SECTION 5.02 CHOICE OF LAW. This Agreement shall be construed in
accordance with, and governed by, the internal law of the State of New York
(without reference to its rules as to conflicts of law).
SECTION 5.03 MODIFICATION. This Agreement may only be modified by a
writing signed by all of the parties hereto.
SECTION 5.04 HEADINGS. The section headings herein are for convenience
only and shall not affect the construction thereof. Unless otherwise indicated,
references to Sections and Articles are to Sections and Articles, respectively,
contained herein.
SECTION 5.05 COUNTERPARTS. This Agreement may be executed in one or
more counterparts but all such separate counterparts shall constitute but one
and the same instrument; provided that, although executed in counterparts, the
executed signature
-11-
<PAGE>
pages of each such counterpart may be affixed to a single copy of this
Agreement which shall constitute an original.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
BY:
---------------------------
NAME:
TITLE:
ACTIVE SPORTS MARKETING
BY:
---------------------------
NAME:
TITLE:
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
BY:
---------------------------
NAME:
TITLE:
-13-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of July 29th
1997, by and between FAMILY GOLF CENTERS, INC., a Delaware corporation (the
"Company"), and ACTIVE SPORTS MARKETING, LLC, a Colorado limited liability
company (the "Seller").
WHEREAS, Golden Spikes, Inc., a wholly-owned subsidiary of the Company
(the "Purchaser"), and the Seller are parties to an Asset Purchase Agreement,
dated as of the date hereof (the "Transaction Agreement"), providing for the
purchase by the Purchaser of certain assets of the Seller;
WHEREAS, in connection with the transactions contemplated by the
Transaction Agreement, the Seller received an aggregate of 16,500 shares of
Common Stock, $.01 par value per share, of the Company (the "Common Stock"),
which are "restricted securities" (as defined in Rule 144 under the Securities
Act of 1933, as amended) and the Company has agreed to provide the Seller with
the registration rights set forth herein with respect to certain of such
shares.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, the parties hereto agree as
follows:
1. Certain Definitions.
Business Day: Any day other than a Saturday, Sunday or holiday on
which banking institutions in New York, New York are closed.
Commission: The Securities and Exchange Commission, or any other
Federal agency at the time administering the Securities Act or the Exchange
Act.
Common Stock: As defined in the second "WHEREAS" clause above.
Company: As defined in the first paragraph of this Agreement.
Company Indemnified Parties: As defined in Section 6(b).
Escrow Agreement: The Escrow Agreement referred to in the Transaction
Agreement, as the same may be amended in accordance with its terms.
Exchange Act: The Securities and Exchange Act of 1934, as amended, or
any
<PAGE>
successor Federal statute, and the rules and regulations of the Commission
promulgated thereunder, as they each may, from time to time, be in effect.
Losses: As defined in Section 6(a).
Prospectus: The prospectus included in the Registration Statement as
of the date it becomes effective under the Securities Act and, in the case of
references to the Prospectus as of a date subsequent to the effective date of
the Registration Statement, as amended or supplemented as of such date,
including all documents incorporated by reference therein, as amended, and each
prospectus supplement relating to the offering and sale of any of the
Registrable Shares.
Purchaser: As defined in the first "WHEREAS" clause above.
Registrable Shares: Shares of Common Stock issued to the Seller
pursuant to the Transaction Agreement, other than the shares held in escrow
pursuant to the Escrow Agreement, and any other shares of capital stock of the
Company issued in respect of such shares as a result of stock splits, stock
dividends, reclassification, recapitalizations, mergers, consolidations or
similar events. References in this Agreement to amounts or percentages of
Registrable Shares as of or on any particular date shall be deemed to refer to
amounts or percentages after giving effect to any applicable events
contemplated by the preceding sentence.
Registration Statement: A registration statement of the Company on any
form (to be selected by the Company) for which the Company then qualifies and
which permits the secondary resale thereunder of Registrable Shares. The term
Registration Statement shall also include all exhibits and financial statements
and schedules and documents incorporated by reference in such Registration
Statement when it becomes effective under the Securities Act, and in the case
of the references to the Registration Statement as of a date subsequent to the
effective date, as amended or supplemented as of such date.
Securities Act: The Securities Act of 1933, as amended, or any
successor Federal statute, and the rules and regulations of the Commission
promulgated thereunder, as they each may, from time to time, be in effect.
Seller: As defined in the first paragraph of this Agreement.
Stockholder Indemnified Parties: As defined in Section 6(a).
Selling Stockholder: Any Stockholder whose Registrable Shares are
included at the request of such Stockholder in any Registration Statement filed
pursuant to Section 2.
Stockholder: The Seller or any transferee of Registrable Shares held
by Seller permitted hereunder if such transferee (i) is designated a
Stockholder by Seller and (ii) has executed a counterpart hereof at the time of
the transfer to such transferee, unless the Registrable Shares held by such
person are acquired in (a) a public distribution pursuant to a registration
2
<PAGE>
statement under the Securities Act or (b) one or more transactions exempt from
registration under the Securities Act where shares sold in such transaction may
be publicly resold without subsequent registration under the Securities Act
(and without limitations as to volume or manner of sale or both).
Transaction Agreement: As defined in the first "WHEREAS" clause above.
2. Incidental Registration.
(a) At any time until the time at which Stockholders may sell publicly
all Registrable Shares owned by such Stockholders without registration under
the Securities Act, each time that the Company proposes to register shares of
its Common Stock under the Securities Act for cash pursuant to either an
underwritten public offering, broker-dealer transactions, or a combination of
the foregoing (other than in connection with a dividend reinvestment, employee
benefit, stock option or similar plan, an offering of rights, warrants or
securities directly or indirectly convertible into or exchangeable or
exercisable for Common Stock or as registration solely for the account of the
Company pursuant to Rule 415 under the Securities Act or a registration of
shares on Form S-8 or S-4 or any other form not generally available for the
registration of securities for sale to the public), the Company shall give
written notice to Stacey Hart, as the representative of the Stockholders (the
"Representative"), of its intention to do so. Upon receipt of such notice, the
Representative may give the Company a written request to register all or some
of such Stockholders' Registrable Shares in the registration described in the
written notice from the Company as set forth in the foregoing sentence,
provided that such written request is given within seven (7) days after any
such notice has been given by the Company (with such request stating (i) the
amount of Registrable Shares to be included and (ii) any other information
reasonably requested by the Company to properly effect the registration of such
Registrable Shares). Subject to Sections 2(b) and 4(c), upon receipt of such
request, if the registration form proposed to be used by the Company may also
be used to register Registrable Shares for distribution by such Selling
Stockholders, the Company will use its reasonable best efforts to promptly
cause all such Registrable Shares requested to be included in such registration
to be so included (in accordance with the methods of distribution set forth in
the Company's notice of intended registration).
(b) If the proposed method of distribution is a firm commitment
underwritten public offering and the managing underwriter thereof determines in
good faith that the inclusion of such Registrable Shares would materially
adversely affect the offering, the number of Registrable Shares to be offered
for the accounts of the Selling Stockholders shall be reduced or limited in
proportion to the number of Registrable Shares owned by all such Selling
Stockholders to the extent necessary to reduce the total number of shares to be
included in such offering to the amount recommended by such managing
underwriter; provided, that if securities are being offered for the account of
other persons or entities (other than, or in addition to, the Company), such
reduction shall be made pro rata from the securities intended to be offered by
such other persons (regardless of whether such other persons acquire or have
acquired their shares of Common Stock before, on or after the date hereof) and
the Selling Stockholders and
3
<PAGE>
subject to the registration rights of those persons set forth on Schedule I
hereto, but no such reduction shall be made from the securities to be offered
for the account of the Company.
(c) The Company's obligations under this Section 2 shall apply to a
registration to be effected for Common Stock to be sold for the account of the
Company as well as a registration statement which includes Common Stock to be
offered for the account of other holders of Common Stock.
(d) The Company may at any time and from time to time, without the
consent of any Stockholder, delay, suspend, abandon or withdraw any
Registration Statement described in Section 2(a) and any related proposed or
actual offering or other distribution in which any Stockholder has requested
inclusion of such Stockholder's Registrable Shares pursuant to this Section 2.
3. Limitations on Registration Rights. Notwithstanding the provisions
of Section 2 hereof, the Company shall not be required to effect or maintain
any registration if (i) the Company has previously filed with the Commission a
Registration Statement which included any of the Stockholders Registrable
Shares pursuant to Section 2 of this Agreement; provided, however, that (A) if
pursuant to Section 2(b) the number of Registrable Shares requested to be
registered by the Selling Stockholders was reduced, then such Selling
Stockholders shall be given another opportunity to register their excluded
Registrable Shares in accordance with this Section 2 or (B) if the Company
shall not, for any reason other than the failure of any stockholder to comply
with this Agreement, cause the Registration Statement to remain effective, and
prepare and file with the Commission any amendments and supplements to the
Registration Statement and to the Prospectus used in connection therewith as
may be necessary to keep the Prospectus current and in compliance in all
material respects with the provisions of the Securities Act, until the sooner
to occur of the sale of all of the Registrable Shares covered by such
Registration Statement or the 90th day following the effective date of such
Registration Statement (as such 90th day may be extended for the period of any
suspension of the offering or distribution of Registrable Shares covered
thereby pursuant to subsection (d) of Section 2), then the Selling Stockholders
shall be given another opportunity to register their Registrable Shares in
accordance with this Section 2; or (ii) there shall have been a material breach
of a representation, warranty, covenant or agreement contained in the
Transaction Agreement or an unsatisfied claim under any indemnity arrangement
relating thereto by a party other than the Company or the Purchaser, which
breach continues after the expiration of any applicable notice or cure periods.
4. Obligations with Respect to Registration.
(a) Subject to Section 2(d) hereof, if and whenever the Company is
obligated by the provisions of this Agreement to effect the registration of any
Registrable Shares under the Securities Act, the Company shall use its
commercially reasonable efforts:
(1) to notify the Selling Stockholders, (A) when a Registration
Statement becomes effective, (B) when the filing of a post-effective amendment
to a Registration
4
<PAGE>
Statement or supplement to the Prospectus is required, when the same is filed,
and in the case of a post-effective amendment, when the same becomes effective,
(C) of any request by the Commission for any amendment of or supplement to a
Registration Statement or any Prospectus relating thereto or for additional
information and (D) of the entry of any stop order suspending the effectiveness
of such Registration Statement or of the initiation of any proceedings for that
purpose;
(2) to furnish to each Selling Stockholder a conformed copy of the
Registration Statement as declared effective by the Commission and of each
post-effective amendment thereto, and such number of copies of the final
Prospectus and of each supplement thereto as may reasonably be required to
facilitate the distribution of the Registrable Shares;
(3) to register or qualify the Registrable Shares covered by a
Registration Statement under the securities or blue sky laws of such
jurisdictions in the United States as the Selling Stockholders shall reasonably
request, and do any and all other acts and things which may be necessary to
enable each Selling Stockholder whose Registrable Shares are covered by such
Registration Statement to consummate the disposition in such jurisdictions of
such Registrable Shares; provided, however, that the Company shall in no event
be required to qualify to do business as a foreign corporation or a dealer in
any jurisdiction where it is not so qualified, to conform its capitalization or
the composition of its assets at the time to the securities or blue sky laws of
such jurisdiction, to execute or file any general consent to service of process
under the laws of any jurisdiction, to take any action that would subject it to
service of process in suits other than those arising out of the offer and sale
of the Registrable Shares covered by such Registration Statement, or to subject
itself to taxation in any jurisdiction where it has not theretofore done so;
and
(4) to cause such Registrable Shares covered by a Registration
Statement to be listed on the principal exchange or exchanges or qualified for
trading on the principal over the counter market on which the Common Stock is
then listed or traded upon the sale of such Registrable Shares pursuant to such
Registration Statement.
(b) The Company's obligations under this Agreement with respect to a
Selling Stockholder shall be conditioned upon such Selling Stockholder's
compliance with the following:
(1) such Selling Stockholder shall cooperate with the Company in
connection with the preparation of the Registration Statement, and such Selling
Stockholder will provide to the Company, in writing, for use in the
Registration Statement, all information regarding such Selling Stockholder and
such other information as may be necessary to enable the Company to prepare the
Registration Statement and Prospectus covering the Registrable Shares and to
maintain the currency and effectiveness thereof;
(2) such Selling Stockholder shall permit the Company, the proposed
underwriters, agents or broker-dealers of the offering or other distribution
and their respective
5
<PAGE>
representatives and agents to examine such documents and records and shall
supply any information as they may reasonably request in connection with the
offering or other distribution in which such Selling Stockholder proposes to
participate;
(3) such Selling Stockholder shall enter into such agreements with the
Company and any underwriter, broker-dealer or similar securities industry
professional containing representations, warranties, indemnities and agreements
as are in each case customarily entered into and made by selling stockholders,
and will cause its counsel to give any legal opinions customarily given, in
secondary distributions under similar circumstances;
(4) during such time as such Selling Stockholder may be engaged in a
distribution of the Registrable Shares, such Selling Stockholder will comply
with all applicable laws, including, but not limited to Regulation M
promulgated under the Exchange Act, and pursuant thereto will, among other
things: (A) not engage in any stabilization activity in connection with the
securities of the Company in contravention of such rules; (B) distribute the
Registrable Shares owned by such Selling Stockholder solely in the manner
described in the Registration Statement; (C) cause to be furnished to each
underwriter, agent or broker-dealer to or through whom the Registrable Shares
owned by such Selling Stockholder may be offered, or to the offeree if an offer
is made directly by the Selling Stockholder, such copies of the Prospectus (as
amended and supplemented to such date) and documents incorporated by reference
therein as may be required by such underwriter, agent, broker-dealer or
offeree; and (D) not bid for or purchase any securities of the Company or
attempt to induce any person to purchase any securities of the Company other
than as permitted under the Exchange Act;
(5) at least five (5) days prior to any distribution of Registrable
Shares, such Selling Stockholder will advise the Company in writing of the
dates on which the distribution will commence and terminate, the number of the
Registrable Shares to be sold, the terms and the manner of sale (including, to
the extent applicable, the purchase price, the name of any underwriter, agent
or broker-dealer to or through whom such distribution is being made, and the
amount of any selling commissions or other items constituting compensation to
such underwriter, agent or broker-dealer) and the number of shares of Common
Stock that will be owned beneficially by such Selling Stockholder after giving
effect to such sale; and
(6) on notice from the Company of the happening of any of the events
specified in clauses (B), (C) or (D) of Section 4(a)(1), or that, as set forth
in Section 2(d), it has delayed, suspended, abandoned or withdrawn any
Registration Statement or any related offering or other distribution or it
otherwise requires the suspension by such Selling Stockholder of the
distribution of any of the Registrable Shares, then such Selling Stockholder
shall cease offering or distributing the Registrable Shares until such time, if
any, as the Company notifies such Selling Stockholder that offering and
distribution of the Registrable Shares may recommence.
5. Expenses of Registration.
All expenses in connection with any Registration Statement, any
qualification or compliance with federal or state laws required in connection
therewith, and the distribution of the
6
<PAGE>
Registrable Shares shall, as between the Selling Stockholders and the Company,
be borne as follows:
(i) The Company shall pay and be responsible for the registration fee
payable under the Securities Act, blue sky fees and expenses, if applicable
(subject to the limitations set forth in Section 4(a)(3)), printing fees and
all fees and disbursements of the Company's counsel and accountants. Solely at
its discretion, the Company may, in lieu of engaging the services of a
financial printing company with respect to the Registration Statement or the
Prospectus, arrange for the photocopying thereof, in which event the Company
will bear the applicable photocopying costs.
(ii) The Selling Stockholders shall pay all fees and disbursements of
their own counsel and advisers, all stock transfer fees (including the cost of
all transfer tax stamps) or expenses, if any, and all other expenses (including
underwriting or brokerage discounts, commissions and fees) related to the
distribution of the Registrable Shares that have not expressly been assumed by
the Company as set forth above.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Selling
Stockholder and each person (if any) who controls such Selling Stockholder
within the meaning of either the Securities Act or the Exchange Act
(collectively, the "Stockholder Indemnified Parties") from and against any
losses, claims, damages or liabilities (collectively "Losses"), joint or
several, to which such Stockholder Indemnified Parties may become subject,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and, subject to
Section 6(c), the Company will reimburse such Stockholder Indemnified Parties
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Losses; provided, however, that the Company
will not indemnify or hold harmless any Stockholder Indemnified Party from or
against any such Losses (i) that arise out of or are based upon any violation
of any federal or state securities laws, rules or regulations committed by any
of the Stockholder Indemnified Parties (or any person who controls any of them
or any agent, broker-dealer or underwriter engaged by them) or in the case of a
non-underwritten offering, any failure by such Selling Stockholder to give any
purchaser of Registrable Shares at or prior to the written confirmation of such
sale, a copy of the most recent Prospectus or (ii) if the untrue statement,
omission or allegation thereof upon which Losses or expenses are based (x) was
made in reliance upon and in conformity with the information provided by or on
behalf of any Stockholder Indemnified Party for use or inclusion in the
Registration Statement or any Prospectus, or (y) was made in any Prospectus
used after such time as the Company advised such Selling Stockholder that the
filing of a post-effective amendment or supplement thereto was required, except
the Prospectus as so amended
7
<PAGE>
or supplemented, or (z) was made in any Prospectus used after such time as the
Registration Statement ceases to be effective or current or has been withdrawn
or abandoned or the use of any such Registration Statement or Prospectus or any
offering or distribution pursuant thereto shall have been suspended or delayed
hereunder.
(b) Each Selling Stockholder, individually and not jointly, agrees to
indemnify and hold harmless the Company, its directors and officers and each
person, if any, who controls the Company within the meaning of either the
Securities Act or the Exchange Act (the "Company Indemnified Parties"), from
and against any Losses, joint or several, to which the Company Indemnified
Parties may become subject, insofar as such Losses (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
the Prospectus, or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, if
the statement or omission was made in reliance upon and in conformity with the
information provided by or on behalf of such Selling Stockholder or any person
who controls such Selling Stockholder for use or inclusion in the Registration
Statement or any Prospectus, or (ii) the use of any Prospectus after such time
as the Company has advised such Selling Stockholder that the filing of a
post-effective amendment or supplement thereto is required, except the
Prospectus as so amended or supplemented, or (iii) the use of any Prospectus
after such time as the Registration Statement ceases to be effective or current
or has been withdrawn or abandoned or the use of any such Registration
Statement or Prospectus or any offering or distribution pursuant thereto shall
have been suspended or delayed hereunder, or (iv) any violation by such Selling
Stockholder or any person who controls such Selling Stockholder within the
meaning of either the Securities Act or the Exchange Act (or any agent,
broker-dealer or underwriter engaged by such Selling Stockholder or any such
controlling person) of any federal or state securities law or rule or
regulation thereunder or in the case of a non-underwritten offering, any
failure by such Selling Stockholder to give any purchaser of Registrable Shares
at or prior to the written confirmation of such sale, a copy of the most recent
Prospectus; and, subject to Section 6(c), such Selling Stockholder will
reimburse such Company Indemnified Parties for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Losses. For purposes of clause (i) of the preceding sentence and clause
(ii) of the last sentence of Section 6(a), but without limiting the generality
thereof, any information concerning any Shareholder Indemnified Party or plan
of distribution included in any Registration Statement or Prospectus which is
provided to the Selling Stockholder for his review within a reasonable period
before filing or use thereof and to which the information such Selling
Stockholder has not promptly provided written notice of objection to the
Company shall be deemed to have been provided by such Selling Stockholder
specifically for use in such Registration Statement or Prospectus.
(c) Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and the Indemnifying Party may participate at its own expense in the defense,
or if it so elects, to assume the defense of any such claim and any action
8
<PAGE>
or proceeding resulting therefrom, including the employment of counsel and the
payment of all expenses. The failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party from its obligations
to indemnify such Indemnified Party, except to the extent the Indemnified
Party's failure to so notify actually prejudices the Indemnifying Party's
ability to defend against such claim, action or proceeding. In the event that
the Indemnifying Party elects to assume the defense in any action or
proceeding, the Indemnified Party shall have the right to employ separate
counsel in any such action or proceeding and to participate in the defense
thereof, but the fees and expenses of such separate counsel shall be such
Indemnified Party's expense unless (i) the Indemnifying Party has agreed to pay
such fees and expenses or (ii) the named parties to any such action or
proceeding (including any impleaded parties) include an Indemnified Party and
the Indemnifying Party, and such Indemnified Party shall have been advised by
counsel that there may be a conflict of interest between such Indemnified Party
and the Indemnifying Party in the conduct of the defense of such action (in
which case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not assume the defense of such
action or proceeding on such Indemnified Party's behalf, it being understood,
however, that the Indemnifying Party shall not, in connection with any one such
action or proceeding or separate but substantially similar or related actions
or proceedings arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for all Indemnified Parties, which firm shall be
designated in writing by the Selling Stockholder(s) or the Company as the case
may be). No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of the Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. The Indemnifying Party shall not be liable for any settlement of
any such action or proceeding effected without its written consent, but if
settled with its written consent, or if there be a final judgment for the
plaintiff in any such action or proceeding, the Indemnifying Party shall
indemnify and hold harmless the Indemnified Party from and against any loss or
liability by reason of such settlement or judgment.
(d) If the indemnification provided for under this Section 6 is
unavailable to or insufficient to hold the Indemnified Party harmless under
subparagraphs (a) or (b) above in respect of any Losses referred to therein for
any reason other than as specified therein, then the Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Indemnifying Party
on the one hand and such Indemnified Party on the other from the subject
offering or distribution or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Indemnifying Party on the one hand and such
Indemnified Party on the other in connection with the statements or omissions
which resulted in such Losses as well as any other relevant equitable
considerations. The relative benefits received by the Indemnifying Party on the
one hand and the Indemnified Party on the other hand shall be deemed to be in
the same
9
<PAGE>
proportion as the net proceeds of the offering or other distribution (after
deducting expenses) received by the Indemnifying Party bears to the net
proceeds of the offering or other distribution (after deducting expenses)
received by the Indemnified Party. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by (or omitted to be supplied by)
the Company or the Selling Stockholders, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, the relative benefits received by each party from the
sale of the Registrable Shares and any other equitable considerations
appropriate under the circumstances. The amount paid or payable by an
Indemnified Party as a result of the Losses referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
7. Notices. All notices, requests, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed, certified or registered mail with
postage prepaid, or sent by telex, telegram or telecopier, as follows:
(i) if to the Company:
Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Attention: General Counsel
Facsimile: (516) 694-0918
(ii) if to Seller or the Representative:
Stacey A. Hart
9200 E. Iliff Avenue
Denver, Colorado 80231
Facsimile: (303) 755-5689
with a copy to:
Ireland, Stapleton, Pryor & Pascoe, P.C.
1675 Broadway, Suite 2600
Denver, Colorado 80202
Attention: Joseph G. Webb, Esq.
Facsimile: (303) 623-2062
10
<PAGE>
or to such other person or address as any party shall specify by notice in
writing to the other party. All notices and other communications given to a
party in accordance with the provisions of this Agreement shall be deemed to
have been given (i) three Business Days after the same are sent by certified or
registered mail, postage prepaid, return receipt requested, (ii) when delivered
by hand or transmitted by telecopy (answer back received) or (iii) one Business
Day after the same are sent by a reliable overnight courier service, with
acknowledgment of receipt requested. Notwithstanding the preceding sentence,
notice of change of address shall be effective only upon actual receipt
thereof.
8. Amendment. Any provision of this Agreement may be amended or
modified in whole or in part at any time by an agreement in writing among the
Company and the Stockholders who hold a majority of the Registrable Shares then
outstanding, executed in the same manner as this Agreement. No consent, waiver
or similar act shall be effective unless in writing.
9. Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto and supersedes all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof.
10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11. Governing Law. This Agreement shall be governed by and interpreted
in accordance with the internal laws of the State of Delaware, without giving
effect to principles of conflicts of laws.
12. Assignment. Subject to the definition of "Stockholder" contained
in Section 1 hereof, the Seller may not assign its rights under this Agreement
without the prior written consent of the Company. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
FAMILY GOLF CENTERS, INC.
By:
--------------------------------
Name:
Title:
ACTIVE SPORTS MARKETING, LLC
By:
--------------------------------
Name:
Title:
12
<PAGE>
PURCHASE AGREEMENT
by and between
PALM LAKES PARTNERS, LTD.,
Seller,
and
PALM FAMILY GOLF CENTERS, INC.,
Purchaser
PREMISES:
Palm Royale Golf Club
La Quinta, California
<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
EXHIBIT A LEGAL DESCRIPTION
EXHIBIT B-1 PERSONAL PROPERTY - TRANSACTION ONE
EXHIBIT B-2 PERSONAL PROPERTY - TRANSACTION TWO
EXHIBIT C CONTRACTS
EXHIBIT D PERMITTED EXCEPTIONS
EXHIBIT E LITIGATION MATTERS
EXHIBIT F CONDITION OF IMPROVEMENTS
<PAGE>
PURCHASE AGREEMENT
PURCHASE AGREEMENT (this "Agreement"), made as of the ____ day of
June, 1997 (the "Effective Date"), by and between PALM LAKES PARTNERS, LTD., a
Colorado limited partnership, having an address at 6786 South Revere Parkway,
Suite 150 D, Englewood, Colorado 80112 ("Seller"), and PALM FAMILY GOLF
CENTERS, INC., a Delaware corporation having an address at 225 Broadhollow
Road, Suite 106E, Melville, New York 11747 ("Purchaser").
W I T N E S S E T H :
WHEREAS, Seller is the owner of certain real property located at 78459
Indigo Drive, La Quinta, California and more particularly described on Exhibit
A attached hereto and made a part hereof (the "Land") and the buildings and
improvements located on the Land (the "Improvements" and, together with the
Land, the "Premises");
WHEREAS, Seller operates a golf course, clubhouse, locker room,
restaurant facility, and related facilities at the Premises under the name
"Palm Royale Golf Club" (the "Business"); and
WHEREAS, Seller wants to sell the Premises to Purchaser, and Purchaser
wants to purchase the Premises from Seller, on the terms, and subject to the
conditions, set forth herein.
NOW, THEREFORE, in consideration of TEN DOLLARS ($10.00), the terms
and conditions set forth herein, and other good and valuable consideration, the
mutual receipt and sufficiency of which are hereby acknowledged, the parties
hereby agree to the foregoing and as follows:
1. Agreement to Sell and Purchase.
1.1 Property to be Purchased by Purchaser. Seller agrees to sell
and convey to Purchaser, and Purchaser agrees to purchase and acquire from
Seller, upon the terms and conditions
1
<PAGE>
hereinafter set forth, all of Seller's right, title and interest in and to the
following property (collectively, the "Property"):
1.1.1 the Premises;
1.1.2 the easements, rights of way, appurtenances and other
rights and benefits of Seller in and to the Premises, including without
limitation, all of Seller's interest in any air rights, water rights and
irrigation rights;
1.1.3 all furnishings, fixtures, machinery, equipment,
vehicles and personalty attached or appurtenant to or used in connection with
the Premises that are owned by Seller, and all inventories, supplies, sales,
marketing and instructional materials of every kind and description owned by
Seller and relating to the Business, wherever located, including without
limitation, the items described on Exhibit B-1 and Exhibit B-2 attached hereto
and made a part hereof (the "Personal Property");
1.1.4 the files, books, notices and other correspondence
from any governmental agencies, and other records used or employed by Seller or
its affiliates in connection with the ownership and/or operation of the
Premises and the Business (collectively, the "Records"); provided, however,
Purchaser shall be required to maintain the Records on the Premises for a
period of seven (7) years following the Effective Date and to provide Seller
with access to the Records during Purchaser's normal business hours at the
Premises upon prior reasonable notice by Seller to Purchaser. Purchaser's
covenant under this Section 1.1.4 shall survive the Closing.
1.1.5 any consents, authorizations, variances, waivers,
licenses (including On Sale Beer and Wine Eating Place License No. 41-301802
(the "Liquor License")), certificates,
2
<PAGE>
permits and approvals held by or granted to Seller in connection with the
ownership of the Premises, to the extent assignable (collectively, the
"Permits");
1.1.6 the contracts, leases and other agreements of or
relating to the Business described on Exhibit C attached hereto and made a part
hereof, to the extent assignable, 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 Effective Date;
1.1.8 any manufacturers' and vendors' warranties and
guarantees, to the extent assignable, 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 and owned by Seller, 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 accounts receivable arising out of the sale of
goods or services prior to the Effective Date;
3
<PAGE>
1.2.2 any rights of Seller with respect to insurance
policies owned by Seller or for which Seller is the named insured;
1.2.3 all cash, funds in bank accounts and cash equivalents
existing as of the Effective Date hereof; and
1.2.4 any patents, trademarks, trademark registrations,
copyrights, copyright registrations, trade names and all registrations thereof
and all applications for any of the foregoing, whether issued or pending, if
any, and all goodwill associated with any of the foregoing (the "Intangible
Assets").
1.3 Assumption of Certain Liabilities. Purchaser shall assume and
agree to pay and discharge when due all liabilities and obligations of Seller
under the Contracts to the extent the same arise on and after the Effective
Date (the "Assumed Liabilities").
1.4 Liabilities to be Retained by Purchaser. Seller shall retain,
and Purchaser shall not assume, perform, discharge or pay, and shall not be
responsible for, any and all liabilities or obligations of any nature
whatsoever (including without limitation the litigation matters identified on
Exhibit E attached hereto) in connection with or relating to the Property,
Seller or the Business or any predecessor owner of the Property or the Business
other than the Assumed Liabilities (collectively, the "Retained Liabilities").
2. Consideration.
2.1 (a) The purchase price for the Property, excluding the
Personal Property listed on Exhibit B-2 and the Liquor License, is Nine Hundred
Ninety-Five Thousand Dollars ($995,000.00), payable, subject to adjustment as
hereinafter provided, and the escrow provided for
4
<PAGE>
in Section 11, on the Closing Date in cash, or by certified or bank check or by
the wire transfer of funds.
(b) The purchase price for the Personal Property listed on
Exhibit B-2 and the Liquor License is Five Thousand Dollars ($5,000.00),
payable in accordance with the provisions of that certain Bulk Sale
Instructions Liquor License Transfer Agreement dated ________________, 1997,
by and between Seller and Purchaser.
3. Title; Permitted Exceptions.
3.1 Seller will convey the Property to Purchaser, free and clear
of any and all liens, charges, encumbrances, mortgages, pledges, security
interests, easements, agreements and other interests and adverse claims
(collectively, "Encumbrances"), other than the matters set forth in Exhibit D
attached hereto and made a part hereof (the "Permitted Exceptions").
3.2 Purchaser may order an examination of title from a title
company licensed or authorized to issue title insurance in the State of
California ("Title Company"), and shall cause a copy of any title report to be
forwarded to Seller's attorney upon receipt.
3.3 If a search of the title discloses judgments, bankruptcies or
other returns against other persons having names the same as or similar to that
of Seller, Seller will on request deliver to the Title Company or Purchaser an
affidavit showing that such judgments, bankruptcies or other returns are not
against Seller, in form sufficient to permit deletion of such exception from
the title policy.
4. Apportionment.
4.1 The parties hereto agree that (i) all operating expenses of
Seller relating to the Premises (i.e., real estate taxes, utilities, cost of
inventories advertising, collections, fees, hired
5
<PAGE>
services, insurance, miscellaneous expenses, postage, repairs and maintenance,
supplies, taxes and wages, but specifically not including interest on
indebtedness, professional fees and expenses, travel, lodging, or
depreciation), and (ii) all income of Seller, shall be apportioned between
Seller and Purchaser as of the Effective Date based on the portion of each such
expense or revenue attributable to the period falling on or before the
Effective Date on the one hand, which Seller shall bear the responsibility and
benefit of, and the portion of each such expense or revenue attributable to the
period falling after the Effective Date, on the other hand, which Purchaser
shall bear the responsibility and benefit of (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".
Notwithstanding the foregoing provisions of this Section 4.1, any and all
Adjustments to be made pursuant to this Section 4.1 shall be made on or prior
to the date which is one (1) year after the Effective Date.
4.2 To the extent that any of the prorations made pursuant to
this Article are based upon estimates of payments to be made and/or expenses to
be incurred by Purchaser subsequent to the Effective Date, or either party
discovers any errors in or omissions in respect of the Adjustment, Seller and
Purchaser agree to adjust such prorations promptly upon receipt by Seller or
Purchaser, as the case may be, of such payments or of bills or other
documentation setting forth the actual amount of such expenses. Notwithstanding
the foregoing provisions of this Section 4.2, any and all Adjustments to be
made pursuant to this Section 4.2 shall be made on or prior to the date which
is one (1) year after the Effective Date.
6
<PAGE>
4.3 Seller and Purchaser shall maintain and make available to
each other any books or records necessary for the adjustment of any item
pursuant to this Article. The provisions of this Article shall survive the
closing of the transactions described herein (the "Closing").
5. The Closing.
5.1 The Closing of the transaction provided for in this Agreement
shall take place simultaneously with the execution and delivery of this
Agreement (the actual date of the Closing being referred to herein as the
"Closing Date").
5.2 At the Closing, Seller shall deliver or cause to be delivered
to Purchaser physical possession of the Property (receipt of which may be
actual or constructive) and the following:
5.2.1 a grant deed with covenants against grantor's acts,
duly executed and acknowledged by Seller, in proper statutory form for
recording, so as to convey to Purchaser fee simple title to the Premises,
subject to and in accordance with the provisions of this Agreement (the
"Deed");
5.2.2 a bill of sale conveying, transferring and selling to
Purchaser all right, title and interest of Seller in and to all of the Personal
Property, which bill of sale shall contain a warranty that such property is
free and clear of all Encumbrances other than the Permitted Exceptions, duly
executed and acknowledged by Seller;
5.2.3 an assignment and assumption agreement (the
"Assignment and Assumption Agreement") assigning to Purchaser all of Seller's
right, title and interest in and to the Contracts, the Permits and the Claims,
duly executed and acknowledged by Seller;
7
<PAGE>
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 to the extent within Seller's possession, a
Certificate or Certificates of Occupancy for all Improvements;
5.2.7 to the extent within Seller's possession, original
counterparts of each of the Contracts;
5.2.8 one-half (1/2) of any transfer tax, sales and use tax
or other return required by any applicable governmental authority in connection
with the sale of the Property, duly executed and acknowledged by Seller;
5.2.9 an affidavit (the "FIRPTA Affidavit") duly executed
and acknowledged by Seller pursuant to Section 1445 (b)(2) of the Internal
Revenue Code of 1986, as amended, stating that Seller is not a foreign person
within the meaning of such provision;
5.2.10 keys to all locks relating to the Property,
appropriately labeled;
5.2.11 all other instruments and documents to be executed,
acknowledged where appropriate and/or delivered by Seller to Purchaser pursuant
to any of the other provisions of this Agreement; and
5.2.12 such other documents as may be reasonably required by
Purchaser's counsel in connection with this transaction.
5.3 At the Closing, Purchaser shall deliver or cause to be
delivered to Seller the following:
8
<PAGE>
5.3.1 the cash consideration referred to in Section 2
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 all other instruments and documents to be executed,
acknowledged where appropriate and/or delivered by Purchaser to Seller; and
5.3.5 such other documents as may be reasonably required by
Seller's counsel in connection with this transaction.
6. Representations and Warranties.
6.1 Seller and Palm Lakes Golf, Inc., a Colorado corporation,
each hereby jointly and severally represent and warrant to Purchaser as
follows:
6.1.1 Organization; Power and Authority. Seller is a limited
partnership 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 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
9
<PAGE>
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. To the best of Seller's knowledge, no
consent, approval or authorization of, exemption by, or filing with, any
governmental or regulatory authority or any third party is required in
connection with the execution, delivery and performance by Seller of this
Agreement, except for consents, approvals, authorizations, exemptions and
filings, if any, which have been obtained.
6.1.4 Compliance with Applicable Laws. To the best of
Seller's knowledge, Seller is not engaging in any activity or omitting to take
any action as a result of which Seller is in violation of any material law,
rule, regulation, ordinance, statute, order, injunction or decree, or any other
requirement of any court or governmental or administrative body or agency,
applicable to the Property or the Business, and neither the execution and
delivery by Seller of this Agreement or of any of the other agreements and
instruments to be executed and delivered by it pursuant hereto, the performance
by Seller of its obligations hereunder or thereunder or the consummation of the
transactions contemplated hereby or thereby will result in any such violation.
Seller is in compliance with all material requirements imposed in writing by
any insurance carrier of Seller to the extent such carrier is an insurer or
indemnitor of the Property. The Premises are not subject to any notice of
violation of law, municipal ordinance, orders or requirements issued by any
building department or other governmental agency or subdivision having
jurisdiction.
6.1.5 Permits. To the best of Seller's knowledge:
10
<PAGE>
(a) 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;
(b) 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 (i)
to avoid the loss of any Permit or the violation of any law, regulation, order
or other requirement of law, or (ii) to enable Purchaser to continue the
operation of the Property as presently conducted after the Closing; and
(c) The current use and occupation of any portion of the
Property does not violate any of, and, where applicable, is in material
compliance with, the Permits, any applicable deed restrictions or other
covenants, restrictions or agreements including without limitation, any of the
Permitted Exceptions, site plan approvals, zoning or subdivision regulations or
urban redevelopment plans applicable to the Premises.
6.1.6 Title to Assets. Seller has good and marketable title
to the Property free and clear of all Encumbrances other than the Permitted
Exceptions.
6.1.7 Contracts. Except as set forth on Exhibit C, Seller is
not a party to any leases, contracts, orders or agreements relating to the
Property or the Business (written or otherwise) (collectively, "Contracts").
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. To the best of Seller's knowledge, each of the Contracts
is in full force and effect and no party under any such
11
<PAGE>
Contract, including Seller, is in default, or has sent or received notice of
default, in any respect of any such Contract.
6.1.8 Condition of the Improvements. To the best of Seller's
knowledge, except as provided on Exhibit F hereto, (i) there are no material
structural or mechanical defects in the Improvements which in the aggregate
require repairs in an amount greater than $25,000, and (ii) there are no leaks
in any roof on any Improvement.
6.1.9 Intentionally omitted.
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. ss.9601(33); (ii) any "pollutant or contaminant" as
defined in 42 U.S.C. ss.9601(33); (iii) any material now defined as "hazardous
waste" pursuant to 40 C.F.R. Part 261; (iv) any petroleum, including crude oil
and any fraction thereof; (v) natural or synthetic gas usable for fuel; (vi)
any "hazardous chemical" as defined pursuant to 29 C.F.R. Part 1910; (vii) any
asbestos, asbestos containing material, polychlorinated biphenyl ("PCB"), or
isomer of dioxin, or any material or thing containing or composed of such
substance or substances; and (viii) any other pollutant, contaminant, chemical,
or industrial or hazardous, toxic or dangerous waste, substance or material,
defined or regulated as such in (or for purposes of any Environmental Law (as
hereinafter defined) and any other toxic, reactive or flammable chemicals.
6.1.10.2 Seller has received no written notice claiming
that the Premises is in violation of any Environmental Law, which violation has
not been corrected. To
12
<PAGE>
Seller's knowledge, no past or current occupant of all or any portion of the
Premises has owned, used, generated, manufactured, stored, handled, released or
disposed of any Hazardous Material on the Premises in violation of any
applicable Environmental Law.
6.1.10.3 To the best of Seller's knowledge, Seller has
no obligation or liability imposed or based upon any provision under any
foreign, federal, state or local law, rule, or regulation or common law, or
under any code, order, decree, judgment or injunction applicable to Seller or
the Property or any notice, or request for information issued, promulgated,
approved or entered thereunder, or under the common law, or any tort, nuisance
or absolute liability theory, relating to public health or safety, worker
health or safety, or pollution, damage to or protection to the environment,
including without limitation, laws relating to emissions, discharges, releases
or threatened releases of Hazardous Material into the environment (including
without limitation, ambient air, surface water, groundwater, land surface or
subsurface), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, generation, disposal, transport or
handling of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes (hereinafter collectively referred to as
"Environmental Laws").
6.1.10.4 Seller has not been subject to any civil,
criminal or administrative action, suit, claim, hearing, notice of violation,
investigation, inquiry or proceeding for failure to comply with, or received
notice of any violation or potential liability under the Environmental Laws in
respect of the Premises.
6.1.10.5 The Premises are not (a) listed or proposed
for listing on the National Priority List or (b) listed on the Comprehensive
Environmental Response, Compensation, Liability Information System List
("CERCLIS") promulgated pursuant to CERCLA,
13
<PAGE>
42 U.S.C. Section 9601(9), or any comparable list maintained by any foreign,
state or local government authority.
6.1.10.6 To the best of Seller's knowledge, there are
no underground storage tanks at the Premises.
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. To the best of Seller's knowledge, all
water, storm and sanitary sewer, electricity, telephone and other utilities
adequately service the Premises, and Seller has received no notification of
interruption of such services due to lack of or failure of any public or
private easements that may exist.
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
and adversely 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 Deed is the
only instrument necessary to convey to Purchaser full access to and the right
to use such roads freely, subject to the provisions of California Law relating
to roads and highways, as well as to convey all rights appurtenant to the
Premises in such roads, if any.
6.1.14 Intentionally omitted.
6.1.15 Litigation. Except as set forth on Exhibit E, there
is no action or proceeding (zoning or otherwise) or governmental investigation
pending, or, to the best of Seller's
14
<PAGE>
knowledge, threatened against, or relating to, Seller (insofar as it relates to
the Premises or the Business), the Premises, the Business or the transactions
contemplated by this Agreement, nor, to the best of Seller's knowledge, is
there any basis for any such action, proceeding or investigation.
6.1.16 Assessments. To the best of Seller's knowledge, 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, other than any assessment that may be made due to the installation of
a traffic light in connection with the development of the sixty-two (62) acre
residential development located north of the Premises.
6.1.17 Employee Agreements. There are no union or employment
contracts or agreements (written or oral) involving employees of Seller or its
affiliates affecting the Property or the Business which will survive the
Closing. All employees of Seller will have been terminated as of the date
hereof at Seller's cost and expense and Seller indemnifies Purchaser from and
against all loss, cost, damage and expense arising therefrom.
6.1.18 Work at the Premises. No services, material or work
have been supplied to the Premises for which payment has not been made in full.
6.1.19 Financial Condition. Seller has delivered to
Purchaser, or will promptly upon execution hereof deliver, true and correct
copies of audited financial statements consisting of balance sheets and income
statements of Seller as of December 31, 1996. Seller has delivered true and
correct copies of monthly internal reports for the months January through May,
1997. Each such balance sheet presents fairly the financial condition, assets
and liabilities of Seller
15
<PAGE>
as of its date; each such statement of income presents fairly the results of
operations of Seller for the period indicated. The financial statements
referred to in this Section are in accordance with the books and records of
Seller. Since December 31, 1996 and since May 31, 1997: (a) there has at no
time been a material adverse change in the financial condition, results of
operations, businesses, properties, assets, liabilities or future prospects of
Seller, the Property or Business; (b) the Business has been conducted in all
respects only in the ordinary course; and (c) Seller has not suffered an
extraordinary loss (whether or not covered by insurance) or waived any right of
substantial value.
6.1.20 Full Disclosure. To the best knowledge of Seller,
none of the information supplied by Seller herein or in the exhibits hereto
contains any untrue statement of a material fact or omits to state a material
fact required to be stated herein or necessary in order to make the statements
herein, in light of the circumstances under which they are made, not
misleading.
6.2 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller as follows:
6.2.1 Organization; Power and Authority. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite power and authority to
carry on its business as it is now being conducted, to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby.
6.2.2 Due Authorization and Execution; Effect of Agreement.
The execution, delivery and performance by Purchaser of this Agreement and the
consummation by Purchaser of the transactions contemplated hereby have been
duly authorized by all necessary corporate action required to be taken on the
part of Purchaser. This Agreement has been duly and
16
<PAGE>
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. As used in this Agreement, the phrase "to the best
of Seller's knowledge" or words of similar import shall mean the actual (and
not constructive or imputed) knowledge, without independent investigation or
inquiry, of (i) Jackson Rule, (ii) the directors and officers of Palm Lakes
Golf, Inc., and (iii) the general and limited partners of Seller. The express
representations and warranties made in this Agreement shall not merge into any
instrument or conveyance delivered at the Closing; provided, however, that any
action, suit or proceeding with respect to the truth, accuracy or completeness
of such representations and warranties shall be commenced, if at all, on or
before the date which is two (2) years after the date of the Closing, or in the
case of a representation or warranty made pursuant to Section 6.1.10 of this
Agreement, on or before the expiration of relevant statutes of limitation, and
if not commenced on or before such date, thereafter shall be void and of no
force or effect.
17
<PAGE>
7. Further Assurances. At any time and from time to time after the
Closing, each party hereto shall, at the request of the other party hereto,
execute and deliver any further instruments or documents and take all such
further action as such other party may reasonably request in order to transfer
into the name of Purchaser any and all Property contemplated to be sold
pursuant to this Agreement and to further consummate the transactions
contemplated by this Agreement. This Article shall survive for one (1) year
after the Closing.
8. Brokers. Seller and Purchaser warrant and represent to each other
that they dealt with no broker, finder or similar agent or party who or which
might be entitled to a commission or compensation on account of introducing the
parties, the negotiation or execution of this Agreement and/or the closing of
the transaction provided for herein, except that Seller engaged Baxley
Properties ("Broker"). Purchaser and Seller hereby respectively agree to
indemnify and hold harmless the other party from and against all loss,
liability, damage and expense (including, without limitation, attorneys' fees)
imposed upon or incurred by the other party by reason of any claim for
commissions or other compensation for bringing about this transaction by any
broker, finder or similar agent or party other than the Broker who claims to
have dealt with the indemnifying party in connection with this transaction.
Seller shall be liable for paying Broker all compensation due Broker. Purchaser
shall have no liability under any circumstances, whether or not closing occurs,
to pay any fee, charge or commission to Broker. The provisions of this Article
shall survive the Closing or any termination of this Agreement.
9. "As Is". Purchaser represents and warrants to Seller that (i) prior
to the Closing, Purchaser will have had the opportunity to investigate all
physical and economic aspects of the Premises and the Business and to make all
inspections and investigations of the Premises and the
18
<PAGE>
Business which Purchaser deems necessary or desirable to protect its interests
in acquiring the Premises and the Business, including, without limitation,
review of all Contracts, permits, certificates of occupancy, environmental
audits and assessments, toxic reports, surveys, investigation of land use and
development rights, development restrictions and conditions that are or may be
imposed by governmental agencies, agreements with associations affecting or
concerning the Premises, the condition of title, soils and geological reports,
and (ii) except as otherwise expressly set forth in this Agreement, neither
Seller nor anyone acting for or on behalf of Seller, has made any
representation, warranty, promise or statement, express or implied, to
Purchaser, or to anyone acting for or on behalf of Purchaser, concerning the
Premises, the Business or the condition or use thereof. Purchaser further
represents and warrants that, in entering into this Agreement, Purchaser has
not relied on any representation, warranty, promise or statement, express or
implied, of Seller, or anyone acting for or on behalf of Seller, other than as
expressly set forth in this Agreement, and that all matters concerning the
Premises and the Business have been or shall be independently verified by
Purchaser prior to the Closing, and that Purchaser shall purchase the Premises
and Business on Purchaser's own prior investigation and examination of the
Premises and the Business (or Purchaser's election not to do so); AND THAT, AS
A MATERIAL INDUCEMENT TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT BY
SELLER, PURCHASER IS PURCHASING THE PREMISES IN AN "AS IS" PHYSICAL CONDITION
AND IN AN "AS IS" STATE OF REPAIR, WITH ALL FAULTS. Except as set forth in this
Agreement, Purchaser does hereby waive, and Seller does hereby disclaim, all
warranties of any type or kind whatsoever with respect to the Premises, whether
express or implied, including, by way of description but not limitation, those
of fitness for a particular purpose and use. Notwithstanding
19
<PAGE>
anything to the contrary herein, Purchaser and Seller acknowledge that any
written disclosures made by Seller prior to the Closing shall constitute notice
to Purchaser of the matter disclosed, and Seller shall have no further
liability thereafter if Purchaser thereafter consummates the transaction
contemplated hereby.
10. Costs and Fees. Documentary stamps for the Deed, deed transfer or
conveyancing taxes, if any, shall be payable by Seller, and in no event be
payable by Purchaser. Seller shall pay the expenses incurred in connection with
the issuance of an owner's policy of title insurance for Purchaser, but only to
the extent of the cost of the standard CLTA owner's policy. Purchaser shall pay
the expenses incurred in connection with (a) the examination of title, (b) the
excess cost of obtaining an ALTA extended coverage owner's policy of title
insurance for Purchaser above the cost of the standard CLTA owner's policy, and
(c) a survey of the Property (the "Survey"). At Seller's expense, the Survey
shall be certified to Seller, and Seller shall be provided with two (2) copies
of the Survey at Seller's expense. 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, but
specifically excluding consequential damages) ("Losses") that may be
20
<PAGE>
suffered or incurred by any of them arising from or by reason of (i) any
Retained Liability or other liability or obligation of Seller which is not an
Assumed Liability; (ii) the breach of any representation, warranty, covenant or
agreement of Seller contained in this Agreement or in any document or other
writing delivered pursuant to this Agreement; and (iii) any and all actions,
suits, proceedings, claims, demands, assessments, judgments, costs and expenses
(including without limitation, interest, penalties, reasonable legal fees and
accounting fees) incident to the foregoing and the enforcement of the
provisions of this Section 11.1. For purposes of better securing the foregoing
indemnity by Seller, Seller shall deposit into an escrow account the sum of
$75,000 pursuant to the Cash Escrow Agreement of even date herewith.
11.2 Subject to the further provisions of this Article, Purchaser
shall protect, defend, hold harmless and indemnify Seller, its partners,
employees and agents, and its successors and assigns from, against and in
respect of any and all Losses that may be suffered or incurred by any of them
arising from or by reason of (i) any of the Assumed Liabilities on and after
the date hereof, (ii) the breach of any representation, warranty, covenant or
agreement of Purchaser contained in this Agreement or in any document or other
writing delivered pursuant to this Agreement; and (iii) any and all actions,
suits, proceedings, claims, demands, assessments, judgments, costs and expenses
(including without limitation, interest, penalties, reasonable legal fees and
accounting fees) incident to the foregoing and the enforcement of the
provisions of this Section 11.2.
11.3 Whenever a party hereto (such party and each of its
affiliates which is entitled to indemnification pursuant to any provision of
this Agreement, an "Indemnified Party") shall learn after the Closing of a
claim that, if allowed (whether voluntarily or by judicial or quasi-judicial
tribunal or agency), would give rise to an obligation of another party (the
"Indemnifying Party") to
21
<PAGE>
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.
22
<PAGE>
11.4 For purposes of this Article, any assertion of fact and/or
law by a third party that, if true, would constitute a breach of a
representation or warranty made by a party to this Agreement or make
operational an indemnification obligation hereunder, shall, on the date that
such assertion is made, immediately invoke the Indemnifying Party's obligation
to protect, defend, hold harmless and indemnify the Indemnified Party pursuant
to this Article.
12. Bulk Sales. The parties agree to waive the requirements, if any,
of all applicable bulk sales laws. As an inducement to Purchaser to enter into
such waiver, Seller represents and warrants that (a) it will not be rendered
insolvent by the transactions contemplated by this Agreement, and (b) all
debts, obligations and liabilities relating to the Property and Business that
are not expressly assumed by Purchaser under this Agreement will be promptly
paid and discharged by Seller as and when they become due. Seller agrees to
indemnify and hold Purchaser harmless from, and reimburse Purchaser for, any
loss, cost, expense, liability or damage which Purchaser may suffer or incur by
virtue of the noncompliance by Seller or Purchaser with any law pertaining to
fraudulent conveyance, bulk sales or any similar law which might make the sale
or transfer of any part of the Property or Business ineffective as to creditors
of or claimants against Seller.
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 Baker & Botts, L.L.P., 2001 Ross Avenue, Dallas, Texas 75201,
Attention: Sheila W. Holmes. A copy of any Notice given by
23
<PAGE>
Purchaser to Seller shall simultaneously be given in either manner provided
above to Slivka Robinson Water & O'Dorisio, P.C., 1099 18th Street, Suite 2600,
Denver, Colorado 80202, Attention: John O'Dorisio, Jr. Notices given in the
manner aforesaid shall be deemed to have been given three (3) business days
after the day so mailed, the day after delivery to any overnight express
carrier and on the day so delivered by hand. Either party shall have the right
to change its address(es) for the receipt of Notices by giving Notice to the
other party in either manner aforesaid. Any Notice required or permitted to be
given by either party may be given by that party's attorney.
14. Miscellaneous.
14.1 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns.
14.2 This Agreement shall be governed by, interpreted under and
construed and enforced in accordance with, the laws of the State of California.
14.3 The captions or article headings in this Agreement are for
convenience only and do not constitute part of this Agreement.
14.4 This Agreement has been fully negotiated by the parties and
rules of construction construing ambiguities against the party responsible for
drafting agreements shall not apply.
14.5 It is agreed that, except where otherwise expressly provided
in particular Articles or Sections of this Agreement, none of the provisions of
this Agreement shall survive the Closing.
24
<PAGE>
14.6 This Agreement (including the Exhibits annexed hereto)
contains the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior understandings, if any, with respect
thereto.
14.7 This Agreement may not be modified, changed, supplemented or
terminated, nor may any obligations hereunder be waived, except by written
instrument signed by the party to be charged or by its agent duly authorized in
writing or as otherwise expressly permitted herein.
14.8 No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof or of any other agreement or provision herein contained. No extension
of the time for performance of any obligations or acts shall be deemed an
extension of the time for performance of any other obligations or acts.
14.9 This Agreement may be executed in one or more counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which taken together shall constitute but one and the same original.
25
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PALM LAKES PARTNERS, LTD., a
Colorado limited partnership
By: Palm Lakes Golf, Inc., a Colorado
corporation, its general partner
By:
---------------------------------
Jackson Rule
President
PALM FAMILY GOLF CENTERS, INC., a
Delaware corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
26
<PAGE>
JOINDER
The undersigned hereby joins in the execution of this Agreement for
purposes of the representations and warranties made in Article VI.
PALM LAKES GOLF, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
27
<PAGE>
CASH ESCROW AGREEMENT
CASH ESCROW AGREEMENT, dated as of June ___, 1997 (this "Agreement"),
by and among PALM LAKES PARTNERS, LTD., a Colorado limited partnership having
an address at 6786 South Revere Parkway, Suite 150 D, Englewood, Colorado 80112
("Seller"), PALM FAMILY GOLF CENTERS, INC., a Delaware corporation having an
address at 225 Broadhollow Road, Suite 106E, Melville, New York 11747
("Purchaser"), and CONTINENTAL STOCK TRANSFER & TRUST COMPANY, incorporated
under the laws of the United States of America with executive offices at 2
Broadway, New York, New York 10004 (together with its successors, the "Escrow
Agent").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution hereof, Seller and
Purchaser are consummating the transactions contemplated by the Purchase
Agreement, dated as of the date hereof (the "Purchase Agreement"), between
Seller and Purchaser;
WHEREAS, pursuant to the Purchase Agreement, Seller is required to
deposit $75,000.00 into an escrow account to be maintained by Escrow Agent to
be held against any claims for indemnity under Article 11 of the Purchase
Agreement; and
WHEREAS, this is the Escrow Agreement referred to in the Purchase
Agreement. Capitalized terms used in this Escrow Agreement and not otherwise
defined herein shall have the respective meanings given to them in the Purchase
Agreement.
NOW, THEREFORE, it is agreed as follows:
1. Escrow.
1
<PAGE>
1.01 Appointment of Escrow Agent.
(a) Seller and Purchaser hereby appoint Escrow Agent, and Escrow Agent
hereby agrees to serve, as Escrow Agent in accordance with, and pursuant to,
this Agreement.
(b) Escrow Agent shall establish at Chase Manhattan Bank a separate
Federally insured, interest bearing account (the "Escrow Account") for any
amounts received by it hereunder.
(c) All monies, including interest thereon, held by Escrow Agent in
the Escrow Account pursuant to the terms hereof shall be hereinafter referred
to as the "Escrowed Funds".
(d) Seller shall be responsible for the payment of any income taxes
payable in connection with any interest earned in the Escrow Account except
with respect to any interest on Escrowed Funds paid to or for the benefit of
Purchaser.
1.02 Operation of Escrow Account. The parties hereto agree that the
Escrow Account shall operate as follows:
(a) At the Closing, Seller shall deliver or cause to be delivered to
Escrow Agent $75,000.00 Escrow Agent shall hold such amount as Escrowed Funds
in the Escrow Account.
(b) At any time prior to the one (1) year anniversary of the Closing
Date (the "Escrow Period"), Purchaser shall be entitled to give a notice to
Escrow Agent, signed by Purchaser's President or any Vice President (with a
copy to Seller), to the effect that there has been an event entitling Purchaser
to indemnification from Seller pursuant to Article 11 of the Purchase
Agreement, which notice shall specify the amounts owed by Seller pursuant to
the Purchase Agreement, the calculation of such amounts and the basis
therefore.
(c) Twenty (20) days after Escrow Agent has received a notice pursuant
to Section 1.02(b) hereof (or, if not a business day, on the next business day
following such twentieth
2
<PAGE>
day) Escrow Agent shall deliver to Purchaser such portion of the Escrowed Funds
as is specified in such notice unless Seller shall have notified Escrow Agent
(with a copy to Purchaser) in writing before such date that Seller disagrees
with Purchaser's determination that Purchaser is entitled to indemnification
with respect to the Purchase Agreement, which notice shall be set forth in
reasonable detail the basis for such disagreement.
(d) Should any dispute arise with respect to the delivery, ownership,
or right of possession of any of the Escrowed Funds during the Escrow Period,
Escrow Agent, as more fully set forth in Section 3.11 hereof, is authorized and
directed to retain in its possession without liability to anyone all or any
part of the Escrowed Funds until such dispute shall have been settled either by
mutual agreement by the parties concerned or by a final order, decree, or
judgment of a court of competent jurisdiction in the United States of America
and time for appeal has expired and no appeal has been perfected, but Escrow
Agent shall be under no duty whatsoever to institute or defend any such
proceedings, and may, in its discretion, deposit such Escrowed Funds with a
court of competent jurisdiction in the United States of America and be relieved
of any and all liability to any of the parties hereto upon such deposit.
1.03 Distribution of Escrowed Funds. Unless a notice under Section
1.02(b) hereof has been given and Escrowed Funds in satisfaction of such notice
have not been delivered to Purchaser, either because the 20-day period has not
yet run out or because a dispute relating to the claim made by such notice is
then pending, the Escrowed Funds or such portion of them as at the time remains
in escrow and is not in dispute, together with all dividends and distributions
received by Escrow Agent with respect thereto, shall be returned to Seller on
the first anniversary of the Closing Date.
3
<PAGE>
1.04 Termination of Escrow Account. This Agreement and the Escrow
Account will terminate at 5:00 P.M., New York City local time, on the date on
which all of the Escrowed Funds contained in the Escrow Account shall be
distributed as set forth above.
2. Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be (a) delivered by hand, (b)
facsimile, or (c) over-night delivery with proper postage prepaid, and
addressed as follows:
If to Purchaser to:
Palm Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Attention: Dominic Chang, President
Telephone: (516) 694-1666
Facsimile: (516) 694-0918
with a copy to:
Palm Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Attention: Pamela Charles, General Counsel
Telephone: (516) 694-1666
Facsimile: (516) 694-0918
If to Seller to:
Palm Lakes Partners, Ltd.
6786 South Revere Parkway, Suite 150 D
Englewood, Colorado 80112
4
<PAGE>
with a copy to:
Slivka Robinson Water & O'Dorisio
1099 18th Street
Suite 2600
Denver, Colorado 80202
Facsimile: (303) 297-2750
Telephone: (303) 297-2600
Attention: John O'Dorisio, Jr.
If to Escrow Agent, to:
2 Broadway
New York, New York 10004
Telephone: (212) 509-4000
Facsimile: (212) 509-5150
Attention:
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. Except as
otherwise provided herein, no notice or communication shall be effective until
received.
3. Concerning Escrow Agent. To induce Escrow Agent to act hereunder,
it is further agreed by each of Seller and Purchaser that:
3.01 Escrow Agent shall not be under any duty to give the Escrowed
Funds held by it hereunder any greater degree of care than it gives its own
similar property and shall not be required to invest any funds held hereunder
except as directed in this Agreement.
3.02 This Agreement expressly sets forth all the duties of Escrow
Agent with respect to any and all matters pertinent hereto. No implied duties
or obligations shall be read into this Agreement against Escrow Agent. Escrow
Agent shall not be bound by the provisions of any agreement among the other
parties hereto except this Agreement.
5
<PAGE>
3.03 Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct, and, except with respect to claims based upon
such gross negligence or willful misconduct that are successfully asserted
against Escrow Agent, the other parties hereto shall jointly and severally
indemnify and hold harmless Escrow Agent (and any successor Escrow Agent) from
and against any and all losses, liabilities, claims, actions, damages, and
expenses, including reasonable attorneys' fees and disbursements, arising out
of, and in connection with, this Agreement. Without limiting the foregoing,
Escrow Agent shall in no event be liable in connection with its investment or
reinvestment of any cash held by it hereunder in good faith, in accordance with
the terms hereof, including, without limitation, any liability for any delays
(not resulting from gross negligence or willful misconduct) in the investment
or reinvestment of the Escrowed Funds; or any loss of interest incident to any
such delays. This Section 3.03 shall survive notwithstanding any termination of
this Agreement or the resignation of Escrow Agent.
3.04 Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument, or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. Escrow Agent may act in reliance upon any instrument or
signature believed by it in good faith to be genuine and may assume, if in good
faith, that any person purporting to give notice or receipt or advice or make
any statement or execute any document in connection with the provisions hereof
has been duly authorized to do so.
3.05 Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Escrow Agreement and shall not be liable
for any action taken or omitted in good faith and in accordance with such
advice.
6
<PAGE>
3.06 Escrow Agent does not have any interest in the Escrowed Funds
deposited hereunder, but is serving as escrow holder only. Any payments of
income from the Escrow Account shall be subject to withholding regulations then
in force with respect to United States taxes. This Section 3.06 shall survive
notwithstanding any termination of this Agreement or the resignation of Escrow
Agent.
3.07 Escrow Agent makes no representation as to the validity, value,
genuineness, or the collectibility of any security or other documents or
instrument held by, or delivered to, it.
3.08 Escrow Agent shall not be called upon to advise any party as to
the wisdom in selling or retaining or taking or refraining from any action with
respect to any securities or other property deposited hereunder.
3.09 Escrow Agent (and any successor escrow agent) at any time may be
discharged from its duties and obligations hereunder by the delivery to it of
notice of termination signed by Purchaser and Seller or at any time may resign
by giving written notice to such effect to Purchaser and Seller. Upon any such
termination or resignation, Escrow Agent shall deliver the Escrowed Funds to
any successor escrow agent jointly designated by the other parties hereto in
writing, or to any court of competent jurisdiction if no such successor escrow
agent is agreed upon, whereupon Escrow Agent shall be discharged of and from
any and all further obligations arising in connection with this Escrow
Agreement. The termination or resignation of Escrow Agent shall take effect on
the earlier of (a) the appointment of a successor (including a court of
competent jurisdiction) or (b) the day that is thirty (30) days after the date
of delivery: (i) to Escrow Agent of the other parties' notice of termination or
(ii) to the other parties hereto of Escrow Agent's written notice of
resignation. If at that time Escrow Agent has not received a designation of a
successor
7
<PAGE>
escrow agent, Escrow Agent's sole responsibility after that time shall be to
keep the Escrowed Funds safe until receipt of a designation of successor escrow
agent or a joint written disposition instruction by the other parties hereto or
an enforceable order of a court of competent jurisdiction.
3.10 Escrow Agent shall have no responsibility for the contents of any
writing of any third party contemplated herein as a means to resolve disputes
and may rely without any liability upon the contents thereof.
3.11 In the event of any disagreement among or between the other
parties hereto resulting in adverse claims or demands being made in connection
with the Escrowed Funds, or in the event that Escrow Agent in good faith is in
doubt as to what action it should take hereunder, Escrow Agent shall be
entitled to retain the Escrowed Funds until Escrow Agent shall have received
(a) a final and non-appealable order of a court of competent jurisdiction in
the United States of America directing delivery of the Escrowed Funds or (b) a
written agreement executed by the other parties hereto directing delivery of
the Escrowed Funds, in which event Escrow Agent shall disburse the Escrowed
Funds in accordance with such order or agreement. Any court order referred to
in (a) above shall be accompanied by a legal opinion by counsel for the
presenting party satisfactory to Escrow Agent to the effect that said court
order is final and non-appealable. Escrow Agent shall act on such court order
and legal opinions without further question.
3.12 As consideration for its agreement to act as Escrow Agent as
herein described, Purchaser and Seller shall share equally and pay the Escrow
Agent's fees determined in accordance with the terms set forth on Exhibit A
hereto (and made a part of this Escrow Agreement as if herein set forth). In
addition, Purchaser and Seller agree to reimburse Escrow Agent (on a 50/50
basis) for all reasonable expenses, disbursements, and advances incurred or
made by Escrow Agent in
8
<PAGE>
performance of its duties hereunder (including reasonable fees, expenses, and
disbursements of its counsel).
4. Miscellaneous.
4.01 Binding Effect. This Escrow Agreement shall be binding upon, and
inure solely to the benefit of, the parties hereto and their respective
successors and assigns, heirs, administrators, and representatives, and shall
not be enforceable by, or inure to the benefit of, any other third party,
except as provided in Section 3.09 hereof with respect to the termination of,
or resignation by, Escrow Agent. No party may assign any of its rights or
obligations under this Agreement without the written consent of the other
parties.
4.02 Choice of Law. This Agreement shall be construed in accordance
with, and governed by, the internal law of the State of New York (without
reference to its rules as to conflicts of law).
4.03 Modification. This Agreement may only be modified by a writing
signed by all of the parties hereto.
4.04 Headings. The section headings herein are for convenience only
and shall not affect the construction thereof. Unless otherwise indicated,
references to Sections and Articles are to Sections and Articles, respectively,
contained herein.
4.05 Counterparts. This Agreement may be executed in one or more
counterparts but all such separate counterparts shall constitute but one and
the same instrument; provided that, although executed in counterparts, the
executed signature pages of each such counterpart may be affixed to a single
copy of this Agreement which shall constitute an original.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
PALM FAMILY GOLF CENTERS, INC., a
Delaware corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
PALM LAKES PARTNERS, LTD., a Colorado
limited partnership
By: Palm Lakes Golf, Inc., a Colorado
corporation, its general partner
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
10
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
ASSIGNMENT AND ASSUMPTION AGREEMENT, made as of the 30th day of June,
1997 (this "Agreement"), between CARVER GOLF ENTERPRISES, INC., a Massachusetts
corporation, doing business as Supersports Family Fun Park, having an address
at 45 Reservoir Park Drive, Rockland, Massachusetts 02370 ("Assignor"), CARVER
FAMILY GOLF CENTERS, INC., a Delaware corporation having an address at 225
Broadhollow Road, Suite 106E, Melville, New York 11747 ("Assignee") and Family
Golf Centers, Inc., a Delaware corporation, having an address at 225
Broadhollow Road, Suite 106E, Melville, New York 11747 ("FGC").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, by a Lease, dated December 31, 1992, as amended by two
addenda, dated August 1993 and August 1996, respectively, and as further
amended and restated by a Commercial Lease (Restated), dated June 30, 1997, by
and between SALVATORE B. SIMEONE, MARIA J. LUONGO, and BENJAMIN A. SIMEONE,
JR., tenants in common known as SIMEONE ASSOCIATES and SIMEONE ASSOCIATES
LIMITED PARTNERSHIP (collectively "Landlord"), as Landlord, and Assignor, as
tenant, Landlord leased to Assignor, and granted to Assignor a purchase option
in respect of, that certain property located in the Town of Carver, Plymouth
County, Massachusetts, described on Exhibit "A" attached hereto and made a part
hereof (such property together with all structures and improvements situated
thereon being referred to herein collectively as the "Premises") (such Lease
and such purchase option being referred to herein collectively as the "Lease");
and
WHEREAS, Assignor desires to assign to Assignee its entire interest as
tenant under the Lease and Assignee desires to accept such assignment and
assume Assignor's obligations under the Lease on the terms and conditions
hereinafter set forth; and
WHEREAS, Assignor desires to sell to Assignee and Assignee desires to
purchase from Assignor substantially all of the business conducted on the
Premises, except the portion of the business of Seller related to the Hayride
Assets (as defined in Section 3.3) (the "Business"); and
WHEREAS, Assignor desires to assign to Assignee and Assignee desires
to assume certain liabilities of Assignor related to the Business as described
herein.
NOW, THEREFORE, in consideration of 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
<PAGE>
1. Assignment and Assumption. Assignor hereby assigns, sets over and
transfers to Assignee all right, title and interest of Assignor in and to the
Premises and the Lease, and Assignee assumes and agrees to perform any and all
of the obligations to be performed by Assignor as the tenant under the Lease
(as if Assignee executed the Lease originally as tenant thereunder) accruing
from and after June 30, 1997, which Lease is attached hereto as Exhibit "B".
Assignee further agrees to be bound by and fully responsible for all of the
covenants, agreements, terms, provisions, and conditions of Assignor as tenant
under the Lease to be performed by Assignor from and after the Closing Date (as
defined in Section 6.1). Assignee agrees that the obligations assumed hereunder
and agreements contained herein shall benefit Landlord and its successors and
assigns as well as Assignor. Upon the full execution and delivery of this
Agreement, Assignor shall deliver possession of the Premises to Assignee, free
of all tenancies or rights of possession other than those listed on the title
policy to be issued to FGC or Assignee by First American Title Insurance
Company in connection with the transactions contemplated in this Agreement at
the Closing (as defined below).
2. Bill of Sale. Assignor does hereby sell, assign, transfer and
convey to Assignee, and Assignee does hereby purchase and acquire from
Assignor, all of Assignor's right, title and interest in and to the following
property (collectively, the "Property"):
2.1 all furnishings, fixtures, machinery, equipment, vehicles and
personalty attached or appurtenant to or used in connection with the Lease that
are owned by Assignor, 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
"C" attached hereto and made a part hereof, but excluding the Hayride Assets
(the "Personal Property");
2.2 the files, books, notices and other correspondence from any
governmental agencies, and other records used or employed by Assignor or its
affiliates in connection with the ownership and/or operation of the Business
(collectively, the "Records");
2.3 any consents, authorizations, variances, waivers, licenses,
certificates, permits and approvals held by or granted to Assignor in
connection with the ownership of the Lease or the Property or the operation of
the Business (collectively, the "Permits");
2.4 the contracts, leases and other agreements of or relating to
the operation of the Business described on Exhibit "D" attached hereto and made
a part hereof (the "Contracts");
2.5 any manufacturers' and vendors' warranties and guarantees,
except to the extent the same relate solely to any Retained Assets or Retained
Liabilities (as hereinafter defined) (the "Claims"); and
2.6 any other properties and assets of every kind and nature,
real or personal, tangible or intangible (including, without limitation, the
exclusive right to the use of Assignor's trade name "Supersports Family Fun
Park"), relating in any way whatsoever to the Lease, the Premises or the
Business, except to the extent the same relate solely to the Retained Assets or
Retained Liabilities.
2
<PAGE>
3. Assets to be Retained by Assignor. Anything herein to the contrary
notwithstanding, Assignor shall not sell, and Assignee shall not acquire, the
following assets of Assignor (the "Retained Assets"):
3.1 any rights of Assignor with respect to insurance policies
owned by Assignor or for which Assignor is the named insured; and
3.2 all cash, funds in bank accounts, and cash equivalents
existing as of the Closing Date.
3.3 all assets of Seller related to the operation of the Haunted
Hayride, as listed on Schedule 3.3 hereto ("Hayride Assets").
4. Assumption of Certain Liabilities. Assignee shall assume and agree
to pay and discharge when due all liabilities and obligations of Assignor under
the Lease, the Contracts and the Business to the extent the same arise from and
after the Closing Date (the "Assumed Liabilities"). Except for the Assumed
Liabilities, Assignor shall retain, and Assignee shall not assume, perform,
discharge or pay, and shall not be responsible for, any and all liabilities or
obligations of any nature whatsoever in connection with or relating to the
Lease, the Premises or the Property, Assignor or the Business or any
predecessor owner of the Lease, the Premises, the Property, or the Business to
the extent the same arise before the Closing Date (collectively, the "Retained
Liabilities").
5. Consideration.
5.1 In consideration for the assignment of the Lease and the sale
of the Property:
5.1.1 FGC shall issue and deliver to Assignor 114,000 shares
of the common stock, par value $.01 per share, of FGC (the "FGC Shares"), of
which 5,000 shares ("Escrow Shares") shall be held in escrow and distributed in
accordance with the Escrow Agreement, dated of even date herewith (the "Escrow
Agreement"), among Assignor, Assignee, FGC and Continental Stock Transfer and
Trust Company (the "Escrow Agent"); and
5.1.2 Assignee shall assume the Assumed Liabilities.
6. Closing; Adjustments; Post-Closing Delivery of Audited Financial
Statements.
6.1 The closing of the transactions provided for in this
Agreement (the "Closing") shall take place simultaneously with the execution
and delivery of this Agreement (the actual date of the Closing being referred
to herein as the "Closing Date").
6.2 The parties hereto agree that (i) all compensation payable to
Landlord under the Lease and all other operating expenses of Assignor relating
to the Lease, the Premises and the Business set forth in Schedule 6.2 (i.e.,
cost of goods sold, advertising, collections, fees, hired services, insurance,
miscellaneous expenses, postage, repairs and maintenance, supplies, taxes,
utilities, wages and interest on indebtedness, but specifically not including
professional fees and
3
<PAGE>
expenses, travel and lodging or depreciation), and (ii) all income of Assignor,
including accounts receivable, shall be apportioned at Closing between Assignor
and Assignee as of the Closing Date based on the portion of each such expense
or revenue attributable to the period falling before the Closing Date on the
one hand, which Assignor shall bear the responsibility and benefit of, and the
portion of each such expense or revenue attributable to the period falling on
or after the Closing Date, on the other hand, which Assignee shall bear the
responsibility and benefit of (the "Adjustment"). The net Adjustment will be
paid at Closing by the party owing the same to the other in cash or by
certified or official bank check or wire transfer. The expenses and liabilities
for which Assignor shall be liable pursuant to this Section 6.2 shall be
included within the meaning of the term "Retained Liabilities".
6.3 To the extent that any of the prorations made pursuant to
this Article 6 are based upon estimates of payments to be made and/or expenses
to be incurred by Assignee subsequent to the Closing Date, or either party
discovers any errors in or omissions in respect of the Adjustment, Assignor and
Assignee agree to adjust such prorations promptly upon receipt by Assignor or
Assignee, as the case may be, of such payments or of bills or other
documentation setting forth the actual amount of such expenses.
6.4 Assignor and Assignee shall maintain and make available to
each other any books or records necessary for the adjustment of any item
pursuant to this Article 6. The provisions of this Article 6 shall survive the
Closing.
6.5 At the Closing:
6.5.1 Assignor shall execute and deliver to Assignee such
assignments, bills of sale and other instruments of conveyance as are necessary
or desirable to accomplish the sale, conveyance, assignment, transfer and
delivery of the Lease and the Property by Assignor to Assignee in accordance
with this Agreement;
6.5.2 FGC and Assignor shall execute and deliver the
Registration Rights Agreement, dated of even date herewith, by which FGC grants
Assignor certain rights to have certain of the FGC Shares registered under the
Securities Act of 1933, as amended (the "Registration Rights Agreement");
6.5.3 The parties and the Escrow Agent shall execute and
deliver the Escrow Agreement; and
6.5.4 One or more of the parties shall deliver certain other
documents related to the transactions contemplated hereby.
6.6 As payment in full of consideration payable by Assignee to
Assignor pursuant to this Agreement, FGC shall deliver to Assignor three stock
certificates two of which shall be registered in Assignor's name for 104,200
FGC Shares and 5,000 FGC Shares and one of which shall be registered in the
name of Paul Ochs ("Ochs") for 4,800 FGC Shares (as further described below).
Immediately after such delivery, Assignor shall deliver to the Escrow Agent, to
be held and
4
<PAGE>
distributed in accordance with the Escrow Agreement, the certificate for 5,000
FGC Shares together with a stock power duly endorsed in blank by Assignor.
6.7 Assignor has advised Assignee that Assignor owes Ochs, having
an address at 175 Milton Street, Milton, Massachusetts 02186, compensation for
services rendered by Ochs to Assignor in connection with the transactions
contemplated by this Agreement, and that Ochs has elected to invest the
compensation owing to him in shares of FGC common stock. Accordingly,
immediately after the Closing, subject to Ochs executing and delivering the
letter agreement substantially in the form of Exhibit F hereto, Assignor shall
surrender to FGC the stock certificate for 4,800 FGC Shares referred to in
Section 6.6.
6.8 Assignor covenants and agrees that, not later than 20
business days after the date of this Agreement, Assignor shall deliver to FGC
(i) a true and complete copy of the audited financial statement of Assignor as
of December 31, 1996 (the "Audited 1996 Financial Statement"), together with
the unqualified audit report thereon of Patrick Barrett, CPA, independent
certified public accountant, (ii) the unaudited balance sheet of Assignor as of
March 31, 1997 and the related statement of income of Assignor for the quarter
then ended (the "Interim Financial Statements") and (iii) internal monthly
income reports for the period April 1, 1997 through June 30, 1997 (the "Monthly
Reports").
7. Representations and Warranties of Assignor. Assignor hereby
represents and warrants to Assignee as follows:
7.1 Organization: Power and Authority. Assignor is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts, and has all requisite power and authority to
carry on its business as it is now being conducted, to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby. Assignor has no subsidiaries.
7.2 Due Authorization and Execution: Effect of Agreement. The
execution, delivery and performance by Assignor of this Agreement, the Escrow
Agreement, the Registration Rights Agreement and the other instruments,
agreements, certificates and documents executed and delivered by Assignor in
connection with the transactions contemplated hereby (collectively, the
"Transaction Documents"), and the consummation by Assignor of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action required to be taken on the part of the Assignor. Each of this
Agreement and the other Transaction Documents has been duly and validly
executed and delivered by Assignor and constitutes the valid and binding
obligation of Assignor, enforceable in accordance with its terms. The
execution, delivery and performance by Assignor of this Agreement and the other
Transaction Documents and the consummation by Assignor of the transactions
contemplated hereby and thereby will not, with or without the giving of notice
or the lapse of time, or both, (a) violate any provision of any law, rule or
regulation to which Assignor is subject; (b) violate any order, judgment or
decree applicable to Assignor; or (c) conflict with or result in a breach of or
a default under any term or condition of Assignor's organizational documents or
any term or condition of any agreement or other instrument to which Assignor is
a party or by which it or its assets may be bound, except in each case, for
violations,
5
<PAGE>
conflicts, breaches or defaults which in the aggregate would not materially
adversely affect the condition of the Premises or the operation of the
Business.
7.3 Consents. No consent, approval or authorization of, exemption
by, or filing with, any governmental or regulatory authority or any third party
is required in connection with the execution, delivery and performance by
Assignor of this Agreement or any of the other Transaction Documents, except
for consents, approvals, authorizations, exemptions and filings, if any, which
have been obtained.
7.4 Compliance with Applicable Laws. Assignor is not engaging in
any activity or omitting to take any action as a result of which Assignor is in
violation of any law, rule, regulation, ordinance, statute, order, injunction
or decree, or any other requirement of any court or governmental or
administrative body or agency, applicable to the Lease, the Premises or the
Business, and none of the execution and delivery by Assignor of this Agreement
or of any of the other Transaction Documents, the performance by Assignor of
its obligations hereunder or thereunder or the consummation of the transactions
contemplated hereby or thereby will result in any such violation. Assignor is
in compliance with all material requirements imposed in writing by any
insurance carrier of Assignor to the extent such carrier is an insurer or
indemnitor of the Lease or the Premises. The Premises are not subject to any
notice of violation of law, municipal ordinance, orders or requirements issued
by any building department or other governmental agency or subdivision having
jurisdiction.
7.5 Permits. All Permits required by any federal, state, or local
law, rule or regulation and necessary for the occupancy and use of the Premises
and the operation of the Business as currently being occupied, used and
conducted have been obtained and are currently in effect. No registrations,
filings, applications, notices, transfers, consents, approvals, orders,
qualifications, waivers or other actions of any kind are required by virtue of
the execution and delivery of this Agreement or any of the other Transaction
Documents or the consummation of the transactions contemplated hereby or
thereby, including, without limitation, any necessary or desirable (a) to avoid
the loss of any Permit or the violation of any law, regulation, order or other
requirement of law, (b) to assign the Lease or transfer the Property to
Assignee as contemplated hereby or (c) to enable Assignee to continue the
operation of the Business as presently conducted after the Closing. The current
use and occupation of any portion of the Premises does not violate any of, and,
where applicable, is in material compliance with, the Permits, any applicable
deed restrictions or other covenants, restrictions or agreements including
without limitation, any of the Permitted Exceptions (hereinafter defined), site
plan approvals, zoning or subdivision regulations or urban redevelopment plans
applicable to the Lease.
7.6 The Lease. Attached hereto as Exhibit "B" is a true and
correct copy of the Lease. The Lease is in full force and effect, has not been
modified or amended in any way except as stated above and neither Landlord nor
Assignor is in default, or sent or received any notice of default, in respect
of the Lease. No event has occurred or circumstance exists which, with the
giving of notice or the passage of time, or both, would constitute a default
under the Lease. Neither Assignor nor Landlord has exercised any right or
option, or stated its intent, to terminate or cancel the Lease. Assignor has
not assigned, transferred or conveyed the Lease or any interest therein, or
6
<PAGE>
granted any right or option with respect thereto, to any party other than
Assignee. The initial expiration date of the Lease is December 31, 2002.
7.7 Personal Property. Exhibit "C" sets forth a complete list of
all Personal Property necessary for the use and operation of the Business as
currently conducted, including any material trademarks, service marks, trade
names, service names, business names and other intellectual property owned by
Seller and used in for the conduct of the Business.
7.8 Title to the Lease and Property. Assignor owns and, upon the
Closing is transferring to Assignee, all right, title and interest in, to and
under the Lease and the Property, free and clear of any and all liens, charges,
encumbrances, mortgages, pledges, security interests, easements, agreements and
other interests and adverse claims (collectively, "Encumbrances"), other than
the matters set forth in Exhibit "E" attached hereto and made a part hereof
(the "Permitted Exceptions").
7.9 Contracts. Except for the Hayride Assets, the Lease and the
Contracts listed on Exhibit "D" attached hereto, Assignor is not a party to any
leases, contracts, orders or agreements relating to the Premises, the Property
or the Business (written or otherwise).
7.10 Condition of the Improvements. There are no material
structural or mechanical defects in the structures or improvements situated on
the Premises, and there are no leaks in any roof of any structure on the
Premises.
7.11 Condition of Personal Property. The Personal Property is in
good operating condition and repair, ordinary wear and tear excepted, and is
adequate, suitable and sufficient to meet the needs of and to operate the
Business and the Property as currently conducted.
7.12 Environmental, Health and Safety Laws. Assignor is not now,
nor has it been in the past, in violation of any Environmental, Health and
Safety Laws (as such term is hereinafter defined). Assignor is not subject to
any order requiring cleanup or any other remediation of any contamination,
pollution or other condition. No proceeding is pending or (to the knowledge of
Assignor) threatened charging Assignor with any violation of any Environmental,
Health and Safety Laws or seeking cleanup or remediation of any contamination,
pollution or other condition and there is no basis on which any such claim
could be brought. No claim has been asserted or threatened by any person
against Assignor for personal injury or property damage resulting from exposure
to Hazardous Substances (as such term is hereinafter defined) released,
discharged or disposed of by Assignor and there is no basis on which any such
claim could be brought. Except in compliance with Environmental, Health and
Safety Laws, there is no solid, liquid or gaseous material present at the
surface or subsurface levels of the Premises or present in the air or water
surrounding the Premises which is in excess of any concentration levels or
standards prescribed or permitted under any Environmental, Health and Safety
Laws, nor does any condition or state of affairs exist on or about the Premises
that currently requires, or that under the provisions of any presently enacted
Environmental, Health and Safety Laws will, to the knowledge of Assignor, in
the future require, any investigation, remediation or closure. The term
"Environmental, Health and Safety Laws" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the
7
<PAGE>
Resource, Conservation and Recovery Act of 1976, and the Occupational Safety
and Health Act of 1970, each as amended to and in effect on the Closing Date,
together with all other laws in effect on the Closing Date (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state and local governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety. The term "Hazardous
Substance" means (a) petroleum or petroleum products, (b) hazardous substances,
hazardous wastes, hazardous materials or toxic substances as defined under
Environmental, Health and Safety Laws, and (c) any other chemical, material or
substances the presence or release of which in or into the environment is
regulated by any governmental agency or authority.
7.13 Tax Proceedings. There are no proceedings pending regarding
the reduction of real estate taxes or assessments in respect of the Premises.
There has been duly filed by or on behalf of Assignor, or a filing extension
from the appropriate federal, state, foreign and local governments or
governmental agencies has been obtained with respect to, all federal, state,
local and foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise and other tax ("Taxes") returns
and reports required to be filed on or prior to the date hereof, and all of
such Tax returns and reports are correct and complete in all material respects.
Payment in full or adequate provision for the payment of all Taxes required to
be paid in respect of the periods covered by such Tax returns and reports has
been made and a reserve which Assignor reasonably believes to be adequate has
been set up for the payment of all such Taxes anticipated to be payable in
respect of periods through the date hereof. The federal income tax returns
required to be filed by or on behalf of Assignor under the Internal Revenue
Code of 1986, as amended (the "Code"), have either been examined by the
Internal Revenue Services ("IRS") or the period during which any assessments
may be made by the IRS has expired for all years up to and including the
taxable year ended December 31, 1992 and any deficiencies or assessments
asserted in writing by the IRS have either been paid or are being contested in
good faith by appropriate proceedings and are adequately reserved against. All
other Taxes due and payable by or on behalf of Assignor have either been paid
or adequately reserved for or are being contested in good faith by appropriate
proceedings (except for such Taxes which are in the aggregate immaterial in
amount). Assignor has not, with regard to any property held, acquired or to be
acquired by it, filed a consent pursuant to Section 341(f) of the Code or any
predecessor statute.
7.14 Utilities. All water, storm and sanitary sewer, gas,
electricity, telephone and other utilities adequately service the Premises,
enter the Premises through lands as to which valid public or private easements
exist that will inure to the benefit of Assignee and the Premises is furnished
by facilities of public utilities and the cost of installation of such
utilities has been fully paid.
7.15 Access. Except as set forth in Schedule 7.15 attached
hereto, to Assignor's knowledge, there are no federal, state, county, municipal
or other governmental plans to change the highway or road system in the
vicinity of the Premises which could materially restrict or change access from
any such highway or road to the Premises, or any pending or threatened
condemnation or eminent domain proceedings relating to or affecting the
Premises.
8
<PAGE>
7.16 Insurance Requirements. All requirements or recommendations,
if any, by any insurer or by any board of fire underwriters or similar body in
respect of the Premises, the Property or the Business have been satisfied in
all material respects. The properties and operations of Assignor are, and at
all times during the past four years have been, insured under various policies
of general liability and other forms of insurance covering such risks as are
usually insured against by prudent companies engaged in the businesses and
activities in which Assignor is engaged, in amounts which are adequate in
relation to the business and properties of Assignor, and all premiums to date
have been paid in full. Assignor has furnished Assignee with true and correct
copies of such policies. Assignor has not been refused any insurance, nor has
its coverage been limited, by an insurance carrier to which it has applied for
insurance or with which it has carried insurance during the past five years.
7.17 Litigation. There is no action or proceeding (zoning or
otherwise) or governmental investigation pending, or, to the best of Assignor's
knowledge, threatened against, or relating to, Assignor (insofar as it relates
to the Lease, the Premises or the Business), the Lease, the Premises, the
Business or the transactions contemplated by this Agreement, nor is there any
basis for any such action, proceeding or investigation.
7.18 Assessments. There are no special or other assessments for
public improvements or otherwise now affecting the Premises nor does Assignor
know of (a) any pending or threatened special assessments affecting the
Premises, or (b) any contemplated improvements affecting the Premises that
governmental authorities have determined will result in special assessments
affecting the Premises.
7.19 Employee Agreements. There are no union or employment
contracts or agreements (written or oral) involving employees of Assignor or
its affiliates affecting the Premises or the Business which will survive the
Closing. All employees of Assignor who are employed to work at the Premises
will have been terminated as of the Closing Date.
7.20 Work at the Premises. No services, material or work have
been supplied to the Premises for which payment has not been made in full in
the ordinary course of business of Assignor.
7.21 Financial Condition. Not later than 20 business days after
the date of this Agreement, Assignor shall deliver to FGC true and complete
copies of (i) the Audited 1996 Financial Statement, together with the
unqualified audit report thereon of Patrick Barrett, CPA, independent certified
public accountant, (ii) the Interim Financial Statements and (iii) the Monthly
Reports. When delivered to FGC in accordance with Section 6.8, the Audited 1996
Financial Statement will present fairly the financial position of Assignor as
of the date indicated. When delivered to FGC in accordance with Section 6.8,
the Interim Financial Statements will present fairly the financial position of
Assignor as of the respective dates indicated and the results of operations of
Assignor for the respective periods specified. The Interim Financial Statements
and the Audited 1996 Financial Statement will be prepared in accordance with
the books and records of Assignor and in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved, subject, in the case of the Interim Financial Statements, to normal,
recurring
9
<PAGE>
year-end audit adjustments. When delivered to FGC in accordance with Section
6.8, the Monthly Reports will present fairly the information provided as of the
respective dates indicated and will have been compiled on a basis consistent
with that of the financial statements referred to above and will be in
accordance with the books and records of Assignor. Since December 31, 1996: (a)
there has at no time been a material adverse change in the financial condition,
results of operations, businesses, properties, assets, liabilities or future
prospects of Assignor, the Premises, the Property or Business; (b) the Business
has been conducted in all respects only in the ordinary course; and (c)
Assignor has not suffered an extraordinary loss (whether or not covered by
insurance) or waived any right of substantial value. Except for any liabilities
arising in the ordinary course of its business consistent with past practices
(none of which is a liability for breach of contract, breach of warranty,
torts, infringements, claims or lawsuits), since December 31, 1996, the
Assignor has not (i) incurred or accrued any liabilities, debts or obligations,
whether absolute, contingent, unliquidated or otherwise and whether due or to
become due, arising out of any transaction entered into prior to or on the date
hereof or out of any state of facts existing prior to or as of the date hereof;
or (ii) declared or paid any dividend or distribution to its stockholders or
redeemed or repurchased any of its capital stock. Immediately after the Closing
and after giving effect to all changes in its assets and liabilities as a
result of the transactions contemplated by this Agreement, Assignor will be
solvent (however solvency is determined under applicable law). Consummation of
the transactions contemplated by this Agreement has not resulted in a
fraudulent conveyance, and none of such transactions will be void or voidable
under any insolvency, fraudulent conveyance or similar law.
7.22 Full Disclosure. To the best knowledge of Assignor, none of
the information supplied by Assignor herein or in the Exhibits or Schedules
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.
7.23 Labor Matters. Assignor has not suffered any strike,
slowdown, picketing or work stoppage by any union or other group of employees
affecting the Business and to Assignor's knowledge no such event or action is
threatened. There are no unfair labor practice charges or grievances pending or
in process or to the knowledge of Assignor threatened by or on behalf of any
employee or group of employees of Assignor, and no written complaints received
by Assignor, or threatened, or, with respect to unresolved complaints, on file
with any federal, state or local governmental agency, alleging employment
discrimination or sexual harassment by Assignor or any of its officers or
employees. Assignor is not a party to any collective bargaining agreement.
7.24 Employee Benefit Plans. None of the execution and delivery
of this Agreement, the consummation of the transactions contemplated hereby,
the termination by Assignor of the employment of Assignor's employees before,
simultaneously with or after the Closing nor any other act or omission of
Assignor will result in FGC or any of its affiliates (including Assignee)
incurring, whether pursuant to contract, law or otherwise, any obligation or
liability to or with respect to any employees or former employees of Assignor,
including, without limitation, any obligation or liability for or with respect
to severance pay or benefits, continuation of any health, medical or other
benefits or any other any employee benefit plan (including, without limitation,
any "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974).
10
<PAGE>
7.25 Investment Representations of Assignor. Assignor represents
and warrants to Assignee and FGC that:
(a) Assignor understands that the FGC Shares it is acquiring
pursuant to this Agreement have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), nor qualified under any state
securities laws, and that the issuance and delivery of the FGC Shares is
intended to be exempt from such registration and qualification based in part
upon the representations of Assignor contained herein. Assignor recognizes that
an investment in the FGC Shares may involve a number of risks, and that no
federal or state agency has passed upon the FGC Shares or made any finding or
determination as to the fairness of this investment.
(b) Assignor has been furnished copies of FGC's filings with the
Securities and Exchange Commission (the "Commission") referred to in Section
8.5 and such other materials regarding FGC, if any, as it has requested in
writing, and has been given the opportunity to obtain from FGC all information
that it has requested regarding its business and affairs.
(c) Assignor and its officers and advisors have such knowledge
and experience in financial and business matters to be capable of evaluating
the merits and risks of the investment contemplated by this Agreement. Assignor
is able to bear the economic risk of its investment in FGC.
(d) Assignor understands that it must bear the economic risk of
such investment indefinitely unless the FGC Shares are registered pursuant to
the Securities Act or an exemption from such registration is available, and
that FGC has no obligation to so register such shares, except as provided in
the Registration Rights Agreement between Assignor and FGC dated the date
hereof. Assignor further understands that there is no assurance that any
exemption will allow Assignor to dispose of or otherwise transfer any or all of
the FGC Shares in the amounts or at the times Assignor might propose. Except
for the transfer to Ochs contemplated by Section 6.7, Assignor will not sell or
otherwise transfer any of the FGC Shares unless they are registered under the
Securities Act or unless an exemption from such registration is available.
Nothing contained herein shall, however, adversely affect Assignor's right to
sell the FGC Shares pursuant to Rule l44 under the Securities Act, to the
extent such Rule is then available in connection with such sale.
(e) Assignor is acquiring the FGC Shares solely for its own
account as principal for investment and not with a view toward resale, transfer
or distribution thereof or any interest therein, in whole or in part, nor with
any present intention of distributing the FGC Shares, except for the proposed
transfer of 4,800 of the FGC Shares to Ochs in accordance with Section 12
hereof.
(f) Assignor is not relying on Assignee or FGC for any advice or
opinion with respect to the tax and other economic considerations relating to
its investment in the FGC Shares. In regard to such considerations, Assignor
has relied on the advice of, or has consulted with, only the Assignor's own
advisors.
11
<PAGE>
(g) Assignor has formed an independent judgment to consummate the
transactions contemplated hereby in exchange for the FGC Shares.
8. Representations and Warranties of Assignee. Assignee hereby
represents and warrants to Assignor as follows:
8.1 Organization, Power and Authority. Each of FGC and Assignee
is a corporation duly organized, validly existing and in good standing under
the laws of the state of its incorporation, and has all requisite corporate
power and authority to carry on its business as it is now being conducted, to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby.
8.2 Due Authorization and Execution: Effect of Agreement. The
execution, delivery and performance by FGC and Assignee of this Agreement and
the consummation by FGC and Assignee of the transactions contemplated hereby
have been duly authorized by all necessary corporate action required to be
taken on the part of FGC and Assignee. Each of this Agreement and the Escrow
Agreement has been duly and validly executed and delivered by FGC and Assignee
and constitutes the valid and binding legal obligation of FGC and Assignee,
enforceable in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or similar laws
affecting the rights of creditors generally or the availability of specific
performance, injunctive relief and other equitable remedies and to general
principles of equity (regardless of whether such principles are considered in a
proceeding in equity or at law). The Registration Rights Agreement has been
duly and validly executed and delivered by FGC and constitutes the valid and
binding legal obligation of FGC, enforceable in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting the rights of creditors
generally or the availability of specific performance, injunctive relief and
other equitable remedies and to general principles of equity (regardless of
whether such principles are considered in a proceeding in equity or at law).
Assuming the representations and warranties of Assignor made in Section 7.25
and of Ochs made in the letter agreement referred to in Section 6.7 are and
continue to be true and complete, the execution, delivery and performance by
FGC and Assignee of this Agreement and the consummation by FGC and Assignee of
the transactions contemplated hereby will not, with or without the giving of
notice or the lapse of time, or both, (a) violate any provision of any law,
rule or regulation to which FGC or Assignee is subject; (b) violate any order,
judgment or decree applicable to FGC or Assignee; or (c) conflict with or
result in a breach of or a default under any term or condition of FGC's or
Assignee's Certificate of Incorporation or By-Laws or any agreement or other
instrument to which FGC or Assignee is a party or by which it or its assets may
be bound, except in each case, for violations, conflicts, breaches or defaults
which in the aggregate would not materially hinder or impair the consummation
of the transactions contemplated hereby.
8.3 Consents and Approvals. Except for any applicable
requirements of the Securities Act and state securities laws, no consent,
approval, 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 of this Agreement by FGC or Assignee,
except any thereof which have been obtained or made or which, if not received
or made, is not reasonably likely to have
12
<PAGE>
a material adverse effect on the business, results of operations or financial
condition of FGC and its subsidiaries taken as a whole (a "FGC Material Adverse
Effect").
8.4 Capitalization. The authorized capital stock of FGC consists
of 50,000,000 shares of FGC Common Stock and 2,000,000 shares of Preferred
Stock, of which there were on May 12, 1997, a total of 11,878,617 shares of FGC
Common Stock and no shares of Preferred Stock issued and outstanding. All FGC
Shares issued and delivered to Assignor pursuant to this Agreement have been
duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights.
8.5 Commission Reports. FGC has made all required filings of
reports and forms with the Commission under the Securities Exchange Act of
1934, as amended (the "Exchange Act") since December 31, 1995. All such reports
and forms (as amended, in the case of any thereof which were amended after
filing) were prepared in all material respects in accordance with the
requirements of the Exchange Act and the rules and regulations thereunder. As
of their respective dates (or as of the date last amended, in the case of any
thereof which were amended after filing), none or such reports or forms
contained any untrue statement of a material fact or omitted 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 to the extent corrected by a subsequently filed
amendment or other report, form or document. The audited consolidated financial
statements and unaudited interim financial statements and schedules of FGC (as
amended, if applicable) contained in such public reports (or incorporated
therein by reference) were prepared in accordance with generally accepted
accounting principles applied on a consistent basis, except as noted therein,
and fairly presented the consolidated financial condition and results of
operations of FGC and its consolidated subsidiaries as at the respective dates
thereof and for the periods indicated therein, subject in the case of interim
unaudited financial statements to normal year-end audit adjustments.
9. Securities Act Legend. Each certificate or other instrument
evidencing any FGC Shares (including any delivered to the Escrow Agent or Ochs)
shall bear a legend in substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and such shares may not be sold or
transferred unless such sale or transfer will be effected in
accordance with the registration requirements of the Securities Act of
1933, as at that time amended, or in accordance with any exemption
from such registration requirements which may then be available."
Assignor understands and acknowledges that FGC will deliver unlegended
certificates in exchange for any certificate bearing such legend only in the
event that (i) (A) Assignor transfers shares represented by such certificate
pursuant to and in the manner provided for in an effective registration
statement covering the transfer or sale of such shares or (B) Assignor shall
have delivered to FGC an opinion of counsel in form and substance satisfactory
to FGC, to the effect that the FGC Shares in question may be transferred
without registration under the Securities Act and (ii) all applicable
requirements of applicable state securities laws have been satisfied.
13
<PAGE>
10. Further Assurances. At any time and from time to time after the
date hereof, either party shall, at the request of the other party, execute and
deliver any further instruments or documents and take all such further action
as the requesting party may reasonably request in order to transfer into the
name of Assignee the Lease and any and all Property contemplated to be sold
pursuant to this Agreement and to further consummate the transactions
contemplated by this Agreement.
11. Brokers. Assignor and Assignee warrant and represent to each other
that they dealt with no broker, finder or similar agent or party who or which
might be entitled to a commission or compensation on account of introducing the
parties, the negotiation or execution of this Agreement and/or the closing of
the transaction provided for herein other than Paul Ochs ("Broker"). Assignor
hereby respectively agrees to indemnify and hold harmless Assignee from and
against all loss, liability, damage and expense (including, without limitation,
attorneys' fees) imposed upon or incurred by Assignee by reason of any claim
for commissions or other compensation for bringing about this transaction by
any broker, finder or similar agent or party (including Broker). Assignee
hereby respectively agrees to indemnify and hold harmless Assignor from and
against all loss, liability, damage and expense (including, without limitation,
attorneys' fees) imposed upon or incurred by Assignor by reason of any claim
for commissions or other compensation for bringing about this transaction by
any broker, finder or similar agent or party (other than Broker).
12. Costs and Fees. Conveyancing taxes, if any, shall be payable by
Assignor, and in no event be payable by Assignee. The Assignee shall pay the
cost of obtaining the audited financial statements of the Assignor and the
other financial information required by Section 7.21 hereof. The Assignor shall
pay 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 12 shall survive the Closing.
13. Title Exceptions Covenant. At the Closing, First American Title
Insurance Company, a California corporation (the "Title Company"), is issuing
Assignee an ALTA Leasehold Owners Title Insurance Policy insuring Assignee's
leasehold interest in the Premises (such policy, including all endorsements,
schedules and other attachments being referred to as the "Title Policy").
Assignor covenants to and agrees with Assignee and FGC that in the event any
exceptions appear in the Title Policy (including, without limitation,
pre-printed exceptions) and such exceptions are not fully insured over by the
Title Company (the "Title Exceptions"), Assignor shall (regardless of whether
the Title Exceptions constitute Permitted Exceptions), from and after the
Closing, take such actions as may be reasonably necessary or reasonably
requested by Assignee or FGC to cure, remedy and remove the Title Exceptions as
promptly as reasonably practical and shall otherwise cooperate with Assignee
and FGC in so curing, remedying and removing the Title Exceptions; provided,
that Assignor's out-of-pocket costs need not exceed the total amount of $4,000
unless Assignee or FGC reimburse Assignor for such excess costs. Without
limiting the generality of the foregoing, Assignor shall, at Assignor's expense
(subject to the expense limitation set forth in the immediately preceding
sentence), use its reasonable efforts to make the services of Stephen J.
McLaughlin, Esq., available for such purposes and use its reasonable efforts to
cause the lessor of the Premises to cooperate with Assignor and Assignee in
such efforts.
14
<PAGE>
14. Indemnification and Survival.
14.1 Survival of Representations Warranties and Covenants. All
representations, warranties and covenants made in this Agreement shall survive
the Closing and be enforceable for the periods hereinafter set forth for the
making of claims. Any party learning of a misrepresentation or breach of
representation, warranty or covenant under this Agreement shall promptly give
written notice thereof to all other parties to this Agreement; provided,
however, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the Indemnifying Party
(as defined in Section 14.4) shall have been actually prejudiced as a result of
such failure.
14.2 Assignor's Indemnification Obligation. Assignor hereby
agrees to indemnify, defend and hold Assignee, it successors, and assigns
harmless from and against the following matters for the period indicated:
14.2.1 So long as written notice of a claim for
indemnification hereunder is delivered by Assignee to Assignor during the
period of three (3) years from the Closing Date, Assignor shall protect,
defend, hold harmless and indemnify each of Assignee and FGC, their respective
officers, directors, shareholders, employees, agents and affiliates, and the
respective successors, assigns, heirs, executors and legal representatives of
each of the foregoing (collectively, the "FGC Indemnified Parties") from,
against and in respect of any and all losses, liabilities, deficiencies,
penalties, fines, costs, damages and expenses whatsoever, contingent or
otherwise (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 or claims
against Assignor, whether known or unknown or now existing or hereafter
arising, which is not an Assumed Liability; (ii) the breach of any
representation, warranty, covenant or agreement of Assignor contained in this
Agreement, in any other Transaction Document or in any other writing delivered
pursuant hereto or thereto (determined for this purpose as if all references to
knowledge and materiality contained in Article 7 are deleted); (iii) the
invalidity or unenforceability, or alleged invalidity or unenforceability, of
any provision of any Transaction Document; (iv) any liability or obligation, or
alleged liability or obligation, of Assignor to, or claim by, in any case
whether known or unknown or now existing or hereafter arising any holder or
former holder of capital stock, equity interests or other securities of
Assignor, or any past, existing or future employee of Assignor, including,
without limitation, any liability, obligation, alleged liability or obligation
or claim based upon or arising out of consummation of the transactions
contemplated by this Agreement; (v) any liability or obligation, or alleged
liability or obligation to, or claim by, in any case whether known or unknown
or now existing or hereafter arising, the landlord under the Lease, any past,
existing or future creditor of Assignor or any other third party relating to or
arising out of any event, fact or circumstance occurring or existing at or at
any time before the Closing or the conduct of the business or affairs of
Assignor from and after the Closing, other than Assumed Liabilities; (vi) the
transfer, issuance or delivery to Ochs of any FGC Shares, any breach or
inaccuracy of any representation or warranty, or any failure to perform any
covenant, agreement or obligation of Ochs under the letter agreement referred
to in Section 6.7 hereof; (vii) any action or omission by Assignee which
constitutes a violation of or conflicts with any of the variances or permits
referred to in item 12 or
15
<PAGE>
13 of Schedule B to the Title Policy or constitutes a violation, conflict with
or interference with, any of the riparian rights or flow of a natural water
course referred to in item 20 of Schedule B to the Title Policy and (viii) any
and all actions, suits, proceedings, claims, demands, assessments, judgments,
costs and expenses (including without limitation, interest, penalties,
reasonable legal fees and accounting fees) incident to the foregoing and the
enforcement of the provisions of this Section 14.2.1.
14.2.2 Assignor shall defend Assignee's title to the
Personal Property forever.
14.3 Assignee's Indemnification Obligation. Assignee agrees to
defend, indemnify, and hold harmless Assignor from and against the following
matters for the periods indicated:
14.3.1 So long as written notice of a claim for
indemnification hereunder is delivered by Assignor to Assignee during the
period of three (3) years from the Closing Date, Assignee shall indemnify and
defend Assignor with respect to any and all claims, liabilities, and
obligations of every kind and description, contingent or otherwise (including
reasonable attorneys' fees and costs), arising out of or related to
misrepresentation, breach of warranty or covenant, or nonfulfillment of any
agreement on the part of Assignee under this Agreement or any Transaction
Document.
14.3.2 Assignee shall indemnify and defend Assignor forever
against any and all claims, liabilities, and obligations of every kind and
description, contingent or otherwise (including reasonable attorneys' fees and
costs), arising out of or related to the Assumed Liabilities, the use of the
Purchased Assets and operation of the Business by Assignee from and after the
Closing Date, or Assignee's failure to perform obligations of Assignor assumed
by Assignee pursuant to this Agreement as Assumed Liabilities.
14.4 Matters Involving Third Parties. Subject to the periods of
limitation described in Section 14.2 and 14.3:
Whenever any of FGC, Assignee or Assignor (in any case for the
purposes of this Article 14, 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.
16
<PAGE>
However, the Indemnified Party shall have the right to participate at its
expense and with counsel of its choice in such settlement, compromise or
litigation. The Indemnified Party shall not be required to refrain from paying
any claim which has matured by a court judgment or decree, unless an appeal is
duly taken therefrom and execution thereof has been stayed, nor shall the
Indemnified Party be required to refrain from paying any claim where the delay
in paying such claim would result in the foreclosure of a lien upon any of the
property or assets then held by the Indemnified Party. The failure to provide a
timely Notice of Claim as provided in this Section 14.4 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, if any, to the
Indemnifying Party resulting from the Indemnified Party's delay or failure to
provide a Notice of Claim as provided in this Section 14.4.
14.5 For purposes of this Article 14, any assertion of fact
and/or law by a third party that, if true, would constitute a breach of a
representation or warranty made by a party to this Agreement or make
operational an indemnification obligation hereunder, shall, on the date that
such assertion is made, immediately invoke the Indemnifying Party's obligation
to protect, defend, hold harmless and indemnify the Indemnified Party pursuant
to this Article 14.
14.6 The obligation of the Assignor under Article 14 hereof shall
be satisfied first from the Escrowed Property (as defined in the Escrow
Agreement) in accordance with the Escrow Agreement and, if the Escrowed
Property (valued as provided in the Escrow Agreement) is inadequate to provide
full indemnification to Assignee, then from Assignor (or its successors or
assigns) directly.
14.7 Survival; Exclusive Remedy. The rights and obligations under
this Section 14 are expressly intended to survive execution of this Agreement
and the Closing of the transactions contemplated hereby for the periods
specified in Sections 14.1 and 14.2 and shall not be affected by any
investigation made by any party at any time. The rights of indemnification
provided in this Section 14 shall be the exclusive remedy of any party for any
misrepresentation, breach of any representation, warranty, covenant or
agreement contained in this Agreement or for claims arising out of the
operation of the Business before or on or after the Closing Date, provided that
if such rights intended for the benefit of any indemnified party are not, for
any reason, enforceable in accordance with their terms, then such indemnified
party shall have all rights and remedies available by contract, at law, in
equity or otherwise so long as claims are brought within the period of
limitations provided for above. Upon expiration of the applicable periods of
indemnification provided hereunder the liability of the Indemnifying Party
shall cease with respect to any and all claims, losses, damages, liabilities,
costs and expenses arising out of matters which have not been the subject of
written notice to the Indemnifying Party delivered prior to the expiration of
the applicable period of indemnification, but shall survive and continue with
respect to all claims, losses, damages, liabilities, costs and expenses arising
out of matters which have been the subject of any such notice.
15. Bulk Sales. The parties agree to waive the requirements, if
any, of all applicable bulk sales laws. As an inducement to Assignee to enter
into such waiver, Assignor represents and warrants that (a) it will not be
rendered insolvent by the transactions contemplated by this Agreement, and (b)
all debts, obligations and liabilities relating to the Lease and Business that
are
17
<PAGE>
not expressly assumed by Assignee under this Agreement will be promptly paid
and discharged by Assignor as and when they become due. Assignor agrees to
indemnify and hold Assignee harmless from, and reimburse Assignee for, any
loss, cost, expense, liability or damage which Assignee may suffer or incur by
virtue of the noncompliance by Assignor or Assignee 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 Lease ineffective as to creditors of
or claimants against Assignor.
16. Notices. All notices, demands, requests, consents or other
communications ("Notices") which either party may desire or be required to give
to the other hereunder shall be in writing and shall be delivered by hand,
overnight express carrier, or sent by registered or certified mail, return
receipt requested, postage prepaid, in either event, addressed to the parties
at their respective addresses first above set forth. A copy of any Notice given
by Assignor to Assignee or FGC shall simultaneously be given in either manner
provided above to Family Golf Centers, Inc., 225 Broadhollow Road, Melville,
New York 11747, Attention: General Counsel. A copy of any Notice given by
Assignee to Assignor shall simultaneously be given in either manner provided
above to Kevin F. Long, Esq., Davis, Malm & D'Agostine, P.C., One Boston Place,
Boston, MA 02108. 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.
17. Miscellaneous.
17.1 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns.
17.2 This Agreement shall be governed by, interpreted under and
construed and enforced in accordance with, the laws of the State of Delaware.
17.3 The captions or article headings in this Agreement are for
convenience only and do not constitute part of this Agreement.
17.4 This Agreement has been fully negotiated by the parties with
the advice of their respective legal counsel and rules of construction
construing ambiguities against the party responsible for drafting agreements
shall not apply.
17.5 This Agreement (including any Exhibits and Schedules annexed
hereto) contains the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior understandings, if any, with
respect thereto.
17.6 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.
18
<PAGE>
17.7 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.
17.8 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.
17.9 Either party may cause this Agreement to be recorded in the
appropriate public office.
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
CARVER GOLF ENTERPRISES, INC.
By:
-------------------------------------
Name:
Title:
CARVER FAMILY GOLF CENTERS, INC.
By:
-------------------------------------
Name:
Title:
FAMILY GOLF CENTERS, INC.
By:
-------------------------------------
Name:
Title:
20
<PAGE>
INDEX OF EXHIBITS & SCHEDULES
-----------------------------
EXHIBIT A LEGAL DESCRIPTION OF PREMISES
EXHIBIT B LEASE
EXHIBIT C PERSONAL PROPERTY
EXHIBIT D CONTRACTS
EXHIBIT E PERMITTED EXCEPTIONS
EXHIBIT F OCHS LETTER AGREEMENT
SCHEDULE 3.3 EXCLUDED ASSETS
SCHEDULE 6.2 CERTAIN EXPENSES
SCHEDULE 7.15 ACCESS TO PREMISES
1
<PAGE>
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of June 30, 1997, among CARVER FAMILY GOLF
CENTERS, INC., a Delaware corporation with executive offices at 225 Broadhollow
Road, Melville, New York 11747 ("Assignee"), FAMILY GOLF CENTERS, INC., a
Delaware corporation with executive offices at 225 Broadhollow Road, Melville,
New York 11747 ("FGC"), CARVER GOLF ENTERPRISES, INC., a Massachusetts
corporation, having an address at 45 Reservoir Park Drive, Rockland,
Massachusetts, 02370 ("Assignor") and CONTINENTAL STOCK TRANSFER & TRUST
COMPANY, incorporated under the laws of the United States of America with
executive offices at 2 Broadway, New York, New York 10004 (the "Escrow Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, simultaneously with the execution hereof, Assignor and
Assignee are consummating the transactions contemplated by the Assignment and
Assumption Agreement, dated as of the date hereof (the "Purchase Agreement"),
between FGC, Assignor and Assignee pursuant to which, among other things, the
Assignee is assuming certain obligations of Assignor including a Lease of
certain real estate in Carver, Massachusetts and purchasing certain assets of
the Assignor; and
WHEREAS, pursuant to the Purchase Agreement, 5,000 shares (the
"Escrowed Property") of the FGC's Common Stock, par value $.01 per share, are
required to be placed into an escrow account (the "Escrow Account") to be
maintained by the Escrow Agent against any claims for indemnity under the
Purchase Agreement; and
WHEREAS, this is the Escrow Agreement referred to in the Purchase
Agreement. Capitalized terms used in this Escrow Agreement and not otherwise
defined herein shall have the respective meanings given to them in the Purchase
Agreement.
NOW, THEREFORE, it is agreed as follows:
I. ESCROW.
SECTION 1.01 APPOINTMENT OF ESCROW AGENT. Assignor and Assignee hereby
appoint the Escrow Agent, and the Escrow Agent hereby agrees to serve, as
Escrow Agent in accordance with, and pursuant to, this Agreement.
<PAGE>
SECTION 1.02 OPERATION OF ESCROW ACCOUNT. The parties hereto agree
that, subject to Section 1.03 hereof, the Escrow Account shall operate as
follows:
(a) Immediately after the Closing on the date hereof, Assignor is
depositing into the Escrow Account an aggregate of 5,000 FGC Shares delivered
to Assignor pursuant to the Purchase Agreement by delivering to the Escrow
Agent a stock certificate in Assignor's name evidencing such FGC Shares
together with a stock power duly endorsed in blank by Assignor.
(b) At any time and from time to time on or prior to the first
anniversary of the date of this Agreement, either of Assignee or FGC
(collectively, "FGC Indemnified Parties") shall be entitled to give one or more
notices to the Escrow Agent, signed by its President or any Vice President
(with a copy to Assignor), to the effect that there has been an event entitling
one or more FGC Indemnified Parties to indemnification from Assignor pursuant
to the Purchase Agreement. Each such notice shall specify the amounts owed by
the Assignor pursuant to the Purchase Agreement, the calculation of such
amounts and, in reasonable detail, the basis therefor.
(c) Twenty days after the Escrow Agent has received a notice pursuant
to Section 1.02(b) (or, if not a business day, on the next business day
following such twentieth day), it shall deliver to FGC Escrowed Property having
a value, determined as set forth in Section 1.02(e), equal to the amount
specified in such notice unless the Assignor shall have notified the Escrow
Agent (with a copy to FGC) in writing before such date that it disagrees with
Assignee's or FGC's determination that the FGC Indemnified Party or Parties
specified in such notice are entitled to indemnification with respect to the
Purchase Agreement, which notice shall be set forth in reasonable detail the
basis for such disagreement.
(d) Should any dispute arise with respect to the delivery, ownership,
or right of possession of the Escrowed Property, the Escrow Agent, as more
fully set forth in Section III (xi), is authorized and directed to retain in
its possession without liability to anyone all or any part of the Escrowed
Property until such dispute shall have been settled either by mutual agreement
by the parties concerned or by a final order, decree, or judgment of a court of
competent jurisdiction in the United States of America and time for appeal has
expired and no appeal has been perfected, but the Escrow Agent shall be under
no duty whatsoever to institute or defend any such proceedings, and may, in its
discretion, deposit such Escrowed Property with a court of competent
jurisdiction in the United States of America which is hearing such dispute.
(e) For purposes of this Agreement, in the event FGC Shares are
required to be delivered to FGC pursuant to this Agreement, the value of each
FGC Share which is part of the Escrowed Property shall be deemed equal to the
average of the daily Closing Prices per FGC Share during the period of 10
consecutive trading days commencing 20 trading days prior to the date of
delivery of such FGC Shares. The "CLOSING PRICE" of an FGC Share on any day
means the last sale price (or, if no last sale is reported, the average of the
high bid and low asked prices) for an FGC Share on such day (or, if such day is
not a trading day, on the next preceding trading day) as reported
2
<PAGE>
on NASDAQ or, if not reported on NASDAQ, as quoted by the National Quotation
Bureau Incorporated, or if the FGC Shares are listed on an exchange, on the
principal exchange on which the FGC Shares are listed. If for any day the
Closing Price of a share of FGC Stock is not determinable by any of the
foregoing means, then the Closing Price for such day shall be determined in
good faith by the Escrow Agent on the basis of such quotations and other
considerations as it may deem appropriate.
(f) In the event that an indemnification claim is made in accordance
with Section 1.02(b) hereof and such claim is not disputed by Assignor within
the 20-day period referred to in Section 1.02(c) hereof, then the Assignor
shall have the right to satisfy such indemnification claim in cash rather than
in FGC Shares being held by the Escrow Agent, provided that the full amount of
such claim is paid to Assignee or FGC within such 20-day period.
SECTION 1.03 DISTRIBUTION OF ESCROWED PROPERTY. Unless a notice under
Section 1.02(b) has been given and Escrowed Property in satisfaction of such
notice has not been delivered to FGC, either because the 20-day period has not
yet run out or because a dispute relating to the claim made by such notice is
then pending, the Escrowed Property or such portion of it as at the time
remains in escrow, together with all dividends and distributions received by
the Escrow Agent with respect thereto, shall be returned to Assignor on June
30, 1998.
SECTION 1.04 TERMINATION OF ESCROW ACCOUNT. This Agreement and the
Escrow Account will terminate at 5:00 P.M., New York City local time, on the
date on which all of the FGC Shares contained in the Escrow Account shall be
distributed as set forth above.
SECTION 1.05 VOTING. The FGC Shares held in the Escrow Account shall
be voted by Assignor or its designees.
II. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be (a) delivered by hand, (b) sent by
certified mail return receipt requested, with proper postage prepaid, or (c)
sent by over-night delivery and addressed as follows:
If to FGC to it at:
225 Broadhollow Road
Melville, New York 11747
Attention: General Counsel
(516) 694-1666
with a copy to:
Baker & Botts, L.L.P.
3
<PAGE>
599 Lexington Avenue
New York, New York 10022
Attention: Joseph E. Young
Tel: (212)-705-5088
Fax: (212)-705-5001
If to Assignor to it at:
Carver Golf Enterprises, Inc.
45 Reservoir Park Drive
Rockland, Massachusetts 02370
Attention: William P. Kelly
Tel: (617) 871-4444
Fax: (617) 871-8521
with a copy to:
Davis, Malm & D'Agostine, P.C.
One Boston Place
Boston, Massachusetts 02108
Attention: Robert E. Richards, Jr., Esq.
Tel: (617) 367-2500
Fax: (617) 305-3133
If to the Escrow Agent, to it at:
2 Broadway
New York, New York 10004
Attention: Steve Nelson
Tel: (212) 509-4000
Fax: (212) 509-5150
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. Except as
otherwise provided herein, no notice or communication shall be effective until
received or refused.
III. CONCERNING THE ESCROW AGENT.
To induce the Escrow Agent to act hereunder, it is further agreed by
each of Assignor, Assignee and FGC that:
(i) The Escrow Agent shall not be under any duty to give the Escrowed
Property
4
<PAGE>
held by it hereunder any greater degree of care than it gives its own similar
property and shall not be required to invest any funds held hereunder except as
directed in this Agreement.
(ii) This Agreement expressly sets forth all the duties of the Escrow
Agent with respect to any and all matters pertinent hereto. No implied duties
or obligations shall be read into this Agreement against the Escrow Agent. The
Escrow Agent shall not be bound by the provisions of any agreement among the
other parties hereto except this Agreement.
(iii) The Escrow Agent shall not be liable, except for its own gross
negligence, willful misconduct or breach of any representations, warranties or
covenants contained in this Agreement, and, except with respect to claims based
upon such gross negligence, willful misconduct or breach that are successfully
asserted against the Escrow Agent, the other parties hereto shall jointly and
severally indemnify and hold harmless the Escrow Agent (and any successor
Escrow Agent) from and against any and all losses, liabilities, claims,
actions, damages, and expenses, including reasonable attorneys' fees and
disbursements, arising out of, and in connection with, this Agreement. Without
limiting the foregoing, the Escrow Agent shall in no event be liable in
connection with its investment or reinvestment of any cash held by it hereunder
in good faith, in accordance with the terms hereof, including, without
limitation, any liability for any delays (not resulting from gross negligence
or willful misconduct) in the investment or reinvestment of the Escrowed Funds,
or any loss of interest incident to any such delays.
(iv) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument, or other writing delivered
to it hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. The Escrow Agent may act in reliance upon any instrument or
signature believed by it in good faith to be genuine and may assume, if in good
faith, that any person purporting to give notice or receipt or advice or make
any statement or execute any document in connection with the provisions hereof
has been duly authorized to do so.
(v) The Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Escrow Agreement and shall not be liable
for any action taken or omitted in good faith and in accordance with such
advice.
(vi) The Escrow Agent does not have any interest in the Escrowed
Property deposited hereunder, but is serving as escrow holder only. Any
payments of income from the Escrow Account shall be subject to withholding
regulations then in force with respect to United States taxes.
This paragraph (vi) and paragraph (iii) of this Article III shall
survive notwithstanding any termination of this Agreement or the resignation of
the Escrow Agent.
(vii) The Escrow Agent makes no representation as to the validity,
value, genuineness, or the collectibility of any security or other documents or
instrument held by, or
5
<PAGE>
delivered to, it.
(viii) The Escrow Agent shall not be called upon to advise any party
as to the wisdom in selling or retaining or taking or refraining from any
action with respect to any securities or other property deposited hereunder.
(ix) The Escrow Agent (and any successor escrow agent) at any time may
be discharged from its duties and obligations hereunder by the delivery to it
of notice of termination signed by Assignor and FGC or at any time may resign
by giving written notice to such effect to Assignor and FGC. Upon any such
termination or resignation, the Escrow Agent shall deliver the Escrowed
Property to any successor escrow agent jointly designated by the other parties
hereto in writing, or to any court of competent jurisdiction if no such
successor escrow agent is agreed upon, whereupon the Escrow Agent shall be
discharged of and from any and all further obligations arising in connection
with this Escrow Agreement. The termination or resignation of the Escrow Agent
shall take effect on the earlier of (A) the appointment of a successor
(including a court of competent jurisdiction) or (B) the day that is 30 days
after the date of delivery: (1) to the Escrow Agent of the other parties'
notice of termination or (2) to the other parties hereto of the Escrow Agent's
written notice of resignation. If at that time the Escrow Agent has not
received a designation of a successor escrow agent, the Escrow Agent's sole
responsibility after that time shall be to keep the Escrowed Property safe
until receipt of a designation of successor escrow agent or a joint written
disposition instruction by the other parties hereto or an enforceable order of
a court of competent jurisdiction.
(x) The Escrow Agent shall have no responsibility for the contents of
any writing of any third party contemplated herein as a means to resolve
disputes and may rely without any liability upon the contents thereof.
(xi) In the event of any disagreement among or between the other
parties hereto resulting in adverse claims or demands being made in connection
with the Escrowed Property, or in the event that the Escrow Agent in good faith
is in doubt as to what action it should take hereunder, the Escrow Agent shall
be entitled to retain the Escrowed Property until the Escrow Agent shall have
received (A) a final and non-appealable order of a court of competent
jurisdiction directing delivery of the Escrowed Property or (B) a written
agreement executed by the other parties hereto directing delivery of the
Escrowed Property, in which event the Escrow Agent shall disburse the Escrowed
Property in accordance with such order or agreement. Any court order referred
to in (A) above shall be accompanied by a legal opinion by counsel for the
presenting party satisfactory to the Escrow Agent to the effect that said court
order is final and non-appealable. The Escrow Agent shall act on such court
order and legal opinions without further question.
(xii) As consideration for its agreement to act as Escrow Agent as
herein described, FGC shall pay the Escrow Agent fees determined in accordance
with the terms set forth on Exhibit A hereto (and made a part of this Escrow
Agreement as if herein set forth). In addition, FGC and Assignor agree to
reimburse the Escrow Agent for all reasonable expenses, disbursements, and
advances incurred or made by the Escrow Agent in performance of its duties
hereunder (including
6
<PAGE>
reasonable fees, expenses, and disbursements of its counsel) and to share
equally the costs thereof.
(xiii) No publicly distributed material or other matter in any
language (including, without limitation, notices and reports) which mentions
the Escrow Agent's name or the rights, powers, or duties of the Escrow Agent
shall be issued by the other parties hereto or on such parties' behalf unless
the Escrow Agent shall first have given its specific written consent thereto.
IV. MISCELLANEOUS.
SECTION 4.01 BINDING EFFECT. This Escrow Agreement shall be binding
upon, and inure solely to the benefit of, the parties hereto and their
respective successors and assigns, heirs, administrators, and representatives,
and shall not be enforceable by, or inure to the benefit of, any other third
party, except as provided in paragraph (ix) of Article III with respect to the
termination of, or resignation by, the Escrow Agent. No party may assign any of
its rights or obligations under this Agreement without the written consent of
the other parties.
SECTION 4.02 CHOICE OF LAW. This Agreement shall be construed in
accordance with, and governed by, the internal law of the State of Delaware
(without reference to its rules as to conflicts of law).
SECTION 4.03 MODIFICATION. This Agreement may only be modified by a
writing signed by all of the parties hereto.
SECTION 4.04 HEADINGS. The section headings herein are for convenience
only and shall not affect the construction thereof. Unless otherwise indicated,
references to Sections and Articles are to Sections and Articles, respectively,
contained herein.
SECTION 4.05 COUNTERPARTS. This Agreement may be executed in one or
more counterparts but all such separate counterparts shall constitute but one
and the same instrument; provided that, although executed in counterparts, the
executed signature pages of each such counterpart may be affixed to a single
copy of this Agreement which shall constitute an original.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
CARVER FAMILY GOLF CENTERS, INC.
By:
--------------------------------
Name:
Title:
FAMILY GOLF CENTERS, INC.
By:
--------------------------------
Name:
Title:
CARVER GOLF ENTERPRISES, INC.
By:
--------------------------------
Name:
Title:
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
By:
--------------------------------
Name:
Title:
8
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of June 30,
1997, by and between FAMILY GOLF CENTERS, INC., a Delaware corporation (the
"Company"), and CARVER GOLF ENTERPRISES, INC., a Massachusetts corporation (the
"Seller").
WHEREAS, Carver Family Golf Centers, Inc., a wholly-owned subsidiary
of the Company (the "Purchaser"), the Company and the Seller are parties to an
Assignment and Assumption Agreement, dated as of the date hereof (the
"Transaction Agreement"), providing for the purchase by the Purchaser of
certain assets of the Seller;
WHEREAS, in connection with the transactions contemplated by the
Transaction Agreement, the Seller received an aggregate of 114,000 shares of
Common Stock, $.01 par value per share, of the Company (the "Common Stock"),
which are "restricted securities" (as defined in Rule 144 under the Securities
Act of 1933, as amended) and the Company has agreed to provide the Seller with
the registration rights set forth herein with respect to certain of such
shares.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, the parties hereto agree as
follows:
1. Certain Definitions.
Business Day: Any day other than a Saturday, Sunday or holiday on
which banking institutions in Boston, Massachusetts or New York, New York are
closed.
Commission: The Securities and Exchange Commission, or any other
Federal agency at the time administering the Securities Act or the Exchange
Act.
Common Stock: As defined in the second "WHEREAS" clause above.
Company: As defined in the first paragraph of this Agreement.
Company Indemnified Parties: As defined in Section 6(b).
Escrow Agreement: The Escrow Agreement referred to in the Transaction
Agreement, as the same may be amended in accordance with its terms.
Exchange Act: The Securities and Exchange Act of 1934, as amended, or
any
<PAGE>
successor Federal statute, and the rules and regulations of the Commission
promulgated thereunder, as they each may, from time to time, be in effect.
Losses: As defined in Section 6(a) hereof.
Prospectus: The prospectus included in the Registration Statement as
of the date it becomes effective under the Securities Act and, in the case of
references to the Prospectus as of a date subsequent to the effective date of
the Registration Statement, as amended or supplemented as of such date,
including all documents incorporated by reference therein, as amended, and each
prospectus supplement relating to the offering and sale of any of the
Registrable Shares.
Purchaser: As defined in the first "WHEREAS" clause above.
Registrable Shares: Shares of Common Stock issued to the Seller
pursuant to the Transaction Agreement, other than the shares held in escrow
pursuant to the Escrow Agreement and other than any shares transferred by
Seller to Paul Ochs, and any other shares of capital stock of the Company
issued in respect of such shares as a result of stock splits, stock dividends,
reclassification, recapitalizations, mergers, consolidations or similar events.
References in this Agreement to amounts or percentages of Registrable Shares as
of or on any particular date shall be deemed to refer to amounts or percentages
after giving effect to any applicable events contemplated by the preceding
sentence.
Registration Statement: A registration statement of the Company on any
form (to be selected by the Company) for which the Company then qualifies and
which permits the secondary resale thereunder of Registrable Shares. The term
Registration Statement shall also include all exhibits and financial statements
and schedules and documents incorporated by reference in such Registration
Statement when it becomes effective under the Securities Act, and in the case
of the references to the Registration Statement as of a date subsequent to the
effective date, as amended or supplemented as of such date.
Securities Act: The Securities Act of 1933, as amended, or any
successor Federal statute, and the rules and regulations of the Commission
promulgated thereunder, as they each may, from time to time, be in effect.
Seller: As defined in the first paragraph of this Agreement.
Stockholder Indemnified Parties: As defined in Section 6(a).
Selling Stockholder: Any Stockholder whose Registrable Shares are
included at the request of such Stockholder in any Registration Statement filed
pursuant to Section 2.
Stockholder: The Seller or any transferee of Registrable Shares held
by Seller permitted hereunder if such transferee (i) is designated a
Stockholder by Seller and (ii) has executed
2
<PAGE>
a counterpart hereof at the time of the transfer to such transferee, unless the
Registrable Shares held by such person are acquired in (a) a public
distribution pursuant to a registration statement under the Securities Act or
(b) one or more transactions exempt from registration under the Securities Act
where shares sold in such transaction may be publicly resold without subsequent
registration under the Securities Act (and without limitations as to volume or
manner of sale or both).
Transaction Agreement: As defined in the first "WHEREAS" clause above.
2. Incidental Registration.
(a) At any time until the time at which Stockholders may sell publicly
all Registrable Shares owned by such Stockholders without registration under
the Securities Act, each time that the Company proposes to register shares of
its Common Stock under the Securities Act for cash pursuant to either an
underwritten public offering, broker-dealer transactions, or a combination of
the foregoing (other than in connection with a dividend reinvestment, employee
benefit, stock option or similar plan, an offering of rights, warrants or
securities directly or indirectly convertible into or exchangeable or
exercisable for Common Stock or as registration solely for the account of the
Company pursuant to Rule 415 under the Securities Act or a registration of
shares on Form S-8 or S-4 or any other form not generally available for the
registration of securities for sale to the public), the Company shall give
written notice to William P. Kelly, as the representative of the Stockholders
(the "Representative"), of its intention to do so. Upon receipt of such notice,
the Representative may give the Company a written request to register all or
some of such Stockholders' Registrable Shares in the registration described in
the written notice from the Company as set forth in the foregoing sentence,
provided that such written request is given within twenty (20) days after any
such notice has been given by the Company (with such request stating (i) the
amount of Registrable Shares to be included and (ii) any other information
reasonably requested by the Company to properly effect the registration of such
Registrable Shares). Subject to Sections 2(b) and 4(c), upon receipt of such
request, if the registration form proposed to be used by the Company may also
be used to register Registrable Shares for distribution by such Selling
Stockholders, the Company will use its reasonable best efforts to promptly
cause all such Registrable Shares requested to be included in such registration
to be so included (in accordance with the methods of distribution set forth in
the Company's notice of intended registration).
(b) If the proposed method of distribution is a firm commitment
underwritten public offering and the managing underwriter thereof determines in
good faith that the inclusion of such Registrable Shares would materially
adversely affect the offering, the number of Registrable Shares to be offered
for the accounts of the Selling Stockholders shall be reduced or limited in
proportion to the number of Registrable Shares owned by all such Selling
Stockholders to the extent necessary to reduce the total number of shares to be
included in such offering to the amount recommended by such managing
underwriter; provided, that if securities are being offered for the account of
other persons or entities (other than, or in addition to, the Company), such
reduction shall be made pro rata from the securities intended to be offered by
such other persons (regardless of whether such other persons acquire or have
acquired their shares of Common Stock
3
<PAGE>
before, on or after the date hereof) and the Selling Stockholders and subject
to the registration rights of those persons set forth on Schedule I hereto, but
no such reduction shall be made from the securities to be offered for the
account of the Company.
(c) The Company's obligations under this Section 2 shall apply to a
registration to be effected for Common Stock to be sold for the account of the
Company as well as a registration statement which includes Common Stock to be
offered for the account of other holders of Common Stock.
(d) The Company may at any time and from time to time, without the
consent of any Stockholder, delay, suspend, abandon or withdraw any
Registration Statement described in Section 2(a) and any related proposed or
actual offering or other distribution in which any Stockholder has requested
inclusion of such Stockholder's Registrable Shares pursuant to this Section 2.
3. Limitations on Registration Rights. Notwithstanding the provisions
of Section 2 hereof, the Company shall not be required to effect or maintain
any registration if (i) the Company has previously filed with the Commission a
Registration Statement which included any of the Stockholders' Registrable
Shares pursuant to Section 2 of this Agreement; provided, however, that (A) if
pursuant to Section 2(b) the number of Registrable Shares requested to be
registered by the Selling Stockholders was reduced, then such Selling
Stockholders shall be given another opportunity to register their excluded
Registrable Shares in accordance with Section 2 or (B) if the Company shall
not, for any reason other than the failure of any Stockholder to comply with
this Agreement, cause the Registration Statement to remain effective, and
prepare and file with the Commission any amendments and supplements to the
Registration Statement and to the Prospectus used in connection therewith as
may be necessary to keep the Prospectus current and in compliance in all
material respects with the provisions of the Securities Act, until the sooner
to occur of the sale of all of the Registrable Shares covered by such
Registration Statement or the 90th day following the effective date of such
Registration Statement (as such 90th day may be extended for the period of any
suspension of the offering or distribution of Registrable Shares covered
thereby pursuant to subsection (d) of Section 2), then the Selling Stockholders
shall be given another opportunity to register their Registrable Shares in
accordance with Section 2; or (ii) there shall have been a material breach of a
representation, warranty, covenant or agreement contained in the Transaction
Agreement, or an unsatisfied claim under any indemnity arrangement relating
thereto by a party other than the Company or the Purchaser, which breach or
claim continues after the expiration of any applicable notice or cure periods.
4. Obligations with Respect to Registration.
(a) Subject to Section 2(d) hereof, if and whenever the Company is
obligated by the provisions of this Agreement to effect the registration of any
Registrable Shares under the Securities Act, the Company shall use its
commercially reasonable efforts:
4
<PAGE>
(1) to notify the Selling Stockholders, (A) when a Registration
Statement becomes effective, (B) when the filing of a post-effective amendment
to a Registration Statement or supplement to the Prospectus is required, when
the same is filed, and in the case of a post-effective amendment, when the same
becomes effective, (C) of any request by the Commission for any amendment of or
supplement to a Registration Statement or any Prospectus relating thereto or
for additional information and (D) of the entry of any stop order suspending
the effectiveness of such Registration Statement or of the initiation of any
proceedings for that purpose;
(2) to furnish to each Selling Stockholder a conformed copy of the
Registration Statement as declared effective by the Commission and of each
post-effective amendment thereto, and such number of copies of the final
Prospectus and of each supplement thereto as may reasonably be required to
facilitate the distribution of the Registrable Shares;
(3) to register or qualify the Registrable Shares covered by a
Registration Statement under the securities or blue sky laws of such
jurisdictions in the United States as the Selling Stockholders shall reasonably
request, and do any and all other acts and things which may be necessary to
enable each Selling Stockholder whose Registrable Shares are covered by such
Registration Statement to consummate the disposition in such jurisdictions of
such Registrable Shares; provided, however, that the Company shall in no event
be required to qualify to do business as a foreign corporation or a dealer in
any jurisdiction where it is not so qualified, to conform its capitalization or
the composition of its assets at the time to the securities or blue sky laws of
such jurisdiction, to execute or file any general consent to service of process
under the laws of any jurisdiction, to take any action that would subject it to
service of process in suits other than those arising out of the offer and sale
of the Registrable Shares covered by such Registration Statement, or to subject
itself to taxation in any jurisdiction where it has not theretofore done so;
and
(4) to cause such Registrable Shares covered by a Registration
Statement to be listed on the principal exchange or exchanges or qualified for
trading on the principal over the counter market on which the Common Stock is
then listed or traded upon the sale of such Registrable Shares pursuant to such
Registration Statement.
(b) The Company's obligations under this Agreement with respect to a
Selling Stockholder shall be conditioned upon such Selling Stockholder's
compliance with the following:
(1) such Selling Stockholder shall cooperate with the Company in
connection with the preparation of the Registration Statement, and such Selling
Stockholder will provide to the Company, in writing, for use in the
Registration Statement, all information regarding such Selling Stockholder and
such other information as may be necessary to enable the Company to prepare the
Registration Statement and Prospectus covering the Registrable Shares and to
maintain the currency and effectiveness thereof;
(2) such Selling Stockholder shall permit the Company, the proposed
5
<PAGE>
underwriters, agents or broker-dealers of the offering or other distribution
and their respective representatives and agents to examine such documents and
records and shall supply any information as they may reasonably request in
connection with the offering or other distribution in which such Selling
Stockholder proposes to participate;
(3) such Selling Stockholder shall enter into such agreements with the
Company and any underwriter, broker-dealer or similar securities industry
professional containing representations, warranties, indemnities and agreements
as are in each case customarily entered into and made by selling stockholders,
and will cause its counsel to give any legal opinions customarily given, in
secondary distributions under similar circumstances;
(4) during such time as such Selling Stockholder may be engaged in a
distribution of the Registrable Shares, such Selling Stockholder will comply
with all applicable laws, including, but not limited to Regulation M
promulgated under the Exchange Act, and pursuant thereto will, among other
things: (A) not engage in any stabilization activity in connection with the
securities of the Company in contravention of such rules; (B) distribute the
Registrable Shares owned by such Selling Stockholder solely in the manner
described in the Registration Statement; (C) cause to be furnished to each
underwriter, agent or broker-dealer to or through whom the Registrable Shares
owned by such Selling Stockholder may be offered, or to the offeree if an offer
is made directly by the Selling Stockholder, such copies of the Prospectus (as
amended and supplemented to such date) and documents incorporated by reference
therein as may be required by such underwriter, agent, broker-dealer or
offeree; and (D) not bid for or purchase any securities of the Company or
attempt to induce any person to purchase any securities of the Company other
than as permitted under the Exchange Act;
(5) in any case in which such information is different for any Selling
Stockholder than that contained in the Registration Statement, at least five
(5) days prior to any distribution of Registrable Shares, such Selling
Stockholder will advise the Company in writing of the dates on which the
distribution will commence and terminate, the number of the Registrable Shares
to be sold, the terms and the manner of sale (including, to the extent
applicable, the purchase price, the name of any underwriter, agent or
broker-dealer to or through whom such distribution is being made, and the
amount of any selling commissions or other items constituting compensation to
such underwriter, agent or broker-dealer) and the number of shares of Common
Stock that will be owned beneficially by such Selling Stockholder after giving
effect to such sale; and
(6) on notice from the Company of the happening of any of the events
specified in clauses (B), (C) or (D) of Section 4(a)(1), or that, as set forth
in Section 2(d), it has delayed, suspended, abandoned or withdrawn any
Registration Statement or any related offering or other distribution or it
otherwise requires the suspension by such Selling Stockholder of the
distribution of any of the Registrable Shares, then such Selling Stockholder
shall cease offering or distributing the Registrable Shares until such time, if
any, as the Company notifies such Selling Stockholder that offering and
distribution of the Registrable Shares may recommence.
6
<PAGE>
5. Expenses of Registration.
All expenses in connection with any Registration Statement, any
qualification or compliance with federal or state laws required in connection
therewith, and the distribution of the Registrable Shares shall, as between the
Selling Stockholders and the Company, be borne as follows:
(i) The Company shall pay and be responsible for the registration fee
payable under the Securities Act, blue sky fees and expenses, if applicable
(subject to the limitations set forth in Section 4(a)(3)), printing fees and
all fees and disbursements of the Company's counsel and accountants. Solely at
its discretion, the Company may, in lieu of engaging the services of a
financial printing company with respect to the Registration Statement or the
Prospectus, arrange for the photocopying thereof, in which event the Company
will bear the applicable photocopying costs.
(ii) The Selling Stockholders shall pay all fees and disbursements of
their own counsel (other than the first $1,500 of fees and disbursements
payable to the one counsel for the Selling Stockholders which will be paid by
the Company) and advisers, all stock transfer fees (including the cost of all
transfer tax stamps) or expenses, if any, and all other expenses (including
underwriting or brokerage discounts, commissions and fees) related to the
distribution of the Registrable Shares that have not expressly been assumed by
the Company as set forth above.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Selling
Stockholder and each person (if any) who controls such Selling Stockholder
within the meaning of either the Securities Act or the Exchange Act
(collectively, the "Stockholder Indemnified Parties") from and against any
losses, claims, damages or liabilities (collectively "Losses"), joint or
several, to which such Stockholder Indemnified Parties may become subject,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and, subject to
Section 6(c), the Company will reimburse such Stockholder Indemnified Parties
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Losses; provided, however, that the Company
will not indemnify or hold harmless any Stockholder Indemnified Party from or
against any such Losses (i) that arise out of or are based upon any violation
of any federal or state securities laws, rules or regulations committed by any
of the Stockholder Indemnified Parties (or any person who controls any of them
or any agent, broker-dealer or underwriter engaged by them) or in the case of a
non-underwritten offering, any failure by such Selling Stockholder to give any
purchaser of Registrable Shares at or prior to the written confirmation of such
sale, a copy of the most recent Prospectus or (ii) if the untrue statement,
omission or allegation thereof upon which Losses or expenses are based (x) was
made in reliance upon and in conformity with the information provided by or on
behalf of any Stockholder
7
<PAGE>
Indemnified Party for use or inclusion in the Registration Statement or any
Prospectus, or (y) was made in any Prospectus used after such time as the
Company advised such Selling Stockholder that the filing of a post-effective
amendment or supplement thereto was required, except the Prospectus as so
amended or supplemented, or (z) was made in any Prospectus used after such time
as the Registration Statement ceases to be effective or current or has been
withdrawn or abandoned or the use of any such Registration Statement or
Prospectus or any offering or distribution pursuant thereto shall have been
suspended or delayed hereunder.
(b) Each Selling Stockholder, individually and not jointly, agrees to
indemnify and hold harmless the Company, its directors and officers and each
person, if any, who controls the Company within the meaning of either the
Securities Act or the Exchange Act (the "Company Indemnified Parties"), from
and against any Losses, joint or several, to which the Company Indemnified
Parties may become subject, insofar as such Losses (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
the Prospectus, or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, if
the statement or omission was made in reliance upon and in conformity with the
information provided in writing specifically by or on behalf of such Selling
Stockholder or any person who controls such Selling Stockholder for use in the
Registration Statement or any Prospectus, or (ii) the use of any Prospectus
after such time as the Company has advised such Selling Stockholder that the
filing of a post-effective amendment or supplement thereto is required, except
the Prospectus as so amended or supplemented, or (iii) the use of any
Prospectus after such time as the Registration Statement ceases to be effective
or current or has been withdrawn or abandoned or the use of any such
Registration Statement or Prospectus or any offering or distribution pursuant
thereto shall have been suspended or delayed hereunder, or (iv) any violation
by such Selling Stockholder or any person who controls such Selling Stockholder
within the meaning of either the Securities Act or the Exchange Act (or any
agent, broker-dealer or underwriter engaged by such Selling Stockholder or any
such controlling person) of any federal or state securities law or rule or
regulation thereunder or in the case of a non-underwritten offering, any
failure by such Selling Stockholder to give any purchaser of Registrable Shares
at or prior to the written confirmation of such sale, a copy of the most recent
Prospectus; and, subject to Section 6(c), such Selling Stockholder will
reimburse such Company Indemnified Parties for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Losses. For purposes of clause (i) of the preceding sentence and clause
(ii) of the last sentence of Section 6(a), but without limiting the generality
thereof, any information concerning any Shareholder Indemnified Party or plan
of distribution included in any Registration Statement or Prospectus which is
provided to the Selling Stockholder for his review within a reasonable period
before filing or use thereof and to which the information such Selling
Stockholder has not promptly provided written notice of objection to the
Company shall be deemed to have been provided by such Selling Stockholder
specifically for use in such Registration Statement or Prospectus.
(c) Each party entitled to indemnification under this Section 6 (the
8
<PAGE>
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and the Indemnifying Party may participate at its own expense in the defense,
or if it so elects, to assume the defense of any such claim and any action or
proceeding resulting therefrom, including the employment of counsel and the
payment of all expenses. The failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party from its obligations
to indemnify such Indemnified Party, except to the extent the Indemnified
Party's failure to so notify actually prejudices the Indemnifying Party's
ability to defend against such claim, action or proceeding. In the event that
the Indemnifying Party elects to assume the defense in any action or
proceeding, the Indemnified Party shall have the right to employ separate
counsel in any such action or proceeding and to participate in the defense
thereof, but the fees and expenses of such separate counsel shall be such
Indemnified Party's expense unless (i) the Indemnifying Party has agreed to pay
such fees and expenses or (ii) the named parties to any such action or
proceeding (including any impleaded parties) include an Indemnified Party and
the Indemnifying Party, and such Indemnified Party shall have been advised by
counsel that there may be a conflict of interest between such Indemnified Party
and the Indemnifying Party in the conduct of the defense of such action (in
which case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not assume the defense of such
action or proceeding on such Indemnified Party's behalf, it being understood,
however, that the Indemnifying Party shall not, in connection with any one such
action or proceeding or separate but substantially similar or related actions
or proceedings arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for all Indemnified Parties, which firm shall be
designated in writing by the Selling Stockholder(s) or the Company as the case
may be). No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of the Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. The Indemnifying Party shall not be liable for any settlement of
any such action or proceeding effected without its written consent, but if
settled with its written consent, or if there be a final judgment for the
plaintiff in any such action or proceeding, the Indemnifying Party shall
indemnify and hold harmless the Indemnified Party from and against any loss or
liability by reason of such settlement or judgment.
(d) If the indemnification provided for under this Section 6 is
unavailable to or insufficient to hold the Indemnified Party harmless under
subparagraphs (a) or (b) above in respect of any Losses referred to therein for
any reason other than as specified therein, then the Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Indemnifying Party
on the one hand and such Indemnified Party on the other from the subject
offering or distribution or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Indemnifying Party
9
<PAGE>
on the one hand and such Indemnified Party on the other in connection with the
statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations. The relative benefits received by the
Indemnifying Party on the one hand and the Indemnified Party on the other hand
shall be deemed to be in the same proportion as the net proceeds of the
offering or other distribution (after deducting expenses) received by the
Indemnifying Party bears to the net proceeds of the offering or other
distribution (after deducting expenses) received by the Indemnified Party. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
(or omitted to be supplied by) the Company or the Selling Stockholders, the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission, the relative benefits received
by each party from the sale of the Registrable Shares and any other equitable
considerations appropriate under the circumstances. The amount paid or payable
by an Indemnified Party as a result of the Losses referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
7. Notices. All notices, requests, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed, certified or registered mail with
postage prepaid, or sent by telex, telegram or telecopier, as follows:
(i) if to the Company:
Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Attention: General Counsel
Facsimile: (516) 694-0918
with a copy to:
Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022
Attention: Joseph E. Young, Esq.
Facsimile: (212) 705-5001
(ii) if to Seller or the Representative:
Carver Golf Enterprises, Inc.
10
<PAGE>
45 Reservoir Park Drive
Rockland, Massachusetts 02370
Attention: William P. Kelly
Facsimile: (617) 871-8521
with a copy to:
Davis, Malm & D'Agostine, P.C.
One Boston Place
Boston, Massachusetts 02108
Attention: Robert E. Richards, Jr., Esq.
Facsimile: (617) 305-3133
or to such other person or address as any party shall specify by notice in
writing to the other party. All notices and other communications given to a
party in accordance with the provisions of this Agreement shall be deemed to
have been given (i) three Business Days after the same are sent by certified or
registered mail, postage prepaid, return receipt requested, (ii) when delivered
by hand or transmitted by telecopy (answer back received) or (iii) one Business
Day after the same are sent by a reliable overnight courier service, with
acknowledgement of receipt requested. Notwithstanding the preceding sentence,
notice of change of address shall be effective only upon actual receipt
thereof.
8. Amendment. Any provision of this Agreement may be amended or
modified in whole or in part at any time by an agreement in writing among the
Company and the Stockholders who hold a majority of the Registrable Shares then
outstanding, executed in the same manner as this Agreement. No consent, waiver
or similar act shall be effective unless in writing.
9. Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto and supersedes all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof.
10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11. Governing Law. This Agreement shall be governed by and interpreted
in accordance with the internal laws of the State of Delaware, without giving
effect to principles of conflicts of laws.
12. Assignment. Subject to the definition of "Stockholder" contained
in Section 1 hereof, the Seller may not assign its rights under this Agreement
without the prior written consent of the Company. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
FAMILY GOLF CENTERS, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
CARVER GOLF ENTERPRISES, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
12
<PAGE>
SCHEDULE I
1. Any registration rights in respect of the Common Stock or any other
class of capital stock of the Company, except those registration rights in
respect of shares of Common Stock issued in connection with the acquisition by
the Company of a golf center.
13
<PAGE>
ASSIGNMENT AND ASSUMPTION OF LEASE
----------------------------------
ASSIGNMENT AND ASSUMPTION OF LEASE, made as of the __ day of June,
1997 (this "Agreement"), by and among DIVOT CITY, a California limited
partnership having an address at c/o Joseph George Distribution, 1600 Coleman
Avenue, San Jose, CA 95150 ("Assignor"), D.C. MANAGEMENT, INC. having the same
address as the Assignor (the Managing Partner) and MILPITAS FAMILY GOLF
CENTERS, INC., a Delaware corporation having an address at 225 Broadhollow
Road, Suite 106E, Melville, New York 11747 ("Assignee").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, by Lease dated March 30, 1993 (the "Lease") by and between
Santa Clara County (the "County"), and Assignor, as tenant (which Lease is
attached as Exhibit A-1 hereto), County leased to Tenant a portion of County's
property located in the City of Milpitas, consisting of 16.124 acres, which
property is more particularly described in Exhibit A attached hereto (the
"Premises");
WHEREAS, by License Agreement dated as of December 9, 1993 (the
"License") by and between County and Assignor (which License is attached as
Exhibit A-2 hereto), County granted Assignor a license to landscape and
maintain the property located between the Assignor's golf center and I-880;
WHEREAS, Assignor desires to assign to Assignee its entire interest as
tenant under the Lease and licensee under the License and Assignee desires to
accept such assignment and assume Assignor's obligations under the Lease and
License on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, and other good and valuable consideration, the mutual receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree to
the foregoing and as follows:
1. Assignment and Assumption. On the Closing Date (as hereinafter
defined) Assignor shall assign, set over and transfer to Assignee all right,
title and interest of Assignor in and to the Premises, the Lease and the
License, and Assignee shall assume and agree to perform any and all of the
obligations to be performed by the tenant under the Lease and License (as if
Assignee executed the Lease and the License originally as tenant or licensee,
respectively, thereunder) accruing from and after April 1, 1997 (the "Effective
Date"). Assignee further agrees to be bound by and fully responsible for all of
the covenants, agreements, terms, provisions, and conditions of Assignor or
tenant under the Lease and as licensee under the License to be performed by
Assignor from and after the Effective Date. Assignee agrees that the
obligations assumed hereunder and agreements contained herein shall benefit the
County and its successors and assigns as well as Assignor. At the Closing, ,
Assignor shall deliver possession of the Premises to Assignee, free of all
tenancies or rights of possession.
1
<PAGE>
2. Bill of Sale. On the Closing Date, Assignor shall sell, assign,
transfer and convey to Assignee, and Assignee shall purchase and acquire from
Assignor, all of Assignor's right, title and interest in and to the following
property (collectively, the "Property"):
2.1 all furnishings, fixtures, machinery, equipment, vehicles and
personalty attached or appurtenant to or used in connection with the Lease that
are owned by Assignor, and all inventories, supplies, sales, marketing and
instructional materials of every kind and description relating to the business
conducted at the Premises (the "Business"), wherever located, including without
limitation, the items described on Exhibit B attached hereto and made a part
hereof (the "Personal Property");
2.2 the files, books, notices and other correspondence from any
governmental agencies, and other records used or employed by Assignor or its
affiliates in connection with the ownership and/or operation of the Business,
other than accounting records, but including copies of such accounting records
relating to the period on or after April 1, 1997 (collectively, the "Records");
2.3 any consents, authorizations, variances, waivers, licenses,
certificates, permits and approvals held by or granted to Assignor in
connection with the ownership of the Lease or operation of the Business
(collectively, the "Permits");
2.4 the contracts, leases and other agreements of or relating to
the operation of the Business described on Exhibit C attached hereto and made a
part hereof (the "Contracts");
2.5 any manufacturers' and vendors' warranties and guarantees,
except to the extent the same relate solely to any Retained Assets or Retained
Liabilities (as hereinafter defined) (the "Claims"); and
2.6 any other properties and assets of every kind and nature,
real or personal, tangible or intangible, relating in any way whatsoever to the
Lease, the License, the Premises or the Business, except to the extent the same
relate solely to the Retained Assets or Retained Liabilities.
3. Assets to be Retained by Assignor. Anything herein to the contrary
notwithstanding, Assignor shall not sell, and Assignee shall not acquire, the
following assets of Assignor (the "Retained Assets"):
3.1 any rights of Assignor with respect to insurance policies
owned by Assignor or for which Assignor is the named insured; and
3.2 all cash, funds in bank accounts and cash equivalents
existing as of the Closing Date.
4. Assumption of Certain Liabilities. Assignee shall assume and agree
to pay and
2
<PAGE>
discharge when due all liabilities and obligations of Assignor under the Lease,
the License and the Contracts to the extent the same arise from and after the
Effective Date (the "Assumed Liabilities"). Assignor shall retain, and Assignee
shall not assume, perform, discharge or pay, and shall not be responsible for,
any and all liabilities or obligations of any nature whatsoever in connection
with or relating to the Lease, the License, the Premises or the Property,
Assignor or the Business or any predecessor owner of the Lease, the License,
the Premises or the Property or the Business other than the Assumed Liabilities
(collectively, the "Retained Liabilities").
5. Title; Permitted Exceptions.
5.1 Within five days after the execution of this Agreement,
Assignor shall furnish Assignee with a Preliminary California Land Title
Association Report of the title to the property. Within fifteen days of receipt
of the said report, Assignee shall notify Assignor, in writing, of any
objection to any exception therein. If Assignee makes a timely objection to any
exception, and the exception is not eliminated within ten days of Assignor's
receipt of the objection, this Agreement shall be terminated. Assignee's
failure to object in this manner to any exception shall be deemed an approval
by the Assignee of that exception. All approved exceptions are hereinafter
referred to as "Permitted Exceptions".
5.2 If a search of the title discloses judgments, bankruptcies or
other returns against other persons having names the same as or similar to that
of Assignor, Assignor will on request deliver to the Title Company or Assignee
an affidavit showing that such judgments, bankruptcies or other returns are not
against Assignor, in form sufficient to permit deletion of such exception from
the title policy.
6. Consideration.
6.1 In consideration for the assignment of the Lease, License and
the sale of the Property, at the Closing Assignee shall:
6.1.1 pay to Assignor the sum of $2,200,000.00, subject to
adjustment as provided in this Section 6 and in Section 7.2, payable by the
wire transfer of funds, $100,000.00 of which shall be held in escrow and
distributed in accordance with the Escrow Agreement, in the form attached
hereto as Exhibit F (the "Escrow Agreement"); and
6.1.2 assume the Assumed Liabilities.
6.2 The purchase price shall be reduced by the amount of all
outstanding gift certificates, debit cards, discount cards, prepaid golf
lessons and all other commitments which have not been performed as of the
Closing Date, as reflected on the Settlement Statement.
6.3 The value of the golf ball inventory as of the date hereof is
$4,500 and the value of the food and beverage inventory as of the date hereof
is $350. To the extent that the value of the said inventories on the closing
date is less than the just mentioned values, the purchase price shall be
reduced by such amount and reflected on the Settlement Statement. The said
inventories shall be valued by the parties at cost or market value, which ever
is the lower at
3
<PAGE>
the time of closing.
6.4 The parties hereby agree that $ 2,141,885.00 of the purchase
price shall be allocated to the assignment and assumption of the Lease and the
License and that the balance shall be allocated to the Property, including the
Personal Property, Permits, Contracts and Claims.
6.5 The purchase price shall be increased by the net profit of
the business for the period beginning on the Effective Date and ending on the
day immediately preceding the Closing Date. If during such period there is a
loss, no adjustment shall be made.
7. Closing; Adjustments.
7.1 The closing of the transaction provided for in this Agreement
(the "Closing") shall take place as soon as practicable after each of the
conditions set forth in Section 8 have been fulfilled or waived in accordance
herewith (the actual date of the Closing being referred to herein as the
"Closing Date"); provided, however, that in no event shall the Closing Date be
subsequent to July 15, 1997. In the event that the Closing Date does not occur
on or prior to July 15, 1997, this Agreement shall automatically be deemed
terminated and neither party shall have any further liabilities or obligations
hereunder except that each party shall be responsible for paying their own
expenses, including legal fees and Assignee shall pay the cost of the ALTA
Survey and the Phase I environmental study.
7.2 The parties hereto agree that (i) all compensation payable to
the County under the Lease and all other operating expenses of Assignor
relating to the Lease (i.e., cost of goods sold, advertising, collections,
fees, hired services, insurance, miscellaneous expenses, postage, repairs and
maintenance, supplies, taxes, utilities, wages and interest on indebtedness,
but specifically not including professional fees and expenses, travel and
lodging or depreciation), and (ii) all income of Assignor, including accounts
receivable, shall be apportioned between Assignor and Assignee as of the
Effective Date based on the portion of each such expense or revenue
attributable to the period falling before the Effective Date on the one hand,
which Assignor shall bear the responsibility and benefit of, and the portion of
each such expense or revenue attributable to the period falling on or after the
Effective Date, on the other hand, which Assignee shall bear the responsibility
and benefit of (the "Adjustment"). The net Adjustment will be paid by the party
owing the same to the other in cash or by certified or official bank check or
wire transfer. The expenses and liabilities for which Assignor shall be liable
pursuant to this Section shall be included within the meaning of the term
"Retained Liabilities".
7.3 To the extent that any of the prorations made pursuant to
this Article are based upon estimates of payments to be made and/or expenses to
be incurred by Assignee subsequent to the Closing Date, or either party
discovers any errors in or omissions in respect of the Adjustment, Assignor and
Assignee agree to adjust such prorations promptly upon receipt by Assignor or
Assignee, as the case may be, of such payments or of bills or other
documentation setting forth the actual amount of such expenses.
4
<PAGE>
7.4 The Assignor hereby agrees that any and all property taxes
which become due and owing on the Premises or Property and which relate to a
period prior to the Effective Date shall upon notice by Assignee to Assignor,
shall be paid promptly by Assignor.
7.5 Assignor and Assignee shall maintain and make available to
each other any books or records necessary for the adjustment of any item
pursuant to this Article. The provisions of this Article shall survive the
Closing.
8. Closing Conditions.
8.1 Assignee's obligation to consummate the transactions
contemplated hereby are conditioned on the delivery at or prior to the Closing
of physical possession of the Premises (receipt of which may be actual or
constructive) and the following:
8.1.1 a bill of sale conveying, transferring and selling to
Assignee all right, title and interest of Assignor in and to 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;
8.1.2 a settlement statement (the "Settlement Statement")
setting forth the amounts paid by or on behalf of and/or credited to each of
Assignee and Assignor pursuant to this Agreement;
8.1.3 a Certificate or Certificates of Occupancy for all
improvements;
8.1.4 original counterparts of each of the Contracts
described on Exhibit C;
8.1.5 a landlord estoppel and consent to assignment with
respect to the Lease, in the form of Exhibit D attached hereto and signed by
the Lessor under such Lease.
8.1.7 an affidavit (the "FIRPTA Affidavit") duly executed
and acknowledged by Assignor pursuant to Section 1445 (b)(2) of the Internal
Revenue Code of 1986, as amended, stating that Assignor is not a foreign person
within the meaning of such provision;
8.1.8 keys to all locks relating to the Premises,
appropriately labeled;
8.1.9 the Escrow Agreement, executed by Assignor and the
escrow agent named therein, in the form attached hereto as Exhibit E.
8.1.10 evidence that the lease with Golf Mart has been
terminated;
8.1.11 Assignor shall have performed, in all material
respects, all of its agreements contained herein that are required to be
performed by Assignor on or prior to the Closing Date, and Assignee shall have
received a certificate of an Executive Officer of Assignor, dated the Closing
Date, certifying to such effect.
5
<PAGE>
8.1.12 The representations and warranties of the Assignor
contained in this Agreement and in any document delivered in connection
herewith shall be true and correct, in all material respects, as of the
Closing, and Assignee shall have received a certificate from Assignor, dated
the Closing Date, certifying to such effect.
8.1.13 an ALTA Survey of the Premises, satisfactory to
Assignee;
8.1.14 a Phase I environmental report disclosing no evidence
of Hazardous Material at, under or on the Premises, or any other environmental
conditions requiring remediation or further testing;
8.1.15 title insurance insuring the leasehold interest of
Assignee;
8.1.16 payment of the cost of all work done through the
Closing with respect to installing and repairing the nets and poles on the
Premises; and
8.1.17 all other instruments and documents to be executed,
acknowledged where appropriate and/or delivered by Assignor to Assignee
pursuant to any of the other provisions of this Agreement.
8.2 Assignor's obligation to consummate the transactions
contemplated hereby are conditioned on the delivery at or prior to the Closing
of the following:
8.2.1 the purchase price referred to in Section 6.1 hereof;
8.2.2 the Escrow Agreement, executed by Assignee and the
escrow agent named therein, in the form attached hereto as Exhibit E;
8.2.3 the Settlement Statement, executed by Assignee;
8.2.4 Assignee shall have performed, in all material
respects, all of its agreements contained herein that are required to be
performed by Assignee on or prior to the Closing Date, and Assignor shall have
received a certificate of an Executive Officer of Assignee dated the Closing
Date, certifying to such effect;
8.2.5 the representations and warranties of Assignee
contained in this Agreement and in any documents delivered in connection
herewith shall be true and correct, in all material respects, as of the
Closing, and Assignor shall have received a certificate of an Executive Officer
of Assignee, dated the Closing Date, certifying to such effect;
8.2.6 the Assignee shall deliver a certificate of deposit or
other instrument with a face value of Fourteen Thousand Dollars ($14,000.00)
with the County as required under the Lease; and
6
<PAGE>
8.2.7 all other instruments and documents to be executed,
acknowledged where appropriate and/or delivered by Assignee to Assignor
pursuant to any of the other provisions of this Agreement.
9. Representations and Warranties of Assignor. Each of the Assignor
and the Managing Partner, jointly and severally, hereby represents and warrants
to Assignee as of the date hereof and as of the Closing Date as follows:
9.1 Organization; Power and Authority. Assignor is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of California, and has all requisite power and authority to
carry on its business as it is now being conducted, to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby.
9.2 Due Authorization and Execution; Effect of Agreement. The
execution, delivery and performance by Assignor of this Agreement and the
consummation by Assignor of the transactions contemplated hereby have been duly
authorized by all necessary partnership action required to be taken on the part
of the Assignor. This Agreement has been duly and validly executed and
delivered by Assignor and constitutes the valid and binding obligation of
Assignor, enforceable in accordance with its terms. The execution, delivery and
performance by Assignor of this Agreement and the consummation by Assignor of
the transactions contemplated hereby will not, with or without the giving of
notice or the lapse of time, or both, (a) violate any provision of any law,
rule or regulation to which Assignor is subject; (b) violate any order,
judgment or decree applicable to Assignor; or (c) conflict with or result in a
breach of or a default under any term or condition of Assignor's organizational
documents or partnership agreement or any term or condition of any agreement or
other instrument to which Assignor is a party or by which it or its assets may
be bound, except in each case, for violations, conflicts, breaches or defaults
which in the aggregate would not materially hinder or impair the consummation
of the transactions contemplated hereby.
9.3 Consents. Except for the Alcohol Beverage License, no
consent, approval or authorization of, exemption by, or filing with, any
governmental or regulatory authority or any third party is required in
connection with the execution, delivery and performance by Assignor of this
Agreement, except for consents, approvals, authorizations, exemptions and
filings, if any, which have been obtained on or prior to the Closing Date.
9.4 Compliance with Applicable Laws. Assignor is not engaging in
any activity or omitting to take any action as a result of which Assignor is in
violation of any law, rule, regulation, ordinance, statute, order, injunction
or decree, or any other requirement of any court or governmental or
administrative body or agency, applicable to the Lease, the License, the
Premises or the Business, and neither the execution and delivery by Assignor of
this Agreement or of any of the other agreements and instruments to be executed
and delivered by it pursuant hereto, the performance by Assignor of its
obligations hereunder or thereunder or the consummation of the transactions
contemplated hereby or thereby will result in any such violation. The Lease 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
7
<PAGE>
subdivision having jurisdiction.
9.5 Permits. Except for the Alcohol Beverage License, all Permits
required by any federal, state, or local law, rule or regulation and necessary
for the operation of the Business as currently being conducted have been
obtained and are currently in effect. No registrations, filings, applications,
notices, transfers, consents, approvals, orders, qualifications, waivers or
other actions of any kind are required by virtue of the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby
(a) to avoid the loss of any Permit or the violation of any law, regulation,
order or other requirement of law, or (b) to enable Assignee to continue the
operation of the Business as presently conducted after the Closing. The current
use and occupation of any portion of the Premises does not violate any of, and,
where applicable, is in material compliance with, the Permits, any applicable
deed restrictions or other covenants, restrictions or agreements including
without limitation, any of the Permitted Exceptions, site plan approvals,
zoning or subdivision regulations or urban redevelopment plans applicable to
the Lease.
9.6 The Lease and the License. Attached hereto as Exhibits A-1
and A-2 are true and correct copies of the Lease and License, respectively. The
Lease and the License are in full force and effect, have not been modified or
amended in any way except as stated above and neither the County nor Assignor
is in default, or sent or received any notice of default, in respect of the
Lease and the License. No event has occurred or circumstance exists which, with
the giving of notice or the passage of time, or both, would constitute a
default under the Lease or the License. Neither Assignor nor County has
exercised any right or option, or stated its intent, to terminate or cancel the
Lease or the License. Assignor has not assigned, transferred or conveyed the
Lease or the License or any interest therein, or granted any right or option
with respect thereto, to any party other than Assignee. The initial expiration
date of the Lease is March 29, 2008 and the initial expiration date of the
License is December 8, 2008.
9.7 Personal Property. Exhibit B sets forth a complete list of
all Personal Property currently used in the operation of the Business as
currently conducted.
9.8 Title to the Lease, the License and Property. To the best of
Seller's and Managing Partner's knowledge, the License, the Lease and the
Property are free and clear of any and all liens, charges, encumbrances,
mortgages, pledges, security interests, easements, agreements and other
interests and adverse claims (collectively, "Encumbrances"), other than the
Permitted Exception.
9.9 Contracts. Except for the Lease, the License, the Contracts
listed on Exhibit C attached hereto and the lease with Golf mart to operate the
pro shop, which will be terminated on or prior to the Closing Date and any
other contracts which will be terminated on or prior to the Closing Date,
Assignor is not a party to any leases, contracts, orders or agreements relating
to the Premises, the Property or the Business (written or otherwise) for which
it has not or shall not satisfy its obligations in whole.
9.12 Environmental Matters.
8
<PAGE>
9.12.1 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. ' 9601(33); (ii) any "pollutant or contaminant" as
defined in 42 U.S.C. ' 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.
9.12.2 To the best of Assignor'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. Assignor has not, and has not caused to be,
manufactured, processed, distributed, used, treated, stored, disposed of,
transported or handled any Hazardous Material at, on or under the Premises.
9.12.3 To the best of Assignor's knowledge, Assignor has no
obligation or liability imposed or based upon any provision under any foreign,
federal, state or local law, rule, or regulation or common law, or under any
code, order, decree, judgment or injunction applicable to Assignor or the
Premises or any notice, or request for information issued, promulgated,
approved or entered thereunder, or under the common law, or any tort, nuisance
or absolute liability theory, relating to public health or safety, worker
health or safety, or pollution, damage to or protection to the environment,
including without limitation, laws relating to emissions, discharges, releases
or threatened releases of Hazardous Material into the environment (including
without limitation, ambient air, surface water, groundwater, land surface or
subsurface), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, generation, disposal, transport or
handling of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes (hereinafter collectively referred to as
"Environmental Laws").
9.12.4 Assignor has not been subject to any civil, criminal
or administrative action, suit, claim, hearing, notice of violation,
investigation, inquiry or proceeding for failure to comply with, or received
notice of any violation or potential liability under the Environmental Laws in
respect of the Premises.
9.12.5 To the best of Assignor's knowledge, the Premises are
not (a) listed or proposed for listing on the National Priority List or (b)
listed on the Comprehensive Environmental Response, Compensation, Liability
Information System List ("CERCLIS") promulgated pursuant to CERCLA, 42 U.S.C. '
9601(9), or any comparable list maintained by any foreign, state or local
government authority.
9.12.6 To the best of Assignor's knowledge, there are no
underground storage tanks at the Premises and Assignor further warrants and
represents that any prior use
9
<PAGE>
and operation of underground storage tanks has been in compliance with all
Environmental Laws.
9.13 Tax Proceedings. There are no proceedings pending regarding
the reduction of real estate taxes or assessments in respect of the Premises.
9.14 Utilities. To the best of Assignor's knowledge, all water,
storm and sanitary sewer, gas, electricity, telephone and other utilities
adequately service the Premises, enter the Premises through lands as to which
valid public or private easements exist that will inure to the benefit of
Assignee and the Premises is furnished by facilities of public utilities and
the cost of installation of such utilities has been fully paid.
9.15 Access. Other than as set forth on Schedule 9.15, 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.
9.16 Insurance Requirements. To the best of Assignor's knowledge,
all requirements or recommendations by any insurer or by any board of fire
underwriters or similar body in respect of the Premises have been satisfied.
9.17 Litigation. There is no action or proceeding (zoning or
otherwise) or governmental investigation pending, or, to the best of Assignor's
knowledge, threatened against, or relating to, Assignor (insofar as it relates
to the Lease, the License, the Premises or the Business), the Lease, the
License, the Premises, the Business or the transactions contemplated by this
Agreement, nor is there any basis for any such action, proceeding or
investigation.
9.18 Assessments. Other than the Permitted Exceptions, there are
no special or other assessments for public improvements or otherwise now
affecting the Premises nor does Assignor know of (a) any pending or threatened
special assessments affecting the Premises or (b) any contemplated improvements
affecting the Premises that may result in special assessments affecting the
Premises.
9.19 Employee Agreements. There are no union or employment
contracts or agreements (written or oral) involving employees of Assignor or
its affiliates affecting the Premises or the Business which will survive the
Closing. All employees of Assignor who are employed to work at the Premises
will have been terminated as of the Closing Date.
9.20 Work at the Premises. Except as set forth on Schedule 9.20,
no services, material or work have been supplied to the Premises for which
payment has not been made in full.
9.21 Financial Condition. Assignor has delivered to Assignee true
and correct copies of (i) audited financial statements consisting of balance
sheets and income statements of Assignor as of December 31, 1995 and December
31, 1996; (ii) unaudited financial statements
10
<PAGE>
for the quarter ended March 31, 1997; and (iii) internal monthly reports for
the period April 1, 1997 through the date hereof. Such balance sheet presents
fairly the financial condition, assets and liabilities of Assignor as of its
date; such statement of income presents fairly the results of operations of
Assignor for the period indicated. The financial statements referred to in this
Section are in accordance with the books and records of Assignor. Since
December 31, 1996 and since March 31, 1997: (a) there has at no time been a
material adverse change in the financial condition, results of operations,
businesses, properties, assets, liabilities or future prospects of Assignor,
the Premises, the Property or Business; (b) the Business has been conducted in
all respects only in the ordinary course; and (c) Assignor has not suffered an
extraordinary loss (whether or not covered by insurance) or waived any right of
substantial value.
9.22 Full Disclosure. To the best knowledge of Assignor, none of
the information supplied by Assignor 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.
10. Representations and Warranties of Assignee. Assignee hereby
represents and warrants to Assignor as of the date hereof and as of the Closing
Date as follows:
10.1 Organization; Power and Authority. Assignee is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite power and authority to carry on its
business as it is now being conducted, to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby.
10.2 Due Authorization and Execution; Effect of Agreement. The
execution, delivery and performance by Assignee of this Agreement and the
consummation by Assignee of the transactions contemplated hereby have been duly
authorized by all necessary corporate action required to be taken on the part
of Assignee. This Agreement has been duly and validly executed and delivered by
Assignee and constitutes the valid and binding obligation of Assignee,
enforceable in accordance with its terms. The execution, delivery and
performance by Assignee of this Agreement and the consummation by Assignee of
the transactions contemplated hereby will not, with or without the giving of
notice or the lapse of time, or both, (a) violate any provision of any law,
rule or regulation to which Assignee is subject; (b) violate any order,
judgment or decree applicable to Assignee; or (c) conflict with or result in a
breach of or a default under any term or condition of Assignee's Certificate of
Incorporation or By-Laws or any agreement or other instrument to which Assignee
is a party or by which it or its assets may be bound, except in each case, for
violations, conflicts, breaches or defaults which in the aggregate would not
materially hinder or impair the consummation of the transactions contemplated
hereby.
10.3 Full Disclosure. None of the information supplied by
Assignee herein 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.
11
<PAGE>
11. Survival. The representations and warranties of the parties made
in Articles 9 and 10 shall survive the Closing.
12. Further Assurances. At any time and from time to time after the
date hereof, either party shall, at the request of the other party, execute and
deliver any further instruments or documents and take all such further action
as the requesting party may reasonably request in order to transfer into the
name of Assignee the Lease, the License and any and all Property contemplated
to be sold pursuant to this Agreement and to further consummate the
transactions contemplated by this Agreement. This Article shall survive the
Closing.
13. Assignor's and Assignee's Covenants. Assignor and Assignee hereby
covenant and agree as follows:
13.1 Access to Information. From the date hereof through the
Closing Date, Assignor shall afford to Assignee and Assignee's accountants,
counsel and other representatives reasonable access, upon reasonable notice and
in such a manner as will not unreasonably interfere with the conduct of
Assignor's business, to the Property. Assignee will provide Assignor with
copies of all studies, tests, surveys and reports which Assignee has obtained
in connection with the Premises.
13.2 Cooperation by the Parties. Each of the parties will use its
bests efforts to secure all necessary consents, approvals, authorizations,
exemptions and waivers from third parties as shall be required in order to
enable such party to effect the transactions contemplated hereby, and will
otherwise use its best efforts to cause the consummation of the transactions
contemplated hereby in accordance with the terms and conditions hereof.
13.3. Operation of the Premises Prior to Closing. During the
period from the date hereof through the Closing Date, Assignor agrees that
(except as expressly specified or permitted by this Agreement or to the extent
that Assignee shall otherwise consent in writing):
13.3.1 Assignor shall operate the Premises in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted
and shall use all reasonable efforts to preserve intact its present business
organization, keep available the services of its present employees and preserve
its relationships with customers, suppliers and other having business dealings
with it to the end that its goodwill and ongoing business shall not be impaired
in any material respect at the Closing Date.
13.3.2 Assignor shall maintain all existing insurance policies in
respect of the Property in full force and effect.
13.3.3 Assignor shall not commit a breach of, or default under,
any Permit or violate any applicable law, regulation, ordinance, order,
injunction or decree or any other requirement of any governmental body or
court, relating to the Premises and the Property.
13.3.4 Assignor shall maintain its inventory at ordinary,
customary
12
<PAGE>
levels, consistent with past practices.
13.3.5 Assignor shall maintain the Premises and the Property
in as good a state of operating condition and repair as they are on the date of
this Agreement, except for ordinary wear and tear.
13.3.6 Assignor shall not enter into any contract,
agreement, lease or occupancy agreement with respect to any of the Premises,
the Property, the Business or the Lease.
13.4 Employees. All employees at the Premises will be terminated
by Assignor as of the Closing; provided, however, that all employees will be
immediately considered for re-hire by the Assignee as of the Closing on the
terms to be determined by Assignee.
13.5 Contracts. Except for the Lease, the License and those
contracts described on Exhibit C attached hereto and made a part hereof,
Assignor will terminate all leases, contracts and agreements relating to the
Premises and the Property, including, without limitation, all maintenance,
service or utility contracts, as of the Closing.
14. "As Is".
14.1 Assignee represents that it has inspected the Premises and
the Property and is familiar with the physical condition thereof, and that it
agrees to accept the Premises and the Property "as is", in its condition at the
date of this Agreement, subject to reasonable use, wear, tear and natural
deterioration between the date hereof and the Closing Date, subject to the
provisions of Article 15 hereof.
15. Condemnation: Fire or Other Casualty. Between the date hereof and
the Closing, the risk of ownership and loss of the Premises and the Property
shall belong solely to the Assignor. If, between the date hereof and the
Closing, all or any portion of the Property is condemned, taken by eminent
domain, damaged by fire or other casualty or by any other cause of nature,
Assignor shall promptly give Assignee notice thereof. After receipt of notice
of such condemnation, taking or damage (from Assignor or otherwise), Assignee
shall have the option either:
15.1 to require Assignor to assign, transfer and/or convey the
Premises and the Property in accordance with the terms and provisions hereof on
the date of the Closing to Assignee in its damaged condition upon and subject
to all of the other terms and conditions of this Agreement, including payment
of the purchase price without adjustment on account of such condemnation,
taking or damage, and to assign Assignee all of Assignor's right, title and
interest in and to any claims Assignor may have under the casualty insurance
policies, condemnation awards and/or any causes of action with respect to such
condemnation or taking of or damage to the Premises and the Property and to pay
the Assignee by certified or bank check all payments theretofore made under
such insurance policies plus any deductible amount under its insurance
policies, or by such condemning or taking authorities; Assignor shall not
13
<PAGE>
settle any fire, casualty, condemnation or eminent domain claim without the
prior written consent of Assignee; or
15.2 to terminate this Agreement by giving notice to Assignor,
whereupon this Agreement shall be terminated, and neither party shall have any
further rights, claims, liabilities or obligations to the other except for
those rights, claims, liabilities and obligations specifically surviving the
termination of this Agreement.
16. Default. Assignor and Assignee agree that, if either party shall
default in the performance or its obligations under this Agreement, the other
party shall be entitled to all rights and remedies available at law or in
equity, including specific performance.
17. Brokers. Assignor and Assignee warrant and represent to each other
that they dealt with no broker, finder or similar agent or party who or which
might be entitled to a commission or compensation on account of introducing the
parties, the negotiation or execution of this Agreement and/or the closing of
the transaction provided for herein. Assignee and Assignor hereby respectively
agree to indemnify and hold harmless the other party from and against all loss,
liability, damage and expense (including, without limitation, attorneys' fees)
imposed upon or incurred by the other party by reason of any claim for
commissions or other compensation for bringing about this transaction by any
broker, finder or similar agent or party.
18. Costs and Fees. Conveyancing taxes, if any, shall be payable by
Assignor, and in no event be payable by Assignee. The Assignor shall pay (a)
half of the cost of obtaining the audited financial statements of the Assignor
and the other financial information required by Section 9.21 hereof, (b) the
cost of an ALTA Survey and CLTA standard title insurance policy (if the
transaction contemplated hereby is consummated), (c) the cost of a Phase I
environmental study (if the transaction contemplated hereby is consummated),
and (c) its own legal expenses. The Assignee shall pay (a) half of the cost of
obtaining the audited financial statements of the Assignor; (b) the cost of the
difference between a CLTA standard title insurance policy and an ALTA policy,
and (c) its own legal fees. 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.
19. Indemnification.
19.1 Subject to the further provisions of this Article, Assignor
shall protect, defend, hold harmless and indemnify Assignee, its officers,
directors, shareholders, employees, agents and affiliates, and their respective
successors and assigns, from, against and in respect of any and all losses,
liabilities, deficiencies, penalties, fines, costs, damages and expenses
whatsoever (including without limitation, reasonable professional fees and
costs of investigation, litigation, settlement, and judgment and interest)
("Losses") that may be suffered or incurred by any of them arising from or by
reason of (i) any Retained Liability or other liability or obligation of
Assignor which is not an Assumed Liability; (ii) the breach of any
representation, warranty, covenant or agreement of Assignor contained in this
Agreement or in any document or other writing prepared by Assignor and
delivered pursuant to this Agreement;
14
<PAGE>
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 19.1.
19.2 Subject to the further provisions of this Article, Assignee
shall protect, defend, hold harmless and indemnify Assignor, its partners,
officers, directors, shareholders, employees and agents, and its successors and
assigns from, against and in respect of any and all Losses that may be suffered
or incurred by any of them arising from or by reason of (i) any of the Assumed
Liabilities on and after the date hereof, (ii) the breach of any
representation, warranty, covenant or agreement of Assignee contained in this
Agreement or in any document or other writing prepared by Assignee and
delivered pursuant to this Agreement; and (iii) any and all actions, suits,
proceedings, claims, demands, assessments, judgments, costs and expenses
(including without limitation, interest, penalties, reasonable legal fees and
accounting fees) incident to the foregoing and the enforcement of the
provisions of this Section 19.2.
19.3 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 19.3 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 19.3.
19.4 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
15
<PAGE>
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.
19.5 The obligation of the Assignor under Section 19.1 hereof
shall be satisfied first from the Escrowed Funds (as defined in the Escrow
Agreement, and, if the Escrowed Funds are inadequate to provide indemnification
to Assignee, then from Assignor directly.
20. Bulk Sales. The parties agree to waive the requirements, if any,
of all applicable bulk sales laws. Assignor represents and warrants that (a) it
will not be rendered insolvent by the transactions contemplated by this
Agreement, and (b) all debts, obligations and liabilities relating to the Lease
and Business that are not expressly assumed by Assignee under this Agreement
will be promptly paid and discharged by Assignor as and when they become due.
Assignor agrees to indemnify and hold Assignee harmless from, and reimburse
Assignee for, any loss, cost, expense, liability or damage which Assignee may
suffer or incur by virtue of the noncompliance by Assignor or Assignee 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 Lease
ineffective as to creditors of or claimants against Assignor.
21. Notices. All notices, demands, requests, consents or other
communications ("Notices") which either party may desire or be required to give
to the other hereunder shall be in writing and shall be delivered by hand,
overnight express carrier, or sent by registered or certified mail, return
receipt requested, postage prepaid, in either event, addressed to the parties
at their respective addresses first above set forth. A copy of any Notice given
by Assignor to Assignee shall simultaneously be given in either manner provided
above to Family Golf Centers, Inc., 225 Broadhollow Road, Melville, New York
11747, Attention: General Counsel. A copy of any Notice given by Assignee to
Assignor shall simultaneously be given in either manner provided above to The
Eagle Law Firm, 2166 the Alameda, San Jose, California, 95126-1187, Attention:
Alexander F. Eagle III. Notices given in the manner aforesaid shall be deemed
to have been given three (3) business days after the day so mailed, he 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.
22. Miscellaneous.
22.1 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns.
22.2 This Agreement shall be governed by, interpreted under and
construed and enforced in accordance with, the laws of the State of California.
22.3 The captions or article headings in this Agreement are for
convenience only and do not constitute part of this Agreement.
16
<PAGE>
22.4 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.
22.5 This Agreement (including the Exhibits annexed hereto)
contains the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior understandings, if any, with respect
thereto.
22.6 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.
22.7 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.
22.8 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.
22.9 Either party may cause this Agreement to be recorded in the
appropriate public office.
17
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
DIVOT CITY
By: D.C. MANAGEMENT, INC.,
its general partner.
By:
-----------------------------------
Name:
Title:
D.C. MANAGEMENT, INC.
By:
-----------------------------------
Name:
Title:
MILPITAS FAMILY GOLF CENTERS, INC.
By:
-----------------------------------
Name:
Title:
18
<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
EXHIBIT A-1 LEASE
EXHIBIT A-2 LICENSE
EXHIBIT B PERSONAL PROPERTY
EXHIBIT C CONTRACTS
EXHIBIT D ASSIGNMENT AND FIRST AMENDMENT OF LEASE
EXHIBIT E ESCROW AGREEMENT
SCHEDULE 9.15 ACCESS--GOVERNMENTAL PLANS FOR ROADWAYS
SCHEDULE 9.20 WORK AT PREMISES
19
<PAGE>
CASH ESCROW AGREEMENT
CASH ESCROW AGREEMENT, dated as of ____________, 1997 (this
"AGREEMENT"), by and among DIVOT CITY, A CALIFORNIA LIMITED PARTNERSHIP, having
an address at 600 South Abbot Avenue, Milpitas, California 95035 ("SELLER"),
MILPITAS FAMILY GOLF CENTERS, INC., a Delaware corporation having an address at
225 Broadhollow Road, Suite 106E, Melville, New York 11747 ("PURCHASER"), and
SANTA CLARA LAND TITLE COMPANY at 701 Miller Street in San Jose, California
95110 ("ESCROW AGENT").
W I T N E S E T H:
- - - - - - - - -
WHEREAS, simultaneously with the execution hereof, Seller and
Purchaser are consummating the transactions contemplated by the Assignment and
Assumption of Lease Agreement dated as of the date hereof (the "PURCHASE
AGREEMENT"), between Seller and Purchaser;
WHEREAS, pursuant to the Purchase Agreement, Seller is required to
deposit $100,000.00 into an escrow account to be maintained by Escrow Agent to
be held against any claims for indemnity under Article 6.1.1 of the Purchase
Agreement; and
WHEREAS, this is the Escrow Agreement referred to in the Assignment
and Assumption of Lease Agreement. Capitalized terms used in this Escrow
Agreement and not otherwise defined herein shall have the respective meanings
given to them in the Purchase Agreement.
NOW, THEREFORE, it is agreed as follows:
<PAGE>
1. ESCROW.
1.01 APPOINTMENT OF ESCROW AGENT.
(a) Seller and Purchaser hereby appoint Escrow Agent, and Escrow Agent
hereby agrees to serve, as Escrow Agent in accordance with, and pursuant to,
this Agreement.
(b) Escrow Agent shall establish at a Federally Insured Bank of its
choice a separate Federally insured, interest bearing account for the benefit
of Seller (the "ESCROW ACCOUNT") for any amounts received by it hereunder.
(c) All monies, including interest thereon, held by Escrow Agent in
the Escrow Account pursuant to the terms hereof shall be hereinafter referred
to as the "ESCROWED FUNDS".
(d) Seller shall be responsible for the payment of any income taxes
payable in connection with any interest earned in the Escrow Account except
with respect to any interest on Escrowed Funds paid to or for the benefit of
Purchaser.
1.02 OPERATION OF ESCROW ACCOUNT. The parties hereto agree that the
Escrow Account shall operate as follows:
(a) At the Closing of the escrow of the Purchase Agreement, Seller
shall deliver or cause to be delivered to Escrow Agent $100,000.00. Escrow
Agent shall hold such amount as Escrowed Funds in the Escrow Account.
(b) At any tie prior to six (6) months after the date Escrow Agent
receives the $100,000 pursuant to section 1.02 (a) (the "Escrow Period"),
Purchaser shall be entitled to give a notice to Escrow Agent and Seller, signed
by Purchaser's President or any Vice President (with a copy to Seller), to the
effect that there has been
<PAGE>
an event entitling Purchaser to indemnification from Seller pursuant to Article
6.1.1 of the Purchase Agreement, which notice shall specify the amounts owed by
Seller pursuant to the Purchase Agreement, the calculation of such amounts and
the basis therefore. Seller and Purchaser shall provide Escrow Agent with a
"Certificate of Incumbency" regarding the identity of their Presidents and
Vice-Presidents.
(c) Twenty (20) days after Escrow Agent has received a notice pursuant
to Section 1.02 (b) hereof (or, if not a business day, on the next business day
following such twentieth day) Escrow Agent shall deliver to Purchaser such
portion of the Escrowed Funds as is specified in such notice unless Seller
shall have notified Escrow Agent (with a copy to Purchaser) in writing before
such date that Seller disagrees with Purchaser's determination that Purchaser
is entitled to indemnification with respect to the Purchase Agreement, which
notice shall be set forth in reasonable detail the basis for such disagreement.
(d) Should there be any dispute with respect to the delivery,
ownership, or right of possession of any of the Escrowed Funds during the
Escrow Period, Escrow Agent, as more fully set forth in Section 3.11 hereof, is
authorized and directed to retain in its possession, without liability to
anyone, all of any part of the Escrowed Funds until such dispute shall have
been settled, either by mutual agreement by the parties concerned, or by a
final order, decree, or judgment of a court of competent jurisdiction in the
United States of America and time for appeal has expired and no appeal have
been perfected, but Escrow Agent shall be under no duty whatsoever to institute
or defend any such proceedings, and may, in its discretion, deposit such
Escrowed Funds with a court of competent jurisdiction in the United States
<PAGE>
of America and be relieved of any and all liability to any of the parties
hereto upon such deposit.
1.03 DISTRIBUTION OF ESCROWED FUNDS. Unless a notice under Section
1.02 (b) hereof has been given and Escrowed Funds in satisfaction of such
notice have not been delivered to Purchaser, either because the 20-day period
has not yet run out or because a dispute relating to the claim made by such
notice is then pending, the Escrowed Funds or such portion of them as at the
time remains in escrow and is not in dispute, together with all interest and
income received by Escrow Agent with respect thereto shall be returned to
Seller on or before two months after the six (6) months Escrow Period provided
in section 1.02(b) has elapsed.
1.04 TERMINATION OF ESCROW ACCOUNT. This Agreement and the Escrow
Account will terminate at 5:00 p.m., Pacific local time, on the date on which
all of the Escrowed Funds contained in the Escrow Account are distributed as
set forth under section 1.03 above.
2. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be (a) delivered by hand, (b)
facsimile, or (c) over-night delivery with proper postage prepaid, return
receipt required, and addressed as follows:
If to Purchaser to:
Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Attention: Dominic Chang, President
Telephone: (516) 694-1666
Facsimile: (516) 694-0918
with a copy to:
<PAGE>
Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Attention: Pamela Charles, General Counsel
Telephone: (516) 694-1666
Facsimile: (516) 694-1935
If to Seller to:
Divot City
600 South Abbot Avenue
Milpitas, California 95035
Attention: Glenn George
with a copy to:
Alexander F. Eagle III
THE EAGLE LAW FIRM
2166 The Alameda
San Jose, California 95126
If to Escrow Agent, to:
Santa Clara Land Title Company
601 Miller Street
San Jose, California 95110
Attention: Melanie
Telephone: (408) 288-7800
Facsimile: (408) 275-0824
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. Except as
otherwise provided herein, no notice or communication shall be effective until
received.
3. CONCERNING ESCROW AGENT.
To induce Escrow Agent to act hereunder, it is further agreed by
Seller and Purchaser that:
3.01 Escrow Agent shall not be under any duty to give the Escrowed
Funds held by it hereunder any greater degree of care than it gives its own
similar property
<PAGE>
and shall not be required to invest any funds held hereunder except as directed
in this Agreement.
3.02 This Agreement expressly sets forth all the duties of Escrow
Agent with respect to any and all matters pertinent hereto. No implied duties
or obligations shall be read into this Agreement against Escrow Agent. Escrow
Agent shall not be bound by the provisions of any agreement among the other
parties hereto except this Agreement.
3.03 Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct, and, except with respect to claims based upon
such gross negligence or willful misconduct that are successfully asserted
against Escrow Agent, the other parties hereto shall jointly and severally
indemnify and hold harmless Escrow Agent (and any successor Escrow Agent) from
and against any and all losses, liabilities, claims, actions, damages, and
expenses, including reasonable attorneys' fees and disbursements, arising out
of, and in connection with, this Agreement. Without limiting the foregoing,
Escrow Agent shall in no event be liable in connection with its investment or
reinvestment of any cash held by it hereunder in good faith, in accordance with
the terms hereof, including, without limitation, any liability for any delays
(not resulting from gross negligence or willful misconduct) in the investment
or reinvestment of the Escrowed Funds; or any loss of interest incident to any
such delays. This Section 3.03 shall survive notwithstanding any termination of
this Agreement for the resignation of Escrow Agent.
3.04 Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument, or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact
<PAGE>
stated therein or the propriety or validity or the service thereof. Escrow
Agent may act in reliance upon any instrument or signature believed by it in
good faith to be genuine and may assume, if in good faith, that any person
purporting to give notice or receipt or advise or make any statement or execute
any document in connection with the provisions hereof has been duly authorized
to do so.
3.05 Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Escrow Agreement and shall not be liable
for any action taken or omitted in good faith and in accordance with such
advice.
3.06 Escrow Agent does not have any interest in the Escrowed Funds
deposited hereunder, but is serving as escrow holder only. Any payments of
income from the Escrow Account shall be subject to withholding regulations then
in force with respect to United States taxes. This Section 3.06 shall survive
notwithstanding any termination of this Agreement or the resignation of Escrow
Agent.
3.07 Escrow Agent makes no representation as to the validity, value,
genuineness, or the collectibility of any security or other documents or
instrument held by, or delivered to, it.
3.08 Escrow Agent shall not be called upon to advise any party as to
the wisdom in selling or retaining or taking or refraining from any action with
respect to any securities or other property deposited hereunder.
3.09 Escrow Agent (and any successor escrow agent) at any time may be
discharged from its duties and obligations hereunder by the delivery to it of
notice of termination signed by Purchaser and Seller or at any time may resign
by giving written notice to such effect to Purchaser and Seller. Upon any such
termination or
<PAGE>
resignation, Escrow Agent shall delivered the Escrowed Funds to any successor
escrow agent jointly designated by the parties hereto in writing, or to any
court of competent jurisdiction if no such successor escrow agent is agreed
upon, whereupon Escrow Agent shall be discharged of and from any and all
further obligations arising in connection with this Escrow Agreement. The
termination or resignation of Escrow Agent shall take effect on the earlier of
(a) the appointment of a successor (including a court of competent jurisdiction
or (b) the day that is thirty (30) days after the date of delivery: (i) to
Escrow Agent of the other parties' notice of termination or (ii) to the other
parties hereto of Escrow Agent's written notice of resignation. If at that time
Escrow Agent has not received a designation of a successor escrow agent, Escrow
Agent's sole responsibility after that time shall be to keep the Escrowed Funds
safe until receipt of a designation of successor escrow agent or a joint
written disposition instruction by the other parties hereto or an enforceable
order of a court of competent jurisdiction.
3.10 Escrow Agent shall have no responsibility for the contents of any
writing of any third party contemplated herein as a means to resolve disputes
and may rely without any liability upon the contents thereof.
3.11 In the event of any disagreement among or between the other
parties hereto resulting in adverse claims or demands being made in connection
with the Escrowed Funds, or in the event that Escrow Agent in good faith is in
doubt as to what action it should take hereunder, Escrow Agent shall be
entitled to retain the Escrowed Funds until Escrow Agent shall have received
(a) a final and non-appealable order of a court of competent jurisdiction in
the United States of America directing delivery of the Escrowed Funds or (b) a
written agreement executed by the other parties hereto
<PAGE>
directing delivery of the Escrowed Funds, in which event Escrow Agent shall
disburse the Escrowed Funds in accordance with such order or agreement. Any
court order referred to in (a) above shall be accompanied by a legal opinion by
counsel for the presenting party satisfactory to Escrow Agent to the effect
that said court order is final and non-appealable. Escrow Agent shall act on
such court order and legal opinions without further question.
3.12 As consideration for its agreement to act as Escrow Agent as
herein described, each of Purchaser and Seller shall pay one half of the Escrow
Agent's fees determined in accordance with the terms set forth on Exhibit A
hereto (and made a part of this Escrow Agreement as if herein set forth). In
addition, Purchaser and Seller agree to reimburse Escrow Agent (on a 50/50
basis) for all reasonable expenses, disbursements, and advances incurred or
made by Escrow Agent in performance of its duties hereunder (including
reasonable fees, expenses, and disbursements of its counsel).
4. MISCELLANEOUS.
4.01 BINDING EFFECT. This escrow Agreement shall be binding upon, and
inure solely to the benefit of, the parties hereto and their respective
successors and assigns, heirs, administrators, and representatives, and shall
not be enforceable by, or inure to the benefit of, any other third party,
except as provided in Section 3.09 hereof with respect to the termination of,
or resignation by, Escrow Agent. No party may assign any of its rights or
obligations under this agreement without the written consent of the other
parties.
<PAGE>
4.02 CHOICE OF LAW. This Agreement shall be construed in accordance
with, and governed by, the internal law of the State of California.
4.03 MODIFICATION. This Agreement may only be modified by a writing
signed by all of the parties hereto.
4.04 HEADINGS. The section headings herein are for convenience only
and shall not affect the construction thereof. Unless otherwise indicated,
references to Sections and Articles, respectively, contained herein.
4.05 COUNTERPARTS. This Agreement may be executed in one or more
counterparts but all such separate counterparts shall constitute both one and
the same instrument; provided that, although executed in counterparts, the
executed signature pages of each such counterpart may be affixed to a single
copy of this Agreement which shall constitute an original.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
MILPITAS FAMILY GOLF CENTERS, INC.
By:
-------------------------------------
Name:
Title:
DIVOT CITY, A CALIFORNIA LIMITED
PARTNERSHIP
By: D.C. MANAGEMENT, INC.,
its general partner
By:
--------------------------------
Name:
Title:
SANTA CLARA LAND TITLE COMPANY
By:
-------------------------------------
Name:
Title:
<PAGE>
AGREEMENT AND PLAN OF MERGER
AMONG
FAMILY GOLF CENTERS, INC.,
PHILADELPHIA FAMILY GOLF CENTERS, INC.
PINLEY ENTERPRISES, LTD.
AND
EACH OF THE STOCKHOLDERS
OF
PINLEY ENTERPRISES, LTD.
DATED AS OF JUNE 5, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I THE MERGER
Section 1.1 The Merger
Section 1.2 Closing
Section 1.3 Effective Time
Section 1.4 Conversion of Shares
Section 1.5 Adjustment to Exchange Ratio
Section 1.6 Exchange of Securities
Section 1.7 Definition of Subsidiary and Affiliate
ARTICLE II CERTAIN MATTERS RELATING TO THE SURVIVING
CORPORATION
Section 2.1 Certificate of Incorporation of the
Surviving Corporation
Section 2.2 By-Laws of the Surviving Corporation
Section 2.3 Directors and Officers of the Surviving Corporation
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB
Section 3.1 Existence, Good Standing, Corporate
Authority
Section 3.2 Authorization, Validity and Effect of
Agreements
Section 3.3 Capitalization
Section 3.4 Parent Reports and Financial Statements
Section 3.5 No Violation
Section 3.6 No Brokers
Section 3.7 Parent Common Stock
Section 3.8 Interim Operations of Merger Sub
Section 3.9 Absence of Certain Changes
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS
Section 4.1 Existence, Good Standing, Corporate
Authority
Section 4.2 Authorization, Validity and Effect of
Agreements
Section 4.3 Compliance with Laws
Section 4.4 Capitalization
Section 4.5 Subsidiaries
Section 4.6 Other Interests
Section 4.7 No Violation
Section 4.8 Conduct of Business
Section 4.9 Litigation
Section 4.10 Absence of Certain Changes
Section 4.11 Trademarks and Patents
Section 4.12 Properties
Section 4.13 Material Contracts
Section 4.14 Taxes
Section 4.15 Employee Benefit Plans
Section 4.16 Labor Matters
<PAGE>
Section 4.17 Absence of Indemnifiable Claims, etc.
Section 4.18 No Brokers
Section 4.19 Financial Condition
Section 4.20 Questionable Payments
Section 4.21 Liabilities
Section 4.22 Environmental Matters
Section 4.23 Insurance
Section 4.24 Full Disclosure
ARTICLE V COVENANTS
Section 5.1 Alternative Proposals
Section 5.2 Interim Operations of PEL
Section 5.3 Filings; Other Action
Section 5.4 Inspection of Records
Section 5.5 Further Action
Section 5.6 Stock Price Guarantee
Section 5.7 Expenses
Section 5.8 Survival of Representations and Warranties
of The Selling Stockholders
Section 5.9 Adjustments
ARTICLE VI CONDITIONS
Section 6.1 Conditions to Obligation of PEL to
Effect the Merger
Section 6.2 Conditions to Obligation of Parent and
Merger Sub to Effect the Merger
ARTICLE VII TERMINATION
Section 7.1 Termination
Section 7.2 Effect of Termination
ARTICLE VIII INDEMNIFICATION
Section 8.1 Obligation of PEL and the Selling Stockholders to Indemnify
Section 8.2 Obligation of Parent to Indemnify
Section 8.3 Notice and Opportunity to Defend
Section 8.4 Escrow Fund
Section 8.5 Limitation on Indemnification
ARTICLE IX GENERAL PROVISIONS
Section 9.1 Notices
Section 9.2 Assignment, Binding Effect
Section 9.3 Entire Agreement
Section 9.4 Amendment
Section 9.5 Governing Law
Section 9.6 Counterparts
Section 9.7 Headings
Section 9.8 Interpretation
Section 9.9 Waivers
Section 9.10 Incorporation of Schedules and Exhibits
Section 9.11 Severability
<PAGE>
Section 9.12 Enforcement of Agreement
SCHEDULES
Schedule 4.12(a) Assets and Property Owned by PEL
Schedule 4.12(b) Liens
Schedule 4.12(c) Assets and Property Leased by PEL
Schedule 4.13 Material Contracts of PEL
Schedule 4.15 Employee Benefit Plans
Schedule 4.16 Name, Title and Salary of Employees
Schedule 4.20 Assumed Liabilities
Schedule 4.23 Insurance
EXHIBITS
Exhibit A Restricted Securities Letter
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is dated as of June 5, 1997 (the
"Agreement") among Family Golf Centers, Inc., a Delaware corporation
("Parent"), Philadelphia Family Golf Centers, Inc., a Delaware corporation and
the wholly-owned subsidiary of Parent ("Merger Sub"), Pinley Enterprises,
Ltd., a Pennsylvania corporation ("PEL"), Robert Finley ("Finley") and Daniel
J. Pinciotti ("Pinciotti"), (Finley and Pinciotti shall collectively be
referred to herein as the "Selling Stockholders").
WHEREAS, the parties wish to provide for the terms and conditions
upon which PEL will be acquired by Parent by means of a merger of PEL with and
into Merger Sub;
WHEREAS, it is the intention of the parties to this Agreement that
for federal income tax purposes, the merger provided for herein shall qualify
as a "reorganization" within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code");
and
NOW THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
of this Agreement, at the Effective Time (as defined in Section 1.3 of this
Agreement), PEL shall be merged with and into Merger Sub in accordance with
the laws of the States of Pennsylvania and Delaware and the terms of this
Agreement (the "Merger"), whereupon the separate corporate existence of PEL
shall cease, and Merger Sub shall continue as the surviving corporation of the
Merger (Merger Sub, in such capacity hereinafter sometimes referred to as the
"Surviving Corporation"). The name of Merger Sub as the Surviving Corporation,
shall be changed, by virtue of the Merger, to " Philadelphia Family Golf
Centers, Inc."
Section 1.2 Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place (a) at
the offices of Parent, 225 Broadhollow Road, Melville, New York 11747 at 10:00
a.m. on the first business day after all the conditions set forth in Article
VI of this Agreement (other than those that are waived by the party or parties
for whose benefit such conditions exist) are satisfied; or (b) at such other
place, time, and/or date upon which the parties hereto may otherwise agree.
The date upon which the Closing shall occur is referred to herein as the
"Closing Date."
Section 1.3 Effective Time. As soon as practical after all the
conditions to the Merger set forth in Article VI of this Agreement have been
fulfilled or waived and this Agreement shall not have been terminated as
provided in Article VII hereof, the parties hereto shall cause certificates of
merger to be properly executed and filed in accordance with the laws of the
States of Pennsylvania and Delaware and the terms of this Agreement. The
parties hereto shall also take such further actions as may be required under
the laws of the States of Pennsylvania and Delaware in connection with the
consummation of the Merger. The Merger shall become effective at such time as
the certificates of merger are duly filed with the Secretary of State of the
States of Pennsylvania and Delaware or at such later time as is specified in
the certificates of merger (the "Effective Time"). From and after the
Effective Time, the Surviving
1
<PAGE>
Corporation shall possess all the rights, privileges, powers and franchises
and be subject to all of the restrictions, disabilities, liabilities and
duties of PEL and Merger Sub, all as provided under applicable law.
Section 1.4 Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Parent, Merger Sub,
PEL or the holder of any of the following securities:
(a) PEL Common Stock. Subject to Section 1.6, each share of
Common Stock, par value $1.00 per share, of PEL (the "PEL Common
Stock") issued and outstanding immediately prior to the Effective
Time shall be converted into the right to receive 20 validly issued,
fully paid and non-assessable shares of Common Stock, par value $.01
per share, of Parent which is listed on the Nasdaq National Market
under the symbol "FGCI" (the "Parent Common Stock") and $150.00 in
cash (such ratio, as adjusted as contemplated pursuant to Section 1.5
being referred to herein as the "Exchange Ratio"). All such shares of
PEL Common Stock shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and
each holder of a certificate representing any such shares shall cease
to have any rights with respect thereto, except the right to receive
the shares of Parent Common Stock to be issued pursuant to this
Section 1.4 with respect thereto upon the surrender of such
certificate in accordance with Section 1.6.
(b) PEL Stock Owned by PEL. All shares of PEL Common Stock
which immediately prior to the Effective Time are held directly by
PEL in its treasury, if any, shall be cancelled and retired and shall
cease to exist, and no capital stock of Parent or other consideration
shall be delivered with respect thereto.
(c) Merger Sub Common Stock. Each share of capital stock of
Merger Sub issued and outstanding immediately prior to the Effective
Time shall remain outstanding and shall continue as one share of
capital stock of the Surviving Corporation and each certificate
evidencing ownership of any such shares shall continue to evidence
ownership of the same number and kind of shares of the Surviving
Corporation.
Section 1.5 Adjustment of Exchange Ratio. In the event that,
subsequent to the date of this Agreement but prior to the Effective Time, the
outstanding shares of Parent Common Stock or PEL Common Stock, respectively,
shall have been changed into a different number of shares or a different class
as a result of a stock split, reverse stock split, stock dividend,
subdivision, reclassification, split, combination, exchange, recapitalization
or other similar transaction, the Exchange Ratio shall be appropriately
adjusted.
Section 1.6 Exchange of Securities.
(a) Promptly after the Effective Time, Parent shall upon
surrender of the stock certificates representing all of the issued
and outstanding shares of PEL Common Stock: (i) deliver to Finley a
certificate representing 7,500 shares of Parent Common Stock plus
$75,000.00 by bank check or the wire transfer of funds, (ii) deliver
to Pinciotti a certificate representing 7,500 shares of Parent Common
Stock plus $75,000.00 by bank check or the wire transfer of funds,
and (iii) deliver to the Escrow Agent (the "Escrow Agent"), under the
Escrow Agreement referred to in Section 6.2(d) and 6.2(g) (the
"Escrow Agreement") a certificate representing 5,000 shares of Parent
Common Stock, such certificate to be held and dealt with as provided
in the Escrow Agreement. The shares of PEL Common Stock so
surrendered shall forthwith be cancelled. No interest will be paid or
accrued on the unpaid dividends and distributions, if any, payable to
the holder of shares of PEL Common Stock.
2
<PAGE>
(b) All shares of Parent Common Stock issued upon conversion
of the shares of PEL Common Stock in accordance with the terms hereof
shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of PEL Common Stock.
Section 1.8 Definition of Subsidiary and Affiliate. As used in this
Agreement, (i) a "Subsidiary" of any party means any corporation or other
organization, whether incorporated or unincorporated, of which such party or
any other Subsidiary of such party is a general partner or at least a majority
of the securities or other interests having by their terms ordinary voting
power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party, by any one or more
of its Subsidiaries, or by such party and one or more of its Subsidiaries (ii)
an "Affiliate" of any party means any individual, corporation or other
organization, whether incorporated or unincorporated, which directly or
indirectly controls, or is controlled by, or is under common control with,
such party. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
any corporation or other organization, whether incorporated or unincorporated,
whether through the ownership of voting securities, by contract or otherwise.
ARTICLE II
CERTAIN MATTERS RELATING TO
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation of the Surviving
Corporation. The Certificate of Incorporation of Merger Sub, as in effect at
the Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by law.
Section 2.2 By-laws of the Surviving Corporation. The By-laws of
Merger Sub, as in effect at the Effective Time, shall be the By-laws of the
Surviving Corporation until thereafter amended as provided by law.
Section 2.3 Directors and Officers of the Surviving Corporation. The
directors of Merger Sub immediately prior to the Effective Time shall be the
directors of the Surviving Corporation and all such directors will hold office
from the Effective Time until their respective successors are duly elected or
appointed and qualify in the manner provided in the Certificate of
Incorporation and By-laws of the Surviving Corporation, or as otherwise
provided by applicable law. The officers of Merger Sub immediately prior to
the Effective Time shall be the officers of the Surviving Corporation and all
such officers will hold office until their respective successors are duly
appointed and qualify in the manner provided in the By-laws of the Surviving
Corporation, or as otherwise provided by applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to PEL as of the date
hereof and at the Effective Time as follows:
Section 3.1 Existence, Good Standing, Corporate Authority. Parent and
each of its Subsidiaries are corporations or partnerships duly organized,
validly existing and in good standing under the laws of their respective
jurisdiction of incorporation. Each of Parent and each of its Subsidiaries is
duly licensed or qualified to do business as a foreign corporation or
partnership and is in good standing under the laws of any other state of the
United States in which the character of the properties owned or leased by it
or in
3
<PAGE>
which the transaction of its respective business makes such qualification
necessary, except where the failure to be so qualified or to be in good
standing would not have a material adverse effect on the business, results of
operations or financial condition of Parent and its Subsidiaries taken as a
whole (a "Parent Material Adverse Effect"). Parent and each of its
Subsidiaries have all requisite corporate power and authority to own, operate
and lease their respective properties.
Section 3.2 Authorization, Validity and Effect of Agreements. Each of
Parent and Merger Sub has the requisite corporate power and authority to
execute and deliver this Agreement and all agreements and documents to be
executed and delivered in connection herewith (the "Ancillary Agreements").
The execution and delivery of this Agreement (and the agreements contemplated
hereby) and the consummation by Parent and Merger Sub of the transactions
contemplated hereby has been duly authorized by all requisite corporate
action. This Agreement constitutes, and all Ancillary Agreements to be
executed and delivered in connection herewith (when executed and delivered
pursuant hereto for value received) will constitute, the valid and legally
binding obligations of Parent and Merger Sub, enforceable against Parent and
Merger Sub in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
Section 3.3 Capitalization. The authorized capital stock of Parent
consists of 50,000,000 shares of Parent Common Stock and 2,000,000 shares of
preferred stock, par value $.10 per share (the "Parent Preferred Stock"). As
of April 30, 1997, there were 11,878,617 shares of Parent Common Stock and no
shares of Parent Preferred Stock, issued and outstanding. Since such date, no
additional shares of capital stock of Parent have been issued, except (i)
pursuant to the exercise of options outstanding under Parent's 1994 Stock
Option Plan 1996 Stock Incentive Plan and 1997 Stock Incentive Plan (the
"Parent Stock Option Plans") and (ii) in connection with other acquisitions of
golf recreational facilities. Parent has no outstanding bonds, debentures,
notes or other obligations the holders of which have the right to vote (or
which are convertible into or exercisable for securities having the right to
vote) with the stockholders of Parent on any matter. All issued and
outstanding shares of Parent Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. There are not at the
date of this Agreement any existing options, warrants, calls, subscriptions,
convertible securities, or other rights, agreements or commitments which
obligate Parent or any of its Subsidiaries to issue, transfer, redeem or sell
any shares of capital stock of Parent or any of its Subsidiaries except (i) as
contemplated by this Agreement, (ii) pursuant to the Parent Stock Option Plans,
(iii) pursuant to other acquisitions of golf recreational facilities, and
(iv) as described in the Parent Commission Filings (as hereinafter defined).
Section 3.4 Parent Reports and Financial Statements. Parent has
heretofore made available to PEL true and complete copies of all reports,
registration statements, and other documents (in each case together with all
amendments thereto) filed by Parent with the Commission since January 1, 1997
(such reports, registration statements, definitive proxy statements and other
documents, filed with the Commission prior to January 1, 1997 together with
any amendments thereto, are sometimes collectively referred to as the "Parent
Commission Filings"). As of their respective dates, each of the Parent
Commission Filings complied in all material respects with the applicable
requirements of the Securities Act, the Exchange Act and the rules and
regulations under each such Act, and none of the Parent Commission Filings and
no representation or warranty by Parent or Merger Sub in this Agreement and
the Ancillary Agreements contained as of such date any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section 3.5 No Violation. Neither the execution and delivery by
Parent and Merger Sub of this Agreement, nor the consummation by Parent and
Merger Sub of the transactions contemplated hereby in accordance with the
terms hereof, will (a) conflict with or result in a breach of any provisions
of the Certificate of Incorporation or Bylaws of Parent or any of its
Subsidiaries; (b) result in a breach or
4
<PAGE>
violation of, a default under, or the triggering of any payment or other
material obligations pursuant to, or accelerate vesting under, the Parent
Stock Option Plans, or any grant or award made under the foregoing; (c)
violate, conflict with, result in a breach of any provision of, constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, result in the termination, or in a right of
termination or cancellation of, accelerate the performance required by, result
in the triggering of any payment or other material obligations pursuant to,
result in the creation of any lien, security interest, charge or encumbrance
upon any of the material properties of Parent or its Subsidiaries under, or
result in being declared void, voidable, or without further binding effect,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust or any material license, franchise, permit, lease,
contract, agreement or other instrument, commitment or obligation to which
Parent or any of its Subsidiaries is a party, or by which Parent or any of its
Subsidiaries or any of their respective properties is bound or affected,
except for any of the foregoing matters which would not have a Parent Material
Adverse Effect; (d) contravene or conflict with or constitute a violation of
any provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to Parent or any of its Subsidiaries which would
have a Parent Material Adverse Effect; or (e) other than the filings provided
for in Section 1.3, filings under applicable federal, state and local
regulatory laws, filings required under the Exchange Act, the Securities Act,
the NASD, or applicable state securities and "Blue Sky" laws or filings in
connection with the maintenance of qualification to do business in other
jurisdictions (collectively, the "Regulatory Filings"), require any material
consent, approval or authorization of, or declaration, of or registration
with, any domestic governmental or regulatory authority, the failure to obtain
or make would have a Parent Material Adverse Effect.
Section 3.6 No Brokers. Parent has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of PEL or Parent to pay any finder's fee, brokerage or agent's
commissions or other like payment in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.
Parent and Merger Sub are aware that Southampton Golf Center, Inc., an
affiliate of PEL, is to pay a commission to Blue Sky Commercial and Thomas
Yaegel & Associates (the "Brokers") on the Closing Date.
Section 3.7 Parent Common Stock. The issuance and delivery by Parent
of shares of Parent Common Stock in connection with the Merger and this
Agreement have been duly and validly authorized by all necessary corporate
action on the part of Parent. The shares of Parent Common Stock to be issued
in connection with the Merger and this Agreement, when issued in accordance
with the terms of this Agreement, will be validly issued, fully paid and
nonassessable and not subject to preemptive rights of any sort.
Section 3.8 Interim Operations of Merger Sub. Merger Sub will be
formed solely for the purpose of engaging in the transactions contemplated
hereby, and immediately prior to the Effective Time will have engaged in no
other business activities, will have no Subsidiaries, and will have conducted
its operations only as contemplated hereby.
Section 3.9 Absence of Certain Changes. Except as otherwise disclosed
in the Parent Commission Filings, since December 31, 1996 there has not been
any Parent Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS
Each of the Selling Stockholders jointly and severally hereby
represents and warrants to Parent as of the date hereof and at the Effective
Time as follows:
5
<PAGE>
Section 4.1 Existence, Good Standing, Corporate Authority. PEL is a
corporation duly organized, validly existing and in good standing under the
laws of Pennsylvania. PEL is duly licensed or qualified to do business as a
foreign corporation or partnership and is in good standing under the laws of
any other state of the United States in which the character of the properties
owned or leased by it or in which the transaction of its business makes such
qualifications necessary, except where the failure to be so qualified or to be
in good standing would not have a material adverse effect on the business,
results of operations or financial condition of PEL taken as a whole (a "PEL
Material Adverse Effect"). PEL has all requisite corporate power and authority
to own, operate and lease its properties. The copies of PEL's Certificates of
Incorporation and Bylaws previously delivered or made available to Parent are
true and correct.
Section 4.2 Authorization, Validity and Effect of Agreements. PEL has
the requisite corporate power and authority to execute and deliver this
agreement and all agreements and documents to be executed and delivered in
connection herewith. The execution and delivery of this Agreement (and the
agreements contemplated hereby) and the consummation by PEL of the
transactions contemplated hereby has been duly authorized by all requisite
corporate action. This Agreement constitutes, and all agreements and documents
to be executed and delivered in connection herewith (when executed and
delivered pursuant hereto for value received) will constitute, the valid and
legally binding obligations of PEL, enforceable against PEL in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity.
Section 4.3 Compliance with Laws.
(a) PEL hold all permits, licenses, variances, exemptions,
orders and approvals of any court, arbitral, tribunal, administrative
agency or commission and other governmental or other regulatory
authority or agency ("Governmental Entities") necessary for the
lawful conduct of its business (the "Permits").
(b) PEL is in substantial compliance with the terms of the
Permits.
(c) PEL is in substantial compliance with all laws,
ordinances or regulations of all Governmental Entities, including,
but not limited to, those related to zoning, occupational health and
safety, controlled substances or employment and employment practices.
(d) As of the date of this Agreement, no investigation,
review, inquiry or proceeding by any Governmental Entity with respect
to PEL is pending or threatened.
(e) PEL is not subject to any agreement, contract or decree
with any Governmental Entities arising out of any current or
previously existing violations, however, PEL has received a letter
from Upper Southampton Township dated May 21, 1997 directing
compliance with a violation alleged therein, which violation has been
cured.
Section 4.4 Capitalization. The authorized capital stock of PEL
consists of 1,000 shares of PEL Common Stock. As of April 30, 1997, there were
1,000 shares of PEL Common Stock issued and outstanding, 500 of which are
owned of record and beneficially by Finley and 500 of which are owned of
record and beneficially by Pinciotti. Since April 30, 1997, no additional
shares of capital stock of PEL have been issued. PEL has no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the stockholders of PEL on any matter. All issued and
outstanding shares of PEL Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. There are not at the
date of this Agreement any existing options, warrants, calls, subscriptions,
convertible
6
<PAGE>
securities, or other rights, agreements or commitments which obligate PEL to
issue, transfer, redeem or sell any shares of capital stock of PEL.
Section 4.5 Subsidiaries. PEL does not have any Subsidiaries.
Section 4.6 Other Interests. PEL does not own, directly or indirectly
any interest or investment (whether equity or debt) in any corporation,
partnership joint venture, business, trust or entity.
Section 4.7 No Violation. Neither the execution and delivery by PEL
of this Agreement, nor the consummation by PEL of the transactions
contemplated hereby in accordance with the terms hereof, will (a) conflict
with or result in a breach of any provisions of the Certificate of
Incorporation or Bylaws of PEL; (b) violate, conflict with, result in a breach
of any provision of, constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, result in the
termination, or in a right of termination or cancellation of, accelerate the
performance required by, result in the triggering of any payment or other
material obligations pursuant to, result in the creation of any lien, security
interest, charge or encumbrance upon any of the material properties of PEL
under, or result in being declared void, voidable, or without further binding
effect, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust or any material license, franchise, permit,
lease, contract, agreement or other instrument, commitment or obligation to
which PEL is a party, or by which PEL or its properties is bound or affected;
(c) contravene or conflict with or constitute a violation of any provisions of
any law, regulation, judgment, injunction, order or decree binding upon or
applicable to PEL; or (e) other than the Regulatory Filings, required any
consent, approval or authorization of, or declaration, of or registration
with, any domestic governmental or regulatory authority.
Section 4.8 Conduct of Business. The business of PEL is not being
conducted in default or violation of any term, condition or provisions of (a)
its respective Certificate of Incorporation or By-Laws or similar
organizational documents; (b) any note, bond, mortgage, indenture, contract,
agreement, lease or other instrument or agreement of any kind to which PEL is
now a party or by which PEL or its properties or assets may be bound; or (c)
any federal, state, local or foreign statute, law, ordinance, rule, regulation
or approval applicable to PEL.
Section 4.9 Litigation. There are no actions, suits or proceedings
pending against PEL or threatened against PEL at law or in equity, or before
or by any federal or state commission, board, bureau, agency or
instrumentality.
Section 4.10 Absence of Certain Changes. Since December 31, 1996, PEL
has conducted its business only in the ordinary course of such business, and
there has not been (a) any PEL Material Adverse Effect; (b) any declaration,
setting aside or payment of any dividend or other distribution with respect to
its capital stock; or (c) any material change in its accounting principles,
practices or methods, except any such change after the date of this Agreement
required by generally accepted accounting principles.
Section 4.11 Trademarks and Patents.
(a) PEL does not own or have the right to any material
computer software, software programs, patents, patent applications,
trademarks, trademark applications, trade secrets, formulations,
service marks, trade names, copyrights, inventions, drawings,
designs, customer lists, proprietary know-how or information or other
rights with respect thereto (collectively, the "Proprietary Rights")
and there are no Proprietary Rights currently pending.
7
<PAGE>
(b) PEL has not disclosed any of its material trade secrets
to any Person without obtaining an agreement obligating the recipient
to maintain the confidentiality thereof and PEL has taken reasonable
security measures to protect the confidentiality and value of its
trade secrets.
Section 4.12 Properties. Schedule 4.12(a) hereto sets forth a
complete and accurate description and list of all assets and property owned by
PEL, including real property. PEL has good and valid title (good and
marketable title in the case of owned real property) to all of its assets and
properties, free and clear of any lien, claim or other encumbrance except as
disclosed on Schedule 4.12(b) hereto. PEL has not received notice that any of
its assets or properties is in violation in any material respect of any
existing law or any building, zoning, health, safety or other ordinance, code
or regulation. The plant, facilities and equipment of PEL necessary to the
operation of its business are in operating condition and repair sufficient for
the operation of the business as presently conducted. Schedule 4.12(c) sets
forth a complete list of all leases of real or personal property to which PEL
is a party. Such leases are valid and subsisting leases, upon consummation of
the transaction contemplated hereby, shall continue to entitle the Surviving
Corporation to the use and possession of the real or personal property
purported to be covered thereby for the terms specified in such leases and for
the purposes for which such real or personal property is now used.
Section 4.13 Material Contracts. Except as set forth on Schedule
4.13, neither PEL nor its properties is a party to, bound by, or subject to
(a) any loan agreements, guaranties or other evidence of indebtedness; (b) any
agreement relating to the ownership or control of any interest in a
partnership, corporation, limited liability company, joint venture or other
entity or similar arrangement; (c) any employment contracts or consulting
arrangements entered into by PEL or agreements or arrangements with respect to
severance or similar matters; (d) any agreement or arrangement restricting in
any manner (i) PEL's right to compete with any other person or entity; (ii)
the right of any other party to compete with PEL; or (iii) the ability of such
person or entity to employ any of PEL's employees; (e) any secrecy or
confidentiality agreement; (f) any contract, agreement or arrangement
containing change of control provisions; (g) any agreement or arrangement
between PEL and any of its officers, directors or other Affiliates; or (i) any
contract, agreement or arrangement requiring a payment in excess of $25,000 in
any twelve month period; or (j) any other material contract, agreement or
arrangement, including equipment leases (collectively, the "PEL Contracts").
Schedule 4.13 sets forth a description of each of the PEL Contracts. All the
PEL Contracts are valid, subsisting, in full force and effect, and binding
upon PEL in accordance with their terms, and binding upon the other parties
thereto in accordance with their terms. PEL is not (with or without notice or
lapse of time or both) in default under any PEL Contract nor is any other
party to any such contract or other agreement (with or without notice or lapse
of time or both) in default thereunder.
Section 4.14 Taxes. PEL (a) has timely filed all material federal,
state and foreign tax returns required to be filed by it for tax years ended
prior to the date of this Agreement or requests for extensions have been
timely filed and any such request shall have been granted and not expired, and
all such returns are complete and accurate in all material respects; (b) has
paid or accrued all taxes shown to be due and payable on such returns and has
paid or accrued all payroll, sales, and admissions taxes and such other taxes
as have been due and payable; and (c) has properly accrued all such taxes for
such periods subsequent to the periods covered by such returns. [PEL validly
elected and has maintained without revocation subchapter S corporation status
for federal and state tax purposes.]
Section 4.15 Employee Benefit Plans. All employee benefit plans and
other benefit arrangements covering employees of PEL (the "PEL Benefit Plans")
and all employee agreements providing compensation, severance or other
benefits to any employee or former employee of PEL are set forth on Schedule
4.15 hereto. True and complete copies of all PEL Benefit Plans, including any
related trust or
8
<PAGE>
funding vehicles, policies or contracts, have been made available to Parent.
None of the PEL Benefit Plans is intended to be qualified under Section 401(a)
of the Code nor does PEL have any "pension plans" as such term is defined in
Section 3(2) of ERISA, with respect to which payments must be made to the
Pension Guaranty Corporation.
Section 4.16 Labor Matters. PEL is not a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization. There is no unfair labor practice or
labor arbitration proceeding pending or threatened against PEL relating to its
business. There are no organization efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of PEL. There is no labor strike, dispute, slowdown or work stoppage
pending or threatened against PEL nor has it experienced any of the same
during the last three years. All employees of PEL are employed at will. A list
of PEL's employees, together with such employee's current job title and salary
history during the last three years, is described on Schedule 4.16.
Section 4.17 Absence of Indemnifiable Claims, etc. There are no
losses, claims, damages, costs, expenses, liabilities or judgments which would
entitle any director, officer or employee of PEL to indemnification by PEL
under applicable law, the articles of incorporation or by-laws of PEL or any
insurance policy maintained by PEL.
Section 4.18 No Brokers. PEL has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of PEL or Parent to pay any payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby. PEL is aware that Southampton Golf Center, Inc., an
affiliate of PEL, is to pay a commission to Blue Sky Commercial on the Closing
Date.
Section 4.19 Financial Condition. PEL has delivered to Parent true
and correct copies of the following, initialed by the chief executive officer
of PEL: audited financial statements consisting of balance sheets and income
statements of PEL as of December 31, 1996 and financial statements for the
three months ended March 31, 1997. Each such balance sheet presents fairly the
financial condition, assets, liabilities, and stockholders' equity of PEL as
of its date; each such statement of income presents fairly the results of
operations of PEL for the period indicated. The financial statements referred
to in this Section 4.20 are in accordance with generally accepted accounting
principles. Since December 31, 1996 and since March 31, 1997:
(i) There has at no time been a material adverse
change in the financial condition, results of operations,
businesses, properties, assets, liabilities, or future
prospects of PEL.
(ii) PEL has not authorized, declared, paid, or
effected any dividend or liquidating or other distribution
in respect of its capital stock or any direct or indirect
redemption, purchase, or other acquisition of any stock of
PEL.
(iii) The operations and businesses of PEL have
been conducted in all respects only in the ordinary course.
(iv) PEL has not suffered an extraordinary loss
(whether or not covered by insurance) or waived any right of
substantial value.
9
<PAGE>
There is no fact known to PEL which materially adversely affects or in the
future (as far as PEL can foresee) may materially adversely affect the
financial condition, results of operations, businesses, properties, assets,
liabilities, or future prospects of PEL or the Surviving Corporation.
Section 4.20 Liabilities. Other than the liabilities and obligations
of PEL listed on Schedule 4.20 hereto which the Surviving Corporation is
assuming and which do not, in the aggregate, exceed $664,000 PEL does not have
and has not incurred any other liabilities or obligations.
Section 4.21 Questionable Payments. Neither PEL, nor any director,
officer, agent, employee, or other person associated with or acting on behalf
of PEL, nor any stockholder of PEL has, directly or indirectly: used any
corporate funds for unlawful contributions, gifts, entertainment, or other
unlawful expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns from corporate funds; violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended; or made
any bribe, rebate, payoff, influence payment, kickback, or other unlawful
payment.
Section 4.22 Environmental Matters.(a) No notice, notification,
demand, request for information, citation, summons or order has been issued,
no complaint has been filed, no penalty has been assessed and no investigation
or review is pending or threatened by any Governmental Entity (a) with respect
to any alleged violation by PEL of any law, ordinance or regulation of any
Governmental Entity, with respect to any generation, treatment, storage,
recycling, transportation or disposal or release, as defined in 42 USMC '
9601(22) ("Release") of any toxic, caustic or otherwise hazardous substance,
including petroleum, its derivatives, by-products and other hydrocarbons,
whether or not regulated under federal, state or local environmental statutes,
ordinances, rules, regulations or orders ("Hazardous Substance") generated by
the Company.
(b) (i) PEL has not handled any Hazardous Substance
on property now or previously owned or leased by PEL; (ii) no polychlorinated
biphenyls or urea formaldehyde is or has been present at any property now or
previously owned or leased by PEL; (iii) no asbestos is or has been present at
any property now or previously owned or leased by PEL; (iv) there are no
underground storage tanks for Hazardous Substances, active or abandoned, at
any property now or previously owned or leased by PEL; (v) no Hazardous
Substance has been Released at, on or under any property now or previously
owned or leased by PEL; and (vi) no Hazardous Substance has been released or
is present, in a reportable or threshold planning quantity, where such a
quantity has been established by statute, ordinance, rule, regulation or
order, at, on or under any property now or previously owned by PEL.
(c) PEL has not transported or arranged for the
transportation, directly or indirectly, of any Hazardous Substance to any
location which is listed or proposed for listing under the Comprehensive
Environmental Responses, Compensation and Liability Act of 1980, as amended
("CERCLA"), or on any similar state list or which is the subject of federal,
state or local enforcement actions or other investigations which may lead to
claims against PEL for cleanup costs, remedial work, damages to natural
resources or for personal injury claims, including, but not limited to, claims
under CERCLA.
(d) No oral or written notification of a Release of
a Hazardous Substance has been filed by or on behalf of PEL and no property
now or previously owned or leased by PEL is listed or, to the Selling
Stockholders' knowledge, proposed for listing, on the National Priorities List
promulgated pursuant to CERCLA, or any similar state list of sites requiring
investigation or clean-up.
(e) There are no environmental liens on any of the
real property or other properties owned or leased by PEL, and no governmental
actions have been taken or are in process which
10
<PAGE>
could subject any of such properties to such liens and PEL would not be
required to place any notice or restriction relating to the presence of
Hazardous Substances at any property owned by any of them in any deed to such
property.
(f) There have been no environmental
investigations, studies, audits, tests, reviews or other analyses conducted by
or which are in the possession of PEL in relation to any property or facility
now or previously owned or leased by PEL which have not been delivered to
Parent prior to the date hereof.
4.23 Insurance. Schedule 4.23 sets forth all policies or
binders of fire, liability, workmen's compensation, vehicular or other
insurance held by or on behalf of PEL (specifying the insurer, the policy
number or covering note number with respect to binders, and describing each
pending claim thereunder of more than $10,000, setting forth the aggregate
amounts paid out under each such policy through the date of this Agreement and
the aggregate limit of any of the insurer's liability thereunder). Such
policies and binders are in full force and effect and insure against risks and
liabilities customary for the business in which PEL is engaged. PEL is not in
default with respect to any provision contained in any such policy or binder
and has not failed to give any notice or present any claim under any such
policy or binder in due and timely fashion. Except for claims set forth on
Schedule 4.23 there are no outstanding unpaid claims under any such policy or
binder. PEL has not received a notice of cancellation or non-renewal of any
such policy or binder. PEL has no knowledge of any inaccuracy in any
application for such policies or binders, any failure to pay premiums when due
or any similar state of facts which might form the basis for termination of
any such insurance.
4.24 Full Disclosure. All documents and other papers
delivered by or on behalf of PEL in connection with this Agreement and the
transactions contemplated hereby are true, complete and authentic. The
information furnished by or on behalf of PEL to Parent and its representatives
in connection with this Agreement and the transactions contemplated hereby
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. There
is no fact which PEL has not disclosed to Parent in writing which materially
adversely affects, or so far as PEL can now foresee will materially adversely
affect, the assets, properties, business or condition (financial or otherwise)
or prospects of PEL or the ability of PEL to perform this Agreement.
ARTICLE V
COVENANTS
Section 5.1 Alternative Proposals. Prior to the Effective Time each
of PEL and the Selling Stockholders agree (a) that they shall not, and shall
direct and cause officers, directors, employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by them) not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer with respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant portion of
the assets of or any equity securities of PEL (any such proposal or offer
being hereinafter referred to as an "Alternative Proposal") or engage in any
negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person relating to an Alternative Proposal,
or otherwise facilitate any effort or attempt to make or implement an
Alternative Proposal; (b) that they will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing, and it will
take the necessary steps to inform the individuals or entities referred to
above of the obligations undertaken in this Section 5.1; and (c) that they
will notify
11
<PAGE>
Parent immediately if any such inquiries or proposals are received
by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with them.
Section 5.2 Interim Operations of PEL. Prior to the Effective Time,
unless Parent has consented in writing thereto, PEL:
(i) I Shall conduct its operations according to its
usual, regular and ordinary course in substantially the same manner as
heretofore conducted;
12
<PAGE>
(ii) Shall use its reasonable efforts to preserve
intact its business organizations and goodwill, keep available the services of
officers and employees and maintain satisfactory relationships with those
persons having business relationships with it;
(iii) Shall not amend its Certificate of
Incorporation or Bylaws or comparable governing instruments;
(iv) Shall promptly notify Parent of any material
emergency or other material change in its condition (financial or otherwise),
business, properties, assets, liabilities, prospects or the normal course of
its business or of its properties, any material litigation or material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the breach of any
representation or warranty contained herein;
(v) Shall not (A), issue any shares of its capital
stock, effect any stock split or otherwise change its capitalization as it
existed on the date hereof; (B) grant, confer or award any option, warrant,
conversion right or other right not existing on the date hereof to acquire any
shares of its capital stock; (C) increase any compensation or enter into or
amend any employment agreement with any of its present or future officers,
directors or employees; (D) grant any severance or termination package to any
employee or consultant; or (E) adopt any new employee benefit plan (including
any stock option, stock benefit or stock purchase plan) or amend any existing
employee benefit plan in any respect;
(vi) Shall not declare, set aside or pay any
dividend or make any other distribution or payment with respect to any shares
of its capital stock or other ownership interests;
(vii) Shall not enter into any transaction, or
agree to enter into any transaction, outside the ordinary course of business,
including, without limitation, any transaction involving a merger,
consolidation, joint venture, partial or complete liquidation or dissolution,
reorganization, recapitalization, restructuring or a purchure, sale, lease or
other disposition of assets or capital stock;
(viii) Shall not incur any indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire any debt securities of others;
(ix) Shall not make any loans, advances or capital
contributions to, or investments in, any other person;
(x)Shall not make or commit to make any capital
expenditures;
(xi) Shall not apply any of its assets to the
direct or indirect payment, discharge, satisfaction or reduction of any amount
payable directly or indirectly to or for the benefit of any Affiliate or enter
into any transaction with any Affiliate.
(xii) Shall not alter the manner of keeping its
books, accounts or records, or change in any manner the accounting practices
therein reflected;
(xiii) Shall not grant or make any mortgage or
pledge or subject itself or any of its properties or assets to any lien,
charge or encumbrance of any kind; and
13
<PAGE>
(xiv) Shall maintain insurance on its tangible
assets and its businesses in such amounts and against such risks and losses as
are currently in effect.
Section 5.3 Filings; Other Action.
(a) Subject to the terms and conditions herein
provided, PEL and Parent shall use all reasonable efforts to take, or cause to
be taken, all action and do, or cause to be done, all things necessary, proper
or appropriate to consummate and make effective the transactions contemplated
by this Agreement. If, at any time after the Effective Time, any further
reasonable action is necessary or desirable to carry out the purpose of this
Agreement, the proper officers and directors of Parent and PEL shall take all
such necessary action.
(b) (i) PEL and Parent shall give any notices to
third parties, and use all reasonable efforts to obtain any third party
consents, necessary, proper or advisable to consummate the transactions
contemplated in this Agreement.
(ii)In the event that either party shall fail to
obtain any third party consent described in subsection (b) (i) above, such
party shall use all reasonable efforts, and shall take any such actions
reasonably requested by the other party hereto, to minimize any adverse effect
upon PEL and Parent, its Subsidiaries, and their respective businesses
resulting, or which could reasonably be expected to result after the Effective
Time, from the failure to obtain such consent.
(c) From and after the date of this Agreement until
the Effective Time, each party hereto shall promptly notify the other of (i)
the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause any condition to the
obligations of any party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied, or (ii) the failure of PEL
or Parent, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it pursuant to this
Agreement which would be likely to result in any condition to the obligations
of any party to effect the Merger and the other transactions contemplated by
this Agreement not to be satisfied; provided, however, that the delivery of
any notice pursuant hereto shall not cure any breach of any representation or
warranty requiring disclosure of such matter prior to the date of this
Agreement or otherwise limit or affect the remedies available hereunder to the
party receiving such notice.
Section 5.4 Inspection of Records. From the date hereof to the
Effective Time, PEL shall (a) allow all designated officers, attorneys,
accountants and other representatives of Parent reasonable access at all
reasonable times to the offices, records and files, correspondence, audits and
properties, as well as to all information relating to commitments, contracts,
titles and financial position, or otherwise pertaining to the business and
affairs, of PEL; (b) furnish to Parent and its representatives such financial
and operating data and other information as such persons may reasonably
request; and (c) instruct the employees, counsel and financial advisors of PEL
to cooperate with the Parent and its representatives in its investigation of
PEL business.
Section 5.5 Further Action. Each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may be reasonably required to effect the Merger.
Section 5.6 Expenses. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall, except as otherwise provided herein,
be paid by the Selling Stockholders if incurred by the Selling Stockholders or
PEL, and by Parent if incurred by Parent or Merger Sub.
14
<PAGE>
Section 5.7 Survival of Representations and Warranties of PEL and the
Selling Stockholders. Notwithstanding any right of Parent to investigate the
affairs of PEL and notwithstanding any knowledge of facts determined or
determinable by Parent pursuant to such investigation or right of
investigation, Parent has the right to rely fully upon the representations,
warranties, covenants and agreement of the Selling Stockholders contained in
this Agreement. All such representations, warranties, covenants and agreements
shall survive the execution and delivery hereof and the Closing hereunder. All
representations, warranties, covenants and agreements made herein by Parent
and Merger Sub shall survive the execution and delivery hereof and the Closing
hereunder.
Section 5.8 Adjustments. The parties hereto agree that (i) all real
property taxes, personal property taxes, and similar ad valorem obligations
that are levied against PEL or its property, (ii) all expenses relating to
PEL's business, including, but not limited to, utilities, bank debt and trade
and accounts payable, and (ii) all revenue relating to PEL's business,
including accounts receivable, shall be apportioned between the Selling
Stockholders and Parent as of the Closing Date based on the portion of each
such expense or revenue attributable to the period falling before the Closing
Date on the one hand, which the Selling Stockholders shall bear the
responsibility and benefit of, and the portion of each such expense or revenue
attributable to the period falling on or after the Closing Date, on the other
hand, which Parent shall bear the responsibility and benefit of (the
"Post-Closing Adjustment"). On or about the 120th day following the Assumed
Closing Date, Parent shall deliver a notice to the Selling Stockholders
setting forth in reasonable detail the Post-Closing Adjustments. Within five
days of the Selling Stockholders' receipt of such notice either Parent or the
Selling Stockholders, as the case may be, shall remit to the other, the amount
equal to such Post-Closing Adjustment.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Obligation of PEL to Effect the Merger. The
obligation of PEL to effect the Merger shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions:
(a) Parent shall have performed, in all material respects,
all of its agreements contained herein that are required to be performed by
Parent on or prior to the Closing Date, and PEL shall have received a
certificate of the President or Executive Vice President of Parent dated the
Closing Date, certifying to such effect.
(b) The representations and warranties of Parent and Merger
Sub contained in this Agreement and in any document delivered in connection
herewith shall be true and correct as of the Closing, and PEL shall have
received a certificate of the President or Executive Vice President of Parent,
dated the Closing Date, certifying to such effect.
(c) Parent shall have delivered to PEL a certified bank or
cashiers check made payable to PEL in the amount of $664,000, in full
satisfaction of all obligations of PEL to Summit Bank as assignee of First
Valley Bank.
(d) PEL shall have received the opinion of the General
Counsel of Parent, dated the Closing Date, in the form heretofore agreed to.
15
<PAGE>
(e) Parent and the Selling Stockholders shall have entered
into an Escrow Agreement.
Section 6.2 Conditions to Obligation of Parent and Merger Sub to
Effect the Merger. The obligations of Parent and Merger Sub to effect the
Merger shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions:
(a) PEL shall have performed, in all material respects, all
of its agreements contained herein that are required to be performed by PEL on
or prior to the Closing Date, and Parent shall have received a certificate of
the President or a Vice President of PEL, dated the Closing Date, certifying
to such effect.
(b) The representations and warranties of the Selling
Stockholders contained in this Agreement and in any document delivered in
connection herewith shall be true and correct as of the Closing, and Parent
shall have received a certificate from the Selling Stockholders, dated the
Closing Date, certifying to such effect.
(c) Parent shall have received the opinion of Gerald L.
Bowen, P.C., counsel to PEL and the Selling Stockholders, dated the Closing
Date, in the form heretofore agreed to.
(d) The Selling Stockholders shall have executed and
delivered the Affiliate Letter addressed to Parent, substantially in the form
of Exhibit A hereto.
(e) Summit Bank shall have executed and delivered a
Certificate of Satisfaction and Release to Parent acknowledging receipt from
PEL of the aggregate amount of $664,000 in full satisfaction of all
obligations of PEL to it, and Summit Bank shall have each executed and
delivered UCC-3 Termination Statements to be filed in each office where a
UCC-1 Financing Statement is currently on file;
(f) Merger Sub shall have received the results of a title
search, in form acceptable to Merger Sub and a copy of the existing title
policy.
(g) Parent and the Selling Stockholders shall have entered
into an Escrow Agreement.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned, by written notice promptly given
to the other parties hereto, at any time prior to the Effective Time, whether
prior to or after approval by their respective stockholders:
Section 7.1.1 By mutual written consent of Parent and PEL;
Section 7.1.2 By either Parent or PEL, if a court of
competent jurisdiction or a Governmental Entity shall have issued an order,
decree or ruling or taken any other action, in each case permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
by this Agreement and such order, decree, ruling or other action shall have
become final and nonappealable;
16
<PAGE>
Section 7.1.3 By Parent, if PEL fails to perform in all
material respects its obligations under this Agreement;
Section 7.1.4 By Parent, if there shall have occurred a PEL
Material Adverse Change since the date of this Agreement; or
Section 7.1.5 By PEL, if Parent fails to perform in all
material respects its obligations under this Agreement.
Section 7.2 Effect of Termination. In the event of the termination of
this Agreement and abandonment of the Merger as provided in Section 7.1
hereof, this Agreement shall forthwith become void and there shall be no
liability on the part of Parent or PEL, except as set forth in this Section
hereof and Article VIII and except to the extent that such termination results
from the willful breach of a party hereto of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Obligation of the Selling Stockholders to Indemnify. Each
of the Selling Stockholders shall indemnify, defend and hold harmless Parent
and its assigns from and against any losses, liabilities, damages or
deficiencies (including interest, penalties and reasonable attorneys' fees and
disbursements) ("Losses") based upon, arising out of or otherwise in respect
of:
(i) the breach of any representation, warranty,
covenant or agreement of PEL or the Selling Stockholders
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 are deleted); and
(ii) any liability or obligation of PEL arising
either prior or subsequent to the Effective Date which is
not expressly referred to in this Agreement or, if such
liability or obligation is expressly referred to in this
Agreement, to the extent the actual liability or obligation
exceeds the amount of such liability or obligation as herein
stated or identified; and
(iii) any liabilities or obligations of PEL
arising prior to the Closing Date other than those
specifically assumed hereunder.
8.2 Obligation of Parent to Indemnify. Parent shall
indemnify, defend and hold harmless each of the Selling Stockholders from and
against any losses, liabilities, damages or deficiencies (including interest,
penalties and reasonable attorneys' fees and disbursements) ("Losses") arising
out of or due to a breach of any representation, warranty, covenant or
agreement of Parent contained in this Agreement or in any document or other
papers delivered by Parent pursuant to this Agreement (determined for this
purpose as if all references to knowledge and materiality are deleted).
8.3 Notice and Opportunity to Defend. If any party (the
"Indemnitee") receives notice of any claim or the commencement of any action
or proceeding with respect to which any other party (or parties) is obligated
to provide indemnification (the "Indemnifying Party") pursuant to Section 8.1
or 8.2, the Indemnitee shall promptly give the Indemnifying Party notice
thereof; provided, however,
17
<PAGE>
that failure to give such notification shall not affect the indemnification
provided hereunder except to the extent the Indemnifying Party shall have been
actually prejudiced as a result of such failure. The Indemnified Party shall
have the right to retain counsel of its own choice to represent it, and the
Indemnifying Party shall pay the fees, expenses and disbursements of such
counsel; and such counsel shall, to the extent consistent with its
professional responsibilities, cooperate with the Indemnifying Party and any
counsel designated by the Indemnifying Party. The Indemnifying Party shall be
liable for any settlement of any claim against the Indemnified Party made with
the Indemnifying Party's written consent, which consent shall not be
unreasonably withheld. The Indemnifying Party shall not, without the prior
written consent of the Indemnified Party, settle or compromise any claim, or
permit a default or consent to the entry of any judgment in respect thereof,
unless such settlement, compromise or consent includes, as an unconditional
term thereof, the giving by the claimant to the Indemnified Party of an
unconditional release from all liability in respect of such claim.
8.4 Escrow Fund. The obligations of the Selling Stockholders
under Section 8.1 shall be satisfied first from the Escrow Fund and, if the
Escrow Fund is inadequate to provide indemnification in full, then directly
from the Selling Stockholders.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Notices. Any notice required to be given hereunder shall
be sufficient if in writing, and sent by facsimile transmission or by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:
If to Parent or Merger Sub: If to PEL:
Family Golf Centers, Inc. Pinley Enterprises, Ltd.
225 Broadhollow Road 6 Commerce Drive
Melville, New York 11747 Ivyland, Pennsylvania 18974
Attn: Robert J. Krause, Senior Vice Attn: Daniel J. Pinciotti
President Fax: (215)
Fax: (516) 694-0918
With copies to: With copies to:
Family Golf Centers, Inc. Gerald L. Bowen, Esq.
225 Broadhollow Road 1160 Street Road
Melville, New York 11747 Southampton, Pennsylvania 18966
Attn: Pamela S. Charles, General Counsel Attn: Gerald L. Bowen, Esq.
Fax: (516) 694-1935 Fax: (215) 322-9308
or to such other address as any party shall specify by written notice so
given, and such notice shall be deemed to have been delivered as of the date
so telecommunicated, personally delivered or mailed.
Section 9.2 Assignment, Binding Effect. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of
18
<PAGE>
law or otherwise) without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
permitted successors and assigns.
Section 9.3 Entire Agreement. This Agreement and any documents
delivered by the parties in connection herewith constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with
respect thereto. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
Section 9.4 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 9.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard
to its rules of conflict of laws.
Section 9.6 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument.
Section 9.7 Headings. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only and shall be given no
substantive or interpretive effect whatsoever.
Section 9.8 Interpretation. In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa.
Section 9.9 Waivers. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or
be construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
Section 9.10 Incorporation of Schedules and Exhibits. The Schedules
and Exhibits attached hereto and referred to herein are hereby incorporated
herein and made a part hereof for all purposes as if fully set forth herein.
Section 9.11 Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
Section 9.12 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be
entitled to seek
19
<PAGE>
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which they are entitled at law or in equity.
20
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year first
written above.
FAMILY GOLF CENTERS, INC.
By:/s/ Robert J. Krause
----------------------------------
Name: Robert J. Krause
Title: Senior Vice President
PHILADELPHIA FAMILY GOLF CENTERS, INC.
By:/s/ Robert J. Krause
----------------------------------
Name: Robert J. Krause
Title: Senior Vice President
PINLEY ENTERPRISES, LTD.
By: /s/ Daniel J. Pinciotti
----------------------------------
Name: Daniel J. Pinciotti
Title: President
/s/ Robert Finley
-------------------------------
ROBERT FINLEY
/s/ Daniel J. Pinciotti
------------------------------
DANIEL J. PINCIOTTI
21
</TABLE>
<PAGE>
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of June ___, 1997, among FAMILY GOLF
CENTERS, INC., a Delaware corporation with executive offices at 225 Broadhollow
Road, Melville, New York 11747 ("FGC"), ROBERT FINLEY with an address of 6
Commerce Drive, Ivyland, Pennsylvania 18974 ("Finley") and DANIEL J. PINCIOTTI
with an address of 6 Commerce Drive, Ivyland, Pennsylvania 18974 ("Dr.
Pinciotti") (Finley and Pinciotti collectively referred to herein as "Selling
Stockholders") and CONTINENTAL STOCK TRANSFER & TRUST COMPANY incorporated
under the laws of the United States of America with executive offices at 2
Broadway, New York, New York 10004 (the "Escrow Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, simultaneously with the execution hereof, Pinley Enterprises,
Ltd. ("PEL") FGC and Philadelphia Family Golf Centers, Inc., a newly-formed,
wholly-owned Delaware subsidiary of FGC ("Subsidiary"), are consummating the
transactions contemplated by the Agreement and Plan of Merger, dated as of the
date hereof (the "Merger Agreement"), among PEL, Subsidiary, FGC and the
Selling Stockholders, pursuant to which, among other things, PEL shall merge
with and into Subsidiary (the "Merger") in accordance with the laws of the
State of Delaware, so that, upon consummation of the Merger, PEL will cease to
exist and Subsidiary will be the Surviving Corporation;
1
<PAGE>
WHEREAS, pursuant to Section 1.6 of the Merger Agreement, 5,000 shares
(the "Escrowed Property") of common stock, par value $.01 per share (the "FGC
Common Stock"), are required to be placed into an escrow account (the "Escrow
Account") to be maintained by the Escrow Agent against any claims for indemnity
under the Merger Agreement; and
WHEREAS, this is the Escrow Agreement referred to in Sections 6.1 and
6.2 of the Merger Agreement. Capitalized terms used in this Escrow Agreement
and not otherwise defined herein shall have the respective meanings given to
them in the Merger Agreement.
NOW, THEREFORE, it is agreed as follows:
I. ESCROW.
SECTION 1.01 APPOINTMENT OF ESCROW AGENT. The Selling Stockholders and
FGC hereby appoint the Escrow Agent, and the Escrow Agent hereby agrees to
serve, as Escrow Agent in accordance with, and pursuant to, this Agreement.
SECTION 1.02 OPERATION OF ESCROW ACCOUNT. The parties hereto agree
that, subject to Section 1.03 hereof, the Escrow Account shall operate as
follows:
(a) As soon as reasonably practicable following the Effective Time,
FGC shall deposit, in accordance with Section 1.03 hereof, into the Escrow
Account an aggregate of 5,000 shares of FGC Common Stock pursuant to the Merger
Agreement.
(b) At any time prior to the first anniversary of the Closing Date,
FGC shall be entitled to give a notice to the Escrow Agent, signed by its
President or any Vice President (with a copy to the Selling Stockholders), (i)
to the effect that there has been an event entitling FGC to indemnification
from the Selling Stockholders pursuant to the Merger Agreement, which notice
2
<PAGE>
shall specify the amounts owed by the Selling Stockholders pursuant to the
Merger Agreement, the calculation of such amounts and the basis therefore.
(c) Twenty days after the Escrow Agent has received a notice pursuant
to Section 1.02(a) (or, if not a business day, on the next business day
following such twentieth day) it shall deliver to FGC Escrowed Property (the
"Escrowed Property") to be valued as set forth in Section 1.02(e) in the
amounts specified in such notice unless the Selling Stockholders shall have
notified the Escrow Agent (with a copy to FGC) in writing before such date that
they disagree with FGC's determination that FGC is entitled to receive Escrowed
Property with respect to the Merger Agreement, which notice shall be set forth
in reasonable detail the basis for such disagreement.
(d) Should any dispute arise with respect to the delivery, ownership,
or right of possession of the Escrowed Property, the Escrow Agent, as more
fully set forth in Section IV(xi), is authorized and directed to retain in its
possession without liability to anyone all or any part of the Escrowed Property
until such dispute shall have been settled either by mutual agreement by the
parties concerned or by a final order, decree, or judgment of a court of
competent jurisdiction in the United States of America and time for appeal has
expired and no appeal has been perfected, but the Escrow Agent shall be under
no duty whatsoever to institute or defend any such proceedings, and may, in its
discretion, deposit such Escrowed Property with a court of competent
jurisdiction in the United States of America which is hearing such dispute.
(e) For purposes of this Agreement, the value of each share of FGC
Common Stock which is part of the Escrowed Property shall be deemed equal to
$20 per share, as adjusted
3
<PAGE>
for any stock split, stock dividend, combination or reclassification occurring
after the date of this Agreement.
SECTION 1.03 DISTRIBUTION OF ESCROWED PROPERTY. Unless a notice under
Section 1.02(a) has been given and Escrowed Property in satisfaction of such
notice has not been delivered to FGC, either because the 20-day period has not
yet run out or because a dispute relating to the claim made by such notice is
then pending, the Escrowed Property or such portion of it as at the time
remains in escrow, together with all dividends and distributions received by
the Escrow Agent with respect thereto, shall be returned to the Selling
Stockholders on the first anniversary of the Closing Date.
SECTION 1.04 TERMINATION OF ESCROW ACCOUNT. This Agreement and the
Escrow Account will terminate at 5:00 P.M., New York City local time, on the
date on which all of the shares of FGC Common Stock contained therein shall be
distributed as set forth above.
SECTION 1.05 VOTING. The shares of FGC Common Stock held in the Escrow
Account shall be voted by the Selling Stockholders.
II. DEPOSIT OF ESCROWED PROPERTY.
SECTION 2.01 DEPOSIT OF ESCROWED PROPERTY. As soon as reasonably
practicable following the Effective Time (as defined in the Merger Agreement),
FGC shall, as set forth in Section 1.02, deposit with the Escrow Agent 5,000
shares of FGC Common Stock.
III. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be (a) delivered by hand, (b)
facsimile, or (c) over-night delivery with proper postage prepaid, and
addressed as follows:
4
<PAGE>
If to FGC to:
225 Broadhollow Road
Melville, New York 11747
(516) 694-1666
(516) 694-0918
If to Finley to:
6 Commerce Drive
Ivyland, Pennsylvania 18974
If to Pinciotti to:
6 Commerce Drive
Ivyland, Pennsylvania 18974
If to the Escrow Agent, to:
2 Broadway
New York, New York 10004
212-509-4000
212-509-5150
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. Except as
otherwise provided herein, no notice or communication shall be effective until
received.
IV. CONCERNING THE ESCROW AGENT.
To induce the Escrow Agent to act hereunder, it is further agreed by
each of the Selling Stockholders and FGC that:
(i) The Escrow Agent shall not be under any duty to give the Escrowed
Property held by it hereunder any greater degree of care than it gives its own
similar property and
5
<PAGE>
shall not be required to invest any funds held hereunder except as directed in
this Agreement. Uninvested funds held hereunder shall not earn or accrue
interest.
(ii) This Agreement expressly sets forth all the duties of the Escrow
Agent with respect to any and all matters pertinent hereto. No implied duties
or obligations shall be read into this Agreement against the Escrow Agent. The
Escrow Agent shall not be bound by the provisions of any agreement among the
other parties hereto except this Agreement.
(iii) The Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct, and, except with respect to claims based upon
such gross negligence or willful misconduct that are successfully asserted
against the Escrow Agent, the other parties hereto shall jointly and severally
indemnify and hold harmless the Escrow Agent (and any successor Escrow Agent)
from and against any and all losses, liabilities, claims, actions, damages, and
expenses, including reasonable attorneys' fees and disbursements, arising out
of, and in connection with, this Agreement. Without limiting the foregoing, the
Escrow Agent shall in no event be liable in connection with its investment or
reinvestment of any cash held by it hereunder in good faith, in accordance with
the terms hereof, including, without limitation, any liability for any delays
(not resulting from gross negligence or willful misconduct) in the investment
or reinvestment of the Escrowed Funds, or any loss of interest incident to any
such delays.
(iv) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument, or other writing delivered
to it hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. The Escrow Agent may act in reliance upon any instrument or
6
<PAGE>
signature believed by it in good faith to be genuine and may assume, if in good
faith, that any person purporting to give notice or receipt or advice or make
any statement or execute any document in connection with the provisions hereof
has been duly authorized to do so.
(v) The Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Escrow Agreement and shall not be liable
for any action taken or omitted in good faith and in accordance with such
advice.
(vi) The Escrow Agent does not have any interest in the Escrowed Funds
deposited hereunder, but is serving as escrow holder only. Any payments of
income from the Escrow Account shall be subject to withholding regulations then
in force with respect to United States taxes.
This paragraph (vi) and paragraph (iii) of this Article V shall
survive notwithstanding any termination of this Agreement or the resignation of
the Escrow Agent.
(vii) The Escrow Agent makes no representation as to the validity,
value, genuineness, or the collectibility of any security or other documents or
instrument held by, or delivered to, it.
(viii) The Escrow Agent shall not be called upon to advise any party
as to the wisdom in selling or retaining or taking or refraining from any
action with respect to any securities or other property deposited hereunder.
(ix) The Escrow Agent (and any successor escrow agent) at any time may
be discharged from its duties and obligations hereunder by the delivery to it
of notice of termination signed by FGC and the Selling Stockholders or at any
time may resign by giving written notice to
7
<PAGE>
such effect to FGC and the Selling Stockholders. Upon any such termination or
resignation, the Escrow Agent shall deliver the Escrowed Property to any
successor escrow agent jointly designated by the other parties hereto in
writing, or to any court of competent jurisdiction if no such successor escrow
agent is agreed upon, whereupon the Escrow Agent shall be discharged of and
from any and all further obligations arising in connection with this Escrow
Agreement. The termination or resignation of the Escrow Agent shall take effect
on the earlier of (A) the appointment of a successor (including a court of
competent jurisdiction) or (B) the day that is 30 days after the date of
delivery: (1) to the Escrow Agent of the other parties' notice of termination
or (2) to the other parties hereto of the Escrow Agent's written notice of
resignation. If at that time the Escrow Agent has not received a designation of
a successor escrow agent, the Escrow Agent's sole responsibility after that
time shall be to keep the Escrowed Property safe until receipt of a designation
of successor escrow agent or a joint written disposition instruction by the
other parties hereto or an enforceable order of a court of competent
jurisdiction.
(x) The Escrow Agent shall have no responsibility for the contents of
any writing of any third party contemplated herein as a means to resolve
disputes and may rely without any liability upon the contents thereof.
(xi) In the event of any disagreement among or between the other
parties hereto resulting in adverse claims or demands being made in connection
with the Escrowed Property, or in the event that the Escrow Agent in good faith
is in doubt as to what action it should take hereunder, the Escrow Agent shall
be entitled to retain the Escrowed Property until the Escrow Agent shall have
received (A) a final and non-appealable order of a court of competent
jurisdiction directing
8
<PAGE>
delivery of the Escrowed Property or (B) a written agreement executed by the
other parties hereto directing delivery of the Escrowed Property, in which
event the Escrow Agent shall disburse the Escrowed Property in accordance with
such order or agreement. Any court order referred to in (A) above shall be
accompanied by a legal opinion by counsel for the presenting party satisfactory
to the Escrow Agent to the effect that said court order is final and
non-appealable. The Escrow Agent shall act on such court order and legal
opinions without further question.
(xii) As consideration for its agreement to act as Escrow Agent as
herein described FGC shall pay the Escrow Agent fees determined in accordance
with the terms set forth on Exhibit B hereto (and made a part of this Escrow
Agreement as if herein set forth). In addition, FGC and the Selling
Stockholders agrees to reimburse the Escrow Agent for all reasonable expenses,
disbursements, and advances incurred or made by the Escrow Agent in performance
of its duties hereunder (including reasonable fees, expenses, and disbursements
of its counsel).
(xiii) No publicly distributed material or other matter in any
language (including, without limitation, notices and reports) which mentions
the Escrow Agent's name or the rights, powers, or duties of the Escrow Agent
shall be issued by the other parties hereto or on such parties' behalf unless
the Escrow Agent shall first have given its specific written consent thereto.
V. MISCELLANEOUS.
SECTION 5.01 BINDING EFFECT. This Escrow Agreement shall be binding
upon, and inure solely to the benefit of, the parties hereto and their
respective successors and assigns, heirs, administrators, and representatives,
and shall not be enforceable by, or inure to the benefit of, any other third
party, except as provided in paragraph (ix) of Article V with respect to the
termination
9
<PAGE>
of, or resignation by, the Escrow Agent. No party may assign any of its rights
or obligations under this Agreement without the written consent of the other
parties.
SECTION 5.02 CHOICE OF LAW. This Agreement shall be construed in
accordance with, and governed by, the internal law of the State of Delaware
(without reference to its rules as to conflicts of law).
SECTION 5.03 MODIFICATION. This Agreement may only be modified by a
writing signed by all of the parties hereto.
SECTION 5.04 HEADINGS. The section headings herein are for convenience
only and shall not affect the construction thereof. Unless otherwise indicated,
references to Sections and Articles are to Sections and Articles, respectively,
contained herein.
SECTION 5.05 COUNTERPARTS. This Agreement may be executed in one or
more counterparts but all such separate counterparts shall constitute but one
and the same instrument; provided that, although executed in counterparts, the
executed signature pages of each such counterpart may be affixed to a single
copy of this Agreement which shall constitute an original.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
BY:
--------------------------------
NAME:
TITLE:
-----------------------------------
ROBERT FINLEY
-----------------------------------
DANIEL J. PINCIOTTI
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
BY:
--------------------------------
NAME:
TITLE:
<PAGE>
ASSET PURCHASE AGREEMENT
by and between
SOUTHAMPTON FAMILY GOLF CENTER, INC.
Seller,
and
PHILADELPHIA FAMILY GOLF CENTERS, INC.,
Purchaser
<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
EXHIBIT A LEGAL DESCRIPTION
EXHIBIT B PERSONAL PROPERTY
EXHIBIT C CONTRACTS
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
ASSET PURCHASE AGREEMENT, made as of the ___ day of June, 1997
(this "Agreement"), by and between SOUTHAMPTON FAMILY GOLF CENTER, INC., a
Pennsylvania corporation having an address at 6 Commerce Drive, Ivyland, PA
19874 ("Seller"), and PHILADELPHIA FAMILY GOLF CENTERS, INC., a Delaware
corporation having an address at 225 Broadhollow Road, Suite 106E, Melville,
New York 11747 ("Purchaser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Seller is the lessee of certain real property located at 114
Street Road, Southampton, Pennsylvania 18966 and more particularly described on
Exhibit A attached hereto and made a part hereof (the "Land") and the buildings
and improvements located on the Land (the "Improvements" and, together with the
Land, the "Premises") pursuant to a lease (the "Lease") with Pinley
Enterprises, Ltd. (the "Landlord");
WHEREAS, Seller operates a driving range and related facilities at the
Premises under the name "The Southampton Golf Center" (the "Business");
WHEREAS, simultaneously with the execution and delivery of this
Agreement, Purchaser is entering into an Agreement and Plan of Merger to merge
with Landlord;
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Lease is being terminated; and
WHEREAS, Seller wants to sell certain assets relating to the Business
to Purchaser, and Purchaser wants to purchase such assets from Seller, on the
terms, and subject to the conditions, set forth herein.
<PAGE>
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, and other good and valuable consideration, the mutual receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree to
the foregoing and as follows:
1. Agreement to Sell and Purchase.
1.1 Property to be Purchased by Purchaser. Seller agrees to sell
and convey to Purchaser, and Purchaser agrees to purchase and acquire from
Seller, upon the terms and conditions hereinafter set forth, all of Seller's
right, title and interest in and to the following property (collectively, the
"Property"):
1.1.1 all furnishings, fixtures, machinery, equipment,
vehicles and personalty attached or appurtenant to or used in connection with
the Business that are owned by Seller, and all inventories, supplies, sales,
marketing and instructional materials of every kind and description relating to
the Business, wherever located, including without limitation, the items
described on Exhibit B attached hereto and made a part hereof (the "Personal
Property");
1.1.2 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");
1.1.3 any consent, authorizations, variances, waivers,
licenses, certificates, permits and approvals held by or granted to Seller in
connection with the operation of the business (collectively, the "Permits");
1.1.4 the contracts, leases and other agreements of or
relating to the Business described on Exhibit C attached hereto and made a part
hereof, except to
2
<PAGE>
the extent the same relate solely to any Retained Assets or Retained
Liabilities (as hereinafter defined) (the "Contracts");
1.1.5 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;
1.1.6 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
1.1.7 any other properties and assets of every kind and
nature, real or personal, tangible or intangible, relating in any way
whatsoever to the Business, except to the extent the same relate solely to the
Retained Assets or Retained Liabilities.
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;
1.2.3 all cash, funds in bank accounts and cash equivalents
existing as of the date hereof; and
1.2.4 any patents, trademarks, trademark registrations,
copyrights, copyright registrations, trade names and all registrations thereof
and all applications
3
<PAGE>
for any of the foregoing, whether issued or pending, if any, and all goodwill
associated with any of the foregoing (the "Intangible Assets").
1.3 Assumption of Certain Liabilities. Purchaser shall assume and
agree to pay and discharge when due all liabilities and obligations of Seller
under the Contracts to the extent the same arise from and after the Closing
(the "Assumed Liabilities").
1.4 Liabilities to be Retained by Purchaser. Seller shall retain,
and Purchaser shall not assume, perform, discharge or pay, and shall not be
responsible for, any and all liabilities or obligations of any nature
whatsoever in connection with or relating to the Property, Seller or the
Business or any predecessor owner of the Property or the Business other than
the Assumed Liabilities (collectively, the "Retained Liabilities").
2. Consideration. In consideration for the Property, Purchaser shall
pay to Seller One Hundred and Six Thousand Dollars ($106,000.00), subject to
adjustment as hereinafter provided, payable on the date hereof in cash, or by
certified or bank check or by the wire transfer of fund.
3. Apportionments.
3.1 The parties hereto agree that (i) all operating expenses of
Seller relating to the Business (i.e., real estate taxes, utilities, cost of
inventories advertising, collections, fees, hired services, insurance,
miscellaneous expenses, postage, repairs and maintenance, supplies, taxes and
wages, but specifically not including interest on indebtedness, professional
fees and expenses, travel, lodging, or depreciation), and (ii) all income of
Seller, shall be apportioned between Seller and Purchaser as of the Closing
Date based on the portion of each such expense or revenue attributable to the
period falling before the Closing Date on the one hand, which Seller shall bear
4
<PAGE>
the responsibility and benefit of, and the portion of each such expense or
revenue attributable to the period falling on or after the Closing Date, on the
other hand, which Purchaser shall bear the responsibility and benefit of (the
"Adjustment"). The net Adjustment will be paid by the party owing the same to
the other at the closing. 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".
3.2 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 such prorations, 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.
3.3 Seller and Purchaser shall maintain and make available to
each other any books or records necessary for the adjustment of any item
pursuant to this Article. The provisions of this Article shall survive the
closing of the transactions described herein (the "Closing").
4. The Closing. The Closing of the transaction provided for in this
Agreement shall take place simultaneously with the execution and delivery of
this Agreement (the actual date of the Closing being referred to herein as the
"Closing Date").
5. Representations and Warranties.
5.1 Seller represents and warrants to Purchaser as follows:
5
<PAGE>
5.1.1 Organization; Power and Authority. Seller is a
corporation duly formed, validly existing and in good standing under the laws
of the State of Pennsylvania, and has all requisite power and authority to
carry on its business as it is now being conducted, to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby.
5.1.2 Due Authorization and Execution; Effect of Agreement.
The execution, delivery and performance by Seller of this Agreement and the
consummation by Seller of the transactions contemplated hereby have been duly
authorized by all necessary corporate action required to be taken on the part
of Seller. This Agreement has been duly and validly executed and delivered by
Seller and constitutes the valid and binding obligation of Seller, enforceable
in accordance with its terms, except to the extent that such 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.
5.1.3 Consents. No consent, approval or authorization of,
exemption by, or filing with, any governmental or regulatory authority or any
third party is required in connection with the execution, delivery and
performance by Seller of this Agreement, except for consents, approvals,
authorizations, exemptions and filings, if any, which have been obtained.
5.1.4 Compliance with Applicable Laws. Seller is not
engaging in any activity or omitting to take any action as a result of which
Seller is in violation of any 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
6
<PAGE>
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.
5.1.5 Permits. All Permits required by any federal, state,
or local law, rule or regulation and necessary for the operation of the
Property and the Business as currently being conducted have been obtained and
are currently in effect. No registrations, filings, applications, notices,
transfers, consents, approvals, orders, qualifications, waivers or other
actions of any kind are required by virtue of the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby (a)
to avoid the loss of any Permit or the violation of any law, regulation, order
or other requirement of law, or (b) to enable Purchaser to continue the
operation of the Property as presently conducted after the Closing. The current
use and occupation of any portion of the Property does not violate any of, and,
where applicable, is in material compliance with, the Permits, any applicable
deed restrictions or other covenants, restrictions or agreements including
without limitation, site plan approvals, zoning or subdivision regulations or
urban redevelopment plans applicable to the Premises.
5.1.6 Title to Assets. Seller has good and marketable title
to the Property free and clear of all Encumbrances.
5.1.7 Contracts. Except as set forth on Exhibit C, Seller is
not a party to any leases, contracts, orders or agreements relating to the
Property or the Business
7
<PAGE>
(written or otherwise) (collectively, "Contracts"). Exhibits C sets forth a
full and complete description of the Contracts described therein, and none of
such Contracts have been amended or modified except as reflected on said
Exhibits. Seller is not holding any security deposits under any of said
Contracts. Each of the Contracts are in full force and effect and no party
under any such Contract, including Seller, is in default, or has sent or
received notice of default, in any respect of any such Contract.
5.1.8 Condition of Personal Property. The Personal Property
is in good operating condition and repair, ordinary wear and tear excepted, and
is adequate, suitable and sufficient to meet the needs of and to operate the
Property as currently conducted.
5.1.10 Environmental Matters.
5.1.10.1 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. ' 9601(33); (ii) any "pollutant or contaminant" as
defined in 42 U.S.C. ' 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
8
<PAGE>
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.
5.1.10.2 There is no Hazardous Material at, under or on
the Premises and there is no ambient air, surface water, groundwater or land
contamination within, under, originating from or relating to the Premises.
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.
5.1.10.3 Seller has no obligation or liability imposed
or based upon any provision under any foreign, federal, state or local law,
rule, or regulation or common law, or under any code, order, decree, judgment
or injunction applicable to Seller or the Property or any notice, or request
for information issued, promulgated, approved or entered thereunder, or under
the common law, or any tort, nuisance or absolute liability theory, relating to
public health or safety, worker health or safety, or pollution, damage to or
protection to the environment, including without limitation, laws relating to
emissions, discharges, releases or threatened releases of Hazardous Material
into the environment (including without limitation, ambient air, surface water,
groundwater, land surface or subsurface), or otherwise relating to the
manufacture, processing, distribution, use, treatment, 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").
5.1.10.4 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
9
<PAGE>
liability under the Environmental Laws in respect of the Premises.
5.1.10.5 The Premises are not (a) listed or proposed
for listing on the National Priority List or (b) listed on the Comprehensive
Environmental Response, Compensation, Liability Information System List
("CERCLIS") promulgated pursuant to CERCLA, 42 U.S.C. ' 960196), or any
comparable list maintained by any foreign, state or local government authority.
5.1.10.6 There are no underground storage tanks at the
Premises and Seller further warrants and represents that any prior use and
operation of underground storage tanks has been in compliance with all
Environmental Laws.
5.1.11 Utilities. All water, storm and sanitary sewer, gas,
electricity, telephone and other utilities adequately service the Premises,
enter the Premises through lands as to which valid public or private easements
exist that will inure to the benefit of Purchaser and the Premises are
furnished by facilities of public utilities and the cost of installation of
such utilities has been fully paid.
5.1.12 Access. To the best of Seller's knowledge, there are
no federal, state, county, municipal or other governmental plans to change the
highway or road system in the vicinity of the Premises which could materially
restrict or change access from any such highway or road to the Premises or any
pending or threatened condemnation or eminent domain proceedings relating to or
affecting the Premises.
5.1.13 Insurance Requirements. All requirements or
recommendations by any insurer or by any board of fire underwriters or similar
body in respect of the Property have been satisfied.
10
<PAGE>
5.1.14 Litigation. There is no action or proceeding (zoning
or otherwise) or governmental investigation pending, or, to the best of
Seller's knowledge, threatened against, or relating to, Seller (insofar as it
relates to the Premises or the Business), the Premises, the Business or the
transactions contemplated by this Agreement, nor is there any basis for any
such action, proceeding or investigation.
5.1.15 Assessments. There are no special or other
assessments for public improvements or otherwise now affecting the Premises nor
does Seller know of (a) any pending or threatened special assessments affecting
the Premises or (b) any contemplated improvements affecting the Premises that
may result in special assessments affecting the Premises.
5.1.16 Employee Agreements. There are no union or employment
contracts or agreements (written or oral) involving employees of Seller or its
affiliates affecting the Property or the Business which will survive the
Closing. All employees of Seller will have been terminated as of the date
hereof.
5.1.17 Work at the Premises. No services, material or work
have been supplied to the Premises for which payment has not been made in full
other than those that will be paid at closing.
5.1.18 Financial Condition. Seller has delivered to
Purchaser true and correct copies of (1) audited financial statements
consisting of balance sheets and income statements of Seller as of December 31,
1996; (2) unaudited statements for the quarters ended March 31, 1997,; and (3)
internal reports for the months ended April 30, May 31, 1997 and for the period
commencing June 1, 1996 through the date immediately prior to
11
<PAGE>
the date hereof. Each such balance sheet presents fairly the financial
condition, assets and liabilities of Seller as of its date; each such statement
of income presents fairly the results of operations of Seller for the period
indicated. The financial statements referred to in this Section are in
accordance with the books and records of Seller. Since December 31, 1996 and
since March 31, 1997: (a) there has at no time been a material adverse change
in the financial condition, results of operations, businesses, properties,
assets, liabilities or future prospects of Seller, the Property or Business;
(b) the Business has been conducted in all respects only in the ordinary
course; and (c) Seller has not suffered an extraordinary loss (whether or not
covered by insurance) or waived any right of substantial value.
5.1.19 Full Disclosure. To the best knowledge of Seller,
none of the information supplied by Seller herein or in the exhibits hereto
contains any untrue statement of a material fact or omits to state a material
fact required to be stated herein or necessary in order to make the statements
herein, in light of the circumstances under which they are made, not
misleading.
5.2 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller as follows:
5.2.1 Organization; Power and Authority. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite power and authority to
carry on its business as it is now being conducted, to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby.
12
<PAGE>
5.2.2 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.
5.3 Survival. The representations and warranties of the parties
made in this Article 5 shall survive the Closing.
6. 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
13
<PAGE>
further consummate the transactions contemplated by this Agreement. This
Article shall survive the Closing.
7. Brokers. Seller and Purchaser warrant and represent to each other
that they dealt with no broker, finder or similar agent or party who or which
might be entitled to a commission or compensation on account of introducing the
parties, the negotiation or execution of this Agreement and/or the closing of
the transaction provided for herein, other than Blue Sky Commercial and Thomas
Yaegel & Associates (the "Brokers"). Purchaser and Seller hereby respectively
agree to indemnify and hold harmless the other party from and against all loss,
liability, damage and expense (including, without limitation, attorneys' fees)
imposed upon or incurred by the other party by reason of any claim for
commissions or other compensation for bringing about this transaction by any
broker, finder or similar agent or party other than the Brokers. Seller agrees
to pay the Brokers any commissions due the Brokers in connection with this
transaction pursuant to a separate agreement or agreements between Seller and
the Brokers. The provisions of this Article shall survive the Closing or any
termination of this Agreement.
8. Costs and Fees. Seller shall pay the expenses incurred in
connection with an audit of the Seller. Purchaser shall pay the expenses
incurred in connection with (a) the examination of title, (b) the issuance of a
policy of title insurance for Purchaser (c) a survey of the property, and (d)
the Phase I environmental study. 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.
14
<PAGE>
9. Indemnification.
9.1 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
Section 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
9.1.
9.2 Subject to the further provisions of this Article, Purchaser
shall protect, defend, hold harmless and indemnify Seller, its partners,
employees and agents, and its successors and assigns from, against and in
respect of any and all Losses that may be suffered or incurred by any of them
arising from or by reason of (i) any of the Assumed Liabilities on and after
the date hereof, (ii) the breach of any representation, warranty, covenant or
agreement of Purchaser contained in this Agreement or in any document or other
writing delivered pursuant to this Agreement; and (iii) any and all actions,
suits, proceedings, claims, demands, assessments,
15
<PAGE>
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 9.2.
9.3 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
16
<PAGE>
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 9.3 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 9.3.
9.4 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.
10. Bulk Sales. The parties agree to waive the requirements, if any,
of all applicable bulk sales laws. As an inducement to Purchaser to enter into
such waiver, Seller represents and warrants that (a) it will not be rendered
insolvent by the transactions contemplated by this Agreement, and (b) all
debts, obligations and liabilities relating to the Property and Business that
are not expressly assumed by Purchaser under this Agreement will be promptly
paid and discharged by Seller as and when they become due. Seller agrees to
indemnify and hold Purchaser harmless from, and reimburse Purchaser for, any
loss, cost, expense, liability or damage which Purchaser may suffer or incur by
virtue of the noncompliance by Seller or Purchaser with any laws pertaining to
fraudulent conveyance, bulk sales or any similar law which might make the sale
or
17
<PAGE>
transfer of any part of the Property or Business ineffective as to creditors
of, or claimants against the Seller.
11. 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 Family Golf Centers, Inc. 225 Broadhollow Road, Melville, New York
11747, Attention: Pamela S. Charles, General Counsel. A copy of any Notice
given by Purchaser to Seller shall simultaneously be given in either manner
provided above to Gerald L. Bowen, P.C., 1160 Street Road, Southampton,
Pennsylvania 18966, Attention: Gerald L. Bowen, Esq. Notices given in the
manner aforesaid shall be deemed to have been given three (3) business days
after the day so mailed, the day after delivery to any overnight express
carrier and on the day so delivered by hand. Either party shall have the right
to change its address(es) for the receipt of Notices by giving Notice to the
other party in either manner aforesaid. Any Notice required or permitted to be
given by either party may be given by that party's attorney.
12. Miscellaneous.
12.1 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns.
13.2 This Agreement shall be governed by, interpreted under and
construed and enforced in accordance with, the laws of the State of New York.
18
<PAGE>
12.3 The captions or article headings in this Agreement are for
convenience only and do not constitute part of this Agreement.
12.4 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.
12.5 It is agreed that, except where otherwise expressly provided
in particular Articles or Sections of this Agreement, none of the provisions of
this Agreement shall survive the Closing.
12.6 This Agreement (including the Exhibits annexed hereto)
contains the entire agreement between the parties with respect to the subject
matter hereof and supercedes all prior understandings, if any, with respect
thereto.
12.7 This Agreement may not be modified, changed, supplemented or
terminated, nor may any obligations hereunder be waived, except by written
instrument signed by the party to be charged or by its agent duly authorized in
writing or as otherwise expressly permitted herein.
12.8 No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof or of any other agreement or provision herein contained. No extension
of the time for performance of any obligations or acts shall be deemed an
extension of the time for performance of any other obligations or acts.
12.9 This Agreement may be executed in one or more counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which taken together shall constitute but one and the same original.
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
SOUTHAMPTOM FAMILY GOLF CENTER,
INC.
By:
-------------------------------------
Name:
Title:
PHILADELPHIA FAMILY GOLF CENTERS,
INC.
By:
-------------------------------------
Name:
Title:
20
<PAGE>
PURCHASE AGREEMENT
AND
ESCROW INSTRUCTIONS
between
LASALLE NATIONAL BANK,
A NATIONAL BANKING ASSOCIATION,
AS TRUSTEE UNDER THAT CERTAIN TRUST INDENTURE
DATED AS OF FEBRUARY 20, 1990,
as Seller,
and
TEMPE FAMILY GOLF CENTERS, INC.,
A DELAWARE CORPORATION,
as Buyer
March ___, 1997
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS.........................................................1
2. AGREEMENT TO PURCHASE AND SALE......................................3
2.1. THE PROPERTY...............................................3
2.2. EXCLUDED PROPERTY..........................................5
3. PURCHASE PRICE AND RIGHT TO TERMINATE...............................5
3.1. AMOUNT AND PAYMENT.........................................5
3.2. EARNEST MONEY DEPOSIT......................................5
3.3. RIGHT TO TERMINATE.........................................6
3.4. PROMISSORY NOTE............................................6
4. TITLE REPORT, ESCROW AND ESCROW INSTRUCTIONS........................6
4.1. TITLE REPORT...............................................6
4.2. ESCROW INSTRUCTIONS........................................7
4.3. INDEMNITY OF ESCROW AGENT..................................7
4.4. EFFECT OF FORM ESCROW INSTRUCTIONS.........................7
5. LIQUOR LICENSE......................................................8
5.1. LIQUOR LICENSE.............................................8
5.2. PURPORTED LIEN ON LIQUOR LICENSE...........................8
6. COMPLETION OF SALE..................................................8
6.1. PLACE AND DATE.............................................8
6.2. MANAGEMENT AGREEMENT.......................................9
7. TITLE TO PROPERTY...................................................9
7.1. GOLF COURSE LEASE AND REAL PROPERTY........................9
7.2. PERSONAL PROPERTY..........................................9
7.3. CONTRACTS AND PERMITS......................................9
7.4. WATER RIGHTS AND LIQUOR LICENSE............................9
8. REPRESENTATIONS AND WARRANTIES.....................................10
8.1. SELLER....................................................10
8.2. BUYER.....................................................12
9. COVENANTS..........................................................12
9.1. SELLER....................................................12
9.2. BUYER.....................................................14
10. CONDITIONS PRECEDENT...............................................15
10.1. SELLER....................................................15
10.2. BUYER.....................................................15
11. CLOSING............................................................16
11.1. PROCEDURE.................................................16
11.2. POSSESSION................................................17
11.3. CLOSING COSTS.............................................18
11.4. PRORATIONS................................................18
11.5. ADJUSTMENTS...............................................18
12. ASSIGNMENT.........................................................18
i
<PAGE>
13. CASUALTY DAMAGE, EMINENT DOMAIN AND RISK OF LOSS...................18
14. GENERAL............................................................19
14.1. TIME OF ESSENCE; FORCE MAJEURE............................19
14.2. NOTICES...................................................19
14.3. GOVERNING LAW.............................................20
14.4. SURVIVAL..................................................20
14.5. CONSTRUCTION..............................................20
14.6. TERMS GENERALLY...........................................20
14.7. FURTHER ASSURANCES........................................20
14.8. PARTIAL INVALIDITY; SEVERABILITY..........................20
14.9. WAIVERS...................................................20
14.10. THIRD PARTY BENEFICIARIES.................................21
14.11. MISCELLANEOUS.............................................21
EXHIBIT "A" - The Land (Paragraph 2.1.2)
EXHIBIT "B" - The Personal Property (Paragraph 2.1.3)
EXHIBIT "C" Assignment of Golf Course Lease and Landlord
Consent and Estoppel (Paragraph 7.1)
EXHIBIT "D" - Permitted Title Exceptions (Paragraph 7.1)
EXHIBIT "E" - Bill of Sale for Personal Property (Paragraph 7.2)
EXHIBIT "F" - Assignment of Contracts and Permits (Paragraph
7.3)
EXHIBIT "G" Management Agreement (Paragraph 6.2)
ii
<PAGE>
PURCHASE AGREEMENT
AND
ESCROW INSTRUCTIONS
THIS AGREEMENT, is made as of March ___, 1997, by and between LASALLE
NATIONAL BANK, A NATIONAL BANKING ASSOCIATION, AS TRUSTEE UNDER THAT CERTAIN
TRUST INDENTURE DATED AS OF FEBRUARY 20, 1990 ("SELLER"), and TEMPE FAMILY
GOLF CENTERS, INC., A DELAWARE CORPORATION ("BUYER").
W I T N E S S E T H:
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which is hereby acknowledged, and in consideration of the covenants set forth
in this Agreement, Seller and Buyer agree as follows:
1. DEFINITIONS. As used herein, the following terms shall have the
meanings indicated:
1.1. "Close of Escrow" or "Closing" means the consummation of the
purchase of the Property by Buyer from Seller in accordance
with this Agreement.
1.2. "Closing Date" means the date specified in PARAGRAPH 6.1
herein on which the Closing is to occur.
1.3. "Contracts and Permits" means those instruments described in
PARAGRAPH 2.1.4 herein.
1.4. "Due Diligence Period" shall mean the period beginning upon
Opening of Escrow and ending upon the earlier of (i) the
conclusion of the fourteenth (14th) day after Opening of
Escrow or (ii) Buyer's delivery of written notice to Seller,
with a copy to Escrow Agent, of Buyer's waiver of its right
to terminate this agreement as set forth in PARAGRAPH 3.3.
1.5. "Effective Date" shall mean March 1, 1997.
1.6. "Environmental Laws" shall mean all federal, state and local
laws, ordinances, rules and regulations now or hereafter in
force, as amended from time to time, in any way relating to
or regulating human health or safety, or industrial hygiene
or environmental conditions, or protection of the
environment, or pollution or contamination of the air, soil,
surface water or groundwater, and includes the Comprehensive
Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. ss. 9601, et seq., the Resource Conservation
and Recovery Act, 42 U.S.C. ss. 6901, et seq., and the Clean
Water Act, 33 U.S.C. ss. 1251, et seq.
<PAGE>
1.7. "Escrow Agent" and "Title Insurer" shall be First American
Title Insurance Company, a California corporation ("Escrow
Agent"), whose address and phone numbers are 111 West
Monroe, Phoenix, Arizona 85003, Attention Carol A. Peterson;
602-256-3701 (direct); 602-254-0872.
1.8. "Golf Course Lease" means those certain instruments
described in PARAGRAPH 2.1.1 herein.
1.9. "Government Authority" means any and all courts, boards,
agencies, commissions, offices, or authorities of any
government unit (federal, state, county, district,
municipal, city or otherwise).
1.10. "Hazardous Substances" shall mean any substance or material
that is described as a toxic or hazardous substance, waste
or material or a pollutant or contaminant, or words of
similar import, in any of the Environmental Laws, and
includes asbestos, petroleum (including crude oil or any
fraction thereof, natural gas, natural gas liquids,
liquefied natural gas, or synthetic gas usable for fuel, or
any mixture thereof), petroleum products, polychlorinated
biphenyls, urea formaldehyde, radon gas, radioactive matter,
medical waste, and chemicals which may cause cancer or
reproductive toxicity.
1.11. "Land" means the real property described in PARAGRAPH 2.1.2
herein.
1.12. "Liquor License" means that certain license described in
PARAGRAPH 2.1.5 herein.
1.13. "Liquor License Transfer" means those acts described in
PARAGRAPH 5.1 herein.
1.14. "Opening of Escrow" means the date on which Buyer and Seller
have each executed and delivered two (2) counterpart copies
of this Agreement to Escrow Agent, and such date shall be
inserted by Escrow Agent on the last page hereof.
1.15. "Permitted Exceptions" means those title exceptions
described in PARAGRAPH 7.1 herein.
1.16. "Property" means the property described in PARAGRAPH 2.1
herein.
1.17. "Real Property" means all buildings, structures,
improvements, machinery, fixtures and equipment affixed or
attached to, or located at, the Land and all easements and
rights appurtenant to such Land, as described in PARAGRAPH
2.1.2 herein.
1.18. "Recorder's Office" means the official records of the
Recorder's Office in Maricopa County, Arizona.
1.19. "Release" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing into the
environment, including continuing migration, of Hazardous
Substances into or through soil, surface water or
groundwater.
1.20. "Tempe" means The City of Tempe, an Arizona municipal
corporation.
2
<PAGE>
1.21. "Title Company" means Escrow Agent.
1.22. "Title Report" means a preliminary title report on the
leasehold estate described in the Golf Course Lease,
together with legible copies of all title exceptions
referenced therein, prepared by Title Company and delivered
to Buyer within ten (10) days after the Opening of Escrow.
Other defined terms shall have the meanings assigned to them in this
Agreement.
2. AGREEMENT TO PURCHASE AND SALE.
2.1. The Property. Seller agrees to sell to Buyer and Buyer
agrees to purchase from Seller, "as is and where is,"
without recourse, warranty or representation other than as
set forth in this agreement, under the terms set forth in
this Agreement, all of the following property (collectively
the "Property"):
2.1.1. All right, title and interest of Seller in the
leasehold estate and related rights created by
the following instruments (collectively, the
"Golf Course Lease"):
2.1.1.1. That certain Agreement/Lease for
the Construction, Development,
Maintenance and Operation of a
Public Golf Course in The Indian
Bend Wash, dated February 11,
1988, executed by Tempe and
Michael Morley, a single man
("Morley"), as disclosed by, and
attached as an exhibit to, that
certain Memorandum of
Agreement/Lease for Construction,
Development, Construction
Easement, and Operating Lease,
dated February 8, 1990 and
recorded February 21, 1990 in
Instrument Number 90-077856 in the
Recorder's Office;
2.1.1.2. The Assignment and Consent dated
January 31, 1990 and recorded
February 21, 1990 in Instrument
Number 90-077855 in the Recorder's
Office, executed by and among
Morley, Indian Bend Limited
Partnership (:Indian Bend"),
LaSalle, and Tempe, whereby Morley
assigned any and all of his right,
title and interest in, to and
under the Golf Course Lease to
Indian Bend and Indian Bend
accepted such assignment, which
assignment was consented to by
Tempe;
2.1.1.3. That certain Certificate of
Correction to Memorandum of
Agreement/Lease for Construction,
Development, Construction
Easement, and Operating Lease
recorded February 15, 1991 in
Instrument Number 91-065532 in the
Recorder's Office;
3
<PAGE>
2.1.1.4. That certain Memorandum of
Commencement of Lease Under
Agreement/Lease dated February 12,
1991 and recorded February 20,
1991 in Instrument Number
91-068666;
2.1.1.5. That certain Assignment of Golf
Course Lease dated February 4,
1997 and recorded February 5, 1997
in Instrument Number 97-0077091 in
the Recorder's Office, executed by
and among LaSalle and Lothar
Goernitz, as chapter 11 trustee of
Indian Bend Limited Partnership,
Debtor in Case No. 96-12273
PHX-RTB in the United States
Bankruptcy Court for the District
of Arizona, whereby said trustee
assigned any and all of his right,
title and interest in, to and
under the Golf Course Lease to
LaSalle and LaSalle accepted such
assignment;
2.1.2. All of Seller's right, title and interest in and
to all buildings, structures, improvements,
machinery, fixtures and equipment affixed or
attached to, or located at the real property
comprising the leasehold estate of the Golf
Course Lease, as more particularly described on
EXHIBIT "A" attached hereto (the "Land"), and
all easements and rights appurtenant to such
Land, including, but not limited to, all
applicable water rights (all such Land,
buildings, structures, improvements, machinery,
fixtures, equipment, easements and rights are
collectively the "Real Property");
2.1.3. All of Seller's tangible and intangible personal
property, which is located at or used in
connection with the Real Property, as more
particularly described on EXHIBIT "B" attached
hereto (the "Personal Property");
2.1.4. All of Seller's interest in all (i) contracts,
leases, lease amendments, lease guaranties, work
letter agreements, improvement agreements,
warranties and guaranties arising out of,
affecting, relating or appurtenant to the Golf
Course Lease, the Personal Property and/or the
Real Property, and (ii) all building permits,
certificates of occupancy, and other
certificates, permits, licenses and approvals
arising out of, affecting, relating or
appurtenant to the Golf Course Lease and/or the
Real Property (collectively, the "Contracts and
Permits"); and
2.1.5. All of Seller's right, title and interest in
that certain Liquor License number 07070792
issued by the Arizona Department of Liquor
Licenses and Control to the agent for Seller, as
owner of such Liquor License (the "Liquor
License").
4
<PAGE>
2.2. Excluded Property. The Property does not include any of Seller's
right, title or interest in any of the following property:
2.2.1. Personal property of Seller that is not located on or at or
used in connection with the Real Property;
2.2.2. Cash, cash equivalents, bank deposits and negotiable
instruments of Seller, including income of the Real Property
received by Seller prior to the Effective Date; and
2.2.3. Claims of Seller arising prior to the Effective Date against
any third parties to recover money or property, including
but not limited to, the right to collect notes payable to
and accounts receivable of Seller and any claims of Seller
against any former owner of the Property, or against any
insider or affiliate thereof. Buyer acknowledges that Seller
is currently pursuing one or more of such claims.
3. PURCHASE PRICE AND RIGHT TO TERMINATE.
3.1. Amount and Payment. The total purchase price for the
Property shall be ONE MILLION SEVEN HUNDRED FIFTY THOUSAND
AND 00/100 DOLLARS ($1,750,000.00), subject to adjustment as
provided in PARAGRAPHS 11.4 AND 11.5. At the Closing on the
Closing Date, Buyer shall pay the total purchase price for
the Property to Seller in cash in immediately available
funds.
3.2. Earnest Money Deposit. Upon Opening of Escrow, Buyer shall
make an Earnest Money Deposit in the amount of $250,000.00
("Earnest Money Deposit"), to be credited against the
required purchase price, as set forth above, at Close of
Escrow. The Earnest Money Deposit shall be non-refundable to
Buyer unless (i) within fourteen (14) days after Opening of
Escrow, Buyer gives notice of the termination of this
Agreement, provided Buyer has not prior thereto waived this
right to terminate, (ii) if the assignment of the Golf
Course Lease is not approved by all Government Authority,
from which such approval is required under the terms of such
lease, before June 30, 1997, provided the failure to obtain
such approval is not materially due to any action or
inaction of Buyer, or (iii) Seller defaults under this
Agreement. Upon the occurrence of any of the events
described in the preceding sentence, Escrow Agent shall
immediately pay the Earnest Money Deposit to Buyer, together
with accrued interest, and this Agreement shall be canceled.
Escrow Agent shall immediately pay the Earnest Money Deposit
to Seller, and this Agreement shall be canceled (i) upon any
Default by Buyer under this agreement, or (ii) if the
assignment of the Golf Course Lease is not approved by all
Government Authority, from which such approval is required
under the terms of such lease, before June 30, 1997 due to
any action or inaction of Buyer. Escrow Agent shall
immediately pay the Earnest Money Deposit to Seller, without
cancellation of this Agreement, upon expiration of the Due
Diligence Period.
5
<PAGE>
3.3. Right to Terminate. Buyer shall have the right to terminate
this Agreement by notice to Seller through the fourteenth
(14th) day after Opening of Escrow. Buyer may at any time
waive this right to terminate by written notice to Seller,
with a copy to Escrow Agent. Buyer shall take all action and
furnish all documents and information reasonably necessary
to obtain approval before June 30, 1997 of the assignment of
the Golf Course Lease by all Government Authority from which
such approval is required under the terms of such lease.
Buyer shall not, prior to obtaining such approval, request
modification of the Golf Course Lease. The application for
approval and all costs associated therewith are the sole
responsibility of Buyer; provided, however, that Seller
shall execute documents and take such further action
reasonably required by the applicable Government Authority
to obtain approval. Seller shall be entitled to terminate
this Agreement by notice to Buyer if Buyer unreasonably
delays in taking any action or in furnishing any documents
or information reasonably necessary to obtain Government
Authority approval of the assignment of the Golf Course
Lease. Buyer shall, before termination for this reason only,
be entitled to written notice and a reasonable opportunity
(not to exceed ten (10) days) to cure.
3.4. Promissory Note. On or before expiration of the Due
Diligence Period and upon payment of the Earnest Money
Deposit to Seller under conditions not requiring the
cancellation of this Agreement, as provided in PARAGRAPH
3.2, Seller shall execute and deliver to Buyer a Promissory
Note in the principal amount of $250,000.00 ("Promissory
Note"), providing for interest thereon at the rate of seven
percent (7%) per annum from the date of expiration of the
Due Diligence Period until paid. The Promissory Note is
intended to document Seller's obligation to refund the
Earnest Money Deposit under the conditions described in
PARAGRAPH 3.2 and shall be due July 1, 1997; provided,
however, the Promissory Note shall be surrendered by Buyer,
with no payment due thereon, if Escrow closes as provided in
this Agreement.
4. TITLE REPORT, ESCROW AND ESCROW INSTRUCTIONS.
4.1. Title Report. Within ten (10) days from the Opening of
Escrow, Seller shall, at Seller's expense, procure the Title
Report, together with legible copies of all recorded
documents referenced therein, by which the Title Company
shall agree to issue to Buyer, upon Close of Escrow, an
American Land Title Association Standard Owner's Policy Form
B-1970 (Amended 10/17/70) of title insurance with respect to
the Golf Course Lease and Real Property, with liability in
the amount of the purchase price, insuring that Buyer's
leasehold interest in the Golf Course Lease and Real
Property is vested in Buyer subject only to the Permitted
Exceptions. Buyer may, in Buyer's sole and absolute
discretion, elect to receive an extended owner's ALTA title
insurance policy in lieu of the standard owner's policy
referenced above. In such event, Buyer shall be responsible
to provide the survey and pay the incremental premium
incident to such upgraded policy.
6
<PAGE>
4.2. Escrow Instructions. This Agreement shall also constitute
escrow instructions. Seller and Buyer will deliver to Escrow
Agent all documents and do or cause to be done all other
things necessary, in the reasonable judgment of Escrow
Agent, to enable it to comply in good faith with its
obligations under this Agreement. Escrow Agent shall perform
its duties faithfully, timely and in good faith according to
the provisions set forth in this Agreement and at law
relative to duties and obligations imposed on escrow agents.
In the event any conflicting demand is made upon Escrow
Agent concerning this Agreement, Seller and Buyer authorize
Escrow Agent, at its election, to implead any money and
documents deposited with Escrow Agent with a court of
competent jurisdiction to determine the rights of Seller and
Buyer. Escrow Agent's deposit of documents and funds with
such court, after deducting its fee (if not previously
collected by Escrow Agent), shall relieve Escrow Agent of
all liability and responsibility with respect to the funds
deposited with such court and Escrow Agent's acts occurring
after the date of such deposit, but shall not relieve Escrow
Agent of any liability or responsibility incurred prior to
such date of deposit with the court.
4.3. Indemnity of Escrow Agent. Seller and Buyer shall indemnify,
defend and hold harmless Escrow Agent and Escrow Agent's
shareholders, directors, officers, employees, agents,
attorneys, successors and assigns, against all claims,
causes of action, demands, liabilities, losses, damages,
costs and expenses, including reasonable attorneys' fees and
disbursements, which Escrow Agent may incur or sustain in
connection with this Agreement or any court action arising
therefrom and shall pay the same upon demand; provided,
however, that such indemnity shall not extend to any costs,
damages, attorneys' fees, expenses or liabilities incurred
by Escrow Agent as a result of (i) Escrow Agent's breach or
default in the performance of any covenant, agreement or
obligation to be performed by Escrow Agent set forth in this
Agreement or (ii) Escrow Agent's negligence. The foregoing
indemnity shall survive any termination of this Agreement,
the Closing and the recording of the documents necessary to
consummate this transaction.
4.4. Effect of Form Escrow Instructions. If Escrow Agent requires
the execution of its standard form printed escrow
instructions, Buyer and Seller agree to execute same;
however, such instructions shall be construed as applying
only to Escrow Agent's engagement, and if there are
conflicts between the terms of this Agreement and the terms
of the printed escrow instructions, the terms of this
Agreement shall control. The parties expressly agree that
the "13-day cancellation" clause or any clause providing for
a period of time after breach before the Escrow can be
terminated shall be stricken from the printed form escrow
instructions, and that upon a breach of this Agreement, the
Escrow may be terminated and this Agreement terminated
immediately by the non-breaching party as more particularly
set forth herein.
7
<PAGE>
5. LIQUOR LICENSE
5.1. Liquor License. Buyer acknowledges Buyer must apply for all
approvals required by all applicable Government Authority to
permit the transfer of control of the Liquor License to
Buyer after the Closing Date, including but not limited to a
person to person transfer application, an
Applicant/Controlling Person Affidavit and/or a change of
agent application and all related documents (the "Liquor
License Transfer"), in accordance with the provisions of
A.R.S. ss. 4-201, et seq. Seller and Buyer agree the
purchase of the Property in accordance with the provisions
of this Agreement shall be final as of the Closing Date,
regardless of any action taken or not taken by any
applicable Government Authority in regard to the Liquor
License. Application for approval by all Applicable
Government Authority and all costs associated therewith are
the sole responsibility of Buyer; provided, however, that
Seller shall execute all documents required by the
applicable Government Authority, whether before or after
Closing, and shall deliver the original Liquor License (or
Interim Permit if Seller has not yet received the original
Liquor License) to Buyer at Closing. Notwithstanding
anything to the contrary herein, Seller makes no
representation or warranty as to the likelihood of approval
or rejection of Buyer, or of the transfer of the Liquor
License, by any applicable Government Authority.
5.2. Purported Lien on Liquor License. Buyer acknowledges that
there is on file with the Arizona Department of Liquor
Licenses and Control a Statement of Legal or Equitable
Interest ("Statement") filed September 19, 1990 against the
Liquor License, pursuant to which Louis and Kimberly
Cincotta claimed a lien on or interest in the Liquor
License. Seller and Buyer agree the purchase of the Property
in accordance with the provisions of this Agreement shall be
subject to any right, title or interest under the Statement
and shall be final as of the Closing Date, regardless of any
action taken in regard to the Liquor License.
Notwithstanding anything to the contrary herein, Seller
makes no representation or warranty as to the validity of
any right, title or interest under the Statement or the
likelihood of any prior claim against the Liquor License.
6. COMPLETION OF SALE.
6.1. Place and Date. The purchase and sale of the Property shall
be completed in accordance with PARAGRAPH 11 herein (the
"Closing"). The Closing shall occur through an escrow opened
with the Title Company at 111 West Monroe, Phoenix, Arizona
85003, attention: Carol A. Peterson, on the earlier of (i)
the first day the Recorder's Office is open for business
that is two (2) or more days after the assignment of the
Golf Course Lease is approved by all Government Authority
from which such approval is required under the terms of such
Lease, or (ii) JUNE 30, 1997 (the "Closing Date"), or at
such other place or on such other date as Seller and Buyer
agree in writing. Prior to the Closing Date, Seller and
Buyer each shall give appropriate written instructions,
consistent with this
8
<PAGE>
Agreement, to the Title Company for the Closing in
accordance with this Agreement.
6.2. Management Agreement. On or before expiration of the Due
Diligence Period and upon payment of the Earnest Money
Deposit to Seller under conditions not requiring the
cancellation of this Agreement, as provided in PARAGRAPH
3.2, Buyer and Seller shall execute and deliver a Management
Agreement ("Management Agreement") in the form attached as
EXHIBIT "G." The Management Agreement shall be terminated
immediately at the option of Buyer or Seller upon any
cancellation of this Agreement.
7. TITLE TO PROPERTY.
7.1. Golf Course Lease and Real Property. Seller shall assign all
of Seller's right, title and interest in the Golf Course
Lease and the Real Property by a duly executed and
acknowledged Assignment in the form of EXHIBIT "B" attached
hereto, free and clear of all liens, claims, encumbrances,
leases, easements, restrictions, rights, covenants and
conditions of any kind or nature whatsoever, except only the
following exceptions (the "Permitted Exceptions"): (a) the
matters described on EXHIBIT "C" attached hereto, and (b)
such other matters as may be approved by Buyer, in Buyer's
sole and absolute discretion, in writing on or before the
Closing. Such assignment shall be "as is, where is" without
warranties or representations of any kind except as provided
herein. On or before the Closing, Tempe shall consent to
such Assignment.
7.2. Personal Property. Seller shall transfer title to Seller's
Personal Property to Buyer, by a duly executed Bill of Sale
("Bill of Sale") in the form of EXHIBIT "D" attached hereto,
free and clear of all liens, claims, encumbrances, security
interests and adverse claims of any kind or nature
whatsoever. Such transfer shall be "as is, where is" without
any warranties or representations of any kind except as
provided herein.
7.3. Contracts and Permits. Seller shall assign to Buyer title to
Seller's interests in those Contracts, if any, which Buyer
has elected to assume before Close of Escrow, and the
Permits by duly executed Assignment of Contracts and Permits
(the "Assignment of Contracts and Permits") in the form of
EXHIBIT "E" attached hereto, free and clear of all liens,
encumbrances, security interests and adverse claims of any
kind or nature whatsoever. Such assignment shall be "as is,
where is" without any warranties or representations of any
kind except as provided herein.
7.4. Water Rights and Liquor License. Seller shall take all
actions and sign all documents necessary to transfer all
Water Rights arising out of, affecting, relating or
appurtenant to the Property ("Water Rights") and the Liquor
License to Buyer on or before the Closing, to the extent
possible, and after the Closing if
9
<PAGE>
necessary. Such transfer shall be "as is, where is" without
warranties or representations of any kind except as provided
herein.
8. REPRESENTATIONS AND WARRANTIES.
8.1. Seller. The representations and warranties of Seller in this
PARAGRAPH 8.1 are a material inducement for Buyer to enter
into this Agreement. Buyer would not purchase the Property
from Seller without such representations and warranties of
Seller. Such representations and warranties shall survive
any termination of this Agreement, the Closing and the
recording of the documents necessary to consummate this
transaction. Seller represents and warrants to Buyer as of
the date of this Agreement as follows, and further
represents that all of the following representations and
warranties shall also be true as of the Closing:
8.1.1. The execution, delivery and performance of this
Agreement by Seller have been duly and validly
authorized by all necessary action on the part
of Seller. The person executing this Agreement
on behalf of Seller is duly authorized to do so
and thereby bind Seller hereto.
8.1.2. The Golf Course Lease is in full force and
effect. The Golf Course Lease has not been
amended or modified. Seller has not assigned,
transferred, pledged or encumbered in any manner
the Golf Course Lease or any interest
thereunder.
8.1.3. The Golf Course Lease, the Real Property, the
Personal Property, the Contracts and Permits,
the Water Rights and Liquor License are, except
as otherwise provided in this agreement, free
and clear of all liens, claims, encumbrances,
security interests and adverse claims of any
kind or nature whatsoever.
8.1.4. The execution, delivery and performance of this
Agreement does not and will not, violate,
conflict with or contravene any provision of the
Trust Indenture of Seller or any judgment,
order, decree, writ or injunction, or any law,
rule or regulation to which Seller is subject,
nor result in any breach of, or constitute a
default under, or require separate consent
pursuant to any loan or credit agreement, lease,
indenture, mortgage, deed of trust, purchase
agreement, guarantee, contract or other
instrument to which Seller is a party or by
which Seller or any of Seller's assets are
bound. This Agreement, and all documents
executed or delivered in connection with the
transactions contemplated hereby, each
constitute legal, valid and binding obligations
of Seller, enforceable in accordance with their
respective terms.
8.1.5. To the best of Seller's knowledge, there are no
federal, state, county, municipal or other
governmental plans to change the highway or road
10
<PAGE>
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. All roads bounding the Property are
public roads and the Assignment of Golf Course
Lease and Landlord Consent and Estoppel is the
only instrument necessary to convey to Buyer
full access to and the right to use such roads
freely, subject to the provisions of Arizona law
relating to roads and highways, as well as to
convey all rights appurtenant to the Property in
such roads.
8.1.6. To the best of Seller's knowledge, other than in
the ordinary course of operation of the
Property, no release of Hazardous Substances has
occurred in, on or under the Real Property (or
any nearby real property which could migrate to
the Real Property) and no violation of any
Environmental Laws has occurred at the Real
Property, from the date of Seller's acquisition
of the Property through the date of this
Agreement.
8.1.7. Seller has not received notice of any threatened
or pending suits, legal actions or other
proceedings by any governmental authority or
otherwise which allege any violation by Seller
of any applicable laws, rules or regulations of
any federal, state or local governmental
authority pertaining to the Property or Seller's
use and operation thereof or which could result
in a lien on or lis pendens affecting the
Property, nor is Seller, to its knowledge, in
violation of any applicable laws, rules or
regulations with respect to the Property. Seller
is involved in the following proceedings, which
are directly or indirectly related to Seller's
interest in the Property:
8.1.7.1. That certain Chapter 11 bankruptcy case
involving Indian Bend Limited Partnership, a
Colorado limited partnership ("Indian Bend"), as
debtor, pending in the United States Bankruptcy
Court for the District of Arizona (Case No.
96-12273-PHX-RTB);
8.1.7.2. That certain receivership action involving
Seller, as plaintiff, and Indian Bend, as
defendant, pending in the Superior Court of the
State of Arizona, County of Maricopa (Case No.
CV 96-18687); and
8.1.7.3. That certain action for judgment on a guaranty
agreement involving Seller, as
Plaintiff/Counter-defendant, and Alfred Salazar,
as Defendant/Counter-claimant, pending in the
District Court, County of Arapahoe, State of
Colorado (Case No. 96-CV-2770, Division 5).
11
<PAGE>
8.1.8. Seller is not a "foreign person" as defined in
Section 1445 of the Internal Revenue Code of
1986, as amended, and the Income Tax Regulations
thereunder.
8.1.9. Seller has not dealt with any investment
adviser, real estate broker or finder, or
incurred any liability for any commission or fee
to any investment adviser, real estate broker or
finder, in connection with the sale of the
Property to Buyer or this Agreement.
8.2. Buyer. The representations and warranties of Buyer in this
PARAGRAPH 8.2 are a material inducement for Seller to enter
into this Agreement. Seller would not sell the Property to
Buyer without such representations and warranties of Buyer.
Such representations and warranties shall survive any
termination of this Agreement, the Closing and the recording
of the documents necessary to consummate this transaction.
Buyer represents and warrants to Seller as of the date of
this Agreement as follows and further represents that the
following representations and warranties shall also be true
as of the Closing:
8.2.1. Buyer is a corporation, duly created and validly
existing under the laws of the State of
Delaware, and has the full corporate power and
authority to execute and deliver this Agreement
and to perform all covenants and agreements of
Buyer hereunder. The person executing this
Agreement on behalf of Buyer is duly authorized
to do so and thereby bind Buyer hereto.
8.2.2. Buyer has the financial capability to perform
its obligations hereunder, both before and after
Close of Escrow, including but not limited to
the ability to tender the Earnest Money Deposit
and to pay when due the full amount of the
purchase price for the Property.
8.2.3. Buyer has not dealt with any investment adviser,
real estate broker or finder, or incurred any
liability for any commission or fee to any
investment adviser, real estate broker or
finder, in connection with the sale of the
Property to Buyer or this Agreement.
9. COVENANTS.
9.1. Seller. Seller covenants and agrees with Buyer as follows:
9.1.1. Between the date of this Agreement and the
Closing Date, Seller shall not execute any
contracts or agreements, any additional lease or
sublease affecting the Golf Course Lease or the
Real Property or amend, modify, renew, extend or
terminate any of the Golf Course Lease or the
Contracts or Permits (other than the renewal of
month-to-month Contracts or Permits) in any
respect without the prior written
12
<PAGE>
approval of Buyer, which approval may be
withheld in Buyer's sole and absolute
discretion. Between the date of this Agreement
and the Closing Date, Seller shall immediately
give Buyer copies of all notices received by
Seller asserting any breach or default under the
Golf Course Lease or the Contracts or any
violation of the Permits or any covenants,
conditions, restrictions, laws, statutes, rules,
regulations or ordinances applicable to the Golf
Course Lease, the Real Property or the Personal
Property. Between the date of this Agreement and
the Closing Date, Seller shall keep in force the
existing property insurance.
9.1.2. Immediately after Seller receives notice that
any Hazardous Substances may be present or any
Release or threatened Release of Hazardous
Substances may have occurred in, on or under the
Real Property (or any nearby real property which
could migrate to the Real Property) or that any
violation of any Environmental Laws may have
occurred at the Real Property, Seller shall give
written notice thereof to Buyer with a
reasonably detailed description of the event,
occurrence or condition in question. Seller
shall immediately furnish to Buyer copies of all
written communications received by Seller from
any person (including notices, complaints,
claims or citations that any Release or
threatened Release of any Hazardous Substances
or any violation of any Environmental Laws has
actually or allegedly occurred) or given by
Seller to any person concerning any past or
present Release or threatened Release of any
Hazardous Substances in, on or under the Real
Property (or any nearby real property which
could migrate to the Real Property) or any past
or present violation of any Environmental Laws
at the Real Property. Seller makes no
representation or warranty, and except as
expressly provided in this PARAGRAPH 9.1.2,
incurs no covenant or obligation to Buyer
regarding any hazardous substances that may be
present or any release or threatened release of
hazardous substances that may have occurred in,
on or under the Real Property (or any nearby
real property that could migrate to the Real
Property) or any violation of any Environmental
Laws that may have occurred at the Real
Property.
9.1.3. Seller shall indemnify and defend Buyer against
and hold Buyer harmless from all claims,
demands, liabilities, losses, damages, costs and
expenses, including reasonable attorneys' fees
and disbursements, arising from or based on any
failure by Seller to perform all obligations of
Seller in accordance with this Agreement, the
Golf Course Lease and the Contracts or the
Permits before the Closing Date, or any breach,
default or violation by Seller (or any event by
Seller or condition which, after notice or the
passage of time, or both, would constitute a
breach, default or violation by Seller) under
this Agreement, the Golf Course Lease, the
Contracts or the Permits
13
<PAGE>
that occurs before the Closing Date, or arising
out of Seller's acquisition of the Golf Course
Lease and the Property from an entity that had
defaulted on its obligations and had filed a
Chapter 11 petition in Bankruptcy Court.
9.1.4. Except as otherwise provided herein, between the
date of this Agreement and the Closing Date,
Seller shall not in any manner sell, convey,
assign, transfer, subdivide, partition, encumber
or otherwise dispose of the Real Property, the
Golf Course Lease, the Contracts, the Permits,
the Bonds under the Trust Indenture to which
Seller is a party, or any part thereof or
interest therein, and Seller may sell, convey,
assign, transfer or otherwise dispose of the
Personal Property only in the ordinary course of
business.
9.1.5. Seller shall indemnify, pay and hold harmless
Buyer, and its respective shareholders,
directors, officers, employees, agents,
attorneys, successors and assigns, against all
claims, demands, liabilities, losses, damages,
costs and expenses, including reasonable
attorneys' fees and disbursements, which any of
them may incur or sustain as a result of any
action or claim or cause of action or proceeding
instituted by any agent, broker or finder,
licensed or otherwise, claiming through, under
or by reason of the conduct of Seller in
connection with this Agreement.
9.2. Buyer. Buyer covenants and agrees with Seller as follows:
9.2.1. Buyer shall indemnify and defend Seller against
and hold Seller harmless from all claims,
demands, liabilities, losses, damages, costs and
expenses, including reasonable attorneys' fees
and disbursements, arising from or based on any
failure by Buyer to perform all obligations of
Buyer in accordance with the Golf Course Lease,
or the Contracts arising or accruing on or after
the Closing Date and during Buyer's ownership of
the Property or any breach, default or violation
by Buyer (or any event by Buyer or condition
which, after notice or the passage of time, or
both, would constitute a breach, default or
violation by Buyer) under the Golf Course Lease
or the Contracts that occurs on or after the
Closing Date and during Buyer's ownership of the
Property.
9.2.2. Buyer shall indemnify, pay and hold harmless
Seller, and its respective beneficiaries,
directors, officers, employees, agents,
attorneys, successors and assigns, against all
claims, demands, liabilities, losses, damages,
costs and expenses, including reasonable
attorneys' fees and disbursements, which any of
them may incur or sustain as a result of any
action or claim or cause of action or proceeding
instituted by any agent, broker or finder,
licensed or otherwise, claiming through,
14
<PAGE>
under or by reason of the conduct of Buyer in
connection with this Agreement.
10. CONDITIONS PRECEDENT.
10.1. Seller. The obligations of Seller under this Agreement are
subject to satisfaction of all of the conditions set forth
in this PARAGRAPH 10.1. Seller may waive any or all of such
conditions in whole or in part but any such waiver shall be
effective only if made in writing. Unless otherwise agreed
in writing, after the Closing, any such condition that has
not been satisfied shall be treated as having been waived in
writing. No such waiver shall constitute a waiver by Seller
of any of its rights or remedies if Buyer defaults in the
performance of any covenant or agreement to be performed by
Buyer under this Agreement or if Buyer breaches any
representation or warranty made by Buyer herein. If any
condition set forth in this PARAGRAPH 10.1 is not fully
satisfied or waived in writing by Seller, this Agreement
shall terminate, but without releasing Buyer from liability
if Buyer defaults in the performance of any such covenant or
agreement to be performed by Buyer or if Buyer breaches any
such representation or warranty made by Buyer before such
termination.
10.1.1. On or before the Closing Date, this Agreement
and the transaction contemplated herein shall
have been approved by all Government Authority
from which such approval is required under the
terms of the Golf Course Lease.
10.1.2. On the Closing Date, Buyer shall not be in
default in the performance of any covenant or
agreement to be performed by Buyer under this
Agreement.
10.1.3. On the Closing Date, no judicial or
administrative suit, action, investigation,
inquiry or other proceeding by any person shall
have been instituted against Buyer or Seller,
which challenges the validity or legality of any
of the transactions contemplated by this
Agreement.
10.1.4. On the Closing Date, all representations and
warranties made by Buyer herein shall be true
and correct as if made on and as of the Closing
Date.
10.2. Buyer. The obligations of Buyer under this Agreement are
subject to satisfaction of all of the conditions set forth
in this PARAGRAPH 10.2. Buyer may waive any or all of such
conditions in whole or in part but any such waiver shall be
effective only if made in writing. After the Closing, any
such condition that has not been satisfied shall be treated
as having been waived in writing. No such waiver shall
constitute a waiver by Buyer of any of its rights or
remedies if Seller defaults in the performance of any
covenant or agreement to be performed by Seller or if Seller
breaches any representation or warranty made by Seller
herein. If any
15
<PAGE>
condition set forth in this PARAGRAPH 10.2 is not fully
satisfied or waived in writing by Buyer, this Agreement
shall terminate, but without releasing Seller from
liability if Seller defaults in the performance of any such
covenant or agreement to be performed by Seller or if Seller
breaches any such representation or warranty made by Seller
before such termination.
10.2.1. On or before the Closing Date, this Agreement
and the transaction contemplated herein shall
have been approved by all Government Authority
from which such approval is required under the
terms of the Golf Course Lease, including but
not limited to the City of Tempe and the Flood
Control District of Maricopa County Arizona.
10.2.2. On the Closing Date, Seller shall not be in
default in the performance of any covenant or
agreement to be performed by Seller under this
Agreement.
10.2.3. On the Closing Date, no judicial or
administrative suit, action, investigation,
inquiry or other proceeding by any person shall
have been instituted against Buyer or Seller,
which challenges the validity or legality of any
of the transactions contemplated by this
Agreement.
10.2.4. On the Closing Date, all representations and
warranties made by Seller herein shall be true
and correct as if made on and as of the Closing
Date.
10.2.5. On the Closing Date, the Title Company shall be
unconditionally and irrevocably committed to
issue to Buyer an American Land Title
Association Standard Owner's Policy Form B-1970
(Amended 10/17/70) of title insurance with
respect to the Golf Course Lease and Real
Property, with liability in the amount of the
purchase price, insuring that Buyer's leasehold
interest in the Golf Course Lease and Real
Property Parcel is vested in Buyer with no
bankruptcy exception and subject only to the
applicable Permitted Exceptions.
11. CLOSING.
11.1. Procedure. Seller and Buyer shall cause the following to
occur at the Closing on the Closing Date:
11.1.1. The Assignment of Golf Course Lease and Landlord
Consent and Estoppel, duly executed and
acknowledged by Seller, and consented to by
Tempe, shall be recorded in the Recorder's
Office.
11.1.2. Seller shall on or before the Closing Date,
execute and deliver to Buyer (i) a Bill of Sale
for Personal Property, (ii) the Assignment of
Contracts and Permits, (iii) a Certificate of
Non-Foreign Status in
16
<PAGE>
accordance with Section 1445 of the Internal
Revenue Code of 1986, as amended, and the Income
Tax Regulations thereunder in the form and
substance satisfactory to Buyer, (iv) all such
documents as are necessary to complete the
Liquor License Transfer as contemplated in
PARAGRAPHS 5.1 and 7.4 herein, and (v) such
other documents as may be reasonably required by
the Title Company or by this Agreement to
effectuate the intent of this Agreement. Seller
shall on or before the Closing Date deliver to
Buyer the original Liquor License or Interim
Permit.
11.1.3. Buyer shall on or before the Closing Date,
execute and deliver to Seller, (i) the
Assignment of Golf Course Lease and Landlord
Consent and Estoppel, (ii) the Assignment of
Contracts and Permits, and (iii) such other
documents as may be reasonably required by the
Title Company or by this Agreement to effectuate
the intent of this Agreement.
11.1.4. Buyer shall on or before the Closing Date
deliver to Seller the original Promissory Note
marked "Canceled."
11.1.5. Buyer shall pay to Seller the total purchase
price for the Property in accordance with this
Agreement.
11.1.6. The Title Company shall be unconditionally
committed to issue to Buyer the title insurance
policy described herein, and shall promptly
after Close of Escrow issue such title insurance
policy to Buyer.
11.1.7. The Title Company shall file any information
return for the sale of the Property required by
Section 6045 of the Internal Revenue Code of
1986, as amended, and the Income Tax Regulations
thereunder. Escrow Agent shall indemnify,
defend, pay and hold harmless Buyer, Seller and
their respective managers, shareholders,
directors, officers, employees, agents, brokers,
attorneys, successors and assigns, from and
against any claims, demands, liabilities,
losses, damages, penalties, costs and expenses,
including reasonable attorneys' fees and
disbursements, resulting from Escrow Agent's
failure to file the reports, if any, Escrow
Agent is required to file pursuant to this
paragraph.
11.2. Possession. Seller shall transfer possession of the Real
Property and the Personal Property to Buyer on the Closing
Date. If not previously delivered to Buyer, Seller shall
deliver originals of the documents described in PARAGRAPH 7,
all files, correspondence, maintenance records and operating
manuals relating to the Real Property, and all keys
(properly tagged or identified) to the Real Property to
Buyer on the Closing Date. The originals of such documents
and such keys shall become the property of Buyer on the
Closing Date.
17
<PAGE>
11.3. Closing Costs. All fees, charges or expenses incidental to
the sale, transfer and assignment of the Property to Buyer
shall be paid according to the customs of real estate
transactions in Maricopa County, Arizona.
11.4. Prorations. All rents payable by Seller under the Golf
Course Lease, taxes, assessments, utilities, maintenance
charges and similar expenses of the Property, to be
determined using the accrual method of accounting, shall be
prorated between Seller and Buyer as of the Effective Date
and, to the extent of information then available, such
prorations shall be made at the Closing. Seller and Buyer
shall use their best efforts prior to the Closing Date to
prepare a schedule of prorations covering as many items to
be prorated as practicable so such prorations can be made at
the Closing. Such prorations shall be adjusted, if
necessary, and completed after the Closing as soon as final
information becomes available. Seller and Buyer agree to
cooperate and to use their best efforts to complete such
prorations no later than thirty (30) days after the Closing
Date, except for any annual reconciliation of expense
reimbursements payable by the tenant under the Golf Course
Lease, which cannot be completed until the final accounting
for the year has been prepared. Monthly income and expense
items shall be prorated on the basis of a thirty (30) day
month. Such income and expenses of the Property for the
period before the Effective Date shall be for the account of
Seller and such income and expenses for the period on and
after the Effective Date shall be for the account of Buyer.
Seller shall pay all taxes, assessments, invoices for goods
furnished or services supplied, and other expenses relating
to the Property that are allocable to the period before the
Effective Date. The net adjustment of all prorations
pursuant to this PARAGRAPH 11.4 shall be paid by the party
owing the same to the other in cash or by certified or
official bank check or wire transfer at the Closing. The
expenses and liabilities for which Seller shall be liable
pursuant to this PARAGRAPH 11.4 shall be a retained
liability of Seller and the expenses and liabilities of the
Buyer shall be an assumed liability of the Buyer.
11.5. Adjustments. The total purchase price for the Property shall
be adjusted upward in the amount of the net operating income
of the Property (exclusive of income taxes, depreciation and
other similar non-operating expenses) from the Effective
Date through the Closing Date.
12. ASSIGNMENT. Buyer may not assign its rights under this Agreement
without Seller's prior written consent.
13. CASUALTY DAMAGE, EMINENT DOMAIN AND RISK OF LOSS. If on or before the
Closing Date, the improvements on the Real Property or any part
thereof are damaged by any casualty, or if proceedings are commenced
for the taking by exercise of the power of eminent domain of all or
any portion of the Property, which, as reasonably determined by
Buyer, would render such Property unacceptable to Buyer or unsuitable
for Buyer's intended use, Buyer shall have the right, by giving
notice to Seller before the
18
<PAGE>
Closing, to terminate this Agreement, in which event this Agreement
shall terminate and the Promissory Note.
14. GENERAL.
14.1. Time of Essence; Force Majeure. Time is of the essence in
the performance of each and every obligation under this
Agreement; provided, however, time for performance of such
obligations by the parties shall be extended and such
parties shall not be deemed to be in default when delays are
due to an act of God, fire, earthquake, flood, explosion,
action of the elements, invasions, insurrection, riot, mob
violence, strikes, lockouts, condemnation, acts of other
parties, or any other cause, whether similar or dissimilar
to the foregoing, not within the reasonable control of the
party seeking the protection of this provision or any other
cause expressly set forth in this document. A lack of funds
or inability to obtain funds shall not be included in the
definition of force majeure events. An extension of time
pursuant to this provision shall only be for the period of
the force majeure event, which period shall commence to run
from time of commencement of the cause and shall continue
until the event causing the force majeure event has been
completely cured or resolved sufficiently to enable full
performance to be resumed without interference.
14.2. Notices. All notices and other communications under this
Agreement shall be properly given only if made in writing
and either mailed by certified mail, return receipt
requested, postage prepaid, or delivered by hand (including
messenger or recognized delivery, courier or air express
service) to the party at the address set forth in this
PARAGRAPH 14.2 or such other address as such party may
designate by notice to the other party. Such notices and
other communications shall be effective on the date of
receipt (evidenced by the certified mail receipt) if mailed
or on the date of hand delivery if hand delivered. If any
such notice or communication is not received or cannot be
delivered due to a change in the address of the receiving
party of which notice was not previously given to the
sending party or due to a refusal to accept by the receiving
party, such notice or other communication shall be effective
on the date delivery is attempted. Any notice or other
communication under this Agreement may be given on behalf of
a party by the attorney for such party.
14.2.1. The address of Seller is: LaSalle National Bank,
Trust Department, 135 South LaSalle Street,
Chicago, Illinois 60603-3499, Attention, Sarah
H. Webb, Group Vice President, with a copy to:
Mohr, Hackett, Pederson, Blakley, Randolph &
Haga, P.C., 2800 North Central Avenue, Suite
1100, Phoenix, Arizona 85004-1043, Attention:
Gregory W. Falls, Esq.
14.2.2. The address of Buyer is: Tempe Family Golf
Centers, Inc., 225 Broadhollow Road, Melville,
New York 11747, with a copy to: Family
19
<PAGE>
Golf Centers, Inc., 225 Broadhollow Road, Melville, New York
11747, Attention: General Counsel.
14.3. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of
Arizona.
14.4. Survival. This Agreement shall constitute the continuing
obligations between the parties and, except as otherwise set
forth herein, shall be binding insofar as applicable beyond
the Closing referred to herein and transfer of ownership of
the Property.
14.5. Construction. Seller and Buyer acknowledge that each party
and its counsel have reviewed and revised this Agreement and
that the rule of construction to the effect that any
ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this
Agreement or any document executed and delivered by either
party in connection with the transactions contemplated by
this Agreement. The captions and headings in this Agreement
are for convenience of reference only and shall not be used
to interpret this Agreement.
14.6. Terms Generally. The defined terms in this Agreement shall
apply equally to both the singular and the plural forms of
the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine
and neuter forms. The term "person" includes individuals,
corporations, partnerships, trusts, other legal entities,
organizations and associations, and any government or
governmental agency or authority. The words "include,"
"includes" and "including" shall be deemed to be followed by
the phrase "without limitation."
14.7. Further Assurances. From and after the date of this
Agreement, Seller and Buyer agree to do such things, perform
such acts, and make, execute, acknowledge and deliver such
documents as may be reasonably necessary or proper and usual
to complete the transactions contemplated by this Agreement
and to carry out the purpose of this Agreement in accordance
with this Agreement.
14.8. Partial Invalidity; Severability. If any provision of this
Agreement is determined by a proper court to be invalid,
illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect the other provisions of
this Agreement and this Agreement shall remain in full force
and effect without such invalid, illegal or unenforceable
provision.
14.9. Waivers. No waiver of any provision of this Agreement or any
breach of this Agreement shall be effective unless such
waiver is in writing and signed by the waiving party and any
such waiver shall not be deemed a waiver of any other
20
<PAGE>
provision of this Agreement or any other or subsequent
breach of this Agreement.
14.10. Third Party Beneficiaries. There are no third party
beneficiaries to this Agreement. None of the provisions of
this Agreement shall inure to the benefit of any person
other than the signatory parties hereto and their respective
successors and assigns, or be deemed to create any rights,
benefits or privileges in favor of any person except the
signatory parties hereto and their respective successors and
assigns.
14.11. Miscellaneous. The Exhibits attached to this Agreement are
made a part of this Agreement. This Agreement shall benefit
and bind Seller and Buyer and their respective personal
representatives, heirs, successors and assigns. This
Agreement may be executed in counterparts, each of which
shall be an original, but all of which shall constitute one
and the same Agreement. This Agreement may not be amended or
modified except by a written instrument signed by Seller and
Buyer. This Agreement constitutes the entire and integrated
agreement between Seller and Buyer relating to the purchase
and sale of the Property and supersedes all prior
agreements, understandings, offers and negotiations, oral or
written, with respect to the purchase and sale of the
Property.
21
<PAGE>
IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of the
date first hereinabove written.
SELLER:
LASALLE NATIONAL BANK, a national banking association,
as trustee under that certain Trust Indenture dated as
of February 20, 1990
By ___________________________________
Sarah H. Webb
Its Group Vice President
BUYER:
TEMPE FAMILY GOLF CENTERS, INC., A DELAWARE
CORPORATION,
By ___________________________________
Its _____________________________
ESCROW AGENT ACCEPTANCE
The foregoing PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS are accepted by
Escrow Agent, and Escrow is opened as of March ___, 1997. The Escrow Number is
__________________________.
FIRST AMERICAN TITLE INSURANCE COMPANY, a California
corporation
By ___________________________________
Its _____________________________
Authorized Agent
22
<PAGE>
ASSIGNMENT AND ASSUMPTION OF LEASE
----------------------------------
ASSIGNMENT AND ASSUMPTION OF LEASE, made as of the __ day of April __,
1997 (this "Agreement"), by and between American Golf Corporation, a California
corporation having an address at 2951 28th Street, Santa Monica, California
90405 ("Assignor"), and SAN BRUNO FAMILY GOLF CENTERS, INC., a Delaware
corporation having an address at 225 Broadhollow Road, Suite 106E, Melville,
New York 11747 ("Assignee").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, by Amended and Restated Lease and Settlement Agreement (the
"Lease"), dated December 17, 1993, by and between San Bruno Park School
District, as landlord (the "Landlord") and Assignor, as tenant (which Lease is
attached as Exhibit A hereto). Assignor leased certain real property, together
with the improvements thereon (together the "Premises") located in the City of
San Bruno, County of San Mateo, State of California (and commonly known as the
"Engvall School Site"), on which Assignor now operates a driving range and
related facilities under the name "San Bruno School District Golf Center".
WHEREAS, Assignor desires to assign to Assignee its entire interest as
tenant under the Lease and Assignee desires to accept such assignment and
assume Assignor's obligations under the Lease on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of TEN ($10.00) DOLLARS, the terms
and conditions set forth herein, and other good and valuable consideration, the
mutual receipt and sufficiency of which are hereby acknowledged, the parties
hereby agree to the foregoing and as follows:
1
<PAGE>
1. Assignment and Assumption. Assignor assigns, sets over and
transfers to Assignee all right, title and interest of Assignor in and to the
Premises and the Lease and, Assignee assumes and agrees to perform any and all
of the obligations to be performed by the tenant under the Lease, (as if
Assignee executed the Lease originally as tenant thereunder). Assignee further
agrees to be bound by and fully responsible for all of the covenants,
agreements, terms, provisions, and conditions of Assignor under the Lease. At
the closing, Assignor shall deliver possession of the Premises to Assignee,
free of all tenancies or rights of possession other than those subleases set
forth on Exhibit B hereto (the "Subleases").
2. Bill of Sale. Assignor does hereby sell, assign, transfer and
convey to Assignee and Assignee does hereby purchase and acquire from Assignor,
all of Assignor's right, title and interest in and to the following property
(collectively, the "Property"):
2.1 all furnishings, fixtures, machinery, equipment, vehicles and
personalty attached or appurtenant to and used in connection with the Premises
that are owned by Assignor, and all inventories, supplies, sales, marketing and
instructional materials of every kind and description owned by Assignor
relating to the business conducted at the Premises (the "Business"), wherever
located, including without limitation, the items described on Exhibit C
attached hereto and made a part hereof but excluding all range balls with the
AGC logo appearing thereon, the AGC point of sale system, the Kronos time clock
and any personal computers located at the Premises (the "Personal Property");
2.2 the files, books, notices and other correspondence from any
governmental agencies, and other records used, employed or held by Assignor or
its affiliates solely in connection with the ownership and/or operation of the
Premises or the Business (collectively, the "Records");
2.3 any consents, authorizations, variances, waivers, licenses,
certificates, permits and approvals held by or granted to Assignor solely in
connection with the ownership of the Lease or the Business (collectively, the
"Permits");
2.4 the contracts, leases and other agreements relating to the
operation of the Business described on Exhibit D attached hereto and made a
part hereof (the "Contracts");
2.5 any manufacturers' and vendors' warranties and guarantees
held by Assignor which relate solely to the Lease, the Premises or the Business
except to the extent the same relate solely to any Retained Assets or Retained
Liabilities (as hereinafter defined) (the "Claims"); and
2.6 all accounts receivable of Assignor arising solely 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);
2
<PAGE>
2.7 any other properties and assets of every kind and nature,
real or personal, tangible or intangible, owned by Assignor relating solely to
the Lease, the Premises, or the Business, except to the extent the same relate
solely to the Retained Assets or Retained Liabilities.
3. Assets to be Retained by Assignor. Anything herein to the contrary
notwithstanding, Assignor shall not sell, and Assignee shall not acquire, the
following assets of Assignor (the "Retained Assets"):
3.1 any rights of Assignor with respect to insurance policies
owned by Assignor or for which Assignor is the named insured;
3.2 all cash, funds in bank accounts and cash equivalents
existing as of the Closing Date; and
3.3 any patents, trademarks, trademark registrations, copyrights,
copyright registrations, trade names and all registrations thereof and all
applications for any of the foregoing, whether issued or pending, if any, and
all goodwill associated with any of the foregoing (the "Intangible Assets").
4. Assumption of Certain Liabilities. Assignee hereby assumes and
agrees to pay and discharge when due all liabilities and obligations of
Assignor under the Lease, the Subleases and the Contracts to the extent the
same arise from and after the Closing Date (the "Assumed Liabilities").
Assignor shall retain, and Assignee shall not assume, perform, discharge or
pay, and shall not be responsible for, any and all liabilities or obligations
of any nature whatsoever in connection with or relating to the Lease, the
Premises, the Business or the Property, Assignor or any predecessor owner of
the Lease, the Premises, the Business or the Property other than the Assumed
Liabilities (collectively, the "Retained Liabilities").
5. Consideration.
5.1 In consideration for the assignment of the Lease and the
purchase of the Property , Assignee shall:
5.1.1 pay to Assignor on the Closing Date the sum of
$2,400,000.00, subject to adjustment as hereinafter provided, payable in cash,
by certified or bank check or by the wire transfer of funds; and
5.1.2. assume the Assumed Liabilities.
5.1.3. pay to Assignor with respect to each Operating Year
(defined below), (i) an amount equal to twenty-five percent (25%) of the
portion of Net Operating Income (defined below) from subleases at the Engvall
School Site in excess of $406,076.00 and (ii) twenty-five percent (25%) of any
Termination Fee (defined below) paid to Assignee by the San Bruno School
District or a third party during the Operating Period (defined below). As used
herein, the term "Termination Fee" means any fee or similar compensation paid
to Assignee in
3
<PAGE>
connection with the termination or purchase of all or a portion of Assignee's
interest in the Lease where such termination or purchase relates to the planned
future development of the portion of the Engvall School Site that is not used
as a golf driving range. As used herein, the term "Operating Year" means each
annual period commencing on the Closing Date and ending on the day immediately
preceding the third anniversary of the Closing Date. "Operating Period" means
the three year period commencing on the Closing Date and ending on the day
immediately preceding the third anniversary of the Closing Date. As used
herein, the term "Net Operating Income" means all rent and other payments made
by subtenants under all subleases less normal and customary operating expenses
(excluding capital expenses) incurred by Assignee with respect to the subleased
premises. Payments under Subsection (i) above shall be made to AGC with thirty
(30) days after the end of each Operating Year. Payments to AGC under
subsection (ii) above shall be made concurrently with the receipt of payment by
Assignee. In order to monitor Assignee's obligations to Assignor pursuant to
this Paragraph 5.1.3., Assignee shall submit to AGC, within thirty (30) days
after the end of each Operating Year, a statement signed by Assignee showing in
reasonable detail the amount of sublease income received by Assignee in such
Operating Year and the expenses incurred by Assignee with respect to such
subleases. Assignor shall have the right, upon reasonable prior notice to
Assignee, to examine Assignee's records relating to the foregoing and to verify
the accuracy of all statements delivered to Assignor. At Assignor's request,
Assignee shall provide Assignor with any additional information necessary to
establish the amounts payable to Assignor hereunder.
6. Closing; Adjustments.
6.1 The closing of the transactions provided for in this
Agreement shall take place simultaneously with the execution and delivery of
this Agreement (the "Closing"). (The actual date of the Closing shall be
referred to herein as the "Closing Date").
6.2 The parties hereto agree that (i) all compensation payable to
Landlord under the Lease and all other operating expenses of Assignor relating
to the Premises or the Business (i.e., cost of goods sold, advertising,
collections, fees, hired services, insurance, miscellaneous expenses, postage,
repairs and maintenance, supplies, taxes, utilities, but specifically not
including wages and interest on indebtedness, professional fees and expenses,
travel and lodging or depreciation), and (ii) all income of Assignor derived
from Assignor's operation of the Business or relating to the Premises,
including accounts receivable and rent and other charges under the Subleases,
shall be apportioned between Assignor and Assignee 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 Assignor 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 Assignees shall bear the responsibility and benefit of (the
"Adjustment"). The net Adjustment will be paid by the party owing the same to
the other in cash or by certified or official bank check or wire transfer. The
expenses and liabilities for which Assignor shall be liable pursuant to this
Section shall be included within the meaning of the term "Retained
Liabilities".
4
<PAGE>
6.3 To the extent that any of the prorations made pursuant to
this Article are based upon estimates of payments to be made and/or expenses to
be incurred by Assignees subsequent to the Closing Date, or either party
discovers any errors in or omissions in respect of the Adjustment, Assignor and
Assignees agree to adjust such prorations promptly upon receipt by Assignor or
Assignee, as the case may be, of such payments or of bills or other
documentation setting forth the actual amount of such expenses.
6.4 Assignor and Assignee shall maintain and make available to
each other any books or records necessary for the adjustment of any item
pursuant to this Article. The provisions of this Article shall survive the
Closing.
7. Representations and Warranties of Assignor. Assignor hereby
represents and warrants to Assignee as follows:
7.1 Organization; Power and Authority. Assignor is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California, and has all requisite power and authority to carry on its
business as it is now being conducted, to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby.
7.2 Due Authorization and Execution; Effect of Agreement. The
execution, delivery and performance by Assignor of this Agreement and the
consummation by Assignor of the transactions contemplated hereby have been duly
authorized by all necessary corporate action required to be taken on the part
of the Assignor. This Agreement has been duly and validly executed and
delivered by Assignor and constitutes the valid and binding obligation of
Assignor, enforceable in accordance with its terms. The execution, delivery and
performance by Assignor of this Agreement and the consummation by Assignor of
the transactions contemplated hereby will not, with or without the giving of
notice or the lapse of time, or both, (a) violate any provision of any law,
rule or regulation to which Assignor is subject; (b) violate any order,
judgment or decree applicable to Assignor; or (c) conflict with or result in a
breach of or a default under any term or condition of Assignor's Certificate of
Incorporation or By-laws or any term or condition of any agreement or other
instrument to which Assignor is a party or by which it or its assets may be
bound, except in each case, for violations, conflicts, breaches or defaults
which in the aggregate would not materially hinder or impair the consummation
of the transactions contemplated hereby.
7.3 Consents. No consent, approval or authorization of, exemption
by, or filing with, any governmental or regulatory authority or any third party
is required in connection with the execution, delivery and performance by
Assignor of this Agreement, except for consents, approvals, authorizations,
exemptions and filings, if any, which have been obtained.
7.4 Compliance with Applicable Laws. To Assignor's actual
knowledge, (i) Assignor is not engaging in any activity or omitting to take any
action as a result of which Assignor is in violation of any law, rule,
regulation, ordinance, statute, order, injunction or decree, or any other
requirement of any court or governmental or administrative body or agency,
applicable to the Premises or the Business, and (ii) neither the execution and
delivery by Assignor
5
<PAGE>
of this Agreement or of any of the other agreements and instruments to be
executed and delivered by it pursuant hereto, nor the performance by Assignor
of its obligations hereunder or thereunder nor the consummation of the
transactions contemplated hereby or thereby will result in any such violation.
To Assignor's actual knowledge, Assignor is in compliance with all material
requirements imposed in writing by any insurance carrier of Assignor to the
extent such carrier is an insurer or indemnitor of the Premises. Assignor has
not received any notice that the Lease is in violation of any law, municipal
ordinance, orders or requirements issued by any building department or other
governmental agency or subdivision having jurisdiction.
7.5 Permits. All Permits required by any federal, state, or local
law, rule or regulation and necessary for the operation of the Premises and the
Business as currently being conducted have been obtained and are currently in
effect. To Assignor's actual knowledge, no registrations, filings,
applications, notices, transfers, consents, approvals, orders, qualifications,
waivers or other actions of any kind are required by virtue of the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby (a) to avoid the loss of any Permit or the violation of any
law, regulation, order or other requirement of law, or (b) to enable Assignee
to continue the operation of the Business and Premises as presently conducted
after the Closing. To Assignor's actual knowledge, the current use and
occupation of any portion of the Premises does not violate any of, and, where
applicable, is in material compliance with, the Permits, any applicable deed
restrictions or other covenants, restrictions or agreements including without
limitation, any of the Permitted Exceptions, site plan approvals, zoning or
subdivision regulations or urban redevelopment plans applicable to the
Premises.
7.6 The Lease. Attached hereto as Exhibit A is a true and correct
copy of the Lease. The Lease is in full force and effect, has not been modified
or amended in any way except as stated above and, to Assignor's actual
knowledge, Landlord is not in default, or sent any notice of default, in
respect of the Lease. Assignor is not in default, and has not received any
notice of default, in respect of the Lease. To Assignor's actual knowledge, no
event has occurred or circumstance exists which, with the giving of notice or
the passage of time, or both, would constitute a default under the Lease. The
Landlord has not notified Assignor that the Landlord has exercised any right or
option, or stated its intent, to terminate or cancel the Lease. Assignor has
not exercised any right or option, or stated its interest, to terminate or
cancel the Lease. Assignor has not assigned, transferred or conveyed the Lease
or any interest therein, or granted any right or option with respect thereto,
to any party other than Assignee. The expiration date of the Lease, assuming
all options to extend the Lease are timely exercised, is December 31, 2013.
7.7 The Subleases. Attached hereto as Exhibit B are true and
correct copies of the Subleases. Each of the Subleases are in full force and
effect, has not been modified or amended in any way and, to Assignor's actual
knowledge, none of the Subleasees are in default, or sent any notice of default
under their respective Sublease. Assignor is not in default and has not
received any notice of default under any Sublease. To Assignor's actual
knowledge, no event has occurred or circumstances exist which, with the giving
of notice or the passage of time, or both, would constitute a default under any
of the Subleases. None of the Subleasees have notified Assignor that it has
exercised any right or option, or stated its intent, to terminate or cancel its
respective Sublease. Assignor has not exercised any right or option, or stated
its intent, to
6
<PAGE>
terminate or cancel any of the Subleases. Assignor has not assigned,
transferred or conveyed any of the Subleases or any interest therein, or
granted any right or option with respect thereto, to any party other than
Assignee. The expiration date of each of the Subleases is listed on Exhibit B
hereto.
7.8 Personal Property. Exhibits C sets forth a complete list of
all Personal Property currently used by Assignor in the operation of the
Business.
7.9 Title to the Lease and Property. The Lease and the Property
are free and clear of any and all liens, charges, encumbrances, mortgages,
pledges, security interests, easements, agreements and other interests and
adverse claims (collectively, "Encumbrances"), other than the matters set forth
in Exhibit E attached hereto and made a part hereof (the "Permitted
Exceptions").
7.10 Contracts. Except for the Lease, the Subleases and the
Contracts (as defined in Section 2.4 and listed on Exhibits D), Assignor is not
a party to any leases, contracts, orders or agreements relating to the
Premises, the Property or the Business (written or otherwise) that will survive
the Closing.
7.11 Condition of the Improvements. To Assignor's actual
knowledge, (i) there are no material structural or mechanical defects in the
Improvements, and (ii) there are no leaks in any roof on any Improvement.
7.12 As-is-Conveyance. Except as set forth in Section 7.9 above,
the Personal Property shall be conveyed in its "AS IS AND WITH ALL FAULTS
CONDITION," without warranty, express or implied, of any kind whatsoever
(including, without limitation, without any warranty of merchantibility).
7.13 Environmental Matters.
7.13.1 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. ' 9601(33); (ii) any "pollutant or contaminant" as
defined in 42 U.S.C. ' 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 any Environmental Law (as hereinafter defined).
7.13.2 To the actual knowledge of Assignor, there is no
Hazardous Material at, under or on the Premises in violation of any
Environmental Law and there is no ambient air, surface water, groundwater or
land contamination within, under, originating from or relating to the Premises
in violation of any Environmental Law. Assignor has not, and has not
7
<PAGE>
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 any Environmental Law.
7.13.3 To the actual knowledge of Assignor, Assignor has no
obligation or liability imposed or based upon any provision (i) under any
foreign, federal, state or local law, rule, or regulation or common law, or
(ii) under any code, order, decree, judgment or injunction applicable to
Assignor or the Premises or (iii) under any notice, or request for information
issued, promulgated, approved or entered under the items listed in clause (ii)
above, or (iv) under the common law, relating to public health or safety,
worker health or safety, or pollution of, damage to or protection of 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 Hazardous Material (hereinafter collectively
referred to as "Environmental Laws").
7.13.4 Assignor has not been subject to any civil, criminal
or administrative action, suit, claim, hearing, notice of violation,
investigation (to Assignor's actual knowledge), inquiry or proceeding for
failure to comply with, or received notice of any violation or potential
liability under the Environmental Laws in respect of the Premises.
7.13.5 To the actual knowledge of Assignor, the Premises 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. '
9601(9), or any comparable list maintained by any foreign, state or local
government authority.
7.13.6 To the actual knowledge of Assignor, there are no
underground storage tanks at the Premises and Assignor further warrants and
represents that, to Assignor's actual knowledge, any prior use and operation of
underground storage tanks has been in compliance with all Environmental Laws.
7.14 Tax Proceedings. There are no proceedings pending regarding
the reduction of real estate taxes or assessments in respect of the Premises.
7.15 Utilities. All water, storm and sanitary sewer, gas,
electric, and telephone (i) adequately service the Premises, and (ii) enter the
Premises through lands as to which valid public or private easements exist that
will inure to the benefit of Assignee. The cost of installation of such
utilities has been fully paid.
7.16 Access. To Assignor's actual knowledge, there are no (i)
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
8
<PAGE>
road to the Premises, or (ii) pending or threatened condemnation or eminent
domain proceedings relating to or affecting the Premises.
7.17 Insurance Requirements. To Assignor's actual knowledge, all
requirements or recommendations by any insurer or by any board of fire
underwriters or similar body in respect of the Premises have been satisfied.
7.18 Litigation. There is no action or proceeding (zoning or
otherwise) or governmental investigation pending, or, to Assignor's actual
knowledge, threatened against, or relating to, Assignor (insofar as it relates
to the Lease, the Premises, or the Business), the Lease, the Premises, the
Business or the transactions contemplated by this Agreement, nor, to Assignor's
actual knowledge, is there any basis for any such action, proceeding or
investigation.
7.19 Assessments. There are no special or other assessments for
public improvements or otherwise now affecting the Premises nor does Assignor
know of (a) any pending or threatened special assessments affecting the
Premises or (b) any contemplated improvements affecting the Premises that may
result in special assessments affecting the Premises.
7.20 Employee Agreements. There are no union or employment
contracts or agreements (written or oral) involving employees of Assignor or
its affiliates affecting the Premises or the Business which will survive the
Closing. All employees of Assignor employed to work at the Premises will have
been terminated as of the Closing Date.
7.21 Work at the Premises. No services, material or work have
been supplied to the Premises for which payment has not been made in full.
7.22 Financial Condition. Assignor has delivered to Assignee true
and correct copies of: (i) audited financial statements consisting of balance
sheets and income statements of Assignor as of December 31, 1995 and December
31, 1996 for the Business; and (ii) monthly internal reports for the months of
January and February and the period from March 1, 1997 through the date hereof.
Each balance sheet presents fairly the financial condition, assets and
liabilities of Assignor with respect to the Business as of its date; each
statement of income presents fairly the results of operations of Assignor for
the period indicated. The financial statements referred to in this Section are
in accordance with the books and records of Assignor. Since December 31, 1996:
(a) there has at no time been a material adverse change in the financial
condition, results of operations, businesses, properties, assets, liabilities
or future prospects of Assignor, the Premises, the Property or Business; (b)
the Business has been conducted in all respects only in the ordinary course;
and (c) Assignor has not suffered an extraordinary loss (whether or not covered
by insurance) or waived any right of substantial value.
7.23 Full Disclosure. To the best knowledge of Assignor, none of
the information supplied by Assignor herein or in the exhibits hereto contains
any untrue statement of a material fact or omits to state a material fact
required to be stated herein or necessary in order to make the statements
herein, in light of the circumstances under which they are made, not
misleading.
9
<PAGE>
As used in this Agreement, the term "Assignor's actual knowledge"
means the actual knowledge of David Pillsbury, who is the Regional Operating
Executive of Assignor for the Northwest United States, and Joseph L. Guerra,
the Executive Vice President of Assignor.
8. Representations and Warranties of Assignee. The Assignee hereby
represents and warrants to Assignor as follows:
8.1 Organization; Power and Authority. The Assignee is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite power and authority to
carry on its business as it is now being conducted, to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby.
8.2 Due Authorization and Execution; Effect of Agreement. The
execution, delivery and performance by Assignee of this Agreement and the
consummation by Assignee of the transactions contemplated hereby have been duly
authorized by all necessary corporate action required to be taken on the part
of Assignee. This Agreement has been duly and validly executed and delivered by
Assignee and constitutes the valid and binding obligation of Assignee,
enforceable in accordance with its terms. The execution, delivery and
performance by Assignee of this Agreement and the consummation by Assignee of
the transactions contemplated hereby will not, with or without the giving of
notice or the lapse of time, or both, (a) violate any provision of any law,
rule or regulation to which Assignee is subject; (b) violate any order,
judgment or decree applicable to Assignee; or (c) conflict with or result in a
breach of or a default under any term or condition of Assignee's Certificate of
Incorporation or By-Laws or any agreement or other instrument to which such
Assignee is a party or by which it or its assets may be bound, except in each
case, for violations, conflicts, breaches or defaults which in the aggregate
would not materially hinder or impair the consummation of the transactions
contemplated hereby.
9. Survival. The representations and warranties of the parties made in
Articles 7 and 8 shall survive until the second anniversary of the Closing Date
except for Section 7.13 which shall survive until the expiration of the statute
of limitations applicable to claims that may be asserted against Assignee, the
Premises or the Business in respect of the matters covered thereby.
10. Further Assurances. At any time and from time to time after the
date hereof, either party shall, at the request of the other party, execute and
deliver any further instruments or documents and take all such further action
as the requesting party may reasonably request in order to transfer into the
name of Assignee the Lease and any and all Property contemplated to be sold
pursuant to this Agreement and to further consummate the transactions
contemplated by this Agreement. This Article shall survive the Closing.
11. Brokers. Assignor and Assignees 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. Assignees and Assignor
hereby respectively agree to indemnify and hold harmless the other party from
and against all loss,
10
<PAGE>
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. The provisions of this Article shall survive
the Closing or any termination of this Agreement.
12. Costs and Fees.
12.1 Assignor shall pay (a) the costs and expenses incurred in
connection with the preparation of the audited financial statements referred to
in Section 7.22 hereof, and (b) transfer or conveyancing taxes, if any.
12.2 Assignee shall pay for (a) the examination of title, (b) the
policy of title insurance for Assignee, (c) an ASTM Phase I environmental
survey of the Premises, and (d) all other costs and expenses incurred by
Assignee in conducting its due diligence of the Premises.
12.3 Each party shall pay for its own legal costs and expenses.
Any other costs expressly provided for elsewhere in this Agreement shall be
divided and borne in accordance with the usual practices in the jurisdiction
where the Premises is located.
12.4 The provisions of this Article shall survive the Closing.
13. Indemnification.
13.1 Subject to the further provisions of this Article, Assignor
shall protect, defend, hold harmless and indemnify Assignee, its officers,
directors, shareholders, employees, agents and affiliates, and their respective
successors and assigns, from, against and in respect of any and all losses,
liabilities, deficiencies, penalties, fines, costs, damages and expenses
whatsoever (including without limitation, reasonable professional fees and
costs of investigation, litigation, settlement, and judgment and interest)
("Losses") that may be suffered or incurred by any of them arising from or by
reason of (i) any Retained Liability or other liability or obligation of
Assignor which is not an Assumed Liability; and (ii) any and all actions,
suits, proceedings, claims, demands, assessments, judgments, costs and expenses
(including without limitation, interest, penalties, reasonable legal fees and
accounting fees) incident to the foregoing and the enforcement of the
provisions of this Section 13.1.
13.2 Subject to the further provisions of this Article, Assignee
shall protect, defend, hold harmless and indemnify Assignor, its officers,
directors, shareholders, employees, agents and affiliates and their respective
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, and (ii) any and all
actions, suits, proceedings, claims, demands, assessments, judgments, costs and
expenses (including without limitation, interest, penalties, reasonable legal
fees and accounting fees) incident to the foregoing and the enforcement of the
provisions of this Section 13.2.
11
<PAGE>
13.3 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 thirty
(30) days from the mailing of a Notice of Claim, the Indemnifying Party shall
request, in writing, that such claim not be paid, the Indemnified Party shall
not pay the same, provided the Indemnifying Party proceeds promptly, at its or
their own expense (including employment of counsel reasonably satisfactory to
the Indemnified Party), to settle, compromise or litigate, in good faith, such
claim. After notice from the Indemnifying Party requesting the Indemnified
Party not to pay such claim and the Indemnifying Party's assumption of the
defense of such claim at its or their expense, the Indemnifying Party shall not
be liable to the Indemnified Party for any legal or other expense subsequently
incurred by the Indemnified Party in connection with the defense thereof.
However, the Indemnified Party shall have the right to participate at its
expense and with counsel of its choice in such settlement, compromise or
litigation. The Indemnified Party shall not be required to refrain from paying
any claim which has matured by a court judgment or decree, unless an appeal is
duly taken therefrom and execution thereof has been stayed, nor shall the
Indemnified Party be required to refrain from paying any claim where the delay
in paying such claim would result in the foreclosure of a lien upon any of the
property or assets then held by the Indemnified Party. The failure to provide a
timely Notice of Claim as provided in this Section 13.3 shall not excuse the
Indemnifying Party from its or their continuing obligations hereunder; however,
the Indemnified Party's claim shall be reduced by any damages to the
Indemnifying Party resulting from the Indemnified Party's delay or failure to
provide a Notice of Claim as provided in this Section 13.3.
13.4 For purposes of this Article, any assertion of fact and/or
law by a third party that, if true, would constitute a breach of a
representation or warranty made by a party to this Agreement or make
operational an indemnification obligation hereunder, shall, on the date that
such assertion is made, immediately invoke the Indemnifying Party's obligation
to protect, defend, hold harmless and indemnify the Indemnified Party pursuant
to this Article.
14. Bulk Sales. The parties agree to waive the requirements, if any,
of all applicable bulk sales laws. As an inducement to Assignee to enter into
such waiver, Assignor represents and warrants that (a) it will not be rendered
insolvent by the transactions contemplated by this Agreement, and (b) all
debts, obligations and liabilities relating to the Premises and Business that
are not expressly assumed by Assignee under this Agreement will be promptly
paid and discharged by Assignor as and when they become due. Assignor agrees to
indemnify and hold Assignee harmless from, and reimburse Assignee for, any
loss, cost, expense, liability or damage which Assignee may suffer or incur by
virtue of the noncompliance by Assignor with any law pertaining to fraudulent
conveyance, bulk sales or any similar law which makes the sale or transfer of
any part of the Property or Lease ineffective as to creditors of or claimants
against Assignor.
12
<PAGE>
15. Notices. All notices, demands, requests, consents or other
communications ("Notices") which either party may desire or be required to give
to the other hereunder shall be in writing and shall be delivered by hand,
overnight express carrier, or sent by registered or certified mail, return
receipt requested, postage prepaid, in either event, addressed to the parties
at their respective addresses first above set forth. A copy of any Notice given
by Assignor to the Assignee shall simultaneously be given in either manner
provided above to the General Counsel of Assignee. A copy of any Notice given
by the Assignees to Assignor shall simultaneously be given in either manner
provided above to the General Counsel of Assignor. Notices given in the manner
aforesaid shall be deemed to have been given three (3) business days after the
day so mailed, the day after delivery to any overnight express carrier and on
the day so delivered by hand. Either party shall have the right to change its
address(es) for the receipt of Notices by giving Notice to the other party in
either manner aforesaid. Any Notice required or permitted to be given by either
party may be given by that party's attorney.
16. Miscellaneous.
16.1 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns.
16.2 This Agreement shall be governed by, interpreted under and
construed and enforced in accordance with, the laws of the State of California.
16.3 The captions or article headings in this Agreement are for
convenience only and do not constitute part of this Agreement.
16.4 This Agreement has been fully negotiated by the parties and
rules of construction construing ambiguities against the party responsible for
drafting agreements shall not apply.
16.5 It is agreed that, except where otherwise expressly provided
in particular Articles or Sections of this Agreement, none of the provisions of
this Agreement shall survive the Closing.
16.6 This Agreement (including the Exhibits annexed hereto)
contains the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior understandings, if any, with respect
thereto.
16.7 This Agreement may not be modified, changed, supplemented or
terminated, nor may any obligations hereunder be waived, except by written
instrument signed by the party to be charged or by its agent duly authorized in
writing or as otherwise expressly permitted herein.
13
<PAGE>
16.8 No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof or of any other agreement or provision herein contained. No extension
of the time for performance of any obligations or acts shall be deemed an
extension of the time for performance of any other obligations or acts.
16.9 This Agreement may be executed in one or more counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which taken together shall constitute but one and the same original.
16.10 Either party may cause this Agreement to be recorded in the
appropriate public office.
16.11 In the event of any action for breach of, to enforce the
provisions of, or otherwise involving this Agreement, the court in such action
shall award a reasonable sum as attorneys' fees to the party who, in light of
the issues litigated and the court's decisions on those issues, was more
successful in the action The more successful party shall not necessarily be the
party who recovers a judgment in the action.
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
AMERICAN GOLF CORPORATION
By:
--------------------------------
Name:
Title:
SAN BRUNO FAMILY
GOLF CENTERS, INC.
By:
--------------------------------
Name:
Title:
15
<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
EXHIBIT A LEASE
EXHIBIT B SUBLEASES
EXHIBIT C PERSONAL PROPERTY
EXHIBIT D CONTRACTS
EXHIBIT E PERMITTED EXCEPTIONS
16
<PAGE>
GUARANTY
WHEREAS, American Golf Corporation, a California corporation
("Assignor") and San Bruno Family Golf Centers, Inc., a Delaware corporation,
("Assignee"), are about to execute (i) the Assignment and Assumption of Lease
dated April ___, 1997 ("Assignment"); and (ii) the Bill of Sale dated April
___, 1997 (collectively, "Transaction Documents");
WHEREAS, the Assignee is a wholly-owned subsidiary of Family Golf
Centers, Inc., a Delaware corporation ("Guarantor"); and
WHEREAS, Assignor would not execute the Transaction Documents if
Guarantor did not execute and deliver to Assignor this Guaranty.
NOW THEREFORE, for and in consideration of the execution of the
Transaction Documents by Assignor and as a material inducement to Assignor to
execute the Transaction Documents, Guarantor hereby unconditionally and
irrevocably guarantees the full, faithful and prompt performance by Assignee
of each and every one of the terms and provisions of Section 5 and 13 of the
Assignment applicable to Assignee, which section is captioned "Consideration"
and "Indemnification", respectively.
It is specially agreed and understood that (i) the terms of the
Transaction Documents may be modified or changed by written agreement between
Assignor and Assignee, and (ii) the Transaction Documents may be assigned by
Assignor or any assignee of Assignor without consent or notice to Guarantor,
and that this Guaranty shall thereupon and thereafter guarantee the
performance of said Transaction Documents as so modified, changed or assigned.
This Guaranty shall not be released, modified or affected by failure
or delay by Assignor to enforce any of its rights or remedies under any of the
Transaction Documents, whether pursuant to the terms thereof or at law or in
equity.
No notice of default need be given to Guarantor, it being
specifically agreed and understood that this Guaranty is a continuing
guarantee under which Assignor may proceed forthwith and immediately against
Assignee or against Guarantor for the enforcement of any rights which Assignor
may have as against Assignee pursuant to the terms of Section 5 and 13 of the
Assignment. Without limiting the generality of the foregoing, Assignor shall
have the right to proceed against Guarantor hereunder without first proceeding
against Assignee and without previous notice to or demand upon either Assignee
or Guarantor.
Guarantor hereby waives (a) notice of acceptance of this Guaranty,
(b) demand of payment, presentation or protest, (c) all right to assert or
plead any statute of limitations
<PAGE>
as to or relating to this Guaranty or the Transaction Documents, (d) any right
to requires Assignor to proceed against Assignee or any other person or entity
liable to Assignor, (e) any right to require Assignor to proceed under any
other remedy Assignor may have before proceeding against Guarantor, (g) any
right of subrogation.
Guarantor hereby subordinates all existing or future indebtedness of
Assignee to Guarantor to the obligations owed to Assignor under the
Transaction Documents and this Guaranty.
The term "Assignor" as used herein refers to and means American Golf
Corporation, a California corporation, and also any assignees of Assignor, and
also any successor to the interest of Assignor.
The term "Assignee" as used herein refers to and means San Bruno
Family Golf Centers, Inc., Delaware corporation, and any assignees of Assignee
and any successory to the interest of Assignee.
In the event Assignor brings any action against Guarantor to enforce
the obligations of Guarantor hereunder, the unsuccessful party in such action
shall pay to the prevailing party all reasonable attorney's fees and costs
incurred by the prevailing party.
"GUARANTOR"
Family Golf Centers, Inc.
a Delaware corporation
Executed at ________________________ By: _____________________
on April ___, 1997 Its: _______________
Address ____________________________
____________________________________
By: _____________________
Its: _______________
<PAGE>
PURCHASE AND SALE AGREEMENT
AGREEMENT, made the 17th day of February, 1997, between CLIFFORD E. ELEY,
as trustee (the "Trustee") of the chapter 7 bankruptcy estate (the "Estate")
of Colorado Beach and Sport Limited Partnership (the "Debtor"), and ENGLEWOOD
FAMILY GOLF CENTERS, INC. ("Purchaser").
RECITALS
A. Debtor filed a voluntary petition under chapter 7 of the Bankruptcy
Code in the United States Bankruptcy Court for the District of Colorado (the
"Bankruptcy Court") on December 31, 1996, which is pending as Case No.
96-26320-DEC (the "Colorado Beach Bankruptcy Case").
B. The Trustee is the duly appointed trustee for the Estate.
C. Debtor was the owner and operator of a volleyball facility located in
Englewood, Colorado (the "Facility"). The Facility consists of certain
improvements and fixtures (the "Improvements") on real property leased from a
third party (the "Land"). A description of the Land is attached hereto as
EXHIBIT A. Debtor also owned certain personal property used in the operation
of the Facility and related business.
D. The Trustee desires to sell, and Purchaser desires to purchase the
Improvements and the related personal property on the terms and conditions
hereinafter set forth.
AGREEMENT
In consideration of the mutual promises and covenants hereinafter set
forth, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. SUBJECT MATTER OF SALE. The Trustee agrees to sell to Purchaser and
Purchaser agrees to buy, on the terms and conditions set forth in this
Agreement, all of the property described in paragraph 2 below.
2. PROPERTY. The property to be conveyed to Purchaser at Closing (as
hereinafter defined) (collectively the "Property") includes:
a. The Improvements, together with all appurtenant real property
interests and rights, if any, which shall be conveyed to Purchaser by a
Trustee's Deed substantially in the form attached hereto as EXHIBIT B;
b. All of the Estate's right, title and interest in and to all personal
property located on the Land or in the Improvements (collectively, the
"Personal Property"), which
1
<PAGE>
shall be transferred to Purchaser by a Bill of Sale substantially in the
form attached hereto as EXHIBIT C; and
c. All of the Estate's right, title and interest, in and to that certain
Ground Lease and Agreement, dated as of July 1, 1995, between the Debtor
and Arapahoe County Public Airport Authority (the "Lease") which shall be
conveyed by an Assignment of Ground Lease substantially in the form
attached hereto as EXHIBIT D.
3. PURCHASE PRICE. The purchase price to be paid by Purchaser for the
Property is $700,000.00.
4. TERMS. The terms of payment are as follows:
a. Upon execution of this Agreement, by cash, wire transfer or certified
check, $50,000 as earnest money.
b. After execution and delivery of the Trustee's Deed, the Bill of Sale
and the Assignment of Ground Lease, by cash, wire transfer or certified
check, $650,000.00.
5. LEASE. The Trustee shall seek approval of the assumption and assignment
of the Lease to Purchaser pursuant to 11 U.S.C. Section 365. Purchaser shall
cooperate with the Trustee in, and be responsible for, demonstrating and
providing adequate assurance of the cure of any default and of future
performance under the Lease. In addition to the Purchase Price, the Purchaser
shall make all cure payments under the Lease and do all other acts required
to cure the Lease in an amount not to exceed $30,000.
6. CLOSING DATE. Title shall be closed on a mutually agreeable date no
later than the Effective Date (defined below) at a mutually agreeable time at
the offices of Holden & Jessop, P.C., 303 East 17th Avenue, Suite 930,
Denver, Colorado 80203 ("Closing"). Closing shall take place no later than
ninety (90) days from the date of this Agreement, failing which, this
Agreement shall terminate and, so long as Purchaser is not in default, the
Trustee shall return the earnest money to Purchaser.
7. EFFECTIVE DATE. The term "Effective Date" as used in this Agreement
shall mean the first business day upon which all of the following conditions
have been satisfied:
a. An order (i) approving this Agreement and authorizing the Trustee to
enter into this Agreement and (ii) authorizing the Trustee to assume and
assign the Lease (the "Approval Order") shall have been entered by the
Bankruptcy Court in the Bankruptcy Case;
b. Ten days (as computed in accordance with Fed. R. Bankr. P. 9006) shall
have passed from the entry of the Approval Order; and
2
<PAGE>
c. The Approval Order (i) shall have become a final, non-appealable
order, or (ii) with respect to any pending appeal of the Approval Order,
shall not have been reversed, remanded, or modified, or (iii) with respect
to any pending appeal of the Approval Order, shall not have been stayed
pending resolution of the appeal.
8. BANKRUPTCY COURT APPROVAL. This Agreement is expressly subject to the
approval of the Bankruptcy Court for the Colorado Beach Bankruptcy Case.
Since the Bankruptcy Court is free to consider higher and better offers in
connection with the approval of this Agreement, the Trustee will seek
approval of reasonable bid procedures which will require any such higher bid
to be (i) from a qualified bidder, (ii) in an amount at least $25,000 greater
than the purchase price set forth herein, (iii) only for the Property, (iv)
free of any contingency items and (v) identical to all other items of this
Agreement.
9. BROKER. The parties agree that no broker brought about this sale.
10. CONDITION OF ASSETS. All of the Property including the Improvements
and the Personal Property sold hereunder are sold "as is" and "where is"
without any warranties, express or implied. Purchaser has made his own
inspection and this purchase is based on said inspection.
11. PERMITTED ENCUMBRANCES. The Property shall be delivered free and clear
of all liens and encumbrances except for the Lease, taxes, sewer and water
charges and other such charges for the current year and any other
encumbrances on the Land (the "Permitted Encumbrances").
12. PRORATIONS. General taxes for the year of Closing, based on the most
recent levy and the most recent assessment, water and sewer charges, if any,
shall be prorated to the date of the Closing. Fees for the real estate
closing and settlement services, if any, shall be paid at closing by
Purchaser. Any sales, use and transfer tax that may accrue because of this
transaction shall be paid by Purchaser.
13. POSSESSION. Possession of the Property shall be delivered to Purchaser
upon completion of the Closing.
14. DAMAGE TO PROPERTY. In the event the Property shall be damaged by fire
or other casualty prior to the date of the Closing, in an amount of not more
than five percent of the total purchase price, the Trustee shall be obligated
to repair the same before the date of Closing. In the event such damage is
not repaired within said time or if the damages exceed such sum, this
Agreement may be terminated at the option of Purchaser. Should Purchaser
elect to carry out this Agreement despite such damage, Purchaser shall be
entitled to credit for all the insurance proceeds resulting from such damage
to the Property, not exceeding, however, the total purchase price. The risk
of loss for any damage to the Property shall be borne by Purchaser once
Purchaser is entitled to possession under the terms of this Agreement.
15. TIME OF ESSENCE. Time is of the essence hereof.
3
<PAGE>
16. REMEDIES. If any payment due hereunder is not paid, honored or
tendered when due, or if any other obligation hereunder is not performed or
waived as herein provided, there shall be the following remedies:
a. IF PURCHASER IS IN DEFAULT: All payments and things of value received
hereunder shall be forfeited by Purchaser and retained on behalf of
Trustee and both parties shall thereafter be released from all obligations
hereunder.
b. IF THE TRUSTEE IS IN DEFAULT: Purchaser may elect to treat this
Agreement as canceled, in which case all payments and things of value
received hereunder shall be returned or Purchaser may elect to treat this
Agreement as being in full force and effect and Purchaser shall have the
right to specific performance.
c. COSTS AND EXPENSES. Anything to the contrary herein notwithstanding,
in the event of any litigation or arbitration arising out of this
Agreement, the court shall award to the prevailing party all reasonable
costs and expenses, including attorneys' fees.
17. TERMINATION. Purchaser shall have the right to terminate this
Agreement prior to Closing in the event that:
a. the Closing does not take place within ninety (90) days from the date
of this Agreement; or
b. the amount required to be paid in order to cure all defaults under the
Lease exceeds $30,000;
whereupon, so long as Purchaser is not in default, the Trustee shall promptly
return the earnest money to Purchaser.
18. NOT ASSIGNABLE. This Agreement shall not be assignable by Purchaser
without the Trustee's prior written consent.
19. CAPTIONS. The captions are inserted only as a matter of convenience
and for reference and in no way define, limit or describe the scope of this
Agreement nor the intent of any provision thereof.
20. FURTHER ASSURANCES. From time to time after the Closing, the Trustee
shall, if requested by Purchaser, make, execute and deliver to Purchaser such
additional assignments, bills of sale, deeds and other instruments of
transfer, as may be reasonably necessary or proper to transfer to Purchaser
all of the Estate's right, title and interest in and to the assets and
property covered by this Agreement. Such efforts and assistance shall be
without out of pocket cost to the Trustee. Each party hereto shall cooperate
fully with one another and shall execute such other and further
4
<PAGE>
documents as may be reasonably necessary or proper for the consummation of
the transactions contemplated by this Agreement.
21. GOVERNING LAW. This Agreement shall be interpreted, governed and
construed in accordance with the laws of the State of Colorado without regard
to conflicts of law.
22. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which when so executed shall be an original, but all of
which together shall constitute one agreement. Any execution of this
Agreement or of any other document contemplated herein may be transmitted by
facsimile and treated as an original by the receiving party.
23. SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance shall be invalid or unenforceable to
any extent, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby and
shall be enforced to the greatest extent permitted by law.
24. SUCCESSORS AND ASSIGNS. The terms, warranties and agreements herein
contained shall bind and inure to the benefit of the respective parties
hereto, and their respective legal representatives, successors and assigns.
25. MODIFICATIONS, WAIVERS, ETC. No waiver, modification, amendment,
discharge or change of this Agreement or any part hereof shall be valid
unless the same is in writing and signed by the party against which the
enforcement of such modification, waiver, amendment, discharge or change is
sought.
IN WITNESS WHEREOF, the Parties have respectively signed and sealed these
presents the day and year first above written.
/s/ Clifford E. Eley
-------------------------------
Clifford E. Eley, as Trustee of
the Chapter 7 Bankruptcy Estate
of Colorado Beach and Sport
Limited Partnership
ENGLEWOOD FAMILY GOLF CENTERS,
INC.
By: /s/ Robert J. Krause
---------------------------
Name: Robert J. Krause
Its: Vice President
5
<PAGE>
PERFORMANCE GUARANTEE:
The undersigned hereby guarantees the obligations and performance of
Purchaser as set forth in the foregoing Agreement.
Dated this 18th day of February, 1997.
FAMILY GOLF CENTERS, INC.
By: /s/ Robert J. Krause
---------------------------
Name: Robert J. Krause
Its: Senior Vice-President
6
<PAGE>
EXHIBITS TO PURCHASE AND SALE AGREEMENT
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ----------- --------------------------------------
<S> <C>
A Legal Description of the Land
B Trustee's Deed
C Bill of Sale for Personal Property
D Assignment of Ground Lease
</TABLE>
7
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, made as of April 2, 1997 (this "AGREEMENT"), by
and between MARGO MASSAHOS, having an address at C/O Robert Schraplau, 501
Buckingham Road, Richardson, Texas 75081 (the "SELLER"), GREEN OAK GOLF
PRACTICE CENTER, INC., a Texas corporation having an address at 1301 NE Green
Oaks Drive, Arlington, Texas 76006 ("ACQUIRED CORPORATION"), and FAMILY GOLF
CENTERS, INC., a Delaware corporation having an address at 225 Broadhollow
Road, Suite 106E, Melville, New York 11747 ("PURCHASER").
W I T N E S S E T H :
WHEREAS, Seller is the owner of all of the outstanding shares of capital
stock of Acquired Corporation (the "STOCK"); and
WHEREAS, Seller wants to sell to Purchaser, and Purchaser wants to
purchase from Seller, the Stock on the terms, and subject to the conditions,
set forth herein.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, and other good and valuable consideration, the mutual
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Agreement to Sell and Purchase. Seller shall sell, assign, transfer,
and convey to Purchaser all of the outstanding shares of capital stock of
Acquired Corporation and shall deliver to the Purchaser at the Closing (as
hereinafter defined) certificates representing such shares duly endorsed in
blank or accompanied by stock
<PAGE>
powers duly endorsed in blank, in each case in proper form for transfer, and
with all stock transfer and any other required documentary stamps affixed
thereto.
2. Consideration. In consideration for the Stock, at the Closing
Purchaser shall:
2.1 pay to Seller the sum of $500,000.00 subject to adjustment as
hereinafter provided, payable in cash, by certified or bank check or by the
wire transfer of funds;
2.2 deposit with an escrow agent $50,000.00 under the Escrow
Agreement dated the date hereof (the "ESCROW AGREEMENT") to be held and
distributed by the escrow agent appointed thereunder (the "ESCROW AGENT") as
provided in the Escrow Agreement;
2.3 issue 7,500 validly issued, fully paid and non-assessable shares
of common stock, par value $.01 per share, of Purchaser (the "FGC STOCK") and
to deliver at Closing, free and clear of all liens, claims and encumbrances a
certificate representing 7,500 shares of FGC Stock registered in the name of
the Seller; and
2.4 assume the liabilities listed on Schedule I hereto (the "ASSUMED
LIABILITIES").
3. Apportionments.
3.1 The parties hereto agree that (a) all operating expenses of
Acquired Corporation (i.e., cost of goods sold, rent, advertising,
collections, fees, hired services, insurance, miscellaneous expenses, postage,
repairs and maintenance, supplies, taxes, utilities and wages, but
specifically not including professional fees and expenses, or other
indebtedness of Acquired Corporation, travel and lodging or
-2-
<PAGE>
depreciation), and (b) all income of Acquired Corporation, including accounts
receivable, shall be apportioned between Seller and Purchaser as of the
Closing Date (as hereinafter defined) based on the portion of each such
expense or revenue attributable to the period falling 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 on and after the Closing Date, on the other hand, which Purchaser
shall bear the responsibility and benefit of (the "ADJUSTMENT"). The net
Adjustment will be paid by the party owing the same to the other in cash or by
certified or official bank check or wire transfer at Closing.
3.2 To the extent that any of the prorations made upon the Closing
Date pursuant to this Article are based upon estimates of payments to be made
and/or expenses to be incurred by Purchaser subsequent to the 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.
3.3 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 3 shall survive the Closing.
4. The Closing. The closing of the transaction provided for in this
Agreement (the "CLOSING") shall take place simultaneously with the execution
and delivery of this Agreement (the actual date of the Closing being referred
to herein as the "CLOSING DATE"), at such place as may be mutually agreed to
by Seller and Purchaser.
-3-
<PAGE>
5. Representations and Warranties of Seller. The Seller hereby represents
and warrants to Purchaser as of the date hereof as follows:
5.1 Organization and Qualification. Acquired Corporation is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Texas , with all requisite power and authority, and all
necessary consents, authorizations, approvals, orders, licenses, certificates,
and permits of and from, and declarations and filings with, all federal,
state, local, and other governmental authorities and all courts and tribunals,
to own, lease, license, and use its properties and assets and to carry on the
business in which it is now engaged and to perform this Agreement. Acquired
Corporation is duly qualified to transact the business in which it is engaged
and is in good standing as a foreign corporation in every jurisdiction in
which its ownership, leasing, licensing, or use of property or assets or the
conduct of its business makes such qualification necessary. The Acquired
Corporation does not own or have the right to vote at least a majority of the
shares of stock, partnership interests or other securities with voting rights
in any corporation, partnership, trust, or other entity ("Subsidiaries") and
does not own any interest in any other enterprise (whether or not such
enterprise is a partnership, trust, corporation or other entity).
-4-
<PAGE>
5.2 Capitalization. The authorized capital stock of Acquired
Corporation consists of 1,000,000 shares of common stock, no par value per
share, of which 1,000 shares are outstanding. Each of such outstanding shares
of Acquired Corporation is validly authorized, validly issued, fully paid and
nonassessable, has not been issued and is not owned or held in violation of
any preemptive right of stockholders, and is owned of record and beneficially
by the Seller free and clear of all liens, security interests, pledges,
charges, encumbrances, stockholders' agreements, and voting trusts. There is
no commitment, plan, or arrangement to issue, and no outstanding option,
warrant, or other right calling for the issuance of, any share of capital
stock of Acquired Corporation or any security or other instrument convertible
into, exercisable for, or exchangeable for capital stock of Acquired
Corporation. There is outstanding no security or other instrument convertible
into or exchangeable for capital stock of Acquired Corporation.
5.3 Financial Condition. Acquired Corporation has delivered or shall
deliver no later than 30 days after the Closing, to the Purchaser true and
correct copies of: (a) an audited balance sheet and income statement of
Acquired Corporation as of December 31, 1996 ("CLOSING BALANCE SHEET"); and
(b) internal reports for the months of January and February and March 1, 1997
through the date hereof. The above-referenced balance sheets present fairly
the financial condition, assets, liabilities, and stockholders' equity of
Acquired Corporation as of its date and each of the above-referenced income
statements presents fairly the results of operations of Acquired Corporation
for the period indicated and presents fairly the information purported to be
shown therein. The financial statements referred to in this Section 5.3 have
been
-5-
<PAGE>
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved and are in accordance
with the books and records of Acquired Corporation. Since December 31, 1996
(the "CLOSING BALANCE SHEET DATE"):
5.3.1 There has at no time been a material adverse change in the
financial condition, results of operations, business, properties, assets or
liabilities of Acquired Corporation.
5.3.2 Acquired Corporation has not authorized, declared, paid, or
effected any dividend or liquidating or other distribution in respect of its
capital stock or any direct or indirect redemption, purchase, or other
acquisition of any stock of Acquired Corporation.
5.3.3 The operations and business of Acquired Corporation have been
conducted in all respects only in the ordinary course.
5.3.4 Acquired Corporation has not suffered an extraordinary loss
(whether or not covered by insurance) or waived any right of substantial
value.
5.3.5 Acquired Corporation has not paid or incurred any tax, other
liability, or expense resulting from the preparation of, or the transactions
contemplated by, this Agreement, it being understood that Seller shall have
paid or will pay all such taxes (including stock transfer taxes resulting from
this Agreement or the transactions contemplated hereby), liabilities, and
expenses.
5.4 Tax and Other Liabilities. The Acquired Corporation does not have
any liability of any nature, accrued or contingent, including without
limitation, liabilities for federal, state, local, foreign, income, estimated,
excise, sales, gross receipts, franchise,
-6-
<PAGE>
employment and payroll related, property and import taxes and penalties,
interest, and additions to tax ("TAXES") and liabilities to customers or
suppliers, other than liabilities for which full provision has been made on
the Closing Balance Sheet and which will be paid off at Closing or which are
listed on Schedule I hereto to be assumed by Purchaser. The Acquired
Corporation has filed all federal, state, local and foreign tax returns
required to be filed by it; has delivered to Purchaser a true and correct copy
of each such return which was filed in the past six years; has paid, or has
established on the Closing Balance Sheet a reserve for, all Taxes,
assessments, and other governmental charges payable or remittable by it or
levied upon it or its properties, assets, income, or franchises which are due
and payable; and has delivered to Purchaser a true and correct copy of any
report as to adjustments received by it from any taxing authority during the
past six years and a statement as to any litigation, governmental or other
proceeding, formal or informal, or investigation pending, threatened, or in
prospect with respect to any such report or the subject matter of such report.
The Acquired Corporation has paid or shall pay by the close of business on the
date hereof all liabilities listed on Schedule II hereto.
5.5 Litigation and Claims. There is no litigation, arbitration,
claim, governmental or other proceeding (formal or informal), or investigation
pending, or to the best knowledge of Seller threatened or in prospect (or any
basis therefor known to Acquired Corporation or the Seller), with respect to
Acquired Corporation, the Seller, or any of its or his respective businesses,
properties, or assets. Acquired Corporation is not affected by any present or
threatened strike or other labor disturbance nor to the knowledge of the
Seller is any union attempting to represent any employee of Acquired
-7-
<PAGE>
Corporation as collective bargaining agent. Acquired Corporation is not in
violation of, or in default with respect to, any law, rule, regulation, order,
judgment, or decree; nor is Acquired Corporation or the Seller required to
take any action in order to avoid such violation or default.
5.6 The Lease. Attached hereto as EXHIBIT A is a true and correct
copy of the Sublease, dated as of October 28, 1994, by and between Acquired
Corporation as Tenant and CCA Golf Center--Arlington, Inc., a Texas
corporation, as Landlord (the "SUBLEASE"). The Sublease is in full force and
effect, has not been modified or amended in any way and neither the Landlord
nor Acquired Corporation is in default, or sent or received any notice of
default, in respect of the Sublease. No event has occurred or circumstance
exists which, with the giving of notice or the passage of time, or both, would
constitute a default under the Sublease. Neither Acquired Corporation nor the
Landlord has exercised any right or option, or stated its intent, to terminate
or cancel the Sublease. Acquired Corporation has not assigned, mortgaged,
pledged, transferred or conveyed the Sublease or any interest therein, or
granted any right or option with respect thereto, to any party other than
Purchaser. As of the date hereof, the Acquired Corporation has paid $19,196.58
in Percentage Rent toward the purchase option under the Sublease.
5.7 Properties. Acquired Corporation does not have any interest in
any real property other than under the Sublease. Acquired Corporation has good
title to all other properties and assets used in its business or owned by it,
free and clear of all liens, mortgages, security interests, pledges, charges,
and encumbrances.
-8-
<PAGE>
5.7.1 All accounts and notes receivable reflected on the
Closing Balance Sheet, or arising since the Closing Balance Sheet Date, have
been collected, or are and will be good and collectible, in each case at the
aggregate recorded amounts thereof without right of recourse, defense,
deduction, return of goods, counterclaim, offset, or set off on the part of
the obligor.
5.7.2 All inventory is merchantable and fit for the
particular purposes for which it is intended and there exists as of the date
hereof, inventory valued at no less than $50,000.00 on a cost basis.
5.7.3 Attached as EXHIBIT B is a true and complete list of
all properties and assets used by Acquired Corporation to operate its
business, owned by Acquired Corporation or leased by Acquired Corporation from
or to a third party, including with respect to such properties and assets
leased by Acquired Corporation, a description of such lease or Sublease. All
real and other tangible properties and assets owned, leased, or licensed by
Acquired Corporation are in good and usable condition (reasonable wear and
tear which is not such as to affect adversely the operation of the business of
Acquired Corporation excepted).
5.7.4 No real property owned, leased, or licensed by
Acquired Corporation lies in an area which is, or to the knowledge of Acquired
Corporation or the Seller will be, subject to zoning, use, or building code
restrictions which would prohibit, and no state of facts relating to the
actions or inaction of another person or entity or his or its ownership,
leasing, licensing, or use of any real or personal property exists or to the
best knowledge of Seller will exist which would prevent, the continued
effective
-9-
<PAGE>
ownership, leasing, licensing, or use of such real property in the business in
which Acquired Corporation is now engaged.
5.7.5 The real and other properties and assets (including
Intangibles) owned by Acquired Corporation or leased or licensed by Acquired
Corporation from a third party constitute all such properties and assets which
are necessary to the business of Acquired Corporation as presently conducted.
5.8 Corporate Instruments. Acquired Corporation has furnished to the
Purchaser true and correct copies of: (a) the articles of incorporation (or
other charter document) and by-laws of Acquired Corporation and all amendments
thereto, as presently in effect, certified by the Secretary of the corporation
and (b) all contracts, agreements, leases and licenses to which Acquired
Corporation is a party, each of which is listed on EXHIBIT C hereto. The stock
ledgers and stock transfer books and the minute book records of Acquired
Corporation relating to all issuances and transfers of stock by Acquired
Corporation and all proceedings of the stockholders and the Board of Directors
and committees thereof of Acquired Corporation since its incorporation made
available to the Purchaser's counsel are the original stock ledgers and stock
transfer books and minute book records of Acquired Corporation or exact copies
thereof. Acquired Corporation is not in violation or breach of, or in default
with respect to, any term of its articles of incorporation (or other charter
document) or by-laws. Margo Massahos and Nick Gingas are the officers of the
Acquired Corporation and Margo Massahos is the sole director, each of whom
will tender their resignation at the Closing.
5.9 Employees. Acquired Corporation does not have or contribute to
any pension, profit-sharing, option, other incentive plan, or any other type
of Employee
-10-
<PAGE>
Benefit Plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), or have any obligation to or
customary arrangement with employees for bonuses, incentive compensation,
vacations, severance pay, insurance, or other benefits. Acquired Corporation
does not have any obligation to provide post-retirement medical benefits or
life insurance coverage to any present or former employees. Acquired
Corporation neither currently contributes to or since September 16, 1980 has
effectuated either a complete or partial withdrawal from any multiemployer
Pension Plan within the meaning of Section 3(37) of ERISA. There are no union
or employment contracts or agreements (written or oral) involving employees of
Acquired Corporation.
5.10 Patents, Trademarks, Et Cetera. Acquired Corporation does not
own or have pending, or is licensed under, any patent, patent application,
trademark, trademark application, trade name, service mark, copyright,
franchise, or other intangible property or asset (all of the foregoing being
herein called "INTANGIBLES"). Acquired Corporation has not infringed, is
infringing, or has received notice of infringement with asserted Intangibles
of others.
5.11 Authority to Sell. Acquired Corporation and Seller have all
requisite power and authority to execute, deliver, and perform this Agreement.
All necessary corporate proceedings of Acquired Corporation have been duly
taken to authorize the execution, delivery, and performance of this Agreement
by Acquired Corporation. This Agreement has been duly authorized, executed,
and delivered by Acquired Corporation, has been duly executed and delivered by
Seller, constitutes the legal, valid, and binding obligation of Acquired
Corporation and Seller, and is
-11-
<PAGE>
enforceable as to them in accordance with its terms. No consent,
authorization, approval, order, license, certificate, or permit of or from, or
declaration or filing with, any federal, state, local, or other governmental
authority or any court or other tribunal is required by Acquired Corporation
or any Seller for the execution, delivery, or performance of this Agreement by
Acquired Corporation or any Seller. No consent of any party to any contract,
agreement, instrument, lease, license, arrangement, or understanding to which
Acquired Corporation or any Seller is a party, or to which it or he or any of
its or his respective businesses, properties, or assets are subject, is
required for the execution, delivery, or performance of this Agreement; and
the execution, delivery, and performance of this Agreement will not violate,
result in a breach of, conflict with, or (with or without the giving of notice
or the passage of time or both) entitle any party to terminate or call a
default under, entitle any party to rights and privileges that such party was
not receiving or entitled to receive immediately before this Agreement was
executed under, or create any obligation on the part of Acquired Corporation
that it was not paying or obligated to pay immediately before this Agreement
was executed under, any term of any such contract, agreement, instrument,
lease, license, arrangement, or understanding, or violate or result in a
breach of any term of the certificate of incorporation (or other charter
document) or by-laws of Acquired Corporation or violate, result in a breach
of, or conflict with any law, rule, regulation, order, judgment, or decree
binding on Acquired Corporation or any Seller or to which it or he or any of
its or his respective businesses, properties, or assets are subject. Upon the
Closing, Purchaser will have good title to all the capital stock of Acquired
-12-
<PAGE>
Corporation, free and clear of all liens, security interests, pledges,
charges, encumbrances, stockholders' agreements, and voting trusts.
5.12 Exemption from Registration. The offer, sale, and delivery of
the Stock as contemplated by this Agreement constitute exempted transactions
under the Securities Act of 1934 (as amended, the "SECURITIES ACT"), and
registration of such shares under the Securities Act is not required in
connection with any such offer, sale, or delivery of such shares.
5.13 Contracts. Except for the Lease and the other contracts listed
on EXHIBIT C hereto, Acquired Corporation is not a party to any leases,
contracts, orders or agreements (written or otherwise).
5.14 Environmental Matters.
5.14.1 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,
42 U.S.C. ' 9601(33); (ii) any "pollutant or contaminant" as defined in 42
U.S.C. ' 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
-13-
<PAGE>
such in (or for purposes of any Environmental Law (as hereinafter defined) and
any other toxic, reactive or flammable chemicals.
5.14.2 To the best knowledge and belief of Seller, and its
principal officers, there is no Hazardous Material at, under or on the
premises covered by the Lease (the "PREMISES") and there is no ambient air,
surface water, groundwater or land contamination within, under, originating
from or relating to the Premises. Acquired Corporation has not, and has not
caused to be, manufactured, processed, distributed, used, treated, stored,
disposed of, transported or handled any Hazardous Material at, on or under the
Premises in violation of Environmental Law.
5.14.3 Acquired Corporation has been given no notice of any
obligation or liability imposed or based upon any provision under any foreign,
federal, state or local law, rule, or regulation or common law, or under any
code, order, decree, judgment or injunction applicable to Acquired Corporation
or the Premises or any notice, or request for information issued, promulgated,
approved or entered thereunder, or under the common law, or any tort, nuisance
or absolute liability theory, 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").
-14-
<PAGE>
5.14.4 Acquired Corporation has not been subject to any
civil, criminal or administrative action, suit, claim, hearing, notice of
violation, investigation, inquiry or proceeding for failure to comply with, or
received notice of any violation or potential liability under the
Environmental Laws in respect of the Premises.
5.14.5 The Premises are not (a) listed or to the best
knowledge of Seller proposed for listing on the National Priority List or (b)
listed on the Comprehensive Environmental Response, Compensation, Liability
Information System List ("CERCLIS") promulgated pursuant to CERCLA, 42 U.S.C.
Section 9601(9), or any comparable list maintained by any foreign, state or
local government authority.
5.14.6 There are no underground storage tanks at the
Premises.
5.15 Tax Proceedings. There are no proceedings pending regarding the
reduction of real estate taxes or assessments in respect of the Premises.
5.16 Utilities. All water, storm and sanitary sewer, gas,
electricity, telephone and other utilities adequately service the Premises,
enter the Premises through lands as to which valid public or private easements
exist that will inure to the benefit of Purchaser and the Premises are
furnished by facilities of public utilities and the cost of installation of
such utilities has been fully paid.
5.17 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. All roads bounding the Premises are public roads.
-15-
<PAGE>
5.18 Work at the Premises. No services, material or work have been
supplied to the Premises for which payment has not been made in full.
5.19 Insurance. Seller has delivered to Purchaser or its counsel true
and correct copies of all insurance policies carried by Seller or Acquired
Corporation for the benefit of Acquired Corporation or relating to the
Premises. All such policies have been fully paid for and are and have at all
times since their commencement date been in full force and effect. Seller or
Acquired Corporation have at all times since the formation of Acquired
Corporation maintained such policies or substantially similar policies in
effect. All requirements or recommendations by any insurer or by any board of
fire underwriters or similar body in respect of the Premises have been
satisfied.
5.20 Investment Intent. The Seller is acquiring the FGC Stock for his
own account (and not for the account of others) and not with a view to the
distribution or resale thereof. The Seller understands that (i) the FGC Stock
is deemed to be "restricted securities" as such term is defined under Rule 144
of the Securities Act; (ii) that he may not sell or otherwise transfer the FGC
Stock in the absence of an effective registration statement covering such
shares or an exemption from the registration provision of the Securities act;
and (iii) that the FGC Stock shall contain a legend to the foregoing effect.
5.21 Full Disclosure. To the best knowledge of Seller, none of the
information supplied by Seller herein or in the exhibits hereto contains any
untrue statement of a material fact or omits to state a material fact required
to be stated herein or necessary in order to make the statements herein, in
light of the circumstances under which they are made, not misleading.
-16-
<PAGE>
6. Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller as of the date hereof and as of the Closing
Date as follows:
6.1 Organization; Power and Authority. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite power and authority to carry on its
business as it is now being conducted, to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby.
6.2 Due Authorization and Execution; Effect of Agreement. The
execution, delivery and performance by Purchaser of this Agreement and the
consummation by Purchaser of the transactions contemplated hereby have been
duly authorized by all necessary corporate action required to be taken on the
part of Purchaser. This Agreement has been duly and validly executed and
delivered by Purchaser and constitutes the valid and binding obligation of
Purchaser, enforceable in accordance with its terms, except to the extent that
such enforceability (a) may be limited by bankruptcy, insolvency, or other
similar laws relating to creditors' rights generally, and (b) is subject to
general principles of equity. The execution, delivery and performance by
Purchaser of this Agreement and the consummation by Purchaser of the
transactions contemplated hereby will not, with or without the giving of
notice or the lapse of time, or both, (i) violate any provision of any law,
rule or regulation to which Purchaser is subject; (ii) violate any order,
judgment or decree applicable to Purchaser; or (iii) conflict with or result
in a breach of or a default under any term or condition of Purchaser's
Certificate of Incorporation or By-Laws or any agreement or other
-17-
<PAGE>
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.
7. Survival. The representations and warranties of the parties made in
Articles 5 and 6 hereof shall survive the Closing.
8. Further Assurances. At any time and from time to time after the
Closing Date, each of the parties hereto shall, at the request of any of the
others, execute and deliver any further instruments or documents and take all
such further action as may be reasonably requested in order to further
consummate the transactions contemplated by this Agreement. This Article shall
survive the Closing.
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 other than C. B. Commercial Realty
("C.B."). Purchaser and Seller hereby respectively agree to indemnify and hold
harmless the other party from and against all loss, liability, damage and
expense (including, without limitation, attorneys' fees) imposed upon or
incurred by the other party by reason of any claim for commissions or other
compensation for bringing about this transaction by any broker, finder or
similar agent or party, other than C.B., who claims to have dealt with the
indemnifying party in connection with this transaction. The Seller hereby
agrees to pay to C.B. any and all
-18-
<PAGE>
fees, expenses and commissions due to C.B. in connection with this
transaction. The provisions of this Article shall survive the Closing or any
termination of this Agreement.
10. Indemnification.
10.1 Indemnification by Seller. Subject to the further provisions of
this Article, Seller shall protect, defend, hold harmless and indemnify
Purchaser, its officers, directors, shareholders, employees, agents and
affiliates, and their respective successors 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 liability which
was not adequately disclosed in this Agreement or on the Closing Balance
Sheet; (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
reference to knowledge and materiality contained in Section 5 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 10.1.
10.2 Indemnification by Purchaser. Subject to the further provisions
of this Article, Purchaser shall protect, defend, hold harmless and indemnify
each Seller, and their respective partners, employees and agents, and its
successors and assigns from, against and in respect of any and all Losses that
may be suffered or incurred by
-19-
<PAGE>
any of them arising from or by reason of (i) the breach of any representation,
warranty, covenant or agreement of Purchaser contained in this Agreement or in
any document or other writing delivered pursuant to this Agreement; and (ii)
any and all actions, suits, proceedings, claims, demands, assessments,
judgments, costs and expenses (including without limitation, interest,
penalties, reasonable legal fees and accounting fees) incident to the
foregoing and the enforcement of the provisions of this Section 10.2.
10.3 Notice and Defense of Claims. Whenever a party hereto (such
party and each of its affiliates which is entitled to indemnification pursuant
to any provision of this 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
-20-
<PAGE>
expense subsequently incurred by the Indemnified Party in connection with the
defense thereof. However, the Indemnified Party shall have the right to
participate at its expense and with counsel of its choice in such settlement,
compromise or litigation. The Indemnified Party shall not be required to
refrain from paying any claim which has matured by a court judgment or decree,
unless an appeal is duly taken therefrom and execution thereof has been
stayed, nor shall the Indemnified Party be required to refrain from paying any
claim where the delay in paying such claim would result in the foreclosure of
a lien upon any of the property or assets then held by the Indemnified Party.
The failure to provide a timely Notice of Claim as provided in this Section
10.3 shall not excuse the Indemnifying Party from its or their continuing
obligations hereunder; however, the Indemnified Party's claim shall be reduced
by any damages to the Indemnifying Party resulting from the Indemnified
Party's delay or failure to provide a Notice of Claim as provided in this
Section 10.3.
10.4 Assertions Deemed True. For purposes of this Article, any
assertion of fact and/or law by a third party that, if true, would constitute
a breach of a representation or warranty made by a party to this Agreement or
make operational an indemnification obligation hereunder, shall, on the date
that such assertion is made, immediately invoke the Indemnifying Party's
obligation to protect, defend, hold harmless and indemnify the Indemnified
Party pursuant to this Article.
10.5 Escrow. The obligation of Seller under Section 10.1 shall be
satisfied first from the Escrow Account and, if the Escrow Account is
inadequate to provide indemnification to Purchaser, then from Seller directly.
-21-
<PAGE>
11. Costs and Fees. The parties shall pay for their own legal and other
advisers retained in connection with this transaction. The Seller shall pay up
to $5,000 for the (i) Phase I environmental study and report, and (ii) an ALTA
Survey. The Purchaser shall pay for the cost of obtaining audited financial
statements. The provisions of this Article shall survive the Closing.
12. Notices. All notices, demands, requests, consents or other
communications ("NOTICES") which either party may desire or be required to
give to the other hereunder shall be in writing and shall be delivered by
hand, overnight express carrier, or sent by registered or certified mail,
return receipt requested, postage prepaid, in either event, addressed to the
parties at their respective addresses first above set forth. A copy of any
Notice given by Seller to Purchaser shall simultaneously be given in either
manner provided above to Family Golf Centers, Inc., 225 Broadhollow Road,
Melville, New York 11747, Attention: General Counsel. A copy of any Notice
given by Purchaser to Seller shall simultaneously be given in either manner
provided above to Ginsberg & Brusilow, 14785 Preston Road, L.B. 65, Dallas,
Texas 75204, Attention: Reuben Ginsberg. 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.
-22-
<PAGE>
13. Miscellaneous.
13.1 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the parties hereto and their respective successors and assigns.
13.2 Governing Law. This Agreement shall be governed by, interpreted
under and construed and enforced in accordance with, the laws of the State of
Delaware.
13.3 Captions. The captions or article headings in this Agreement are
for convenience only and do not constitute part of this Agreement.
13.4 Construction. This Agreement has been fully negotiated by the
parties and rules of construction construing ambiguities against the party
responsible for drafting agreements shall not apply.
13.5 Entire Agreement. This Agreement (including the Exhibits annexed
hereto) contain the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior understandings, if any, with
respect thereto.
13.6 Amendments. This Agreement may not be modified, changed,
supplemented or terminated, nor may any obligations hereunder be waived,
except by written instrument signed by the party to be charged or by its agent
duly authorized in writing or as otherwise expressly permitted herein.
13.7 No Waiver or Extension. No waiver of any breach of any agreement
or provision herein contained shall be deemed a waiver of any preceding or
succeeding breach thereof or of any other agreement or provision herein
contained. No
-23-
<PAGE>
extension of the time for performance of any obligations or acts shall be
deemed an extension of the time for performance of any other obligations or
acts.
13.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which taken together shall constitute but one and the
same original.
-24-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
____________________________
MARGO MASSAHOS
GREEN OAK GOLF PRACTICE CENTER, INC.
By: ________________________
Name:
Title:
FAMILY GOLF CENTERS, INC.
By: ________________________
Name:
Title:
-25-
<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
EXHIBIT A THE SUBLEASE
EXHIBIT B PERSONAL PROPERTY
EXHIBIT C CONTRACTS AND AGREEMENTS
SCHEDULE I ASSUMED LIABILITIES
SCHEDULE II DEBT TO BE PAID AT CLOSING
-26-
<PAGE>
CASH ESCROW AGREEMENT
CASH ESCROW AGREEMENT, dated as of April 2, 1997 (this "AGREEMENT"),
by and among MARGO MASSAHOS having an address at c/o Robert Schraplau, 501
Buckingham Road, Richardson, Texas 75081("SELLER"), FAMILY GOLF CENTERS, INC.,
a Delaware corporation having an address at 225 Broadhollow Road, Suite 106E,
Melville, New York 11747 ("PURCHASER"), and CONTINENTAL STOCK TRANSFER & TRUST
COMPANY, incorporated under the laws of the United States of America with
executive offices at 2 Broadway, New York, New York 10004 (together with its
successors, the "ESCROW AGENT").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution hereof, Seller and
Purchaser are consummating the transactions contemplated by the Stock Purchase
Agreement, dated as of the date hereof (the "PURCHASE AGREEMENT"), between
Seller and Purchaser;
WHEREAS, pursuant to the Purchase Agreement, Seller is required to
deposit $50,000.00 into an escrow account to be maintained by Escrow Agent to
be held against any claims for indemnity under Article 10 of the Purchase
Agreement; and
WHEREAS, this is the Escrow Agreement referred to in the Purchase
Agreement. Capitalized terms used in this Escrow Agreement and not otherwise
defined herein shall have the respective meanings given to them in the
Purchase Agreement.
NOW, THEREFORE, it is agreed as follows:
<PAGE>
1. ESCROW.
1.01 APPOINTMENT OF ESCROW AGENT.
(a) Seller and Purchaser hereby appoint Escrow Agent, and Escrow
Agent hereby agrees to serve, as Escrow Agent in accordance with, and pursuant
to, this Agreement.
(b) Escrow Agent shall establish at Chase Manhattan Bank a separate
Federally insured, interest bearing account (the "Escrow Account") for any
amounts received by it hereunder.
(c) All monies, including interest thereon, held by Escrow Agent in
the Escrow Account pursuant to the terms hereof shall be hereinafter referred
to as the "ESCROWED FUNDS".
(d) Seller shall be responsible for the payment of any income taxes
payable in connection with any interest earned in the Escrow Account except
with respect to any interest on Escrowed Funds paid to or for the benefit of
Purchaser.
1.02 OPERATION OF ESCROW ACCOUNT. The parties hereto agree that the Escrow
Account shall operate as follows:
(a) At the Closing, Seller shall deliver or cause to be delivered to
Escrow Agent $50,000.00. Escrow Agent shall hold such amount as Escrowed Funds
in the Escrow Account.
(b) At any time prior to the six month anniversary of the Closing Date
(the "Escrow Period"), Purchaser shall be entitled to give a notice to Escrow
Agent, signed by Purchaser's President or any Vice President (with a copy to
Seller), to the effect
-2-
<PAGE>
that there has been an event entitling Purchaser to indemnification from Seller
pursuant to Article 10 of the Purchase Agreement, which notice shall specify
the amounts owed by Seller pursuant to the Purchase Agreement, the calculation
of such amounts and the basis therefore.
(c) Twenty (20) days after Escrow Agent has received a notice pursuant
to Section 1.02(b) hereof (or, if not a business day, on the next business day
following such twentieth day) Escrow Agent shall deliver to Purchaser such
portion of the Escrowed Funds as is specified in such notice unless Seller
shall have notified Escrow Agent (with a copy to Purchaser) in writing before
such date that Seller disagrees with Purchaser's determination that Purchaser
is entitled to indemnification with respect to the Purchase Agreement, which
notice shall be set forth in reasonable detail the basis for such disagreement.
(d) Should any dispute arise with respect to the delivery, ownership,
or right of possession of any of the Escrowed Funds during the Escrow Period,
Escrow Agent, as more fully set forth in Section 3.11 hereof, is authorized and
directed to retain in its possession without liability to anyone all or any
part of the Escrowed Funds until such dispute shall have been settled either by
mutual agreement by the parties concerned or by a final order, decree, or
judgment of a court of competent jurisdiction in the United States of America
and time for appeal has expired and no appeal has been perfected, but Escrow
Agent shall be under no duty whatsoever to institute or defend any such
proceedings, and may, in its discretion, deposit such Escrowed Funds with a
court of
-3-
<PAGE>
competent jurisdiction in the United States of America and be relieved of any
and all liability to any of the parties hereto upon such deposit.
1.03 DISTRIBUTION OF ESCROWED FUNDS. Unless a notice under Section 1.02(b)
hereof has been given and Escrowed Funds in satisfaction of such notice have
not been delivered to Purchaser, either because the 20-day period has not yet
run out or because a dispute relating to the claim made by such notice is then
pending, the Escrowed Funds or such portion of them as at the time remains in
escrow and is not in dispute, together with all dividends and distributions
received by Escrow Agent with respect thereto, shall be returned to Seller on
the first anniversary of the Closing Date.
1.04 TERMINATION OF ESCROW ACCOUNT. This Agreement and the Escrow Account
will terminate at 5:00 P.M., New York City local time, on the date on which all
of the Escrowed Funds contained in the Escrow Account shall be distributed as
set forth above.
2. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be (a) delivered by hand, (b)
facsimile, or (c) over-night delivery with proper postage prepaid, and
addressed as follows:
If to Purchaser to:
Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Attention: Dominic Chang, President
Telephone: (516) 694-1666
Facsimile: (516) 694-0918
with a copy to:
Family Golf Centers, Inc.
-4-
<PAGE>
225 Broadhollow Road
Melville, New York 11747
Attention: Pamela Charles, General Counsel
Telephone: (516) 694-1666
Facsimile: (516) 694-0918
If to Seller to:
Margo Massahos
c/o Robert Schraplau
501 Buckingham Road
Richardson, Texas 75081
Telephone: 972-235-6982
Facsimile: 972-235-6999
with a copy to:
Reuben M. Ginsberg, P.C.
14785 Preston Road
L.B. 65
Dallas, Texas 75204
Facsimile: 972-386-4048
Telephone: 972-744-0044
Attention: Reuben Ginsberg
If to Escrow Agent, to:
2 Broadway
New York, New York 10004
Telephone: (212) 509-4000
Facsimile: (212) 509-5150
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. Except as
otherwise provided herein, no notice or communication shall be effective until
received.
-5-
<PAGE>
3. CONCERNING ESCROW AGENT.
To induce Escrow Agent to act hereunder, it is further agreed by each of
Seller and Purchaser that:
3.01 Escrow Agent shall not be under any duty to give the Escrowed Funds
held by it hereunder any greater degree of care than it gives its own similar
property and shall not be required to invest any funds held hereunder except as
directed in this Agreement.
3.02 This Agreement expressly sets forth all the duties of Escrow Agent
with respect to any and all matters pertinent hereto. No implied duties or
obligations shall be read into this Agreement against Escrow Agent. Escrow
Agent shall not be bound by the provisions of any agreement among the other
parties hereto except this Agreement.
3.03 Escrow Agent shall not be liable, except for its own gross negligence
or willful misconduct, and, except with respect to claims based upon such gross
negligence or willful misconduct that are successfully asserted against Escrow
Agent, the other parties hereto shall jointly and severally indemnify and hold
harmless Escrow Agent (and any successor Escrow Agent) from and against any and
all losses, liabilities, claims, actions, damages, and expenses, including
reasonable attorneys' fees and disbursements, arising out of, and in connection
with, this Agreement. Without limiting the foregoing, Escrow Agent shall in no
event be liable in connection with its investment or reinvestment of any cash
held by it hereunder in good faith, in accordance with the terms hereof,
including, without limitation, any liability for any delays (not resulting from
gross negligence or willful misconduct) in the investment or reinvestment of
the Escrowed
-6-
<PAGE>
Funds; or any loss of interest incident to any such delays. This Section 3.03
shall survive notwithstanding any termination of this Agreement or the
resignation of Escrow Agent.
3.04 Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument, or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. Escrow Agent may act in reliance upon any instrument or
signature believed by it in good faith to be genuine and may assume, if in good
faith, that any person purporting to give notice or receipt or advice or make
any statement or execute any document in connection with the provisions hereof
has been duly authorized to do so.
3.05 Escrow Agent may act pursuant to the advice of counsel with respect
to any matter relating to this Escrow Agreement and shall not be liable for any
action taken or omitted in good faith and in accordance with such advice.
3.06 Escrow Agent does not have any interest in the Escrowed Funds
deposited hereunder, but is serving as escrow holder only. Any payments of
income from the Escrow Account shall be subject to withholding regulations then
in force with respect to United States taxes. This Section 3.06 shall survive
notwithstanding any termination of this Agreement or the resignation of Escrow
Agent.
3.07 Escrow Agent makes no representation as to the validity, value,
genuineness, or the collectibility of any security or other documents or
instrument held by, or delivered to, it.
-7-
<PAGE>
3.08 Escrow Agent shall not be called upon to advise any party as to the
wisdom in selling or retaining or taking or refraining from any action with
respect to any securities or other property deposited hereunder.
3.09 Escrow Agent (and any successor escrow agent) at any time may be
discharged from its duties and obligations hereunder by the delivery to it of
notice of termination signed by Purchaser and Seller or at any time may resign
by giving written notice to such effect to Purchaser and Seller. Upon any such
termination or resignation, Escrow Agent shall deliver the Escrowed Funds to
any successor escrow agent jointly designated by the other parties hereto in
writing, or to any court of competent jurisdiction if no such successor escrow
agent is agreed upon, whereupon Escrow Agent shall be discharged of and from
any and all further obligations arising in connection with this Escrow
Agreement. The termination or resignation of Escrow Agent shall take effect on
the earlier of (a) the appointment of a successor (including a court of
competent jurisdiction) or (b) the day that is thirty (30) days after the date
of delivery: (i) to Escrow Agent of the other parties' notice of termination or
(ii) to the other parties hereto of Escrow Agent's written notice of
resignation. If at that time Escrow Agent has not received a designation of a
successor escrow agent, Escrow Agent's sole responsibility after that time
shall be to keep the Escrowed Funds safe until receipt of a designation of
successor escrow agent or a joint written disposition instruction by the other
parties hereto or an enforceable order of a court of competent jurisdiction.
-8-
<PAGE>
3.10 Escrow Agent shall have no responsibility for the contents of any
writing of any third party contemplated herein as a means to resolve disputes
and may rely without any liability upon the contents thereof.
3.11 In the event of any disagreement among or between the other parties
hereto resulting in adverse claims or demands being made in connection with the
Escrowed Funds, or in the event that Escrow Agent in good faith is in doubt as
to what action it should take hereunder, Escrow Agent shall be entitled to
retain the Escrowed Funds until Escrow Agent shall have received (a) a final
and non-appealable order of a court of competent jurisdiction in the United
States of America directing delivery of the Escrowed Funds or (b) a written
agreement executed by the other parties hereto directing delivery of the
Escrowed Funds, in which event Escrow Agent shall disburse the Escrowed Funds
in accordance with such order or agreement. Any court order referred to in (a)
above shall be accompanied by a legal opinion by counsel for the presenting
party satisfactory to Escrow Agent to the effect that said court order is final
and non-appealable. Escrow Agent shall act on such court order and legal
opinions without further question.
3.12 As consideration for its agreement to act as Escrow Agent as herein
described, Purchaser shall pay the Escrow Agent's fees determined in accordance
with the terms set forth on Exhibit A hereto (and made a part of this Escrow
Agreement as if herein set forth). In addition, Purchaser and Seller agree to
reimburse Escrow Agent (on a 50/50 basis) for all reasonable expenses,
disbursements, and advances incurred or
-9-
<PAGE>
made by Escrow Agent in performance of its duties hereunder (including
reasonable fees, expenses, and disbursements of its counsel).
4. MISCELLANEOUS.
4.01 BINDING EFFECT. This Escrow Agreement shall be binding upon, and
inure solely to the benefit of, the parties hereto and their respective
successors and assigns, heirs, administrators, and representatives, and shall
not be enforceable by, or inure to the benefit of, any other third party,
except as provided in Section 3.09 hereof with respect to the termination of,
or resignation by, Escrow Agent. No party may assign any of its rights or
obligations under this Agreement without the written consent of the other
parties.
4.02 CHOICE OF LAW. This Agreement shall be construed in accordance with,
and governed by, the internal law of the State of Texas (without reference to
its rules as to conflicts of law).
4.03 MODIFICATION. This Agreement may only be modified by a writing signed
by all of the parties hereto.
4.04 HEADINGS. The section headings herein are for convenience only and
shall not affect the construction thereof. Unless otherwise indicated,
references to Sections and Articles are to Sections and Articles, respectively,
contained herein.
4.05 COUNTERPARTS. This Agreement may be executed in one or more
counterparts but all such separate counterparts shall constitute but one and
the same instrument; provided that, although executed in counterparts, the
executed signature pages of each such counterpart may be affixed to a single
copy of this Agreement which shall constitute an original.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
By: __________________________________
Name:
Title:
_______________________________________
MARGO MASSAHOS
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By: __________________________________
Name:
Title:
-11-
<PAGE>
ASSIGNMENT AND ASSUMPTION OF CONCESSION LICENSES
ASSIGNMENT AND ASSUMPTION OF CONCESSION LICENSES, made as of the __
day of March __, 1997 (this "Agreement"), by and between American Golf
Corporation, a California corporation having an address at 2951 28th Street,
Santa Monica, California 90405 ("Assignor"), RANDALL'S ISLAND FAMILY GOLF
CENTERS, INC. ("RIFGC"), a Delaware corporation having an address at 225
Broadhollow Road, Suite 106E, Melville, New York 11747 and DARLINGTON FAMILY
GOLF CENTERS, INC. ("DFGC"), a Delaware Corporation having an address of 225
Broadhollow Road, Suite 106E, Melville, New York 11747 (RIFGC and DFGC are
collectively referred to herein as "Assignees" and individually as an
"Assignee").
W I T N E S S E T H :
WHEREAS, by Concession License, dated November 5, 1990 (the
"Randall's Island License") by and between the City of New York (the "City")
acting by and through its Commissioner of the Department of Parks and
Recreation, and Assignor, as licensee (which License is attached as Exhibit A
hereto), Assignor was granted the license to construct, operate, maintain and
manage the golf recreation center, including a driving range, miniature golf
course, batting cages, snack bar and pro shop on Randall's Island (the
"Randall's Island Concession");
WHEREAS, by Concession License, dated November 22, 1989 (the
"Darlington License") by and between the County of Bergen, a body politic and
corporate of the State of New Jersey (the "County") and Assignor, as licensee;
as modified by that certain Order for Entry of Judgment, entered on June 11,
1993 in the Superior Court of New Jersey, Chancery Division, Bergen County,
and as amended by that certain Agreement Amendment, dated April 19, 1995(which
Darlington License is attached as Exhibit B hereto), Assignor was granted the
license to construct, manage, operate and maintain the Darlington Driving
Range located in Mahwah, New Jersey (the "Darlington Concession") (the
Darlington Concession and the Randall's Island Concession collectively
referred to herein as the "Concessions" and the Darlington License and the
Randall's Island License collectively referred to herein as the "Licenses");
WHEREAS, Assignor desires to assign to RIFGC its entire interest as
concessionaire under the Randall's Island License and RIFGC desires to accept
such assignment and assume Assignor's obligations under the Randall's Island
License on the terms and conditions hereinafter set forth;
WHEREAS, Assignor desires to assign to DFGC its entire interest as
concessionaire under the Darlington License and DFGC desires to accept such
assignment and assume Assignor's obligations under the Darlington License on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of TEN ($10.00) DOLLARS, the terms
and conditions set forth herein, and other good and valuable consideration,
the mutual receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree to the foregoing and as follows:
-1-
<PAGE>
1. Assignment and Assumption. Assignor assigns, sets over and
transfers to RIFGC and DFGC all right, title and interest of Assignor in and
to the Randall's Island License and Darlington License, respectively, and each
of RIFGC and DFGC assumes and agrees to perform any and all of the obligations
to be performed by the concessionaire or licensee or contractor under the
Randall's Island License and Darlington License, respectively, (as if each
such Assignee executed the License originally as concessionaire or licensee or
contractor thereunder). Each Assignee further agrees to be bound by and fully
responsible for all of the covenants, agreements, terms, provisions, and
conditions of Assignor under the License which it is assuming. Each Assignee
agrees that the obligations assumed by it hereunder and agreements contained
herein shall benefit the City and County, as the case may be, and its
successors and assigns, as well as Assignor.
2. Bill of Sale. Assignor does hereby sell, assign, transfer and
convey to RIFGC, in the case of the Randall's Island Concession and DFGC, in
the case of the Darlington Concession, and each of RIFGC and DFGC does hereby
purchase and acquire from Assignor, all of Assignor's right, title and
interest in and to the following property (collectively, the "Property"):
2.1 all furnishings, fixtures, machinery, equipment,
vehicles and personalty attached or appurtenant to and used in connection with
the Concessions that are owned by Assignor, and all inventories, supplies,
sales, marketing and instructional materials of every kind and description
owned by Assignor relating to the businesses conducted by Assignor at the
Concessions (the "Businesses"), located at the Darlington Concession or the
Randall's Island Concession, including without limitation, the items described
on Exhibit C-1 and C-2 attached hereto and made a part hereof (the "Personal
Property");
2.2 the files, books, notices and other correspondence from
any governmental agencies, and other records used or held by Assignor or its
affiliates solely in connection with the ownership and/or operation of the
Concessions (collectively, the "Records");
2.3 any consents, authorizations, variances, waivers,
licenses, certificates, permits and approvals held by or granted to Assignor
solely in connection with the ownership of the Concessions (collectively, the
"Permits");
2.4 the contracts, leases and other agreements relating to
the operation of the Businesses described on Exhibit D-1 and D-2 attached
hereto and made a part hereof (the "Randall's Island Contracts" and
"Darlington Contracts" which shall collectively be referred to as the
"Contracts");
2.5 any manufacturers' and vendors' warranties and
guarantees held by Assignor which relate solely to the Concessions, except to
the extent the same relate solely to any Retained Assets or Retained
Liabilities (as hereinafter defined) (the "Claims"); and
2.6 any other properties and assets of every kind and
nature, real or personal, tangible or intangible, owned by Assignor relating
solely to the Concessions or the Businesses, except to the extent the same
relate solely to the Retained Assets or Retained Liabilities.
-2-
<PAGE>
3. Assets to be Retained by Assignor. Anything herein to the contrary
notwithstanding, Assignor shall not sell, and Assignees shall not acquire, the
following assets of Assignor (the "Retained Assets"):
3.1 any rights of Assignor with respect to insurance
policies owned by Assignor or for which Assignor is the named insured;
3.2 all cash, funds in bank accounts and cash equivalents
existing as of the date hereof; and
3.3 any patents, trademarks, trademark registrations,
copyrights, copyright registrations, trade names and all registrations thereof
and all applications for any of the foregoing, whether issued or pending, if
any, and all goodwill associated with any of the foregoing (the " Intangible
Assets").
4. Assumption of Certain Liabilities. Each of RIFGC and DFGC hereby
assume and agree to pay and discharge when due all liabilities and obligations
of Assignor under the Randall's Island License, the Darlington License and/or
the Concessions, or arising with respect to the Property, to the extent the
same arise from and after the date hereof (the "Assumed Liabilities").
Assignor shall retain, and Assignees 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 Concessions or
the Property, Assignor or any predecessor owner of the Concessions, the
Businesses other than the Assumed Liabilities (collectively, the "Retained
Liabilities").
5. Consideration.
5.1 In consideration for the assignment of the Licenses,
Assignees shall:
a. pay to Assignor on the Closing Date (as
hereinafter defined) the sum of $2,300,000.00, subject to adjustment as
hereinafter provided, payable in cash, by certified or bank check or by the
wire transfer of funds on the date hereof; and
b. assume the Assumed Liabilities.
6. Closing; Adjustments.
6.1 The closing of the transactions provided for in this
Agreement shall take place simultaneously with the execution and delivery of
this Agreement (the "Closing"). (The actual date of the Closing shall be
referred to herein as the "Closing Date").
6.2 The parties hereto agree that (i) all compensation
payable to the City and County under the Licenses and all other operating
expenses of Assignor relating to the Concessions (i.e., cost of goods sold,
advertising, collections, fees, hired services, insurance, miscellaneous
expenses, postage, repairs and maintenance, supplies, taxes, utilities, wages
and interest on indebtedness, but specifically not including professional fees
and expenses, travel and lodging or depreciation), and (ii) all income of
Assignor derived from Assignor's operations under the Licenses, including
accounts receivable, shall be apportioned between Assignor and Assignees
-3-
<PAGE>
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 Assignor 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 Assignees shall bear the
responsibility and benefit of (the "Adjustment"). The net Adjustment will be
paid by the party owing the same to the other in cash or by certified or
official bank check or wire transfer. The expenses and liabilities for which
Assignor shall be liable pursuant to this Section shall be included within the
meaning of the term "Retained Liabilities".
6.3 To the extent that any of the prorations made pursuant
to this Article are based upon estimates of payments to be made and/or
expenses to be incurred by Assignees subsequent to the Closing Date, or either
party discovers any errors in or omissions in respect of the Adjustment,
Assignor and Assignees agree to adjust such prorations promptly upon receipt
by Assignor or Assignees, as the case may be, of such payments or of bills or
other documentation setting forth the actual amount of such expenses.
6.4 Assignor and Assignees shall maintain and make available
to each other any books or records necessary for the adjustment of any item
pursuant to this Article. The provisions of this Article shall survive the
Closing.
7. Representations and Warranties of Assignor. Assignor hereby
represents and warrants to each Assignee as follows:
7.1 Organization; Power and Authority. Assignor is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California, and has all requisite power and authority to
carry on its business as it is now being conducted, to execute, deliver and
perform its obligations under this Agreement and to consummate the
transactions contemplated hereby.
7.2 Due Authorization and Execution; Effect of Agreement.
The execution, delivery and performance by Assignor of this Agreement and the
consummation by Assignor of the transactions contemplated hereby have been
duly authorized by all necessary corporate action required to be taken on the
part of the Assignor. This Agreement has been duly and validly executed and
delivered by Assignor and constitutes the valid and binding obligation of
Assignor, enforceable in accordance with its terms. The execution, delivery
and performance by Assignor of this Agreement and the consummation by Assignor
of the transactions contemplated hereby will not, with or without the giving
of notice or the lapse of time, or both, (a) violate any provision of any law,
rule or regulation to which Assignor is subject; (b) violate any order,
judgment or decree applicable to Assignor; or (c) conflict with or result in a
breach of or a default under any term or condition of Assignor's Certificate
of Incorporation or By-laws or any term or condition of any agreement or other
instrument to which Assignor is a party or by which it or its assets may be
bound, except in each case, for violations, conflicts, breaches or defaults
which in the aggregate would not materially hinder or impair the consummation
of the transactions contemplated hereby.
7.3 Consents. No consent, approval or authorization of,
exemption by, or filing with, any governmental or regulatory authority or any
third party is required in connection with the execution, delivery and
performance by Assignor of this Agreement, except for consents, approvals,
authorizations, exemptions and filings, if any, which have been obtained.
-4-
<PAGE>
7.4 Compliance with Applicable Laws. To Assignor's actual
knowledge, (i) Assignor is not engaging in any activity or omitting to take
any action as a result of which Assignor is in violation of any law, rule,
regulation, ordinance, statute, order, injunction or decree, or any other
requirement of any court or governmental or administrative body or agency,
applicable to the Concessions, and (ii) neither the execution and delivery by
Assignor of this Agreement or of any of the other agreements and instruments
to be executed and delivered by it pursuant hereto, nor the performance by
Assignor of its obligations hereunder or thereunder nor the consummation of
the transactions contemplated hereby or thereby will result in any such
violation. To Assignor's actual knowledge, Assignor is in compliance with all
material requirements imposed in writing by any insurance carrier of Assignor
to the extent such carrier is an insurer or indemnitor of the Concessions.
Assignor has not received any notice that the Concessions are in violation of
any law, municipal ordinance, orders or requirements issued by any building
department or other governmental agency or subdivision having jurisdiction.
7.5 Permits. All Permits required by any federal, state, or
local law, rule or regulation and necessary for the operation of the
Concessions and the Businesses as currently being conducted have been obtained
and are currently in effect. To Assignor's actual knowledge, no registrations,
filings, applications, notices, transfers, consents, approvals, orders,
qualifications, waivers or other actions of any kind are required by virtue of
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby (a) to avoid the loss of any Permit or the
violation of any law, regulation, order or other requirement of law, or (b) to
enable Assignee to continue the operation of the Concessions as presently
conducted after the Closing. To Assignor's actual knowledge, the current use
and occupation of any portion of the Concessions 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 Concessions.
7.6 The Licenses. Attached hereto as Exhibit A and B are
true and correct copies of the Licenses. Each of the Licenses is in full force
and effect, has not been modified or amended in any way except as stated above
and, to Assignor's actual knowledge, neither the City, in the case of the
Randall's Island License, nor the County, in the case of the Darlington
License, is in default, or sent any notice of default, in respect of either of
the Licenses. Assignor is not in default, and has not received any notice of
default, in respect of either of the Licenses. To Assignor's actual knowledge,
no event has occurred or circumstance exists which, with the giving of notice
or the passage of time, or both, would constitute a default under either of
the Licenses. Neither City, in the case of the Randall's Island License, nor
the County, in the case of the Darlington License, has notified Assignor that
the City or County has exercised any right or option, or stated its intent, to
terminate or cancel either of the Licenses. Assignor has not exercised any
right or option, or stated its interest, to terminate or cancel either of the
Licenses. Assignor has not assigned, transferred or conveyed either of the
Licenses or any interest therein, or granted any right or option with respect
thereto, to any party other than Assignee. The expiration date of the
Randall's Island License is March 1, 2007 and the expiration of the Darlington
License is March 1, 2011.
7.7 Personal Property. Exhibits C-1 and C-2 sets forth a
complete list of all Personal Property currently used by Assignor in the
operation of the Concessions.
-5-
<PAGE>
7.8 Title to the License and Property. The Concessions and
the Property are free and clear of any and all liens, charges, encumbrances,
mortgages, pledges, security interests, easements, agreements and other
interests and adverse claims (collectively, "Encumbrances"), other than the
matters set forth in Exhibit E attached hereto and made a part hereof (the
"Permitted Exceptions").
7.9 Contracts. Except for the Licenses and the Contracts (as
defined in Section 2.4 and listed on Exhibits D-1 and D-2), Assignor is not a
party to any leases, contracts, orders or agreements relating to the
Concessions, the Property or the Businesses (written or otherwise) that will
survive the Closing.
7.10 Condition of the Improvements. To Assignor's actual
knowledge, (i) there are no material structural or mechanical defects in the
Improvements, and (ii) there are no leaks in any roof on any Improvement.
7.11 As-is-Conveyance. Except as set forth in Section 7.8
above, the Personal Property shall be conveyed in its "AS IS AND WITH ALL
FAULTS CONDITION," without warranty, express or implied, of any kind
whatsoever (including, without limitation, without any warranty of
merchantibility).
7.12 Environmental Matters.
7.12.1 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. ' 9601(33); (ii) any "pollutant or contaminant" as
defined in 42 U.S.C. ' 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 any Environmental Law (as
hereinafter defined).
7.12.2 To the actual knowledge of Assignor, there
is no Hazardous Material at, under or on the Concessions in violation of any
Environmental Law and there is no ambient air, surface water, groundwater or
land contamination within, under, originating from or relating to the
Concessions in violation of any Environmental Law. Assignor has not, and has
not caused to be, manufactured, processed, distributed, used, treated, stored,
disposed of, transported or handled any Hazardous Material at, on or under the
Concessions in violation of any Environmental Law.
7.12.3 To the actual knowledge of Assignor,
Assignor has no obligation or liability imposed or based upon any provision
(i) under any foreign, federal, state or local law, rule, or regulation or
common law, or (ii) under any code, order, decree, judgment or injunction
applicable to Assignor or the Concessions or (iii) under any notice, or
request for information issued, promulgated, approved or entered under the
items listed in clause (ii) above, or (iv) under
-6-
<PAGE>
the common law, relating to public health or safety, worker health or safety,
or pollution of, damage to or protection of 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 Hazardous Material (hereinafter collectively referred to as
"Environmental Laws").
7.12.4 Assignor has not been subject to any civil,
criminal or administrative action, suit, claim, hearing, notice of violation,
investigation (to Assignor's actual knowledge), 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 Concessions.
.7.12.5 To the actual knowledge of Assignor, the
Concessions 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. ' 9601(9), or any comparable list maintained by
any foreign, state or local government authority.
7.12.6 To the actual knowledge of Assignor, there
are no underground storage tanks at the Concessions and Assignor further
warrants and represents that, to Assignor's actual knowledge, any prior use
and operation of underground storage tanks has been in compliance with all
Environmental Laws.
7.13 Tax Proceedings. There are no proceedings pending
regarding the reduction of real estate taxes or assessments in respect of the
Concessions.
7.14 Utilities. All water, storm and sanitary sewer, gas,
electricity, and telephone (i) adequately service the Concessions, and (ii)
enter the Concessions through lands as to which valid public or private
easements exist that will inure to the benefit of Assignees and the
Concessions. The cost of installation of such utilities has been fully paid.
7.15 Access. To Assignor's actual knowledge, there are no
(i) federal, state, county, municipal or other governmental plans to change
the highway or road system in the vicinity of the Concessions which could
materially restrict or change access from any such highway or road to the
Concessions, or (ii) pending or threatened condemnation or eminent domain
proceedings relating to or affecting the Concessions.
7.16 Insurance Requirements. To Assignor's actual knowledge,
all requirements or recommendations by any insurer or by any board of fire
underwriters or similar body in respect of the Concessions have been
satisfied.
7.17 Litigation. There is no action or proceeding (zoning or
otherwise) or governmental investigation pending, or, to Assignor's actual
knowledge, threatened against, or relating to, Assignor (insofar as it relates
to the Concessions or the Businesses), the Concessions, the Businesses or the
transactions contemplated by this Agreement, nor, to Assignor's actual
knowledge, is there any basis for any such action, proceeding or
investigation.
-7-
<PAGE>
7.18 Assessments. There are no special or other assessments
for public improvements or otherwise now affecting the Concessions nor does
Assignor know of (a) any pending or threatened special assessments affecting
the Concessions or (b) any contemplated improvements affecting the Concessions
that may result in special assessments affecting the Concessions.
7.19 Employee Agreements. There are no union or employment
contracts or agreements (written or oral) involving employees of Assignor or
its affiliates affecting the Concessions or the Business which will survive
the Closing. All employees of Assignor employed to work at either of the
Concessions will have been terminated as of the Closing Date.
7.20 Work at the Concessions. No services, material or work
have been supplied to either of the Concessions for which payment has not been
made in full.
7.21 Financial Condition. Assignor has delivered, or shall
deliver no later than 20 days after the date hereof, to Assignee true and
correct copies of: (i) audited financial statements consisting of balance
sheets and income statements of Assignor as of December 31, 1995 and December
31, 1996 for each of the Concessions; and (ii) monthly internal reports for
the months of January, February and the period from March 1, 1997 through the
date hereof. Such balance sheet presents fairly the financial condition,
assets and liabilities of Assignor with respect to the Concessions as of its
date; such statement of income presents fairly the results of operations of
Assignor for the period indicated. The financial statements referred to in
this Section are in accordance with the books and records of Assignor. Since
December 31, 1996: (a) there has at no time been a material adverse change in
the financial condition, results of operations, businesses, properties,
assets, liabilities or future prospects of Assignor, the Concessions, the
Property or Businesses; (b) the Business has been conducted in all respects
only in the ordinary course; and (c) Assignor has not suffered an
extraordinary loss (whether or not covered by insurance) or waived any right
of substantial value.
7.22 Full Disclosure. To the best knowledge of Assignor,
none of the information supplied by Assignor herein or in the exhibits hereto
contains any untrue statement of a material fact or omits to state a material
fact required to be stated herein or necessary in order to make the statements
herein, in light of the circumstances under which they are made, not
misleading.
As used in this Agreement, the term "Assignor's actual
knowledge" means the actual knowledge of Rich Hohman, who is the Regional
Operating Executive of Assignor for the Northeast United States, Joe Guerra,
the Executive Vice President of Assignor, Rod Halabov, the Manager of the
Randall's Island Concession, and Chris Arabio, the Manager of the Darlington
Concession.
8. Representations and Warranties of Assignee. Each of the
Assignees hereby represents and warrants to Assignor as follows:
8.1 Organization; Power and Authority. Each Assignee is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite power and authority to
carry on its business as it is now being conducted, to execute, deliver and
perform its obligations under this Agreement and to consummate the
transactions contemplated hereby.
-8-
<PAGE>
8.2 Due Authorization and Execution; Effect of Agreement.
The execution, delivery and performance by each Assignee of this Agreement and
the consummation by Assignee of the transactions contemplated hereby have been
duly authorized by all necessary corporate action required to be taken on the
part of each Assignee. This Agreement has been duly and validly executed and
delivered by each Assignee and constitutes the valid and binding obligation of
Assignee, enforceable in accordance with its terms. The execution, delivery
and performance by each Assignee of this Agreement and the consummation by
each Assignee of the transactions contemplated hereby will not, with or
without the giving of notice or the lapse of time, or both, (a) violate any
provision of any law, rule or regulation to which such Assignee is subject;
(b) violate any order, judgment or decree applicable to such Assignee; or (c)
conflict with or result in a breach of or a default under any term or
condition of such Assignee's Certificate of Incorporation or By-Laws or any
agreement or other instrument to which such Assignee is a party or by which it
or its assets may be bound, except in each case, for violations, conflicts,
breaches or defaults which in the aggregate would not materially hinder or
impair the consummation of the transactions contemplated hereby.
9. Survival. The representations and warranties of the parties made
in Articles 7 and 8 shall survive until the second anniversary of the Closing
Date except for Section 7.12 which shall survive until the expiration of the
statute of limitations applicable to claims that may be asserted against the
Assignees, the Concessions or the Businesses in respect of the matters covered
thereby.
10. Further Assurances. At any time and from time to time after the
date hereof, either party shall, at the request of the other party, execute
and deliver any further instruments or documents and take all such further
action as the requesting party may reasonably request in order to transfer
into the name of Assignees the Licenses and any and all Property contemplated
to be sold pursuant to this Agreement and to further consummate the
transactions contemplated by this Agreement. This Article shall survive the
Closing.
11. Brokers. Assignor and Assignees 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. Assignees and Assignor
hereby respectively agree to indemnify and hold harmless the other party from
and against all loss, liability, damage and expense (including, without
limitation, attorneys' fees) imposed upon or incurred by the other party by
reason of any claim for commissions or other compensation for bringing about
this transaction by any broker, finder or similar agent. The provisions of
this Article shall survive the Closing or any termination of this Agreement.
12. Costs and Fees.
12.1 Assignor shall pay (a) the costs and expenses incurred
in connection with the preparation of the audited financial statements
referred to in Section 7.21 hereof, and (b) transfer or conveyancing taxes, if
any.
12.2 Assignee shall pay for (a) the examination of title,
(b) the policy of title insurance for Assignee, (c) an ASTM Phase I
environmental survey of the Concessions, and (d)
-9-
<PAGE>
all other costs and expenses incurred by Assignee in conducting its due
diligence of the Concessions and Licenses.
12.3 Each party shall pay for its own legal costs and
expenses. Any other costs expressly provided for elsewhere in this Agreement
shall be divided and borne in accordance with the usual practices in the
jurisdiction where the Concessions are located.
12.4 The provisions of this Article shall survive the
Closing.
13. Indemnification.
13.1 Subject to the further provisions of this Article,
Assignor shall protect, defend, hold harmless and indemnify Assignee, its
officers, directors, shareholders, employees, agents and affiliates, and their
respective successors and assigns, from, against and in respect of any and all
losses, liabilities, deficiencies, penalties, fines, costs, damages and
expenses whatsoever (including without limitation, reasonable professional
fees and costs of investigation, litigation, settlement, and judgment and
interest) ("Losses") that may be suffered or incurred by any of them arising
from or by reason of (i) any Retained Liability or other liability or
obligation of Assignor which is not an Assumed Liability; and (ii) any and all
actions, suits, proceedings, claims, demands, assessments, judgments, costs
and expenses (including without limitation, interest, penalties, reasonable
legal fees and accounting fees) incident to the foregoing and the enforcement
of the provisions of this Section 13.1.
13.2 Subject to the further provisions of this Article,
Assignees shall protect, defend, hold harmless and indemnify Assignor, its
officers, directors, shareholders, employees, agents and affiliates and their
respective 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; and
(ii) any and all actions, suits, proceedings, claims, demands, assessments,
judgments, costs and expenses (including without limitation, interest,
penalties, reasonable legal fees and accounting fees) incident to the
foregoing and the enforcement of the provisions of this Section 13.2.
13.3 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 quasijudicial
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
thirty (30) 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,
-10-
<PAGE>
the Indemnified Party shall have the right to participate at its expense and
with counsel of its choice in such settlement, compromise or litigation. The
Indemnified Party shall not be required to refrain from paying any claim which
has matured by a court judgment or decree, unless an appeal is duly taken
therefrom and execution thereof has been stayed, nor shall the Indemnified
Party be required to refrain from paying any claim where the delay in paying
such claim would result in the foreclosure of a lien upon any of the property
or assets then held by the Indemnified Party. The failure to provide a timely
Notice of Claim as provided in this Section 13.3 shall not excuse the
Indemnifying Party from its or their continuing obligations hereunder;
however, the Indemnified Party's claim shall be reduced by any damages to the
Indemnifying Party resulting from the Indemnified Party's delay or failure to
provide a Notice of Claim as provided in this Section 13.3.
13.4 For purposes of this Article, any assertion of fact
and/or law by a third party that, if true, would constitute a breach of a
representation or warranty made by a party to this Agreement or make
operational an indemnification obligation hereunder, shall, on the date that
such assertion is made, immediately invoke the Indemnifying Party's obligation
to protect, defend, hold harmless and indemnify the Indemnified Party pursuant
to this Article.
.14. Bulk Sales. The parties agree to waive the requirements, if any,
of all applicable bulk sales laws. As an inducement to Assignee to enter into
such waiver, Assignor represents and warrants that (a) it will not be rendered
insolvent by the transactions contemplated by this Agreement, and (b) all
debts, obligations and liabilities relating to the Concessions and Businesses
that are not expressly assumed by Assignees under this Agreement will be
promptly paid and discharged by Assignor as and when they become due. Assignor
agrees to indemnify and hold Assignees harmless from, and reimburse Assignees
for, any loss, cost, expense, liability or damage which Assignees may suffer
or incur by virtue of the noncompliance by Assignor with any law pertaining to
fraudulent conveyance, bulk sales or any similar law which makes the sale or
transfer of any part of the Property or License ineffective as to creditors of
or claimants against Assignor.
15. Notices. All notices, demands, requests, consents or other
communications ("Notices") which either party may desire or be required to
give to the other hereunder shall be in writing and shall be delivered by
hand, overnight express carrier, or sent by registered or certified mail,
return receipt requested, postage prepaid, in either event, addressed to the
parties at their respective addresses first above set forth. A copy of any
Notice given by Assignor to either of the Assignees 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 either of the Assignees to
Assignor shall simultaneously be given in either manner provided above to the
General Counsel of Assignor. 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.
-11-
<PAGE>
16. Miscellaneous.
16.1 This Agreement shall bind and inure to the benefit
of the parties hereto and their respective successors and assigns.
16.2 This Agreement shall be governed by, interpreted
under and construed and enforced in accordance with, the laws of the State of
New York.
16.3 The captions or article headings in this Agreement
are for convenience only and do not constitute part of this Agreement.
16.4 This Agreement has been fully negotiated by the
parties and rules of construction construing ambiguities against the party
responsible for drafting agreements shall not apply.
16.5 It is agreed that, except where otherwise expressly
provided in particular Articles or Sections of this Agreement, none of the
provisions of this Agreement shall survive the Closing.
16.6 This Agreement (including the Exhibits annexed
hereto) contains the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior understandings, if any, with
respect thereto.
16.7 This Agreement may not be modified, changed,
supplemented or terminated, nor may any obligations hereunder be waived,
except by written instrument signed by the party to be charged or by its agent
duly authorized in writing or as otherwise expressly permitted herein.
16.8 No waiver of any breach of any agreement or
provision herein contained shall be deemed a waiver of any preceding or
succeeding breach thereof or of any other agreement or provision herein
contained. No extension of the time for performance of any obligations or acts
shall be deemed an extension of the time for performance of any other
obligations or acts.
16.9 This Agreement may be executed in one or more
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which taken together shall constitute but one and the
same original.
16.10 Either party may cause this Agreement to be recorded
in the appropriate public office.
16.11 In the event of any action for breach of, to enforce
the provisions of, or otherwise involving this Agreement, the court in
such action shall award a reasonable sum as attorneys' fees to the party who,
in light of the issues litigated and the court's decisions on those issues,
was more successful in the action The more successful party shall not
necessarily be the party who recovers a judgment in the action.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
AMERICAN GOLF CORPORATION
By:_____________________
Name:
Title:
RANDALL'S ISLAND FAMILY
GOLF CENTERS, INC.
By:_____________________
Name:
Title:
DARLINGTON FAMILY GOLF
CENTERS, INC.
By:_____________________
Name:
Title:
-13-
<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
EXHIBIT A RANDALL'S ISLAND LICENSE
EXHIBIT B DARLINGTON LICENSE
EXHIBIT C-1 RANDALL'S ISLAND PERSONAL PROPERTY
EXHIBIT C-2 DARLINGTON PERSONAL PROPERTY
EXHIBIT D-1 RANDALL'S ISLAND CONTRACTS
EXHIBIT D-2 DARLINGTON CONTRACTS
EXHIBIT E PERMITTED EXCEPTIONS
<PAGE>
GUARANTY
WHEREAS, American Golf Corporation, a California corporation
("Assignor"), and Randall's Island Family Golf Centers, Inc., a Delaware
corporation, and Darlington Family Golf Centers, Inc., a Delaware corporation
(together, "Assignee"), are about to execute (i) the Assignment and Assumption
of Concession Licenses dated March 21, 1997 ("Assignment"); and (ii) the Bill
of Sale dated March 21, 1997 (together, "Transaction Documents");
WHEREAS, each Assignee is a wholly-owned subsidiary of Family Golf
Centers, Inc., a Delaware corporation ("Guarantor"); and
WHEREAS, Assignor would not execute the Transaction Documents if
Guarantor did not execute and deliver to Assignor this Guaranty.
NOW THEREFORE, for and in consideration of the execution of the
Transaction Documents by Assignor and as a material inducement to Assignor to
execute the Transaction Documents, Guarantor hereby unconditionally and
irrevocably guarantees the full, faithful and prompt performance by Assignee
of each and every one of the terms and provisions of Section 13 of the
Assignment applicable to Assignee, which section is captioned
"Indemnification."
It is specially agreed and understood that (i) the terms of the
Transaction Documents may be modified or changed by written agreement between
Assignor and Assignee, and (ii) the Transaction Documents may be assigned by
Assignor or any assignee of Assignor without consent or notice to Guarantor,
and that this Guaranty shall thereupon and thereafter guarantee the
performance of said Transaction Documents as so modified, changed or assigned.
This Guaranty shall not be released, modified or affected by any
failure or delay by Assignor to enforce any of its rights or remedies under
any of the Transaction Documents, whether pursuant to the terms thereof or at
law or in equity.
No notice of default need be given to Guarantor, it being
specifically agreed and understood that this Guaranty is a continuing
guarantee under which Assignor may proceed forthwith and immediately against
Assignee or against Guarantor for the enforcement of any rights which Assignor
may have as against Assignee pursuant to the terms of Section 13 of the
Assignment. Without limiting the generality of the foregoing, Assignor shall
have the right to proceed against Guarantor hereunder without first proceeding
against Assignee and without previous notice to or demand upon either Assignee
or Guarantor.
<PAGE>
Guarantor hereby waives (a) notice of acceptance of this Guaranty,
(b) demand of payment, presentation or protest, (c) all right to assert or
plead any statute of limitations as to or relating to this Guaranty or the
Transaction Documents, (d) any right to require Assignor to proceed against
Assignee or any other person or entity liable to Assignor, (e) any right to
require Assignor to proceed under any other remedy Assignor may have before
proceeding against Guarantor, (g) any right of subrogation.
Guarantor hereby subordinates all existing or future indebtedness of
Assignee to Guarantor to the obligations owed to Assignor under the
Transaction Documents and this Guaranty.
The term "Assignor" as used herein refers to and means American Golf
Corporation, a California corporation, and also any assignees of Assignor, and
also any successor to the interest of Assignor.
The term "Assignee" as used herein refers to and means Randall's
Island Family Golf Centers, Inc., a Delaware corporation, and Darlington
Family Golf Centers, Inc., a Delaware corporation, and also any successor to
the interests of either or both such entities.
In the event Assignor brings any action against Guarantor to enforce
the obligations of Guarantor hereunder, the unsuccessful party in such action
shall pay to the prevailing party all reasonable attorneys' fees and costs
incurred by the prevailing party.
Notwithstanding any provision of this Guaranty to the contrary, this
Guaranty shall be of no further force or effect from and after the date, if
any, that Assignor is formally released pursuant to a release agreement
acceptable to Assignor in Assignor's reasonable discretion from all past,
present and future obligations and liabilities under the Randall's Island
License (as defined in the Assignment) and the Darlington License (as defined
in the Assignment).
"GUARANTOR"
Family Golf Centers, Inc.
a Delaware corporation
Executed at Melville, New York By: _____________________
on March 21, 1997 Its: _______________
Address: 225 Broadhollow Road
Melville, NY 11747
By: _____________________
Its: _______________
<PAGE>
ASSET
PURCHASE AGREEMENT
by and between
CAROLINA CAPITAL VENTURES, LTD.
Seller,
and
RALEIGH FAMILY GOLF CENTERS, INC.,
Purchaser
PREMISES:
9820 Capital Boulevard
Wake Forest, North Carolina
- 1 -
<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
EXHIBIT A LEGAL DESCRIPTION
EXHIBIT B PERSONAL PROPERTY
EXHIBIT C CONTRACTS
EXHIBIT D LEASE
EXHIBIT E ESCROW AGREEMENT
EXHIBIT F PERMITTED EXCEPTIONS
- 2 -
<PAGE>
ASSET
PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, made as of the __th day of March, 1997
(this "Agreement"), by and between CAROLINA CAPITAL VENTURES, LTD., a North
Carolina corporation having an address 9820 Capital Boulevard, Wake Forest,
North Carolina 27587 ("Seller"), and RALEIGH FAMILY GOLF CENTERS, INC., a
Delaware corporation having an address at 225 Broadhollow Road, Suite 106E,
Melville, New York 11747 ("Purchaser").
W I T N E S S E T H :
WHEREAS, Seller is the owner of certain real property located 9820
Capital Boulevard, Wake Forest, North Carolina 27587 and more particularly
described on Exhibit A attached hereto and made a part hereof, which is
subject to that certain Option Agreement by and between the Seller and Charles
B. Shearon, dated March 12, 1997 (the "Land") and the buildings and
improvements located on the Land (the "Improvements" and, together with the
Land, the "Premises");
WHEREAS, Seller operates a driving range and related facilities
at the Premises under the name "The Capital Sports Golf Center" (the
"Business"); and
WHEREAS, Seller wants to lease the Premises, and sell certain
assets, to the Purchaser, and Purchaser want to lease the Premises, and
purchase certain assets, from the Seller, on the terms, and subject to the
conditions, set forth herein.
NOW, THEREFORE, in consideration of the respective premises,
mutual covenants and agreements of the parties hereto, and other good and
valuable consideration, the receipt and
-3-
<PAGE>
sufficiency of which are hereby acknowledged, the parties hereto agree to the
foregoing and as follows:
1. Agreement to Sell and Purchase Certain Assets.
1.1 Property to be Purchased by Purchaser. Seller agrees to
sell and convey to Purchaser, and Purchaser agrees to purchase and acquire
from Seller, upon the terms and conditions hereinafter set forth, all of
Seller's right, title and interest in and to the following property
(collectively, the "Property"):
1.1.1 all furnishings, fixtures, machinery,
equipment, vehicles and personalty attached or appurtenant to or used in
connection with the Premises that are owned by Seller, and all inventories,
supplies, sales, marketing and instructional materials of every kind and
description relating to the Business, wherever located, including without
limitation, the items described on Exhibit B attached hereto and made a part
hereof and which are being transferred "as is" with no representations or
warranties as to condition (the "Personal Property");
1.1.2 the files, books, notices and other
correspondence from any governmental agencies, and other records used or
employed by Seller or its affiliates in connection with the ownership and/or
operation of the Premises and the Business (collectively, the "Records");
1.1.3 any consents, authorizations, variances,
waivers, licenses, certificates, permits and approvals held by or granted to
Seller in connection with the ownership of the Premises or operation of the
Business (collectively, the "Permits");
1.1.4 the contracts, leases and other agreements
of or relating to the Business described on Exhibit C attached hereto and made
a part hereof, except to
-4-
<PAGE>
the extent the same relate solely to any Retained Assets or Retained
Liabilities (as hereinafter defined) (the "Contracts");
1.1.5 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);
1.1.6 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
1.1.7 any other properties and assets of every
kind and nature, real or personal, tangible or intangible, relating in any way
whatsoever to the Premises or the 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;
1.2.3 all cash, funds in bank accounts and cash
equivalents existing as of the Closing Date hereof; and
1.2.4 any patents, trademarks, trademark
registrations, copyrights, copyright registrations, trade names and all
registrations thereof and all applications for
-5-
<PAGE>
any of the foregoing, whether issued or pending, if any, and all goodwill
associated with any of the foregoing (the "Intangible Assets").
1.3 Assumption of Certain Liabilities. Purchaser shall
assume and agree to pay and discharge when due: (i) all liabilities and
obligations of Seller under the Contracts to the extent the same arise from
and after the Closing Date and (ii) up to $500 of outstanding commitments to
customers with respect to pre-paid range ball cards and gift certificates (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, the Premises,
Seller or the Business or any predecessor owner of the Property, the Premises
or the Business other than the Assumed Liabilities (collectively, the
"Retained Liabilities"). All outstanding commitments to customers with respect
to pre-paid range ball cards and gift certificates which have not been assumed
by Purchaser, shall be honored by Purchaser and Seller shall reimburse
Purchaser all such amounts within five days after request therefore by
Purchaser.
2. Lease Of Premises. Concurrently with the execution of this
Agreement, Seller shall lease the Premises to Purchaser in accordance with,
and subject to the terms and conditions of, the Lease, attached as Exhibit D
hereto.
3. Consideration. In consideration for the Property and the
leasehold interest in the Premises, Purchaser shall pay to Seller at Closing
$1,100,000.00 (the "Purchaser Price"), payable in cash, certified or bank
check or wire transfer of funds, $100,000.00 of which shall be placed in
escrow to be held and distributed in accordance with the Escrow Agreement,
attached hereto as Exhibit E (the "Escrow Agreement").
-6-
<PAGE>
4. Title; Permitted Exceptions. Seller will convey the Property to
Purchaser, free and clear of any and all liens, charges, encumbrances,
pledges, security interests, agreements and other interests and adverse claims
(collectively, "Encumbrances"), other than the matters set forth in Exhibit F
attached hereto and made a part hereof (the "Permitted Exceptions").
5. Apportionments.
5.1 The parties hereto agree that (i) all operating expenses
of Seller relating to the Premises (i.e., real estate taxes, utilities,
advertising, collections, fees, hired services, insurance, miscellaneous
expenses, postage, repairs and maintenance, supplies, taxes and wages, but
specifically not including interest on indebtedness, professional fees and
expenses, travel, lodging, or depreciation), and (ii) all income of Seller,
shall be apportioned between Seller and Purchaser as of the Closing Date based
on the portion of each such expense or revenue attributable to the period
falling 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 on or 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".
5.2 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 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.
-7-
<PAGE>
5.3 Seller and Purchaser shall maintain and make available
to each other any books or records necessary for the adjustment of any item
pursuant to this Article. The provisions of this Article shall survive the
closing of the transactions described herein (the "Closing").
6. The Closing.
6.1 The Closing of the transaction provided for in this
Agreement shall take place simultaneously with the execution and delivery of
this Agreement (the actual date of the Closing being referred to herein as the
"Closing Date").
6.2 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:
6.2.1 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;
6.2.2 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;
6.2.3 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;
-8-
<PAGE>
6.2.4 the Escrow Agreement, duly
executed and acknowledged by Seller;
6.2.5 the Lease, duly executed and
acknowledged by Seller;
6.2.6 a Certificate or Certificates
of Occupancy for all Improvements;
6.2.7 original counterparts of each
of the Contracts;
6.2.8 any transfer tax or other
return required by any applicable governmental authority in connection with
the sale of the Property, duly executed and acknowledged by Seller;
6.2.9 keys to all locks relating to
the Property, appropriately labeled;
6.2.10 all other instruments and
documents to be executed, acknowledged where appropriate and/or delivered by
Seller to Purchaser pursuant to any of the other provisions of this Agreement;
and
6.2.11 such other documents as may
be reasonably required by Purchaser's counsel in connection with this
transaction.
6.3 At the Closing, Purchaser shall deliver or cause to be
delivered to Seller the following:
6.3.1 the cash consideration
referred to in Section 2 hereof;
-9-
<PAGE>
6.3.2 the Assignment and Assumption
Agreement, duly executed and acknowledged by Purchaser;
6.3.3 the Settlement Statement, duly
executed and acknowledged by Purchaser;
6.3.4 the Escrow Agreement, duly
executed and acknowledged by Purchaser;
6.3.5 the Lease, duly executed and
acknowledged by Purchaser;
6.3.6 all other instruments and
documents to be executed, acknowledged where appropriate and/or delivered by
Purchaser to Seller; and
6.3.7 such other documents as may be
reasonably required by Seller's counsel in connection with this transaction.
7. Representations and Warranties.
7.1 Seller represents and warrants to Purchaser as
follows:
-10-
<PAGE>
7.1.1 Organization; Power and Authority. Seller is a
corporation duly formed, validly existing and in good standing under the laws
of the State of North Carolina, and has all requisite power and authority to
carry on its business as it is now being conducted, to execute, deliver and
perform its obligations under this Agreement and to consummate the
transactions contemplated hereby.
7.1.2 Due Authorization and Execution; Effect of
Agreement. The execution, delivery and performance by Seller of this Agreement
and the consummation by Seller of the transactions contemplated hereby have
been duly authorized by all necessary corporate action required to be taken on
the part of Seller. This Agreement has been duly and validly executed and
delivered by Seller and constitutes the valid and binding obligation of
Seller, enforceable in accordance with its terms, except to the extent that
such 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.
7.1.3 Consents. No consent, approval or authorization of,
exemption by, or filing with, any governmental or regulatory authority or any
third party is required in connection with the execution, delivery and
performance by Seller of this Agreement, except for consents, approvals,
authorizations, exemptions and filings, if any, which have been obtained.
7.1.4 Compliance with Applicable Laws. Seller is not
engaging in any activity or omitting to take any action as a result of which
Seller is in violation of any material law, rule, regulation, ordinance,
statute, order, injunction or decree, or any other requirement of any court or
governmental or administrative body or agency, applicable to the Property or
the Business, and neither the execution and delivery by Seller of this
Agreement or of
-11-
<PAGE>
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.
7.1.5 Permits. All Permits required by any federal,
state, or local law, rule or regulation and necessary for the operation of the
Property and the Business as currently being conducted have been obtained and
are currently in effect. No registrations, filings, applications, notices,
transfers, consents, approvals, orders, qualifications, waivers or other
actions of any kind are required by virtue of the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby (a)
to avoid the loss of any Permit or the violation of any law, regulation, order
or other requirement of law, or (b) to enable Purchaser to continue the
operation of the Property as presently conducted after the Closing. The
current use and occupation of any portion of the Property does not violate any
of, and, where applicable, is in material compliance with, the Permits, any
applicable deed restrictions or other covenants, restrictions or agreements
including without limitation, any of the Permitted Exceptions, site plan
approvals, zoning or subdivision regulations or urban redevelopment plans
applicable to the Premises.
7.1.6 Title to Assets. Seller has good and marketable
title to the Property free and clear of all Encumbrances other than the
Permitted Exceptions.
-12-
<PAGE>
7.1.7 Contracts. Except as set forth on Exhibit C, Seller
is not a party to any leases, contracts, orders or agreements relating to the
Property or the Business (written or otherwise) (collectively, "Contracts").
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
default, or has sent or received notice of default, in any respect of any such
Contract.
7.1.8 INTENTIONALLY OMITTED.
7.1.9 INTENTIONALLY OMITTED.
7.1.10 Environmental Matters.
7.1.10.1 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. ' 9601(33); (ii) any "pollutant or
contaminant" as defined in 42 U.S.C. ' 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,
-13-
<PAGE>
defined or regulated as such in (or for purposes of any Environmental Law (as
hereinafter defined) and any other toxic, reactive or flammable chemicals.
7.1.10.2 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.
7.1.10.3 To the best of Seller's
knowledge, Seller has no obligation or liability imposed or based upon any
provision under any foreign, federal, state or local law, rule, or regulation
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").
-14-
<PAGE>
7.1.10.4 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.
7.1.10.5 To the best of Seller's
knowledge, the Premises are not (a) listed or proposed for listing on the
National Priority List or (b) listed on the Comprehensive Environmental
Response, Compensation, Liability Information System List ("CERCLIS")
promulgated pursuant to CERCLA, 42 U.S.C. ' 9601(9), or any comparable list
maintained by any foreign, state or local government authority.
7.1.10.6 To the best of Seller's
knowledge, there are no underground storage tanks at the Premises other than
as disclosed on the Phase I environmental report commissioned by the Purchaser
in connection with this transaction and Seller further warrants and represents
that any prior use and operation of underground storage tanks by Seller has
been in compliance with all Environmental Laws.
7.1.11 Tax Proceedings. There are no proceedings pending
regarding the reduction of real estate taxes or assessments in respect of the
Premises.
7.1.12 Utilities. All water, storm and sanitary sewer,
gas, electricity, telephone and other utilities adequately service the
Premises, enter the Premises through lands as to which valid public or private
easements exist that will inure to the benefit of Purchaser and the Premises
are furnished utilities by facilities of public utilities and the cost of
installation of such utilities has been fully paid.
-15-
<PAGE>
7.1.13 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. All roads bounding the
Premises are public roads and the Lease is the only instrument necessary to
convey to Purchaser full access to and the right to use such roads freely, as
well as to convey all rights appurtenant to the Premises in such roads.
7.1.14 Insurance Requirements. All requirements or
recommendations by any insurer or by any board of fire underwriters or similar
body in respect of the Property have been satisfied.
7.1.15 Litigation. There is no action or proceeding
(zoning or otherwise) or governmental investigation pending, or, to the best
of Seller's knowledge, threatened against, or relating to, Seller (insofar as
it relates to the Premises or the Business), the Premises, the Business or the
transactions contemplated by this Agreement, nor is there any basis for any
such action, proceeding or investigation.
7.1.16 Assessments. There are no special or other
assessments for public improvements or otherwise now affecting the Premises
nor does Seller know of (a) any pending or threatened special assessments
affecting the Premises or (b) any contemplated improvements affecting the
Premises that may result in special assessments affecting the Premises.
7.1.17 Employee Agreements. There are no union or
employment contracts or agreements (written or oral) involving employees of
Seller or its affiliates
-16-
<PAGE>
affecting the Property or the Business which will survive the Closing. All
employees of Seller will have been terminated as of the date hereof.
7.1.18 Work at the Premises. No services, material or
work have been supplied to the Premises for which payment has not been made in
full.
7.1.19 Financial Condition. Seller has delivered to
Purchaser, true and correct copies of audited financial statements consisting
of balance sheets and income statements of Seller as of December 31, 1996.
Seller has delivered true and correct copies of monthly internal reports for
the months of January and February, 1997. Each such balance sheet presents
fairly the financial condition, assets and liabilities of Seller as of its
date; each such statement of income presents fairly the results of operations
of Seller for the period indicated. The financial statements referred to in
this Section are in accordance with the books and records of Seller. Since
December 31, 1996: (a) there has at no time been a material adverse change in
the financial condition, results of operations, businesses, properties,
assets, liabilities or future prospects of Seller, the Property, the Premises
or Business; (b) the Business has been conducted in all respects only in the
ordinary course; and (c) Seller has not suffered an extraordinary loss
(whether or not covered by insurance) or waived any right of substantial
value.
7.1.20 Full Disclosure. None of the information supplied
by Seller herein or in the exhibits hereto contains any untrue statement of a
material fact or omits to state a material fact required to be stated herein
or necessary in order to make the statements herein, in light of the
circumstances under which they are made, not misleading.
7.2 Representations and Warranties of Purchaser.
Purchaser hereby represents and warrants to Seller as follows:
-17-
<PAGE>
7.2.1 Organization; Power and Authority. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite power and authority to
carry on its business as it is now being conducted, to execute, deliver and
perform its obligations under this Agreement and to consummate the
transactions contemplated hereby.
7.2.2 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.
7.3 Survival. The representations and warranties of the
parties made in this Article 7 shall survive the Closing.
-18-
<PAGE>
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.
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 other than Mr. David
Peebles and Blue Sky Commercial (the "Brokers"). Seller agrees to pay the
Brokers any and all fees and commissions due to the Brokers in connection with
this transaction. Purchaser and Seller hereby respectively agree to indemnify
and hold harmless the other party from and against all loss, liability, damage
and expense (including, without limitation, attorneys' fees) imposed upon or
incurred by the other party by reason of any claim for commissions or other
compensation for bringing about this transaction by any broker, finder or
similar agent or party (other than the Brokers) who claims to have dealt with
the indemnifying party in connection with this transaction. The provisions of
this Article shall survive the Closing or any termination of this Agreement.
10. Costs and Fees. Documentary stamps or conveyancing taxes, if
any, shall be payable by Seller, and in no event be payable by Purchaser.
Purchaser shall pay the expenses incurred in connection with (a) the
examination of title, and (b) a survey of the Property. Any other similar
costs not expressly provided for elsewhere in this Agreement shall be divided
and borne in
-19-
<PAGE>
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 reference to knowledge and
materiality contained in Section 7 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, affiliates, employees and agents, and its
successors and assigns from, against and in respect of any and all Losses that
may be suffered or incurred by any of them arising from or by reason of (i)
any of the Assumed Liabilities on and after the date hereof, (ii) the breach
of any representation, warranty,
-20-
<PAGE>
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
Section 7 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 11.2.
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
thirty (30) 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,
-21-
<PAGE>
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 The obligations of Seller under Section 11.1 shall
be satisfied first from the Escrow Account and, if the Escrow Account is
inadequate to provide indemnification to Purchaser, then from Seller directly.
12. Bulk Sales. The parties agree to waive the requirements, if any,
of all applicable bulk sales laws. As an inducement to Purchaser to enter into
such waiver, Seller represents and warrants that (a) it will not be rendered
insolvent by the transactions contemplated by this Agreement, (b) all debts,
obligations and liabilities relating to the Property and Business that are not
-22-
<PAGE>
expressly assumed by Purchaser under this Agreement will be promptly paid and
discharged by Seller as and when they become due, and (c) the sale of the
Property pursuant to this Agreement does not constitute a "bulk sale" within
the meaning of applicable law. Seller agrees to indemnify and hold Purchaser
harmless from, and reimburse Purchaser for, any loss, cost, expense, liability
or damage which Purchaser may suffer or incur by virtue of the noncompliance
by Seller or Purchaser with any law pertaining to fraudulent conveyance, bulk
sales or any similar law which might make the sale or transfer of any part of
the Property or Business ineffective as to creditors of or claimants against
Seller.
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 Family Golf Centers, Inc., 225 Broadhollow Road,
Melville, New York, New York 11747, Attention: Pamela Charles, Esq., General
Counsel. A copy of any Notice given by Purchaser to Seller shall be sent to it
at 8925 Lindenshire Road, Raleigh, North Carolina 27615, and simultaneously be
given in either manner provided above to Cranfill, Sumner & Hartzog, L.L.P.,
Hillsborough Place, Suite 300, 225 Hillsborough Street, Raleigh, North
Carolina 27611-7808, Attention: Richard T. Boyette, 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
-23-
<PAGE>
Notices by giving Notice to the other party in either manner aforesaid. Any
Notice required or permitted to be given by either party may be given by that
party's attorney.
14. Miscellaneous.
14.1 This Agreement shall bind and inure to the benefit of
the parties hereto and their respective successors and assigns. Each of the
individuals comprising Seller shall be jointly and severally liable for each
and every covenant, agreement, obligation, representation and warranty of
Seller hereunder.
14.2 The parties agree to submit any unresolved disputes
under this Agreement to non-binding mediation to be conducted in accordance
with the rules governing mediated settlement conferences in Superior Court as
promulgated, from time-to-time, by the North Carolina Supreme Court. Such
mediation shall take place in Raleigh, North Carolina.
14.3 This Agreement shall be governed by, interpreted under
and construed and enforced in accordance with, the laws of the State of North
Carolina.
14.4 The captions or article headings in this Agreement are
for convenience only and do not constitute part of this Agreement.
14.5 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.
-24-
<PAGE>
14.6 It is agreed that, except where otherwise expressly
provided in particular Articles or Sections of this Agreement, none of the
provisions of this Agreement shall survive the Closing.
14.7 This Agreement (including the Exhibits annexed hereto)
contains the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior understandings, if any, with respect
thereto.
14.8 This Agreement may not be modified, changed,
supplemented or terminated, nor may any obligations hereunder be waived,
except by written instrument signed by the party to be charged or by its agent
duly authorized in writing or as otherwise expressly permitted herein.
14.9 No waiver of any breach of any agreement or provision
herein contained shall be deemed a waiver of any preceding or succeeding
breach thereof or of any other agreement or provision herein contained. No
extension of the time for performance of any obligations or acts shall be
deemed an extension of the time for performance of any other obligations or
acts.
14.10 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.
-25-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
CAROLINA CAPITAL VENTURES, LTD.
By:______________________
Name:
Title:
RALEIGH FAMILY GOLF CENTERS, INC.
By: _____________________
Name:
Title:
-26-
<PAGE>
EXHIBIT F
PERMITTED EXCEPTIONS
1. Taxes for 1997, not yet due and payable.
2. Deed of Trust from Carolina Capital Ventures, Ltd., to Clifford E.
Gingery, Trustee, for the benefit of United Carolina Bank, recorded in
Book 4697, Page 725, Wake County Registry.
3. Rights of tenants in possession under unrecorded lease of less than one
(1) year's duration.
4. Joint Access Easement with Provision for Maintenance by and between
Carolina Capital Ventures, Ltd., and Janko Import Cars, Inc., recorded in
Book 5062, Page 747, Wake County Registry.
5. Right of Way to Carolina Power & Light Company, recorded in Book 4743,
Page 189, Wake County Registry.
6. UCC-1 Financing Statement bearing File Number 90-15732, evidencing
Carolina Capital Ventures, Ltd., as Debtor, and United Carolina Bank, as
Secured Party, and continued by UCC-3 Financing Statement bearing File
Number 95-09405, both filed in the Wake County Registry.
7. UCC-1 Financing Statement bearing File Number 675085, evidencing Carolina
Capital Ventures, Ltd., as Debtor, and United Carolina Bank, as Secured
Party, and continued by UCC-3 Financing Statement bearing File Number
1192146, both filed in the North Carolina Secretary of State.
8. Option Agreement by and between Carolina Capital Ventures, Ltd. And
Charles B. Shearon, dated March 12, 1997.
* Items 2, 6 and 7 shall be removed as soon as practicable after Closing.
-32-
<PAGE>
GROUND LEASE AGREEMENT
BY AND BETWEEN
CAROLINA CAPITAL VENTURES, LTD.,
AS LANDLORD
AND
RALEIGH FAMILY GOLF CENTERS, INC.,
AS TENANT
----------------------------------
MARCH _____, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I................................................................1
Section 1.01. Leased Premises...............................1
Section 1.02. Initial Term..................................1
Section 1.03. Use...........................................1
Section 1.04. Renewal Term..................................1
ARTICLE II...............................................................2
Section 2.01. ..............................................2
Base Rent.......................................................2
Section 2.02. Payment of Rent...............................3
Section 2.03 Base Rent During the Option Period............3
ARTICLE III..............................................................4
Section 3.01. Impositions...................................4
Section 3.02. Payment of Impositions........................5
Section 3.03. Payment to be Made Direct.....................5
Section 3.04. Payment of Bills..............................5
ARTICLE IV...............................................................6
Section 4.01. Casualty Insurance............................6
Section 4.02. Liability Insurance...........................6
Section 4.03. Evidence of Insurance.........................6
Section 4.04. Right of Landlord to Obtain Insurance.........6
Section 4.05. Indemnification...............................6
ARTICLE V................................................................7
Section 5.01. Damage to Improvements........................7
ARTICLE VI...............................................................7
Section 6.01. Alterations...................................7
Section 6.02. Right to Demolish.............................7
Section 6.03. Rights to Continue............................7
Section 6.04. Liens; End of Term............................7
ARTICLE VII..............................................................8
Section 7.01. Sublease and Assignment.......................8
Section 7.02. Liens.........................................8
Section 7.03. Estoppel Certificates.........................8
-i-
<PAGE>
ARTICLE VIII.............................................................9
Section 8.01. Right of Refusal..............................9
ARTICLE IX...............................................................9
Section 9.01. General Defaults by Tenant....................9
Section 9.02. Specific Defaults by Tenant..................11
ARTICLE X...............................................................12
Section 10.01. Notice Parties...............................12
Section 10.02. Right of Certain Notice Parties to
Obtain New Lease..........................12
ARTICLE XI..............................................................13
Section 11.01. Condemnation.................................13
ARTICLE XII.............................................................13
Section 12.01. Peaceful Enjoyment...........................13
Section 12.02. Title to Leased Premises.....................13
ARTICLE XIII............................................................14
Section 13.01. Landlord's Mortgagee.........................14
ARTICLE XIV.............................................................14
Section 14.01. Surrender....................................14
ARTICLE XV..............................................................15
Section 15.01. Notices......................................15
ARTICLE XVI.............................................................15
Section 16.01. Entire Agreement.............................15
ARTICLE XVII............................................................16
Section 17.01. Landlord Default.............................16
ARTICLE XVIII...........................................................16
Section 18.01. Actions Requiring Consent of
Tenant's Mortgagee........................16
ARTICLE XIX.............................................................16
Section 19.01. Governing Law................................16
ARTICLE XX..............................................................16
Section 20.01. Compliance with Laws.........................16
Section 20.02. Hazardous Materials..........................17
-ii-
<PAGE>
ARTICLE XXI.............................................................17
Section 21.01. Attorney's Fees..............................17
ARTICLE XXII............................................................17
Section 22.01. Recording of Lease...........................17
ARTICLE XXIII...........................................................18
Section 23.01. Brokers......................................18
ARTICLE XXIV............................................................18
Section 24.01. Mediation....................................18
ARTICLE XXV.............................................................18
Section 25.01. Guaranty.....................................18
Attachments:
EXHIBIT A: Leased Premises
EXHIBIT B: Permitted Title Exceptions
EXHIBIT C: Guaranty Agreement
-iii-
<PAGE>
GROUND LEASE AGREEMENT
THIS GROUND LEASE AGREEMENT (this "Lease") is made and
entered into as of the ____ day of March, 1997 (the "Effective Date"), by and
between CAROLINA CAPITAL VENTURES, LTD., a North Carolina corporation
(hereinafter called "Landlord"), and RALEIGH FAMILY GOLF CENTERS, INC., a
Delaware corporation (hereinafter called "Tenant"), as follows:
ARTICLE I
SECTION 1.01. LEASED PREMISES. Subject to the terms,
provisions and conditions hereinafter set forth, and in consideration of the
covenants of payment and performance stipulated herein, Landlord has leased,
demised and let and by these presents does hereby lease, demise and let unto
Tenant, for the uses described in Section 1.04, all those certain premises
situated on Capital Boulevard in Wake County, North Carolina, more
particularly described on Exhibit A attached hereto and for all purposes made
a part hereof (the "Leased Premises").
TO HAVE AND TO HOLD the Leased Premises, together with any
rights, easements, privileges, both subterranean and vertical, and the
appurtenances and improvements thereunto attaching or in anywise belonging,
unto Tenant, and the successors in interest and permitted assigns of Tenant,
for and during the term hereinafter set forth.
SECTION 1.02. INITIAL TERM. Unless sooner terminated under
provisions hereof, the initial term of this Lease (the "Initial Term") shall
be and continue in full force and effect commencing on the Effective Date and
continuing thereafter for, during and until 11:59 p.m. on the date that is
twenty-five (25) years after the Effective Date. The term of this Lease may be
renewed as set forth in Section 1.04.
SECTION 1.03. USE. Tenant may use the Leased Premises for
any lawful purpose.
SECTION 1.04. RENEWAL TERM. So long as Tenant is not in
default under the terms of this Lease, Tenant shall have the option to renew
this Lease for one (1) period of five (5) years (the "Option Period") to
commence at the expiration of the Initial Term. Tenant shall be deemed to have
exercised its option to renew for the Option Period automatically, without act
or notification being required on the part of Tenant, unless Tenant delivers
written notice that it will not exercise such option to Landlord at least one
hundred eighty (180) days prior to the expiration of the Initial Term. Subject
to Section 2.03, the renewal of this Lease shall be upon the same terms and
conditions as described in this Lease.
-1-
<PAGE>
ARTICLE II
SECTION 2.01. BASE RENT. As consideration for the use and
occupancy of, and as rental for, the Leased Premises, Tenant promises and
agrees to pay Landlord, while this Lease remains in force and effect during
the Initial Term hereof and any extension thereto (collectively, the "Term"),
and in the manner hereinafter provided, and subject to the terms, provisions,
and conditions hereinafter set forth, annual lease rentals (the "Base Rent")
in the sums specified below, which sums shall be paid in equal monthly
installments, in advance, on the first day of each calendar month during the
Term; provided, however, that if the Effective Date is other than the first
day of a calendar month or if this Lease expires or terminates on other than
the last day of a calendar month, then the installments of Base Rent for such
month or months shall be prorated and the installment or installments so
prorated shall be paid in advance. Said installments for such prorated month
or months shall be calculated by multiplying the equal monthly installment by
a fraction, the numerator of which shall be the number of days of the term
occurring during said commencement or expiration month, as the case may be,
and the denominator of which shall be the number of days in said month. "Lease
Year" means a period of one (1) year, with the first (1st) Lease Year
commencing on the Effective Date and expiring on the day immediately preceding
the first (1st) anniversary of the Effective Date and with each subsequent
Lease Year commencing upon the expiration of the prior Lease Year.
Subject to Section 2.03 hereof, the Base Rent to be paid by
Tenant shall be as follows:
(a) for each of Lease Years one (1) through five
(5), One Hundred Thousand Dollars ($100,000);
and
(b) beginning on the first day of Lease Year six
(6) and on each fifth anniversary thereafter
(the last day of Lease Year six (6) and each
fifth anniversary thereafter being referred to
herein as a "Change Date"), the rentals shall
increase by multiplying the Base Rent that is
in effect on the day immediately preceding the
applicable Change Date by a fraction, the
numerator of which is the CPI as of the date of
the increase and the denominator of which is
(i) for Lease Year six (6), the CPI as of the
Effective Date, and (ii) for each subsequent
Change Date, the CPI as of the immediately
preceding Change Date. "CPI" means the Consumer
Price Index - All Items, for
Raleigh/Durham/Chapel Hill MSA, published most
recently prior to the applicable date, or if
such is no longer published, such other index
which measures changes in the cost of living
that may be selected by Tenant and approved by
Landlord, which approval shall not be
unreasonably withheld.
-2-
<PAGE>
SECTION 2.02. PAYMENT OF RENT. The rentals described in
Section 2.01 and Section 2.03 shall be in addition to all other payments to be
made by Tenant as herein provided and shall be paid to Landlord without notice
or demand and without abatement, deduction or set-off, except as may otherwise
be expressly provided in this Lease. If any of the rentals described in
Section 2.01 or in Section 2.03 are not paid within five (5) days after the
same are due, such past due payments shall bear interest from and after such
five (5) day period until paid at the rate of ten percent (10%) per annum.
SECTION 2.03 BASE RENT DURING THE OPTION PERIOD.
(a) If Tenant exercises or is deemed to have exercised
Tenant's right under Section 1.04 hereof to extend the term hereof for the
Option Period, then the Base Rent payable by Tenant to Landlord hereunder
during the Option Period shall be an amount equal to the product obtained by
multiplying (x) the Fair Market Value (hereinafter defined) determined in
accordance with the provisions of this Section 2.03, by (y) ten percent (10%).
(b) If Tenant exercises or is deemed to have exercised
Tenant's rights under Section 1.04 hereof to extend the term hereof for the
Option Period, then Landlord and Tenant shall attempt through negotiation to
determine the fair market value of the Leased Premises as of the first day of
the Option Period, assuming that (i) the Leased Premises are used for the
purposes then established by Tenant, (ii) the Leased Premises are free and
clear of all leases and tenancies (including this Lease), (iii) the Leased
Premises are available for sale in the then market for comparable properties
in the vicinity of the Leased Premises, and (iv) Landlord has had a reasonable
time to locate a purchaser and that neither Landlord nor the purchaser is
under any compulsion to buy or sell, and otherwise taking into account all
relevant factors (such fair market value of the Leased Premises being referred
to herein as the "Fair Market Value."
(c) If Landlord and Tenant are unable to agree upon the Fair
Market Value on or before one hundred twenty (120) days before the first day
of the Option Period, Landlord and Tenant shall each hire one (1) independent
real estate appraiser, and such appraisers will engage a third independent
real estate appraiser (individually, an "Appraiser", and collectively, the
"Appraisers"). Each of the Appraisers shall be MAI certified and each shall be
experienced in appraising commercial property in Wake County, North Carolina.
Each of the Appraisers shall, within thirty (30) days after the date of
designation of the Appraisers, determine an appraisal as to the Fair Market
Value, and the parties hereto agree that the Fair Market Value shall be the
average of such three (3) appraisals. Landlord and Tenant shall each pay the
costs of the Appraiser selected by such party and shall share equally the cost
of the third Appraiser. The Appraisers shall not have the power to add to,
modify or change any of the provisions of this Lease.
-3-
<PAGE>
(d) After a determination has been made of the Fair Market
Value, the parties shall execute and deliver to each other an instrument
setting forth the Base Rent for the Option Period as hereinabove determined.
(e) If the final determination of the Fair Market Value is
not made on or before the first day of the Option Period in accordance with
the provisions of this Section 2.03, then, pending such final determination,
the Fair Market Value shall be deemed to be an amount equal to the Base
Amount. If, based upon the final determination hereunder of the Fair Market
Value, the payments made by Tenant on account of the Base Rent for the period
prior to the final determination of the Fair Market Value were less than the
Base Rent payable for such period, then Tenant, not later than the tenth
(10th) day after Landlord's demand therefor, shall pay to Landlord the amount
of such deficiency. If, based upon the final determination hereunder of the
Fair Market Value, the payments made by Tenant on account of the Base Rent for
the period prior to the final determination of the Fair Market Value were more
than the Base Rent payable for such period, then Landlord, not later than the
tenth (10th) day after Tenant's demand therefor, shall pay to Tenant the
amount of such surplus.
ARTICLE III
SECTION 3.01. IMPOSITIONS. The term "Impositions" shall mean
all taxes, assessments, and other charges by public authority, general and
special, ordinary and extraordinary, foreseen and unforeseen, of any kind and
nature whatsoever, which shall or may during the Term be assessed, levied,
charged, confirmed or imposed by public authority upon or accrue or become due
or payable out of or on account of or become a lien on the Leased Premises,
but shall not include any income taxes, capital levy, estate, succession,
inheritance or transfer taxes or similar tax of Landlord, or any corporate
franchise taxes imposed upon any owner of the fee of the Leased Premises, or
any income, profits or revenue tax, assessment or charge imposed upon the rent
or other benefit received by Landlord under this Lease, by any municipality,
county or state, the United States of America or any governmental body.
SECTION 3.02. PAYMENT OF IMPOSITIONS. As additional rental
during the Term, Tenant will pay or cause to be paid, as and when the same
shall become due, all Impositions, except that:
(i) All Impositions for the fiscal year or
tax year in which the Initial Term of
this Lease commences, as well as during
the year in which the Term of this
Lease expires or earlier terminates,
shall be apportioned so that the Tenant
shall pay its proportionate share of
the Impositions which are payable in
the year in which the Initial Term
commences and in the year in
-4-
<PAGE>
which the Term expires or earlier
terminates, and Landlord shall likewise
pay its proportionate share.
(ii) Where any Imposition is permitted by
law to be paid in installments, Tenant
may pay such Imposition in installments
as and when such installments become
due; provided, however, that the amount
of all installments of any such
Impositions which are to become due and
payable after the expiration or earlier
termination of the Term shall not be
apportioned (except as provided in
subsection (i) hereof).
(iii) The provisions of this Section 3.02
shall never be construed as imposing
any liability upon Tenant for the
payment of any taxes, assessments or
other charges imposed by city, county,
state or federal laws or ordinances or
any other laws or ordinances, upon the
income of Landlord, or upon the
transfer or passing of any interest
owned by Landlord in the Leased
Premises, generally known as income,
inheritance, estate, succession or
transfer taxes, nor shall Tenant be
obligated to pay any withholding,
profit or revenue tax or charge levied
upon the rents payable to Landlord
under the terms of this Lease, or any
corporate franchise tax or corporate
license fee which may be levied upon or
against any successor corporate
Landlord. The payment of all such
taxes, assessments and other charges
referred to in this Section 3.02(iii)
shall be the sole liability of
Landlord.
Landlord represents and warrants to Tenant that the Leased
Premises constitute a separate and distinct tax lot for real estate tax
purposes.
SECTION 3.03. PAYMENT TO BE MADE DIRECT. Tenant shall pay
all such Impositions to be paid by it directly to the taxing authority.
SECTION 3.04. PAYMENT OF BILLS. Tenant shall fully and
promptly pay all gas, heat, light, power, telephone, water, sewer and drainage
charges and other charges by public utilities of every kind for services
furnished to the improvements located on the Leased Premises for Tenant's use
during the term of this Lease.
-5-
<PAGE>
ARTICLE IV
SECTION 4.01. CASUALTY INSURANCE. During the Term, Tenant
will, at its sole cost and expense, keep and maintain an "all risk" casualty
insurance policy on the building and other improvements located on the Leased
Premises or any replacements or substitutions therefor in amounts sufficient
to provide coverage for the full replacement cost value of the same. Such full
replacement cost value shall be determined from time to time (but not more
frequently than once in any forty-eight calendar months) at the request of
Landlord, by one of the insurers or, at the option of Tenant, by an appraiser,
engineer, architect or contractor approved in writing by Landlord (which
approval shall not be unreasonably withheld) and paid by Tenant.
Such insurance shall be secured and maintained in a company
or companies selected by Tenant and shall be carried in the name of both
Landlord and Tenant, as their respective interests may appear, but shall
expressly provide that any loss thereunder may be adjusted with Tenant alone,
and shall be payable as set forth in Article V.
SECTION 4.02. LIABILITY INSURANCE. During the Term, Tenant
agrees to cause to be secured and maintained in force, at Tenant's sole cost
and expense, with companies selected by Tenant, commercial general liability
insurance with limits (which may be effected through primary and/or excess
coverage) of not less than $1,000,000.00 with respect to bodily injury or
death to any number of persons in any one accident nor less than $3,000,000.00
with respect to property damage in any one accident. Landlord shall be named
as an additional insured under such policy and the liability insurance
required under this Section 4.02 shall be primary.
SECTION 4.03. EVIDENCE OF INSURANCE. Tenant shall deliver to
Landlord duly executed certificates of insurance reflecting Tenant's
maintenance of the insurance required under Sections 4.01 and 4.02 of this
Lease. The insurance required under such sections shall be cancelable only
upon at least sixty (60) days prior written notice to Landlord.
SECTION 4.04. RIGHT OF LANDLORD TO OBTAIN INSURANCE. In the
event of the failure of Tenant to maintain insurance required by this Article
IV, Landlord may give notice of such failure to Tenant, and if such failure
continues for ten (10) days after such notice, Landlord may at its election
(but shall not be obligated to) procure such insurance as may be necessary to
comply with the above requirements, and Tenant agrees to repay the cost of
same to Landlord on demand, with interest thereon at ten percent (10%) per
annum until paid.
SECTION 4.05. INDEMNIFICATION. Except as otherwise expressly
provided in this Lease to the contrary, Landlord shall not be liable to
Tenant, or to Tenant's agents, servants or employees or third parties for any
damage to person or property caused by the negligence or intentional torts of
Tenant, or its agents, servants or employees, and Tenant agrees to indemnify
and hold Landlord harmless from all liability and claims for any such damage.
Except as otherwise expressly provided in this Lease to the contrary, Tenant
shall not be liable to Landlord,
-6-
<PAGE>
or to Landlord's agents, servants or employees for any damage to person or
property caused by the negligence or intentional torts of Landlord, or its
agents, servants or employees, and Landlord agrees to indemnify and hold
Tenant harmless from all liability and claims for any such damage and from all
liability and claims arising either prior to or subsequent to execution of
this Lease which are not specifically assumed by Tenant or disclosed by
Landlord in this Lease.
ARTICLE V
SECTION 5.01. DAMAGE TO IMPROVEMENTS. Should any
improvements during the Term of this Lease be wholly or partially destroyed or
damaged by fire, or any other casualty whatsoever, Tenant, in its sole
discretion, shall do one of the following, all at its cost and expense: (a)
repair, replace, restore or reconstruct the same, subject to Tenant's rights
under Section 6.02; (b) demolish the ruins and construct new improvements; or
(c) demolish and remove the ruins and grade the Leased Premises to the level
of the adjoining sidewalk.
It is agreed that all casualty insurance proceeds shall be
paid to Tenant. In the event of any such casualty, the rental and other
payments herein provided for shall not be abated and the happening of any such
casualty shall not cause the termination of this Lease.
ARTICLE VI
SECTION 6.01. ALTERATIONS. So long as Tenant is not in
default under the terms of this Lease, Tenant shall have the right, from time
to time, to make, at its sole cost and expense, additions, alterations and
changes in or to the improvements that are located upon the Leased Premises.
SECTION 6.02. RIGHT TO DEMOLISH. So long as Tenant is not in
default under the terms of this Lease, Tenant shall have the right to demolish
any improvements now or hereafter situated on the Leased Premises and to
remove the same from the Leased Premises without the prior written consent of
Landlord.
SECTION 6.03. RIGHTS TO CONTINUE. The demolition and removal
of any then existing improvements and the construction of new improvements by
Tenant upon the Leased Premises at any time or times pursuant to the terms
hereof shall not exhaust the rights of Tenant to do the same at any future
time or times during the Term, and Tenant may exercise the rights granted to
it in Section 6.01 at any time or times and from time to time during the Term.
SECTION 6.04. LIENS; END OF TERM. Tenant shall have no
right, authority or power to bind Landlord, or any interest of Landlord in the
Leased Premises, for any claim for labor or material or for any other charge
or expense incurred in the erection and construction of any improvements, or
any change, alteration or addition thereto, nor to render such Leased Premises
liable to any lien or right of lien for any labor or material, and Tenant
shall in no
-7-
<PAGE>
way be considered as the agent of Landlord in the construction, erection or
operation of any improvements.
Upon the termination of this Lease, whether by expiration of
the Term or by reason of default on the part of Tenant, or for any other
reason whatsoever, all improvements located on the Leased Premises shall merge
with the freehold estate and become the property of Landlord as a part of the
realty, free and clear of any burdens placed upon Tenant's leasehold estate.
ARTICLE VII
SECTION 7.01. SUBLEASE AND ASSIGNMENT. At any time during
the Term, Tenant shall have and is hereby granted the right freely to sublet
all or any portion of the Leased Premises.
Tenant shall have the right to assign Tenant's interest in
the leasehold estate created hereby without obtaining Landlord's approval or
consent. Any assignee shall expressly assume all liabilities and obligations
of Tenant under this Lease which will accrue after the effective date of such
assignment. Tenant also shall furnish to Landlord a copy of such instrument of
assignment and assumption as herein provided. No such assignment or subletting
by Tenant shall relieve Tenant of any covenants or obligations under this
Lease and Tenant shall remain fully liable hereunder.
SECTION 7.02. LIENS. Tenant may mortgage, pledge or
otherwise hypothecate Tenant's interest in the leasehold estate created
hereby, except that any mechanic's or materialmen's lien shall be released of
record or bonded to Landlord's reasonable satisfaction upon demand by
Landlord; provided, however, Tenant shall be permitted to contest the validity
of any such lien as long as the interests of Landlord are not jeopardized
thereby. No mortgage, pledge, lien or encumbrance shall in any way affect or
encumber Landlord's fee title and estate in and to the Leased Premises and
shall be expressly subject and subordinate to the rights and estate of
Landlord hereunder.
SECTION 7.03. ESTOPPEL CERTIFICATES. Landlord and Tenant
shall, from time to time, without additional consideration, execute and
deliver (x) an estoppel certificate consisting of statements, if true (and if
not true, setting forth the true state of facts as Landlord or Tenant views
them), that (i) this Lease is in full force and effect, with rental paid
through the date of such estoppel; (ii) this Lease has not been modified or
amended; (iii) Landlord and Tenant are not then in default; (iv) Tenant and
Landlord have fully performed all of Tenant's and Landlord's obligations
thereunder; and (v) such other statements as reasonably may be required by
Tenant or by Tenant's mortgagee, or by Landlord or by Landlord's mortgagee,
and (y) and such further certificates and instruments of a similar nature
setting forth factual matters and/or evidencing the agreement of Landlord or
Tenant to the mortgage or other
-8-
<PAGE>
hypothecation by the Tenant or Landlord of the interest created hereby as may
be reasonably requested by Tenant or any mortgagee of Tenant or Landlord or
any mortgagee of Landlord.
ARTICLE VIII
SECTION 8.01. RIGHT OF REFUSAL. Landlord hereby grants to
Tenant a right of first refusal (the "Right of Refusal") during the Term to
purchase the fee simple title to the Leased Premises, including all rights,
title, and interest of Landlord under this Lease, upon the terms, provisions,
and conditions of this Section 8.01. Landlord shall not convey, assign or
otherwise transfer the fee simple title to the Leased Premies or any portion
thereof to any third party without first complying with the provisions of this
Section 8.01. If during the Term Landlord receives a bona fide written offer
from an independent third party to purchase all or a portion of the Leased
Premises from Landlord (any such offer being referred to herein as an
"Offer"), then Landlord shall offer to Tenant in writing (the "Refusal
Notice") the right to purchase the Leased Premises or the applicable portion
thereof on the terms set forth in the Offer. The Refusal Notice shall include
a copy of the Offer. Tenant shall exercise its Right of Refusal, if at all, by
written notice to Landlord within fifteen (15) days after the date the Refusal
Notice is received by Tenant (the "Refusal Election Period"). If Tenant does
not exercise its Right of Refusal prior to the expiration of the Refusal
Election Period, Tenant shall be deemed to have not exercised the Right of
Refusal and Landlord may thereafter sell all or the applicable portion of the
Leased Premises on the terms set forth in the Offer to the party that
submitted the Offer without regard to Tenant's rights under this Section 8.01;
provided, however, that if Landlord does not consummate any such sale within
ninety (90) days after the end of the Refusal Election Period, then Landlord
may not consummate any such sale without again making an offer to Tenant as
contemplated by this Section 8.01. Nothing contained in this Section 8.01
limits or impairs Tenant's other rights hereunder as tenant of the Leased
Premises for the Term. Notwithstanding the provisions of this Section 8.01,
the exercise by Charles B. Shearon ("Shearon") of Shearon's option to purchase
certain land from Landlord pursuant to that certain Option Agreement by and
between Landlord and Tenant dated as of March 12, 1997, and/or any subsequent,
similar transaction which results in the replacement of the southern portion
of the Leased Premises with equal acreage along the eastern boundary of the
Leased Premises, shall not constitute an Offer for purposes of effecting
Tenant's Right of Refusal.
ARTICLE IX
SECTION 9.01. GENERAL DEFAULTS BY TENANT. Subject to Section
10.02, if Tenant should:
(A) default in the payment of any installment of rent,
imposition, utility charge or other liquidated sum of money herein
stipulated to be paid by Tenant, and if such default shall continue
for a period of fifteen (15) days after such payment is due, or
-9-
<PAGE>
(B) fail to perform any covenant imposed upon Tenant
hereunder which does not involve the payment of a liquidated sum of
money, and if any such default specified in this clause (B) shall
continue for a period of thirty (30) days after notice of said
default has been given to Tenant by Landlord,
then Landlord may, at Landlord's election:
(1) with or without terminating this Lease, immediately or
at any time thereafter re-enter the Leased Premises and correct or
repair any condition which shall constitute a failure on Tenant's
part to keep, observe, perform, satisfy or abide by any term,
condition, covenant, agreement or obligation of this Lease and Tenant
shall fully reimburse and compensate Landlord on demand for the costs
incurred by Landlord in doing so;
(2) declare this Lease canceled and terminated, in which
event this Lease shall terminate as if that were the day originally
fixed herein for expiration of the term of this Lease, and Landlord,
the agents or representatives of Landlord, shall have the right,
without further demand or notice, to re-enter and take possession of
the Leased Premises, with or without process of law, and remove all
persons and their property from the Leased Premises without being
deemed guilty of any manner of trespass, and be entitled to recover
forthwith as damages a sum of money equal to the total of (A) the
cost of recovering the Leased Premises (including, without
limitation, attorneys' fees and costs of suit), (B) any unpaid rents
owed at the time of termination, plus interest thereon from due date
at the rate of ten percent (10%) per annum, (C) the present value of
the balance of the rent for the remainder of the term of this Lease
less the present value of the fair market rental value of the Leased
Premises for said period (in each case using a discount rate of eight
percent (8%) per annum), and (D) any other sum of money and damages
owed by Tenant to Landlord; provided, however, that Landlord may not
so cancel or terminate this Lease if any such default specified in
clause (B) cannot reasonably be corrected within such thirty (30) day
period for so long as Tenant proceeds in good faith and with due
diligence to remedy and correct such default and such default is in
fact cured on or before one hundred eighty (180) days after such
notice of said default has been given to Tenant; or
(3) Landlord may terminate Tenant's right of possession (but
not this Lease) and may repossess the Leased Premises by forcible
entry or detainer suit or otherwise without demand or notice of any
kind to Tenant and without terminating this Lease, and remove all
persons or property therefrom, using such force as may be necessary
(Tenant hereby waiving any claim by reason of such reentry,
repossession or removal or by issuance of any distress warrant or
writ of sequestration), in which event Landlord may (but shall be
under no obligation to do so unless required by law), relet the
Leased Premises or any part thereof for the account of Tenant for
such rent and upon such terms as shall be satisfactory to Landlord.
For the purpose of such reletting
-10-
<PAGE>
Landlord is authorized to make any repairs, changes, alterations or
additions in or to the Leased Premises, or provide leasing
inducements or brokerage commissions that may be necessary or
convenient, and (A) if Landlord shall fail or refuse to relet the
Leased Premises, or (B) if the Leased Premises is relet and a
sufficient sum shall not be realized from such reletting (after
paying the unpaid amounts due hereunder earned but unpaid at the time
of reletting plus interest thereon at a rate of ten percent (10%) per
annum, the cost of recovering possession [including, without
limitation, attorneys' fees and costs of suit], all of the costs and
expenses of such repairs, changes, alterations and additions and all
other expenses of such reletting [including, without limitation,
leasing inducements and brokerage commission] and of the collection
of the rent accruing therefrom) to satisfy the rent provided for in
this Lease to be paid, then Tenant shall pay to Landlord as damages a
sum equal to the amount of the rental reserved in this Lease for such
period or periods or, if the Leased Premises have been relet, Tenant
shall satisfy and pay any such deficiency upon demand therefor from
time to time as the same accrues or becomes due. Tenant agrees that
Landlord may file suit to recover any sums falling due under the
terms of this Section 9.01 from time to time on one or more occasions
without Landlord being obligated to wait until expiration of the term
of this Lease, and no delivery or recovery of any portion due
Landlord hereunder shall be any defense in any action to recover any
amount not theretofore reduced to judgment in favor of Landlord, nor
shall such reletting be construed as an election on the part of
Landlord to terminate this Lease unless a written notice of such
intention be given to Tenant by Landlord. Notwithstanding any such
reletting without termination, Landlord may at any time thereafter
elect to terminate this Lease for such previous breach.
No waiver of any breach of any covenant or provision of this Lease shall be
construed to be a waiver of any other or subsequent breach of the same or of
any other covenant or provision, and the acceptance of rental after default
shall not be a waiver of the right to demand payment of any subsequent
installment of rent on the day it becomes due. In the event that Landlord
elects to declare this Lease canceled and terminated as herein provided, all
Improvements shall be and become the absolute and unconditional property of
Landlord, free and clear of any mortgage, lien or other encumbrance created by
Tenant and permitted by Landlord.
SECTION 9.02. SPECIFIC DEFAULTS BY TENANT. If Tenant should
(i) file a voluntary or involuntary petition in bankruptcy which is not
dismissed or discharged within ninety (90) days of filing, (ii) make an
assignment for the benefit of creditors, or (iii) have a receiver appointed
for all or substantially all of its assets and not cause such receivership to
cease within one hundred eighty (180) days after such appointment, then
Landlord may exercise the remedies specified in Section 9.01, including the
right to terminate this Lease, but without Tenant having the additional one
hundred eighty (180) day grace period described in Section 9.01.
-11-
<PAGE>
ARTICLE X
SECTION 10.01. NOTICE PARTIES. As used herein, "Notice
Party" means any person or entity (I) which is a mortgagee who holds a
mortgage which burdens all or any part of Tenant's leasehold interest under
this Lease, and (II) whose name and address for notice purposes has been
furnished by Tenant to Landlord. Landlord shall give each Notice Party a
duplicate copy of any and all notices of default or other notices in writing
which Landlord may give or serve upon Tenant pursuant to the terms of this
Lease, and any such notice shall not be effective until said duplicate copy is
given to such Notice Party. A different address may be designated by such
Notice Party by written notice delivered to Landlord from time to time. Any
such Notice Party may, at its option, at any time before the rights of Tenant
shall have been forfeited to the Landlord as provided for in this Lease, cure
in full any default by Tenant under this Lease, any such cure in full shall be
as effective to prevent a forfeiture of the rights of Tenant hereunder as the
same would have been if done and performed by Tenant instead of by any such
Notice Party. In no event shall Landlord be required to accept from a Notice
Party partial cure of any default by Tenant under this Lease and no Notice
Party shall have any rights on account of such partial cure, even if accepted
by Landlord.
No such mortgagee or trustee of the rights and interests of
Tenant hereunder shall be or become liable to Landlord as an assignee of this
Lease until such time as said mortgagee or trustee shall by foreclosure or
other appropriate proceedings in the nature thereof, or as the result of any
other action or remedy provided for by such mortgagee or deed of trust, or by
proper conveyance from Tenant, either acquire the rights and interests of
Tenant under the terms of this Lease or actually take possession of the Leased
Premises, whichever occurs earlier, and such liability of said mortgagee or
trustee shall terminate upon such mortgagee's or trustee's assigning such
rights and interests to another party or relinquishing such possession, as the
case may be.
SECTION 10.02. RIGHT OF CERTAIN NOTICE PARTIES TO OBTAIN NEW
LEASE. Upon termination of this Lease pursuant to Section 9.02, the Notice
Party, if any, who holds a first lien on Tenant's leasehold estate under this
Lease shall have the option, upon written notice to Landlord given not later
than ninety (90) days after receipt of written notice from Landlord of such
termination, to elect to receive, in its own name or in the name of its
nominee, from Landlord a new lease of the Leased Premises for the unexpired
balance of the Term, on the same terms and conditions as in this Lease set
forth, and Landlord agrees to execute such lease provided:
(i) the Notice Party shall forthwith cure any
default of Tenant; and
(ii) the Notice Party or its nominee shall
thereafter observe and perform all covenants
and conditions in said lease contained on the
part of Tenant to be observed and performed.
-12-
<PAGE>
Any such new lease, by virtue of the recording of this Lease or a memorandum
thereof, shall have priority equal to this Lease.
ARTICLE XI
SECTION 11.01. CONDEMNATION. As used herein, "Condemnation"
or "Condemned" means a taking by the government of the United States of
America, the State of North Carolina, the County of Wake, or any government or
power whatsoever, or by any corporation under the right of eminent domain, or
a condemnation by any court, city, state, county or governmental authority or
office, department or bureau of the city, county, state or the United States
of America.
(a) If only Landlord's interest in the Leased Premises (but
not the leasehold estate of Tenant under this Lease nor in
any improvements located on the Leased Premises) is
Condemned in whole or in part, then this Lease shall not be
affected thereby and all proceeds of such Condemnation shall
be paid to Landlord.
(b) If only Tenant's leasehold estate under this Lease
and/or in the improvements shall be Condemned in whole or in
part, then this Lease shall not be affected thereby and all
proceeds of such Condemnation shall be paid to Tenant,
except that if such condemnation affects a material portion
of the Leased Premises, then Tenant shall have the right to
terminate this Lease by giving notice thereof to Landlord on
or prior to the thirtieth (30th) day after such
Condemnation, in which case Landlord shall have the right to
receive the entire award for such condemnation.
ARTICLE XII
SECTION 12.01. PEACEFUL ENJOYMENT. Subject to all of the
terms and provisions of this Lease, Landlord covenants and warrants that
Tenant, on paying the rental and other payments herein provided and performing
and observing all of its covenants and agreements herein contained and
provided, shall and may peaceably and quietly have, hold, occupy, use and
enjoy, and shall have the full, exclusive and unrestricted use and enjoyment
of, the Leased Premises during the Term.
SECTION 12.02. TITLE TO LEASED PREMISES. Landlord covenants
to Tenant that Landlord owns good and marketable title to the Leased Premises,
subject only to the matters listed on Exhibit B attached hereto and made a
part hereof, to the extent the same are valid and in force and effect as to
the Leased Premises, and Landlord agrees to warrant and forever defend the
title to the Leased Premises against the claims of any and all persons
whomsoever lawfully (or otherwise) claiming the same or any part thereof.
-13-
<PAGE>
ARTICLE XIII
SECTION 13.01. LANDLORD'S MORTGAGEE. Any and all mortgages
on the fee title or reversionary interest of Landlord in the Leased Premises
shall be subject and subordinate to this Lease; provided, however, that
nothing contained herein shall restrict or otherwise impair the right of
Landlord to transfer, convey, sell, mortgage or otherwise deal with the fee to
the Leased Premises or affect the right of Landlord to assign this Lease and
the rental and other sums payable hereunder as further collateral security for
any such fee mortgage or otherwise, and Tenant agrees to honor any such
assignment from and after receipt of an executed copy thereof; and Tenant
further agrees that while any such mortgage or other encumbrance is in force,
and if Tenant shall have been given written notice thereof and the name and
address of the mortgagee and/or trustee, Tenant shall give said mortgagee or
trustee a duplicate copy of any and all notices of default or other notices in
writing which Tenant may give or serve upon Landlord pursuant to the terms of
this Lease, and any such notice shall not be effective until said duplicate
copy is given to such mortgagee or trustee. A different address may be
designated by such mortgagee or trustee by written notice delivered to Tenant
from time to time. Any such mortgagee and/or trustee may, at its option, at
any time before any rights of the Tenant shall have accrued as a result of any
default of Landlord hereunder, make any payment or do any other act or thing
required of the Landlord by the terms of this Lease; and all payments so made
and all things so done or performed by any such mortgagee and/or trustee shall
be as effective to prevent accrual of any rights of Tenant hereunder as the
same would have been if done and performed by the Landlord instead of by any
such mortgagee or trustee. No such mortgagee or trustee of the rights and
interests of the Landlord hereunder shall be or become liable to Tenant as an
assignee of this Lease until such time as said mortgagee or trustee shall by
foreclosure or other appropriate proceedings in the nature thereof, or as the
result of any other action or remedy provided for by such mortgagee or deed of
trust, or by proper conveyance from Landlord, acquire the rights and interests
of the Landlord under the terms of this Lease, and such liability of said
mortgagee or trustee shall terminate upon such mortgagee's or trustee's
assigning such rights and interests to another party.
ARTICLE XIV
SECTION 14.01. SURRENDER. Tenant covenants and agrees to and
with Landlord that upon termination of this Lease (subject, however, to
Section 10.02), whether by lapse of time or because of any of the conditions
or provisions contained herein, Tenant will peaceably and quietly yield up and
surrender possession to Landlord of the Leased Premises and all buildings and
permanent improvements and other properties herein provided to be the property
of Landlord on termination hereof without disturbance or molestation thereof.
-14-
<PAGE>
ARTICLE XV
SECTION 15.01. 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 as follows:
If to Landlord, to: Carolina Capital Ventures, Ltd.
8925 Lindenshire Road
Raleigh, North Carolina 27615
Attention: Mark Robertson
If to Tenant, to: Family Golf Centers, Inc.
225 Broadhollow Road, Suite 106E
Melville, NY 11747
Attention: General Counsel
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 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.
ARTICLE XVI
SECTION 16.01. ENTIRE AGREEMENT. This agreement embodies the
entire contract between the parties hereto relative to the subject matter
hereof. No variations, modifications or changes herein or hereof shall be
binding upon any party hereto unless such are in writing and executed by both
Landlord and Tenant. No waiver or waivers of any breach or default or any
breaches or defaults by either party of any term, condition or liability of or
performance by the other party of any duty or obligation hereunder, including
without limitation, the acceptance by Landlord or payment by Tenant of any
rentals at any time or in any manner other than as herein provided shall be
deemed a waiver thereof, nor shall any such waiver or waivers be deemed or
construed to be a waiver or waivers of subsequent breaches or defaults of any
kind, character or description under any circumstances. If any term or
provision of this Lease, or the application thereof to any person or
circumstance, shall to any extent be invalid or unenforceable, the remainder
of this Lease, or the application of such provision to persons or
circumstances other than those as to which it is invalid or unenforceable,
shall not be affected thereby, and each provision of this Lease shall be valid
and shall be enforceable to the extent permitted by law.
-15-
<PAGE>
ARTICLE XVII
SECTION 17.01. LANDLORD DEFAULT. In the event Landlord
defaults in undertaking the performance of any of Landlord's covenants or
obligations herein contained for a period of thirty (30) days next following
the date on which Landlord receives written notice given by Tenant to Landlord
as provided herein asserting such default of Landlord, Tenant shall have the
right (but shall not be obligated), at Tenant's sole election, to perform
Landlord's covenants or obligations which Tenant asserts to be in default, at
the expense of Landlord, and to make claim against Landlord for an amount
equal to the cost incurred by Tenant in so doing, together with interest
thereon at the rate of ten percent (10%) per annum from the date incurred by
Tenant until repaid by Landlord.
ARTICLE XVIII
SECTION 18.01. ACTIONS REQUIRING CONSENT OF TENANT'S
MORTGAGEE. So long as there shall be a leasehold mortgage on the leasehold
estate of Tenant hereunder, this Lease shall not, without the prior written
consent of the leasehold mortgagee (as defined below), terminate by merger in
the event Tenant shall acquire the fee estate to any portion of the Leased
Premises. As used herein, the term "leasehold mortgagee" shall mean and
include the trustee, beneficiary and mortgagee named in any deed of trust or
mortgage which is a lien on the leasehold estate of Tenant hereunder.
ARTICLE XIX
SECTION 19.01. GOVERNING LAW. This Lease shall be governed
by the laws of the State of North Carolina, and the covenants contained herein
shall be deemed performable in Wake County, North Carolina. The proper venue
for any suit brought in connection with this Lease shall be the appropriate
local, state or federal court in Wake County, North Carolina.
ARTICLE XX
SECTION 20.01. COMPLIANCE WITH LAWS. As used in this Lease,
"Legal Requirements" shall mean any applicable law, statute, ordinance, order,
rule, regulation, decree or requirement of a Governmental Authority, and
"Governmental Authority" shall mean the United States, the state, county, city
and political subdivisions in which the Leased Premises are located or which
exercise jurisdiction over the Leased Premises, and any agency, department,
commission, board, bureau or instrumentality of any of them which exercise
jurisdiction over the Leased Premises. Throughout the Term, at Tenant's own
cost and expense, Tenant shall conform to and substantially comply with all
Legal Requirements affecting the Leased Premises.
-16-
<PAGE>
SECTION 20.02. HAZARDOUS MATERIALS. Landlord represents
that, to the best of Landlord's knowledge, as of the Effective Date, no
substances, materials or wastes subject to regulation by Legal Requirements
from time to time in effect concerning hazardous, toxic or radioactive
materials ("Hazardous Materials") are located on the Leased Premises in
violation of Legal Requirements. Landlord shall indemnify, protect, defend
(with counsel reasonably approved by Tenant) and hold Tenant, and the
officers, directors, shareholders, employees and agents of Tenant, harmless
from any and all obligations, claims, administrative proceedings, judgments,
damages, fines, costs and liabilities, including reasonable attorneys' fees
incurred, that arise directly or indirectly from or in connection with the
presence, suspected presence, Release (as defined below), or suspected Release
of Hazardous Materials prior to or in existence as of the Effective Date
arising out of, in connection with or by reason of the action or inaction of
Landlord, or Landlord's officers, directors, partners, agents, employees,
contractors, subtenants, invitees or visitors, including such costs as are
attributable to periods of time prior to the Effective Date. As used in this
Lease, "Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing
into the environment (including the abandonment or discarding of barrels,
containers and other closed receptacles).
Tenant shall indemnify, protect, defend (with counsel
reasonably approved by Landlord) and hold Landlord, and the officers,
directors, shareholders, employees and agents of Landlord, harmless from any
and all obligations, claims, administrative proceedings, judgments, damages,
fines, costs and liabilities, including reasonable attorneys' fees incurred,
that arise directly or indirectly from or in connection with the presence,
suspected presence, Release, or suspected Release of Hazardous Materials after
the Effective Date arising out of, in connection with or by reason of the
action or inaction of Tenant, or Tenant's officers, directors, partners,
agents, employees, contractors, subtenants, invitees or visitors.
ARTICLE XXI
SECTION 21.01. ATTORNEY'S FEES. If either party hereto
commences legal proceedings against the other party hereto with respect to
this Lease, and if such commencing party prevails in such proceedings, then
the non-prevailing party shall pay the prevailing party's reasonable legal
fees and costs of suit.
ARTICLE XXII
SECTION 22.01. RECORDING OF LEASE. Tenant may not record
this Lease in the real property records of Wake County, North Carolina. At the
request of either party hereto, both parties hereto shall execute and
acknowledge a memorandum of this Lease to be recorded in the real property
records of Wake County, North Carolina, in a form and of a content reasonably
acceptable to Landlord and Tenant, and at the expense of the requesting party,
containing such terms as may be necessary to place third parties on notice of
Tenant's rights under this Lease.
-17-
<PAGE>
ARTICLE XXIII
SECTION 23.01. BROKERS. Landlord shall be responsible for any
fee owed to Mr. David Peebles and/or Blue Sky Commercial (collectively,
"Landlord's Brokers"). Other than Landlord's Brokers, each party hereto
warrants and represents that it has not dealt with a broker or intermediary
entitled to any compensation in connection with this Lease or Tenant's use of
the Leased Premises. Each party hereby agrees to hold the other party, its
officers, directors, shareholders, affiliates, employees, agents and
representatives harmless from any and all claims, liabilities, costs and
expenses (including reasonable attorneys' fees) arising from any claim for any
commissions or other fees by any other broker or agent acting or purporting to
have acted on behalf of such party.
ARTICLE XXIV
SECTION 24.01. MEDIATION. The parties agree to submit any
unresolved disputes under this Lease to non-binding mediation to be conducted
in accordance with the rules governing mediated settlement conferences in
Superior Court as promulgated, from time to time, by the North Carolina
Supreme Court. Such mediation shall take place in Raleigh, North Carolina.
ARTICLE XXV
SECTION 25.01. GUARANTY. Family Golf Centers, Inc., has
executed a Guaranty Agreement of even date herewith in the form attached
hereto as Exhibit C to guaranty to Landlord certain of Tenant's obligations
hereunder as more particularly described therein.
IN WITNESS WHEREOF, this Lease is made and entered into in
multiple original counterparts as of the date and year first above written.
CAROLINA CAPITAL VENTURES, LTD.
By: __________________________
Name:_________________________
Title:________________________
RALEIGH FAMILY GOLF CENTERS, INC.
By:___________________________
Name:_________________________
Title:________________________
-18-
<PAGE>
EXHIBIT C
GUARANTY AGREEMENT
Section 1. Guaranty. For value received, FAMILY GOLF
CENTERS, INC., a Delaware corporation ("Guarantor"), hereby absolutely and
unconditionally guarantees to CAROLINA CAPITAL VENTURES, LTD., a North
Carolina corporation ("Beneficiary"), and its successors or assigns, the full,
prompt and faithful performance of each and every obligation of RALEIGH FAMILY
GOLF CENTERS, INC., a Delaware corporation ("Tenant"), under the Lease
Agreement between Beneficiary, as landlord, and Tenant, as tenant, relating to
the lease of certain property in Wake County, North Carolina (as the same may
have been amended from time to time, the "Lease"). As used in this Guaranty
Agreement (this "Guaranty"), "Guaranteed Obligations" means all obligations of
Tenant guaranteed by Guarantor in this Section 1.
Section 2. Term. The obligations of Guarantor as to the
Guaranteed Obligations shall continue in full force and effect against
Guarantor until Guarantor has performed the Guaranteed Obligations as set
forth herein. This Guaranty covers any and all of the Guaranteed Obligations,
whether presently outstanding or arising subsequent to the date hereof. This
Guaranty is binding upon and enforceable against Guarantor and the assigns and
successors of Guarantor.
Section 3. Representation and Warranty of Guarantor.
Guarantor hereby represents and warrants to Beneficiary that Guarantor has
received, or will receive, direct or indirect benefit from the making of this
Guaranty.
Section 4. Waiver of Rights. Guarantor hereby waives (a)
notice of acceptance hereof; (b) grace, demand, presentment and protest with
respect to the Guaranteed Obligations or to any instrument, agreement or
document evidencing or creating same; (c) notice of grace, demand, presentment
and protest; (d) notice of non-payment or other defaults, of intention to
accelerate and of acceleration of the Guaranteed Obligations; (e) notice of
and/or any right to consent or object to the assignment of any interest in the
Lease or the Guaranteed Obligations; (f) notice of the renewal, extension,
amendment and/or modification of any of the terms and provisions of the Lease;
(g) notice of the filing of suit and diligence by Beneficiary in collection or
enforcement of the Guaranteed Obligations; and (h) any other notice regarding
the Guaranteed Obligations.
Section 5. Primary Liability of Guarantor. The liability of
Guarantor shall not be impaired, reduced or in any way affected by: (a)
Beneficiary's failure, refusal, or neglect to collect or enforce the
Guaranteed Obligations, by way of, without limitation, any indulgence,
forbearance, compromise, settlement or waiver of performance which may be
extended to Tenant by Beneficiary or agreed upon by Beneficiary and Tenant; or
(b) any
<PAGE>
termination of the Lease to the extent that Tenant thereafter continues to be
liable. This Guaranty constitutes a primary obligation of Guarantor. This is
an absolute, unconditional, irrevocable and continuing guaranty of payment and
performance and not of collection and is in no way conditioned upon any
attempt to collect from Tenant or upon any other event or contingency.
Guarantor agrees that Beneficiary is not required, as a condition to
establishing Guarantor's liability hereunder, to proceed against any person
(including, without limitation, Tenant or any other guarantor). Guarantor
hereby expressly waives any right or claim to force Beneficiary to proceed
first against Tenant or any other guarantor as to any of the Guaranteed
Obligations or other obligations of Tenant, and agrees that no delay or
refusal of Beneficiary to exercise any right or privilege which Beneficiary
has or may have against Tenant, whether arising from any documents executed by
Tenant, any common law, applicable statute or otherwise, shall operate to
impair the liability of Guarantor hereunder. The obligations of Guarantor
hereunder shall not be reduced, impaired or in any way affected by: (a)
receivership, insolvency, bankruptcy or other proceedings affecting Tenant or
any of Tenant's assets; (b) receivership, insolvency, bankruptcy or other
proceedings affecting Guarantor or any of Guarantor's assets; and (c) any
allegation of fraud, failure of consideration, forgery or other defense,
whether or not known to Beneficiary (even though rendering all or any part of
the Guaranteed Obligations void or unenforceable or uncollectible as against
Tenant or any other guarantor). This Guaranty shall continue to be effective
or be reinstated, as the case may be, if at any time any payment of any of the
Guaranteed Obligations is rescinded or must otherwise be returned by
Beneficiary upon the insolvency, bankruptcy or reorganization of Tenant or
otherwise.
Section 6. Place of Performance; Attorneys' Fees. All
payments to be made and obligations to be performed hereunder shall be paid or
performed in the location for payment or performance (as applicable) set forth
in the Lease. If it becomes necessary for Beneficiary to enforce this Guaranty
by legal action, Guarantor hereby waives the right to be sued in the county or
state of such Guarantor's residence and agrees to submit to the jurisdiction
and venue of the appropriate federal, state or other governmental court in
Wake County, North Carolina. Guarantor unconditionally agrees to pay
Beneficiary's collection expenses, including, without limitation, court costs
and reasonable attorneys' fees if enforcement hereof is placed in the hands of
an attorney, including, but expressly not limited to, enforcement by suit or
through probate, bankruptcy or any judicial proceedings.
Section 7. Applicable Law. This Guaranty shall be governed
by and construed in accordance with the laws of the United States of America
and the State of North Carolina, and is intended to be performed in accordance
with and as permitted by such laws.
Section 8. Entire Agreement. This Guaranty constitutes the
entire agreement of the parties with respect to the subject matter hereof, and
all prior correspondence, memoranda, agreements or understandings (written or
oral) with respect hereto are merged into and superseded by this Guaranty.
This Guaranty may not be changed,
<PAGE>
modified, discharged or terminated in any manner other than by an agreement in
writing signed by Guarantor and Beneficiary.
Section 9. Severability. In case any one or more of the
provisions contained in this Guaranty shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
other provisions contained herein shall not in any way be affected or impaired
thereby.
EXECUTED as of the ________ day of ________ , 1997.
GUARANTOR:
FAMILY GOLF CENTERS, INC.
By:______________________
Name:____________________
Title:___________________
<PAGE>
CASH ESCROW AGREEMENT
CASH ESCROW AGREEMENT, dated as of March ___, 1997 (this
"AGREEMENT"), by and among CAROLINA CAPITAL VENTURES, LTD., a North Carolina
corporation having an address at 9820 Capital Boulevard, Wake County, North
Carolina 27587 ("SELLER"), RALEIGH FAMILY GOLF CENTERS, INC., a Delaware
corporation having an address at 225 Broadhollow Road, Suite 106E, Melville,
New York 11747 ("PURCHASER"), and CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
incorporated under the laws of the United States of America with executive
offices at 2 Broadway, New York, New York 10004 (together with its successors,
the "ESCROW AGENT").
W I T N E S E T H:
WHEREAS, simultaneously with the execution hereof, Seller and
Purchaser are consummating the transactions contemplated by the Asset Purchase
Agreement, dated as of the date hereof (the "PURCHASE AGREEMENT"), between
Seller and Purchaser; WHEREAS, pursuant to the Purchase Agreement, Seller is
required to deposit $100,000.00 into an escrow account to be maintained by
Escrow Agent to be held against any claims for indemnity under Article II of
the Purchase Agreement; and WHEREAS, this is the Escrow Agreement referred to
in the Purchase Agreement. Capitalized terms used in this Escrow Agreement and
not otherwise defined herein shall have the respective meanings given to them
in the Purchase Agreement.
NOW, THEREFORE, it is agreed as follows:
<PAGE>
1. ESCROW.
1.01 APPOINTMENT OF ESCROW AGENT.
(a) Seller and Purchaser hereby appoint Escrow Agent, and Escrow
Agent hereby agrees to serve, as Escrow Agent in accordance with, and pursuant
to, this Agreement.
(b) Escrow Agent shall establish at Chase Manhattan Bank a separate
Federally insured, interest bearing account (the "Escrow Account") for any
amounts received by it hereunder.
(c) All monies, including interest thereon, held by Escrow Agent in
the Escrow Account pursuant to the terms hereof shall be hereinafter referred
to as the "ESCROWED FUNDS".
(d) Seller shall be responsible for the payment of any income taxes
payable in connection with any interest earned in the Escrow Account except
with respect to any interest on Escrowed Funds paid to or for the benefit of
Purchaser.
1.02 OPERATION OF ESCROW ACCOUNT. The parties hereto agree that the
Escrow Account shall operate as follows:
(a) At the Closing, Seller shall deliver or cause to be
delivered to Escrow Agent $100,000.00 Escrow Agent shall hold such amount as
Escrowed Funds in the Escrow Account.
(b) At any time prior to the first anniversary of the
Closing Date, Purchaser shall be entitled to give a notice to Escrow Agent,
signed by Purchaser's President or any Vice President (with a copy to Seller),
to the effect that there has been an event entitling Purchaser to
indemnification from Seller pursuant to Article 11 of the
<PAGE>
Purchase Agreement, which notice shall specify the amounts owed by Seller
pursuant to the Purchase Agreement, the calculation of such amounts and the
basis therefore.
(c) Twenty (20) days after Escrow Agent has received a
notice pursuant to Section 1.02(b) hereof (or, if not a business day, on the
next business day following such twentieth day) Escrow Agent shall deliver to
Purchaser such portion of the Escrowed Funds as is specified in such notice
unless Seller shall have notified Escrow Agent (with a copy to Purchaser) in
writing before such date that Seller disagrees with Purchaser's determination
that Purchaser is entitled to indemnification with respect to the Purchase
Agreement, which notice shall be set forth in reasonable detail the basis for
such disagreement.
(d) Should any dispute arise with respect to the delivery,
ownership, or right of possession of any of the Escrowed Funds, Escrow Agent,
as more fully set forth in Section 3.11 hereof, is authorized and directed to
retain in its possession without liability to anyone all or any part of the
Escrowed Funds until such dispute shall have been settled either by mutual
agreement by the parties concerned or by a final order, decree, or judgment of
a court of competent jurisdiction in the United States of America and time for
appeal has expired and no appeal has been perfected, but Escrow Agent shall be
under no duty whatsoever to institute or defend any such proceedings, and may,
in its discretion, deposit such Escrowed Funds with a court of competent
jurisdiction in North Carolina and be relieved of any and all liability to any
of the parties hereto upon such deposit.
1.03 DISTRIBUTION OF ESCROWED FUNDS. Unless a notice under Section
1.02(b) hereof has been given and Escrowed Funds in satisfaction of such
notice have not been
<PAGE>
delivered to Purchaser, either because the 20-day period has not yet run out
or because a dispute relating to the claim made by such notice is then
pending, the Escrowed Funds or such portion of them as at the time remains in
escrow and is not in dispute, together with all dividends and distributions
received by Escrow Agent with respect thereto, shall be returned to Seller on
the six month anniversary of the Closing Date.
1.04 TERMINATION OF ESCROW ACCOUNT. This Agreement and the Escrow
Account will terminate at 5:00 P.M., New York City local time, on the date on
which all of the Escrowed Funds contained in the Escrow Account shall be
distributed as set forth above.
2. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be (a) delivered by hand, (b)
facsimile, or (c) over-night delivery with proper postage prepaid, and
addressed as follows:
If to Purchaser to:
Raleigh Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Attention: Dominic Chang, President
Telephone: (516) 694-1666
Facsimile: (516) 694-0918
with a copy to:
Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Attention: Pamela Charles, General Counsel
Telephone: (516) 694-1666
Facsimile: (516) 694-0918
If to Seller to:
<PAGE>
Carolina Capital Ventures Ltd.
8925 Lindenshire Road
Raleigh, North Carolina 27615
Attention: Mark Robertson
Telephone:
Facsimile:
with a copy to:
Cranfill, Sumner & Hartzog, L.L.P.
Hillsborough Place
Suite 300
225 Hillsborough Street
Raleigh, North Carolina 27611-7808
Telephone: (919) 828-5100
Facsimile: (919) 828-2277
Attention: Richard T. Boyette, Esq.
If to Escrow Agent, to:
2 Broadway
New York, New York 10004
Telephone: (212) 509-4000
Facsimile: (212) 509-5150
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. Except as
otherwise provided herein, no notice or communication shall be effective until
received.
<PAGE>
3. CONCERNING ESCROW AGENT.
To induce Escrow Agent to act hereunder, it is further agreed by each
of Seller and Purchaser that:
3.01 Escrow Agent shall not be under any duty to give the Escrowed
Funds held by it hereunder any greater degree of care than it gives its own
similar property and shall not be required to invest any funds held hereunder
except as directed in this Agreement.
3.02 This Agreement expressly sets forth all the duties of Escrow
Agent with respect to any and all matters pertinent hereto. No implied duties
or obligations shall be read into this Agreement against Escrow Agent. Escrow
Agent shall not be bound by the provisions of any agreement among the other
parties hereto except this Agreement.
3.03 Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct, and, except with respect to claims based
upon such gross negligence or willful misconduct that are successfully
asserted against Escrow Agent, the other parties hereto shall jointly and
severally indemnify and hold harmless Escrow Agent (and any successor Escrow
Agent) from and against any and all losses, liabilities, claims, actions,
damages, and expenses, including reasonable attorneys' fees and disbursements,
arising out of, and in connection with, this Agreement. Without limiting the
foregoing, Escrow Agent shall in no event be liable in connection with its
investment or reinvestment of any cash held by it hereunder in good faith, in
accordance with the terms hereof, including, without limitation, any liability
for any delays (not resulting from gross negligence or willful misconduct) in
the investment or reinvestment of the Escrowed
<PAGE>
Funds; or any loss of interest incident to any such delays. This Section 3.03
shall survive notwithstanding any termination of this Agreement or the
resignation of Escrow Agent.
3.04 Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument, or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. Escrow Agent may act in reliance upon any instrument or
signature believed by it in good faith to be genuine and may assume, if in
good faith, that any person purporting to give notice or receipt or advice or
make any statement or execute any document in connection with the provisions
hereof has been duly authorized to do so.
3.05 Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Escrow Agreement and shall not be
liable for any action taken or omitted in good faith and in accordance with
such advice.
3.06 Escrow Agent does not have any interest in the Escrowed Funds
deposited hereunder, but is serving as escrow holder only. Any payments of
income from the Escrow Account shall be subject to withholding regulations
then in force with respect to United States taxes. This Section 3.06 shall
survive notwithstanding any termination of this Agreement or the resignation
of Escrow Agent.
3.07 Escrow Agent makes no representation as to the validity, value,
genuineness, or the collectibility of any security or other documents or
instrument held by, or delivered to, it.
<PAGE>
3.08 Escrow Agent shall not be called upon to advise any party as to
the wisdom in selling or retaining or taking or refraining from any action
with respect to any securities or other property deposited hereunder.
3.09 Escrow Agent (and any successor escrow agent) at any time may be
discharged from its duties and obligations hereunder by the delivery to it of
notice of termination signed by Purchaser and Seller or at any time may resign
by giving written notice to such effect to Purchaser and Seller. Upon any such
termination or resignation, Escrow Agent shall deliver the Escrowed Funds to
any successor escrow agent jointly designated by the other parties hereto in
writing, or to any court of competent jurisdiction if no such successor escrow
agent is agreed upon, whereupon Escrow Agent shall be discharged of and from
any and all further obligations arising in connection with this Escrow
Agreement. The termination or resignation of Escrow Agent shall take effect on
the earlier of (a) the appointment of a successor (including a court of
competent jurisdiction) or (b) the day that is thirty (30) days after the date
of delivery: (i) to Escrow Agent of the other parties' notice of termination
or (ii) to the other parties hereto of Escrow Agent's written notice of
resignation. If at that time Escrow Agent has not received a designation of a
successor escrow agent, Escrow Agent's sole responsibility after that time
shall be to keep the Escrowed Funds safe until receipt of a designation of
successor escrow agent or a joint written disposition instruction by the other
parties hereto or an enforceable order of a court of competent jurisdiction.
<PAGE>
3.10 Escrow Agent shall have no responsibility for the contents of
any writing of any third party contemplated herein as a means to resolve
disputes and may rely without any liability upon the contents thereof.
3.11 In the event of any disagreement among or between the other
parties hereto resulting in adverse claims or demands being made in connection
with the Escrowed Funds, or in the event that Escrow Agent in good faith is in
doubt as to what action it should take hereunder, Escrow Agent shall be
entitled to retain the Escrowed Funds until Escrow Agent shall have received
(a) a final and non-appealable order of a court of competent jurisdiction in
North Carolina directing delivery of the Escrowed Funds or (b) a written
agreement executed by the other parties hereto directing delivery of the
Escrowed Funds, in which event Escrow Agent shall disburse the Escrowed Funds
in accordance with such order or agreement. Any court order referred to in
(a) above shall be accompanied by a legal opinion by counsel for the presenting
party satisfactory to Escrow Agent to the effect that said court order is final
and non-appealable. Escrow Agent shall act on such court order and legal
opinions without further question.
3.12 As consideration for its agreement to act as Escrow Agent as
herein described, Purchaser shall pay the Escrow Agent's fees determined in
accordance with the terms set forth on Exhibit A hereto (and made a part of
this Escrow Agreement as if herein set forth). In addition, Purchaser and
Seller agree to reimburse Escrow Agent (on a 50/50 basis) for all reasonable
expenses, disbursements, and advances incurred or
<PAGE>
made by Escrow Agent in performance of its duties hereunder (including
reasonable fees, expenses, and disbursements of its counsel).
4. MISCELLANEOUS.
4.01 BINDING EFFECT. This Escrow Agreement shall be binding upon, and
inure solely to the benefit of, the parties hereto and their respective
successors and assigns, heirs, administrators, and representatives, and shall
not be enforceable by, or inure to the benefit of, any other third party,
except as provided in Section 3.09 hereof with respect to the termination of,
or resignation by, Escrow Agent. No party may assign any of its rights or
obligations under this Agreement without the written consent of the other
parties.
4.02 CHOICE OF LAW. This Agreement shall be construed in accordance
with, and governed by, the internal law of the State of New York (without
reference to its rules as to conflicts of law).
4.03 MODIFICATION. This Agreement may only be modified by a writing
signed by all of the parties hereto.
4.04 HEADINGS. The section headings herein are for convenience only
and shall not affect the construction thereof. Unless otherwise indicated,
references to Sections and Articles are to Sections and Articles,
respectively, contained herein.
4.05 COUNTERPARTS. This Agreement may be executed in one or more
counterparts but all such separate counterparts shall constitute but one and
the same instrument; provided that, although executed in counterparts, the
executed signature pages of each such counterpart may be affixed to a single
copy of this Agreement which shall constitute an original.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the day and year first above written.
RALEIGH FAMILY GOLF CENTERS, INC.
By: _____________________________
Name:
Title:
CAROLINA CAPITAL VENTURES, LTD.
By: _____________________________
Name:
Title:
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
By: _____________________________
Name:
Title:
<PAGE>
ASSET PURCHASE AGREEMENT
by and between
COLLEGE GOLF CENTER PARTNERSHIP,
Seller,
and
PALM DESERT FAMILY GOLF CENTERS, INC.,
Purchaser
PREMISES:
COLLEGE OF THE DESERT GOLF DRIVING RANGE
73-450 Fred Waring Drive
Palm Desert, CA 92260
<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
EXHIBIT A JOINT OCCUPANCY AGREEMENT AND AMENDMENTS
EXHIBIT B-1 PERSONAL PROPERTY
EXHIBIT B-2 EXCLUDED PERSONAL PROPERTY
EXHIBIT C CONTRACTS AND OTHER AGREEMENTS
EXHIBIT D SUBJOINT OCCUPANCY AGREEMENT
EXHIBIT E CONSENT TO SUBOCCUPANCY AND ASSIGNMENT
EXHIBIT F SIGNAGE, LANDSCAPING AND FENCE IMPROVEMENTS
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, made as of the __ day of ________, 1997
(this "Agreement"), by and between COLLEGE GOLF CENTER PARTNERSHIP, a
California general partnership having an address at 73-450 Fred Waring Drive,
Palm Desert, California 92260 ("Seller"), and PALM DESERT FAMILY GOLF CENTERS,
INC., a Delaware corporation having an address at 225 Broadhollow Road, Suite
106E, Melville, New York 11747 ("Purchaser").
W I T N E S S E T H :
WHEREAS, Seller is the joint occupant of certain real property
located at 73-450 Fred Waring Drive, Palm Desert 92260 (the "Land") and the
buildings and improvements located on the Land (the "Improvements" and,
together with the Land, the "Premises") pursuant to a certain Joint Occupancy
Agreement dated June 15, 1995, which was amended by First Amendment to Joint
Occupancy Agreement dated July 1, 1995, Second Amendment to Joint Occupancy
Agreement dated September 8, 1995, and Third Amendment to Joint Occupancy
Agreement dated December 13, 1996 (the Joint Occupancy Agreement and its
amendments are hereinafter collectively referred to as the "Joint Occupancy
Agreement"), copies of which are attached hereto as Exhibit A and made a part
hereof;
WHEREAS, Seller operates a golf driving range and related facilities
at the Premises under the name "College of the Desert Practice Center" (the
"Business"); and
WHEREAS, Seller wants to permit Purchaser to suboccupy the Premises,
and ultimately assign the Joint Occupancy Agreement to Purchaser, and
Purchaser wants to suboccupy the Premises and ultimately assume the Joint
Occupancy Agreement from
<PAGE>
Seller, on the terms, and subject to the conditions, set forth in that certain
Suboccupancy Agreement described below.
WHEREAS, Seller wants to sell, and Purchaser wants to purchase
certain assets used in connection with the operation of the Business.
NOW, THEREFORE, in consideration of the terms and conditions set
forth herein, and other good and valuable consideration, the mutual receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree to
the foregoing and as follows:
1. Agreement to Sell and Purchase.
1.1 Property to be Purchased by Purchaser. Seller agrees to
sell and convey to Purchaser, and Purchaser agrees to purchase and acquire
from Seller, upon the terms and conditions hereinafter set forth, all of
Seller's right, title and interest in and to the following property
(collectively, the "Owned Property"):
1.1.1 all furnishings, fixtures, machinery,
equipment, vehicles and personalty attached or appurtenant to or used in
connection with the Premises that are owned by Seller, and all inventories,
supplies, sales, marketing and instructional materials of every kind and
description relating to the Business, wherever located, including without
limitation, the items described on Exhibit B-1 attached hereto and made a part
hereof (the "Personal Property"), except specifically not including the items
described on Exhibit B-2 attached hereto and made a part hereof;
1.1.2 the files, books, notices and other
correspondence from any governmental agencies, and other records used or
employed by Seller or its affiliates in
- 2 -
<PAGE>
connection with the leasing of the Premises and/or operation of the Premises
and the Business (collectively, the "Records");
1.1.3 any consents, authorizations, variances,
waivers, licenses, certificates, permits and approvals held by or granted to
Seller in connection with the leasing and/or operation of the Premises
(collectively, the "Permits");
1.1.4 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
1.1.5 the contracts, leases, and other agreements
relating to the Premises as listed on Exhibit C attached hereto and made a
part hereof (collectively, the "Contracts")
1.1.6 any other properties and assets of every kind
and nature, real or personal, tangible or intangible, owned by Seller,
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 Property to be Suboccupied by Seller and Purchaser.
Concurrently with the execution of this Agreement and the Closing hereunder,
Seller agrees to permit the Purchaser to suboccupay the Premises pursuant to
the Suboccupancy Agreement attached hereto as Exhibit D and made a part hereof
(the "Suboccupancy Agreement").
1.3 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"):
1.3.1 any rights of Seller with respect to
insurance policies owned by Seller or for which Seller is the named insured;
- 3 -
<PAGE>
1.3.2 all cash, funds in bank accounts and cash
equivalents existing as of the date hereof; and
1.3.3 any patents, trademarks, trademark
registrations, copyrights, copyright registrations, trade names and all
registrations thereof and all applications for any of the foregoing, whether
issued or pending, if any, and all goodwill associated with any of the
foregoing (the "Intangible Assets").
1.4 Liabilities to be Retained by Seller. 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 Owned Property or the
Premises, Seller or the Business or any predecessor owner of the Property or
the Business other than those specifically assumed hereunder and relate to the
post-closing period (collectively, the "Retained Liabilities").
2. Consideration. In consideration for the Owned Property, Purchaser
shall pay to Seller Ten Thousand Dollars ($10,000.00) which shall be payable
on the date hereof in cash, or by certified or bank check or by the wire
transfer of funds, and Purchaser shall also pay to Seller the amounts payable
pursuant to the Suboccupancy Agreement.
3. Title. Seller will convey the Owned Property to Purchaser free and
clear of any and all monetary liens, charges, encumbrances, mortgages,
pledges, security interests, easements, agreements and other interests and
adverse claims (collectively, "Encumbrances").
4. Apportionments.
- 4 -
<PAGE>
4.1 The following items shall be apportioned as of 11:59 PM
on February 1, 1997:
4.1.1 real estate taxes and assessments, on the
basis of the fiscal year for which the same are levied, imposed or assessed,
subject to Section 4.2 hereof;
4.1.2 charges for water, sewer rents, electricity,
steam, gas and telephone, which are not metered; provided that if the
consumption of any of such utilities is measured by meters, at the Closing (as
hereinafter defined) Seller shall furnish a current reading of each meter; and
further provided that if there is not a meter or if the current bill for any
of such utilities has not been issued prior to the Closing Date, the charges
therefore shall be adjusted at the Closing on the basis of the charges for the
prior period for which bills were issued and shall be further adjusted when
the bills for the current period are issued;
4.1.3 utility deposits, to the extent actually
assigned to Purchaser;
4.1.4 fuel, if any, at Seller's cost therefor (as
determined by Seller's fuel supplier).
4.1.5 revenue, income and accounts receivable from
the use and/or operation of the Property.
4.1.6 all amounts payable under the Joint Occupancy
Agreement and the Suboccupancy Agreement, on the basis of when same is due and
payable.
4.2 If the Closing shall occur before the real estate tax
rate is fixed, the apportionment of real estate taxes shall be based upon the
tax rate for the next preceding year applied to the latest assessed valuation.
- 5 -
<PAGE>
4.3 To the extent that any of the prorations made pursuant
to this Article are based upon estimates of payments to be made and/or
expenses to be incurred by Purchaser subsequent to the Effective Date, or
either party discovers any errors in or omissions in respect of the
Adjustment, Seller and Purchaser agree to adjust such prorations promptly upon
receipt by Seller or Purchaser, as the case may be, of such payments or of
bills or other documentation setting forth the actual amount of such expenses.
4.4 Seller and Purchaser shall maintain and make available
to each other any books or records necessary for the adjustment of any item
pursuant to this Article. The provisions of this Article shall survive the
Closing (as hereinafter defined).
5. The Closing.
5.1 The closing of the transaction provided for in this
Agreement (the "Closing") shall take place simultaneously with the execution
and delivery of this Agreement (the actual date of the Closing being referred
to herein as the "Closing Date").
5.2 At the Closing, Seller shall deliver or cause to be
delivered to Purchaser physical possession of the Owned Property (receipt of
which may be actual or constructive) and the following:
5.2.1 a Consent to Suboccupancy and Assignment in
the form attached hereto as Exhibit E.
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 provide that the Personal
Property is being conveyed to Purchaser in its "as is" condition with all
present faults, except that it shall contain a warranty that such property
- 6 -
<PAGE>
is owned by Seller free and clear of all Encumbrances, 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 Permits and the Claims, duly executed
and acknowledged by Seller;
5.2.4 a settlement statement (the "Settlement
Statement") setting forth the amounts paid by or on behalf of and/or credited
to each of Purchaser and Seller pursuant to this Agreement;
5.2.5 a Certificate or Certificates of Occupancy
for all Improvements;
5.2.6 any transfer tax or other return required by
any applicable governmental authority in connection with the subleasing of the
Joint Occupancy Agreement Property, duly executed and acknowledged by Seller,
if any is required;
5.2.7 an inventory of memorabilia to be kept and/or
displayed on the Premises;
5.2.8 keys to all locks relating to the Property,
appropriately labeled;
5.2.9 the Suboccupancy Agreement, duly executed and
acknowledged by Seller;
5.2.10 all other instruments and documents to be
executed, acknowledged where appropriate and/or delivered by Seller to
Purchaser pursuant to any of the other provisions of this Agreement; and
5.2.11 such other documents as may be reasonably
required to complete this transaction.
- 7 -
<PAGE>
5.3 At the Closing, Purchaser shall deliver or cause to be
delivered to Seller the following:
5.3.1 the cash consideration referred to in Section
2 hereof;
5.3.2 the 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 all other instruments and documents to be
executed, acknowledged where appropriate and/or delivered by Purchaser to
Seller;
5.3.5 the Suboccupancy Agreement, duly executed and
acknowledged by the Purchaser, and the option consideration required
thereunder; and
5.3.6 such other documents as may be reasonably
required to complete this transaction.
6. Representations and Warranties.
6.1 Seller represents and warrants to Purchaser as follows:
6.1.1 Organization; Power and Authority. Seller is
a partnership duly formed validly existing and in good standing under the laws
of the State of California, and has all requisite power and authority to carry
on its business as it is now being conducted, to execute, deliver and perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby.
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
- 8 -
<PAGE>
necessary partnership action required to be taken on the part of Seller. This
Agreement has been duly and validly executed and delivered by Seller and
constitutes the valid and binding obligation of Seller, enforceable in
accordance with its terms, except to the extent that such enforceability (a)
may be limited by bankruptcy, insolvency, or other similar laws relating to
creditors' rights generally; and (b) is subject to general principles of
equity.
6.1.3 Consents. No consent, approval or
authorization of, exemption by, or filing with, any governmental or regulatory
authority or any third party is required in connection with the execution,
delivery and performance by Seller of this Agreement, except for consents,
approvals, authorizations, exemptions and filings, if any, which have been
obtained.
6.1.4 Compliance with Applicable Laws. 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.
Except with respect to certain fencing, landscaping and signage work which
must be undertaken by Seller, as more particularly described in Exhibit F, the
Premises are not subject to any notice of violation of law, municipal
ordinance, orders or
- 9 -
<PAGE>
requirements issued by any building department or other governmental agency or
subdivision having jurisdiction.
6.1.5 Permits. All Permits required by any federal,
state, or local law, rule or regulation and necessary for the operation of the
Property and the Business as currently being conducted have been obtained and
are currently in effect. No registrations, filings, applications, notices,
transfers, consents, approvals, orders, qualifications, waivers or other
actions of any kind are required by virtue of the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby (a)
to avoid the loss of any Permit or the violation of any law, regulation, order
or other requirement of law, or (b) to enable Purchaser to continue the
operation of the Property as presently conducted after the Closing. To the
best of seller's knowledge, the current use and occupation of any portion of
the Premises does not violate any of, and, where applicable, is in material
compliance with, the Permits, any applicable deed restrictions or other
covenants, restrictions or agreements including without limitation, any of the
Permitted Exceptions, site plan approvals, zoning or subdivision regulations
or urban redevelopment plans applicable to the Premises.
6.1.6 Title to Assets. Seller has good and
marketable title to the Owned Property free and clear of all Encumbrances.
6.1.7 Contracts. Other than the Joint Occupancy
Agreement and the Contracts, Seller is not a party to any Joint Occupancy
Agreements, contracts, orders or agreements relating to the Property or the
Business (written or otherwise).
- 10 -
<PAGE>
6.1.8 Condition of the Improvements. There are no
repairs Seller intends to make or is obligated to make pursuant to the Joint
Occupancy Agreement except for the landscaping, fencing and signage
improvements listed on Exhibit F.
6.1.9 Condition of Personal Property. The Owned
Property is free and clear of any monetary liens.
6.1.10 Joint Occupancy Agreement. The Joint
Occupancy Agreement contained in Exhibit A constitutes a true, complete and
accurate copy of the Joint Occupancy Agreement by which Seller utilizes and
occupies the Premises. There are no other amendments or modifications to the
Joint Occupancy Agreement or any other agreements relating to the leasing or
use of the Premises, except as otherwise stated in this Agreement, to which
Seller is a party and which would be binding upon Purchaser.
6.1.11 Joint Occupancy Agreement Defaults.
6.1.11.1 Seller is not and has not received any
notice from the District that Seller is in default under the Joint Occupancy
Agreement.
6.1.11.2 Seller has not given notice to the
District, nor does Seller have any knowledge or make any claim that the
District is in default under the Joint Occupancy Agreement.
6.1.12 Environmental Matters.
6.1.12.1 As used in this Agreement "Hazardous
Material" shall mean: (I) any "hazardous substance" as now defined pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act of
1980 ("CERCLA"), 42 U.S.C. ss. 9601(33); (ii) any "pollutant or contaminant"
as defined in 42 U.S.C. ss. 9601(33); (iii) any
- 11 -
<PAGE>
material now defined as
"hazardous waste" pursuant to 40 C.F.R. Part 261; (iv) any petroleum,
including crude oil and any fraction thereof; (v) natural or synthetic gas
usable for fuel; (vi) any "hazardous chemical" as defined pursuant to 29
C.F.R. Part 1910; (vii) any asbestos, asbestos containing material,
polychlorinated biphenyl ("PCB"), or isomer of dioxin, or any material or
thing containing or composed of such substance or substances; and (viii) any
other pollutant, contaminant, chemical, or industrial or hazardous, toxic or
dangerous waste, substance or material, defined or regulated as such in (or
for purposes of any Environmental Law (as hereinafter defined) and any other
toxic, reactive or flammable chemicals.
6.1.12.2 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 in levels violating
Environmental Laws 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, and will indemnify Purchaser
from and against any breach of the foregoing.
6.1.12.3 Seller has no obligation or liability
imposed or based upon any provision under the Joint Occupancy Agreement or 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
- 12 -
<PAGE>
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").
6.1.12.4 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.
6.1.12.5 To the best of Seller's knowledge, the
Premises are not (a) listed or proposed for listing on the National Priority
List or (b) listed on the Comprehensive Environmental Response, Compensation,
Liability Information System List ("CERCLIS") promulgated pursuant to CERCLA,
42 U.S.C. ss. 9601(9), or any comparable list maintained by any foreign, state
or local government authority.
6.1.12.6 To the best of Seller's knowledge, there
are no underground storage tanks at the Premises and Seller further warrants
and represents that Seller's prior use and operation of underground storage
tanks, if any, has been in compliance with all Environmental Laws.
6.1.13 Tax Proceedings. There are no proceedings pending
regarding the reduction of real estate taxes or assessments in respect of the
Premises.
- 13 -
<PAGE>
6.1.14 Utilities. All water, storm and sanitary sewer, gas,
electricity, telephone and other utilities adequately service the Premises,
enter the Premises through lands as to which valid public or private easements
exist that will inure to the benefit of Purchaser and the Premises are
furnished by facilities of public utilities and to the best of Seller's
knowledge the cost of installation of such utilities has been fully paid.
6.1.15 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. All roads bounding the Premises are public roads
and this Agreement is the only instrument necessary to convey to Purchaser
full access to and the right to use such roads freely.
6.1.16 Insurance Requirements. To the best of Seller's
knowledge, all requirements or recommendations by any insurer or by any board
of fire underwriters or similar body in respect of the Property have been
satisfied.
6.1.17 Litigation. Except for the city's requirements for
landscaping, signage and fencing, there is no action or proceeding (zoning or
otherwise) or governmental investigation pending, or, to the best of Seller's
knowledge, threatened against, or relating to, Seller (insofar as it relates
to the Premises or the Business), the Premises, the Business or the
transactions contemplated by this Agreement, nor to the best of Seller's
knowledge is there any basis for any such action, proceeding or investigation.
- 14 -
<PAGE>
6.1.18 Assessments. To the best of Seller's knowledge 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.
6.1.19 Employee Agreements. There are no union or employment
contracts or agreements (written or oral) involving employees of Seller or its
affiliates affecting the Property or the Business which will survive the
Closing for more than thirty (30) days. All employees of Seller will have been
given notice of termination prior to the date hereof.
6.1.20 Work at the Premises. No services, material or work
have been supplied to the Premises for which payment has not been made in
full.
6.1.21 Financial Condition. Prior to the closing, Seller has
delivered to Purchaser true and correct copies of (1) financial statements
consisting of balance sheets and income statements of Seller as of December
31, 1996; and (2) internal reports for the months ended January 31, 1997, and
for the period commencing February 1, 1997 through the date immediately prior
to the date hereof. Each such balance sheet presents fairly the financial
condition, assets and liabilities of Seller as of its date; each such
statement of income presents fairly the results of operations of Seller for
the period indicated. The financial statements referred to in this Section are
in accordance with the books and records of Seller. Since December 31, 1996
and since January 31, 1997: (a) there has at no time been a material adverse
change in the financial condition, results of operations, businesses,
properties, assets, liabilities or future prospects of Seller, the
- 15 -
<PAGE>
Property or Business; (b) the Business has been conducted in all respects only
in the ordinary course; and (c) Seller has not suffered an extraordinary loss
(whether or not covered by insurance) or waived any right of substantial
value.
6.1.22 Full Disclosure. To the best knowledge of Seller,
none of the information supplied by Seller herein or in the exhibits hereto
contains any untrue statement of a material fact or omits to state a material
fact required to be stated herein or necessary in order to make the statements
herein, in light of the circumstances under which they are made, not
misleading.
6.2 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller as follows:
6.2.1 Organization; Power and Authority. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite power and authority to
carry on its business as it is now being conducted, to execute, deliver and
perform its obligations under this Agreement and to consummate the
transactions contemplated hereby.
6.2.2 Due Authorization and Execution; Effect of Agreement.
The execution, delivery and performance by Purchaser of this Agreement and the
consummation by Purchaser of the transactions contemplated hereby have been
duly authorized by all necessary corporate action required to be taken on the
part of Purchaser. This Agreement has been duly and validly executed and
delivered by Purchaser and constitutes the valid and binding obligation of
Purchaser, enforceable in accordance with its terms. The execution, delivery
and performance by Purchaser of this Agreement and the consummation by
Purchaser of the transactions contemplated hereby
- 16 -
<PAGE>
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 for a period of two
(2) years, except for environmental issues which shall survive until the
expiration of the statute of limitations.
7. Further Assurances. At any time and from time to time after the
Closing, each party shall, at the request of the other, execute and deliver
any further instruments or documents and take all such further action as such
other may reasonably request in order to transfer into the name of Purchaser
any and all Property contemplated to be sold pursuant to this Agreement and to
further consummate the transactions contemplated by this Agreement. This
Article shall survive the Closing.
8. Brokers. Seller and Purchaser warrant and represent to each other
that they dealt with no broker, finder or similar agent or party who or which
might be entitled to a commission or compensation on account of introducing
the parties, the negotiation or execution of this Agreement and/or the closing
of the transaction provided for herein. 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,
- 17 -
<PAGE>
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 who claims to
have dealt with the indemnifying party in connection with this transaction.
The provisions of this Article shall survive the Closing or any termination of
this Agreement.
9. Costs and Fees. Documentary stamps for the subleasing and/or
assignment of the Joint Occupancy Agreement, if any, shall be payable by
Seller, and in no event be payable by Purchaser. Purchaser shall pay the
expenses incurred in connection with (a) the examination of title, and (b) a
survey of the Property. Any other similar costs not expressly provided for
elsewhere in this Agreement shall be divided and borne in accordance with the
usual practices in the jurisdiction where the Premises are located. The
provisions of this Article shall survive the Closing.
10. Indemnification.
10.1 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; (ii) the breach of any representation, warranty,
covenant or agreement of Seller contained in this Agreement or the
Suboccupancy Agreement; and (iii) any and all actions, suits, proceedings,
claims,
- 18 -
<PAGE>
demands, assessments, judgments, costs and expenses (including without
limitation, interest, penalties, reasonable legal fees and accounting fees)
incident to the foregoing and the enforcement of the provisions of this
Section 10.1.
10.2 Subject to the further provisions of this Article,
Purchaser shall protect, defend, hold harmless and indemnify Seller, its
partners, employees and agents, and its successors and assigns from, against
and in respect of any and all Losses that may be suffered or incurred by any
of them arising from or by reason of (i) the breach of any representation,
warranty, covenant or agreement of Purchaser contained in this Agreement or in
any document or other writing delivered pursuant to this Agreement; and (ii)
any and all actions, suits, proceedings, claims, demands, assessments,
judgments, costs and expenses (including without limitation, interest,
penalties, reasonable legal fees and accounting fees) incident to the
foregoing and the enforcement of the provisions of this Section 10.2.
10.3 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
- 19 -
<PAGE>
paid, the Indemnified Party shall not pay the same, provided the Indemnifying
Party proceeds promptly, at its or their own expense (including employment of
counsel reasonably satisfactory to the Indemnified Party), to settle,
compromise or litigate, in good faith, such claim. After notice from the
Indemnifying Party requesting the Indemnified Party not to pay such claim and
the Indemnifying Party's assumption of the defense of such claim at its or
their expense, the Indemnifying Party shall not be liable to the Indemnified
Party for any legal or other expense subsequently incurred by the Indemnified
Party in connection with the defense thereof. However, the Indemnified Party
shall have the right to participate at its expense and with counsel of its
choice in such settlement, compromise or litigation. The Indemnified Party
shall not be required to refrain from paying any claim which has matured by a
court judgment or decree, unless an appeal is duly taken therefrom and
execution thereof has been stayed, nor shall the Indemnified Party be required
to refrain from paying any claim where the delay in paying such claim would
result in the foreclosure of a lien upon any of the property or assets then
held by the Indemnified Party. The failure to provide a timely Notice of Claim
as provided in this Section 10.3 shall not excuse the Indemnifying Party from
its or their continuing obligations hereunder; however, the Indemnified
Party's claim shall be reduced by any damages to the Indemnifying Party
resulting from the Indemnified Party's delay or failure to provide a Notice of
Claim as provided in this Section 10.3.
10.4 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
- 20 -
<PAGE>
Party's obligation to protect, defend, hold harmless and indemnify the
Indemnified Party pursuant to this Article.
10.5 The obligation of Seller under Section 10.1 hereof
shall be satisfied first by a reduction in the balance due and owing from
Purchaser pursuant to the Assignment Option provisions contained in the
Suboccupancy Agreement, and, if the Assignment Option funds are inadequate to
provide indemnification to Purchaser, then from Seller directly.
11. Bulk Sales. The parties agree to waive the requirements, if any,
of all applicable bulk sales laws. As an inducement to Purchaser to enter into
such waiver, Seller represents and warrants that (a) it will not be rendered
insolvent by the transactions contemplated by this Agreement, (b) all debts,
obligations and liabilities relating to the Property and Business that are not
expressly assumed by Purchaser under this Agreement will be promptly paid and
discharged by Seller as and when they become due, and (c) the sale of the
Owned Property and the subleasing and assignment of the Joint Occupancy
Agreement Property pursuant to this Agreement does not constitute a "bulk
sale" within the meaning of applicable law. Seller agrees to indemnify and
hold Purchaser harmless from, and reimburse Purchaser for, any loss, cost,
expense, liability or damage which Purchaser may suffer or incur by virtue of
the noncompliance by Seller or Purchaser with any laws pertaining to
fraudulent conveyance, bulk sales or any similar law which might make the sale
or transfer of any part of the Owned or Joint Occupancy Agreement Property or
Business ineffective as to creditors of, or claimants against the Seller.
- 21 -
<PAGE>
12. Notices. All notices, demands, requests, consents or other
communications ("Notices") which either party may desire or be required to
give to the other hereunder shall be in writing and shall be delivered by
hand, overnight express carrier, or sent by registered or certified mail,
return receipt requested, postage prepaid, in either event, addressed to the
parties at their respective addresses first above set forth. 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 William J. Harris, Esq., 777 South Pacific
Coast Highway, Suite 101, Solana Beach, California 92075. Notices given in the
manner aforesaid shall be deemed to have been given three (3) business days
after the day so mailed, the day after delivery to any overnight express
carrier and on the day so delivered by hand. Either party shall have the right
to change its address(es) for the receipt of Notices by giving Notice to the
other party in either manner aforesaid. Any Notice required or permitted to be
given by either party may be given by that party's attorney.
13. Miscellaneous.
13.1 This Agreement shall bind and inure to the benefit of
the parties hereto and their respective successors and assigns.
13.2 This Agreement shall be governed by, interpreted under
and construed and enforced in accordance with, the laws of the State of
California.
13.3 The captions or article headings in this Agreement are
for convenience only and do not constitute part of this Agreement.
- 22 -
<PAGE>
13.4 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.
13.5 It is agreed that, except where otherwise expressly
provided in particular Articles or Sections of this Agreement, none of the
provisions of this Agreement shall survive the Closing.
13.6 This Agreement (including the Exhibits annexed hereto)
and the Suboccupancy Agreement contain the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
understandings, if any, with respect thereto.
13.7 This Agreement may not be modified, changed,
supplemented or terminated, nor may any obligations hereunder be waived,
except by written instrument signed by the party to be charged or by its agent
duly authorized in writing or as otherwise expressly permitted herein.
13.8 No waiver of any breach of any agreement or provision
herein contained shall be deemed a waiver of any preceding or succeeding
breach thereof or of any other agreement or provision herein contained. No
extension of the time for performance of any obligations or acts shall be
deemed an extension of the time for performance of any other obligations or
acts.
13.9 This Agreement may be executed in one or more
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which taken together shall constitute but one and the
same original.
- 23 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
COLLEGE GOLF CENTER PARTNERSHIP, a
California General Partnership
By: Lynn Shackelford, Inc.
----------------------------------
By:
Name: Lynn Shackelford
Title: President
By: College Golf Center LLC
By: REGOLF CORP., its member
By:
----------------------------------
Name: George Pappas
Title: President
PALM DESERT FAMILY GOLF CENTERS, INC., a
Delaware Corporation
By:
----------------------------------
Name:
Title:
- 24 -
<PAGE>
SUBOCCUPANCY AGREEMENT
THIS Suboccupancy Agreement ("SOA") is made as of the 26th day of
February, 1997, by and between COLLEGE GOLF CENTER PARTNERSHIP, a California
general partnership (hereinafter referred to as "Sublandlord") and PALM
DESERT FAMILY GOLF CENTERS, INC., a Delaware corporation (hereinafter
collectively referred to as "Subtenant") with regard to the following facts.
RECITALS
A. Sublandlord is the "Operator" under that certain Joint Occupancy
Agreement dated June 15, 1995, as amended by that certain First Amendment
dated July 1, 1995, Second Amendment dated September 8, 1995, and Third
Amendment dated December 13, 1996 (collectively "Master Occupancy
Agreement"), with The Desert Community College District of Riverside County,
California ("District"), (a copy of which Master Occupancy Agreement is
attached hereto as Exhibit A and by this reference made a part hereof)
concerning certain Premises more particularly described in the Asset Purchase
Agreement of even date herewith, by and between Sublandlord and Subtenant
("Agreement").
B. Subtenant desires to sublease from Sublandlord the Premises and
Sublandlord has agreed to sublease the Premises to Subtenant upon the terms,
covenants and conditions herein set forth.
C. Capitalized terms used herein and otherwise defined shall have the
meaning assigned to such terms in the Agreement.
AGREEMENT
In consideration of the mutual covenants contained herein, the sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
1. Sublease. Sublandlord hereby subleases and demises to Subtenant and
Subtenant hereby hires and takes from Sublandlord the Premises.
2. Term. The Term of this SOA shall commence as of the date hereof and
shall end, unless sooner terminated as provided in the Master Occupancy
Agreement, on July 31, 2000, subject to Section 9 below.
3. Rent.
(a) Base Rent. The base rent payable under this SOA shall equal the "Fixed
Rent" payable under the Master Occupancy Agreement, provided, however,
Subtenant shall not be required to pay any installment of such base rent to
Sublandlord
<PAGE>
unless and until Sublandlord has delivered evidence to Subtenant that
Sublandlord has paid such Base Rent to the District (i.e. Sublandlord shall
pay the District such rent in advance and Subtenant shall pay such rent to
Sublandlord in arrears). Sublandlord shall deliver Subtenant evidence of
Sublandlord's payment of each monthly Fixed Rent payment obligation to the
District at least fifteen (15) days prior to the due date thereof. If
Sublandlord fails to deliver Subtenant evidence of such payment within three
(3) business days after Subtenant's notice to Sublandlord that Subtenant has
failed to timely receive evidence of such payment, Subtenant may pay such
rent payment directly to the District. In addition to such Base Rent,
Subtenant shall pay to the District all other payments and charges payable by
Operator under the Master Occupancy Agreement, including by not limited to,
Percentage Rental as and when required to be paid under the Master Occupancy
Agreement.
(b) Overage Rent. In addition to such Fixed Rent, Subtenant shall pay to
Sublandlord, during the term hereof, overage rent in the monthly amount of
Two Hundred Thirty-Three Dollars ($233.00) which amount shall be payable to
Sublandlord, without notice, on the first day of each month during the term.
4. Master Occupancy Agreement. Subtenant and this SOA shall be subject in
all respects to the terms of, and the rights of the District under, the
Master Occupancy Agreement. Subject to Section 6 hereof, the covenants,
agreements, terms and provisions of the Master Occupancy Agreement insofar
are made a part of and incorporated into this SOA as if recited herein in
full, and Subtenant shall perform and comply with all of the covenants,
agreements, terms and provisions of Operator under the Master Occupancy
Agreement. As between the parties hereto only, in the event of a conflict
between the terms of the Master Occupancy Agreement and the terms of this
SOA, the terms of this SOA shall control.
5. Performance Under Master Occupancy Agreement.
5.1 Subtenant recognizes that Sublandlord is not in a position to render
any of the services or to perform any of the obligations required of
Sublandlord by the terms of this SOA. Therefore, subtenant shall not have
any claim against Sublandlord by reason of the District's failure or
refusal to comply with any of the provisions of the Master Occupancy
Agreement unless such failure or refusal is a result of Sublandlord's act
or failure to act. Subtenant covenants and warrants that it fully
understands and agrees to be subject to and bound by all of the covenants,
agreements, terms, provisions and conditions of the Master Occupancy
Agreement, except as modified herein. Furthermore, Subtenant and
Sublandlrod further covenant not to take any action or do or perform any
act or fail to perform any act which would result in the failure or breach
of any of the covenants, agreements, terms, provisions or conditions of
the Master Occupancy Agreement on the part of the Operator thereunder.
5.2 Sublandlord covenants as follows: (i) not to voluntarily terminate
the Master Occupancy Agreement, (ii) not to modify the Master Occupancy
Agreement,
<PAGE>
and (iii) to take all actions reasonably necessary to preserve the Master
Occupancy Agreement.
6. Variations from Master Occupancy Agreement. The following covenants,
agreements, terms, provisions and conditions of the Master Occupancy
Agreement are hereby modified or not incorporated herein:
6.1 Rent shall be payable in the manner described in Section 3 above.
6.2 Any notice which may or shall be given by either party hereunder
shall be either delivered personally or sent by certified mail, return
receipt requested, addressed to the party for whom it is intended at the
addresses set forth in the Agreement, or to such other address as may have
been designated in a notice given in accordance with the provisions of
this Section 6.2
6.3 Sublandlord shall deliver the Premises to Subtenant in its current
"as is" condition subject to the covenants, representations and warranties
set forth in the Agreement.
6.4 Subtenant shall carry all of the insurance required under the Master
Occupancy Agreement and Sublandlord shall be named as an additional
insured under its liability policy.
7. Indemnity. Subtenant hereby agrees to indemnify and hold Sublandlord
harmless from and against any and all claims, losses and damages, including,
without limitation, reasonable attorneys' fees and disbursements, which may
at any time be asserted against Sublandlord by (a) the District for failure
of Subtenant to perform any of the covenants, agreements, terms, provisions
or conditions contained in the Master Occupancy Agreement which by reason of
the provisions of this SOA Subtenant is obligated to perform, or (b) any
person by reason of Subtenant's use and/or occupancy of the Premises. The
provisions of this Section 7 shall survive the expiration or earlier
termination of the Master Occupancy Agreement and/or this SOA, except to the
extent any of the foregoing is caused by or due to the negligence or willful
misconduct of Sublandlord. Sublandlord shall indemnity and hold Subtenant
harmless from and against any and all claims, losses and damages, including
without limitation reasonable attorneys' fees and disbursements which arise
due to the negligence or willful misconduct of Sublandlord.
8. Assignment or Subletting. Subject further to all of the rights of the
District under the Master Occupancy Agreement and the restrictions contained
in the Master Occupancy Agreement and the restrictions contained in the
Master Occupancy Agreement, Subtenant shall not be entitled to assign this
SOA or to sublet all or any portion of the Premises without the prior written
consent of Sublandlord, which consent will not be unreasonably withheld,
conditioned or delayed by Sublandlord.
<PAGE>
9. Assignment Option. For the consideration set forth below, Sublandlord
hereby grants to Subtenant the option to acquire all of Sublandlord's right,
title and interest in the Premises and the Master Occupancy Agreement
effective as of the date which is five (5) years after the date hereof. To
exercise such option, Subtenant shall give Sublandlord written notice of such
exercise on or prior to the date which five (5) years after the date hereof.
Notwithstanding the foregoing, Sublandlord shall have the right to require
Subtenant to exercise such option at any time during the term hereof upon
thirty (30) days prior written notice in which event such assignment shall
occur on or before the date which is forty-five (45) days after Sublandlord's
delivery of such notice. The consideration for such option shall equal Four
Hundred and Ninety Thousand Dollars ($490,000). Four Hundred and Forty
Thousand Dollars ($440,000) of such option consideration shall be
nonrefundable and shall be payable to Sublandlord, in cash, on the date
hereof with the remaining Fifty Thousand Dollars ($50,000) to be payable, in
cash, on the effective date of the assignment, subject to Subtenant's offset
rights set forth in Section 10 of the Agreement. Sublandlord shall execute
and deliver to Subtenant any and all documents reasonably requested by
Subtenant to evidence the assignment of all of Sublandlord's right, title and
interest in the Premises and under the Master Occupancy Agreement to
Subtenant at the time of such assignment. The obligations of this Section 9
shall survive the expiration or early termination of this SOA. Upon such
assignment, this SOA shall be null and void.
10. Severability. If any term or provision of this SOA or the application
thereof to any person or circumstances shall, to any extent, be invalid and
unenforceable, the remainder of this SOA or the application of such term or
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby and each term or
provision of this SOA shall be valid and be enforced to the fullest extent
permitted by law.
11. Entire Agreement; Waiver. This SOA and the Agreement contain the
entire agreement between the parties hereto and shall be binding upon and
inure to the benefit of their respective heirs, representatives, successors
and permitted assigns. Any agreement hereinafter made shall be ineffective to
change, modify, waive, release, discharge, terminate or effect an abandonment
hereof, in whole or in part, unless such agreement is in writing and signed
by the parties hereto.
12. Further Assurances. The parties hereto agree that each of them, upon
the request of the other party, shall execute and deliver, in recordable form
if necessary, such further documents, instruments or agreements and shall
take such further action that may be necessary or appropriate to effectuate
the purposes of this SOA.
13. Governing Law. This SOA shall be governed by and in all respects
construed in accordance with the internal laws of the State of California.
<PAGE>
14. Consent of District. The validity of this SOA shall be subject to the
District's prior written consent hereto pursuant to the terms of the Master
Occupancy Agreement.
15. Counterparts. This SOA may be executed in multiple counterparts, all
of which together shall constitute one and the same agreement.
16. Quiet Enjoyment. Sublandlrod agrees that upon Subtenant paying rent
and observing and performing all obligations under this SOA Subtenant shall
quietly have, hold and enjoy the Premises without hindrance by or from
Sublandlord.
17. Remedies. Notwithstanding any rights and remedies at law or in equity,
in the event of Subtenant's default hereunder Sublandlord shall only have the
right to collect monetary damages from Subtenant. In no event shall
Sublandlord have the right to terminate this SOA.
18. Guaranty. This SOA is subject to and conditional upon Subtenant's
delivery to Sublandlord of a Guaranty of SOA in the form of Exhibit B
attached hereto, which shall be fully executed by Family Golf Centers, Inc.,
a Delaware corporation.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this SOA to be executed
as of the day and year first above written.
"SUBLANDLORD"
COLLEGE GOLF CENTER PARTNERSHIP,
a California general partnership
By: Lynn Shackelford, Inc.
By:
-----------------------------
Name: Lynn Shackelford
Title: President
By: COLLEGE GOLF CENTER LLC
By: REGOLF CORP., its
member
By:
-------------------------
Name: George Pappas
Title: President
"SUBTENANT"
PALM DESERT FAMILY GOLF CENTERS,
INC., a Delaware corporation
By:
-------------------------
Its:
By:
-------------------------
Its:
<PAGE>
Financial Statements
Palm Royale Country Club Operations
December 31, 1996
Maryanov Madsen Gordon & Campbell
CERTIFIED PUBLIC ACCOUNTANTS--A Professional Corporation
<PAGE>
PALM ROYALE COUNTRY CLUB OPERATIONS
TABLE OF CONTENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
PAGE
--------
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
BALANCE SHEET 2
STATEMENT OF OPERATIONS AND PARTNERS' DEFICIT IN PALM ROYALE
COUNTRY CLUB 3
STATEMENT OF CASH FLOWS 4-5
NOTES TO FINANCIAL STATEMENTS 6-11
SCHEDULES TO FINANCIAL STATEMENTS 12-13
</TABLE>
<PAGE>
[MARYANOV MADSEN GORDON & CAMPBELL LETTERHEAD]
CERTIFIED PUBLIC ACCOUNTANTS -A PROFESSIONAL CORPORATION
INDEPENDENT AUDITORS' REPORT
Family Golf Centers, Inc.
Palm Royale Country Club Operations
Melville, New York
We have audited the accompanying balance sheet of Palm Royale Country Club
Operations owned and operated by Palm Lakes Partners, Ltd., as of December
31, 1996, and the related statements of operations and partners' deficit in
Palm Royale Country Club and cash flows for the year then ended. These
financial statements are the responsibility of Palm Lakes Partners, Ltd. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Palm Royale Country Club
Operations as of December 31, 1996, and the results of their operations and
cash flows for the year then ended in conformity with generally accepted
accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information
contained in Schedules 1 and 2 is presented for the purposes of additional
analysis and is not a required part of the basic financial statements. Such
information has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, is fairly stated
in all material respects in relation to the basic financial statements taken
as a whole.
/s/ Maryanov Madsen Gordon & Campbell
June 9, 1997
1
<PAGE>
LIABILITIES AND PARTNERS' DEFICIT IN PALM ROYALE COUNTRY CLUB
<TABLE>
<CAPTION>
<S> <C>
CURRENT LIABILITIES
Current portion of long-term debt........... $ 18,863
Notes payable to related parties............ 110,791
Accounts payable............................ 6,104
Accrued expenses............................ 1,929
Prepaid golf dues........................... 9,348
Accrued interest............................ 5,907
Accrued interest--related parties........... 18,214
Due to Palm Lakes Partners, Ltd............. 373,609
-----------
Total current liabilities................. 544,765
LONG-TERM DEBT, net of current portion ...... 640,454
CONTINGENCIES................................ --
-----------
Total liabilities......................... 1,185,219
PARTNERS' DEFICIT IN PALM ROYALE COUNTRY
CLUB......................................... (247,630)
-----------
$ 937,589
===========
</TABLE>
2
<PAGE>
PALM ROYALE COUNTRY CLUB OPERATIONS
STATEMENT OF OPERATIONS AND
PARTNERS' DEFICIT IN PALM ROYALE COUNTRY CLUB
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
INCOME
Greens fees and dues......................... $ 258,390
Tournaments.................................. 15,196
Club and cart rentals........................ 20,000
Pro shop sales............................... 6,440
Clubhouse rentals............................ 10,189
-----------
Total income.............................. 310,215
-----------
EXPENSES
Golf course expenses--Schedule 1............. 175,944
Depreciation and amortization................ 49,553
Advertising.................................. 11,029
General and administrative--Schedule 2 ...... 140,010
-----------
Total expenses............................ 376,536
-----------
LOSS FROM OPERATIONS.......................... (66,321)
OTHER INCOME (EXPENSES)
Interest income.............................. 1,370
Other income................................. 3,652
Interest expense............................. (84,926)
-----------
NET LOSS...................................... (146,225)
PARTNERS' DEFICIT IN PALM ROYALE COUNTRY CLUB
Beginning of year............................ (101,405)
-----------
PARTNERS' DEFICIT IN PALM ROYALE COUNTRY CLUB
End of year.................................. $(247,630)
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
PALM ROYALE COUNTRY CLUB OPERATIONS
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
INCREASE IN CASH
Cash flows from operating activities:
Cash received from customers................. $ 324,172
Cash paid to suppliers and employees ........ (382,303)
Interest received............................ 1,370
Interest paid................................ (77,807)
-----------
Net cash used by operating activities ...... (134,568)
-----------
Cash flows from investing activities:
Capital expenditures......................... (2,441)
Proceeds from sale of fixed assets........... 350
-----------
Net cash used by investing activities ...... (2,091)
-----------
Cash flows from financing activities:
Repayments from limited partner.............. 1,136
Advances to general partner.................. (968)
Repayments to limited partners and others ... (61,000)
Net borrowings from Palm Lakes Partners,
Ltd......................................... 373,610
Repayment of note payable.................... (13,967)
-----------
Net cash provided by financing activities .. 298,811
-----------
Net increase in cash.......................... 162,152
Cash at beginning of year..................... 2,382
-----------
Cash at end of year........................... $ 164,534
===========
Continued
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
PALM ROYALE COUNTRY CLUB OPERATIONS
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
(Continued)
RECONCILIATION OF NET LOSS TO NET CASH
USED BY OPERATING ACTIVITIES:
Net loss...................................... $(146,225)
------------
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization................ 49,553
(Increase) decrease in assets:
Accounts receivable......................... 135
Inventory................................... (502)
Deposits.................................... 10,170
Increase (decrease) in liabilities:
Accounts payable............................ (52,410)
Accrued expenses............................ (4,589)
Prepaid golf dues........................... 2,181
Accrued interest............................ (124)
Accrued interest--related parties........... 7,243
------------
Total adjustments.......................... 11,657
------------
Net cash used by operating activities ..... $(134,568)
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
PALM ROYALE COUNTRY CLUB OPERATIONS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
The Palm Royale Country Club (the "Club") was purchased in April,
1993 by Palm Lakes Partners, Ltd., a Colorado limited partnership
(the "Partnership"). The Partnership owns, operates and manages the
Club's operations which consist of a golf course, pro shop, club
house and restaurant (presently leased by an outside catering
company) which are open to the general public. The Club is located
in La Quinta, California.
Estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of
estimates and assumptions regarding certain types of assets,
liabilities, revenues, and expenses. Such estimates primarily relate
to unsettled transactions and events as of the date of the financial
statements. Accordingly, upon settlement, actual results may differ
from estimated amounts.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Club considers all
highly liquid investment instruments purchased with an original
maturity of three months or less to be cash equivalents.
Allowance for Doubtful Accounts
The Club uses the allowance method for determining uncollectible
accounts. At December 31, 1996, the allowance for doubtful accounts
amounted to $13,021.
Inventory
The Club has a limited inventory of retail items sold in the golf
shop. Inventory is valued at the lower of cost or market on the
first-in first-out (FIFO) basis.
Continued
6
<PAGE>
PALM ROYALE COUNTRY CLUB OPERATIONS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment
Property and equipment are stated at cost and are depreciated using
the straight-line method over the estimated useful lives of the
assets as follows:
<TABLE>
<CAPTION>
<S> <C>
Golf course improvements 30 years
Clubhouse building 30 years
Furniture and fixtures 10 years
Machinery and equipment 5-7 years
</TABLE>
Acquisition Costs
Acquisition costs incurred by the Partnership as a result of its
purchase of the Club are amortized using the straight-line method over
five years.
Partners' Deficit in Palm Royale Country Club
Partners' deficit is based on the Club's operations since purchased in
1993. The Partnership's other activity is not reflected in these
financial statements, and accordingly, only the assets, liabilities
and results of operations from Palm Royale Country Club are presented.
Income Taxes
Since the Club is an operating activity owned by a Colorado limited
partnership, no income taxes are applicable.
Advertising
Advertising costs, except for costs associated with direct-response
advertising, are charged to operations when incurred. The costs of
direct-response advertising are capitalized and amortized over the
period during which future benefits are expected to be received. At
December 31, 1996, no costs were capitalized and amortized.
7
<PAGE>
PALM ROYALE COUNTRY CLUB OPERATIONS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1: ACCOUNTS RECEIVABLE FROM RELATED PARTIES
The Club bills the Palm Royale Country Club Homeowners' Association
(the "Association") its portion of the cost of water withdrawn from
the well on the golf course property, the cost of the electricity or
other energy used to pump the water from such well, the cost of
maintaining and repairing such pump and well (including their
replacement, if necessary), and any taxes required to be paid in
connection with the withdrawal of water from such well, which
portion is equal to the ratio of the area of the landscaped common
area to the sum of the area of that portion of the golf course
property consisting of irrigated landscaping and the area of the
landscaped common property. At present, the landscaped common
property amounts to approximately 40.4% of the total property.
During the year ended December 31, 1996, the Association reimbursed
the Club $11,341 for such expenses. As of December 31, 1996,
accounts receivable from the Association amounted to $13,875.
The Association is contesting billings for 1994 and 1995 in the
amount of $13,021. This amount is included in the allowance for
doubtful accounts at December 31, 1996.
As of December 31, 1996, accounts receivable from general partner
David Evans (50% shareholder of the corporation which is the general
partner of the limited partnership which owns and operates the Club)
amounted to $968.
NOTE 2: PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at cost, less
accumulated depreciation as of December 31, 1996:
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
Golf course improvements ..... $441,226
Clubhouse building............ 219,657
Furniture and fixtures........ 35,404
Operating equipment........... 80,272
Machinery..................... 17,069
Land.......................... 110,306
----------
903,934
Less accumulated
depreciation............... 146,850
----------
$757,084
==========
</TABLE>
8
<PAGE>
PALM ROYALE COUNTRY CLUB OPERATIONS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 3: LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1996:
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
Note payable to bank at variable rate equal to
two percent (2%) per annum in excess of the
prime interest rate as announced by Bank of
America, monthly interest and principal payments
amortized over twenty (20) years, due April 23, 2003,
and secured by real property, assigned leases and
rents, and personal property.......................... $659,317
Less current portion.................................. 18,863
----------
Long-term debt, net of current portion................ $640,454
==========
</TABLE>
The following is a summary of principal maturities of long-term debt:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, AMOUNT
- ------------------- ---------
<S> <C>
1997.............. $ 18,863
1998.............. 20,942
1999.............. 23,249
2000.............. 25,812
2001 and
thereafter....... 570,451
---------
$659,317
=========
</TABLE>
9
<PAGE>
PALM ROYALE COUNTRY CLUB OPERATIONS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 4: NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties consisted of the following at
December 31, 1996:
<TABLE>
<CAPTION>
AMOUNT
---------
<S> <C>
Note payable to general partner, David
Evans at ten percent (10%) per annum,
due on demand............................. $ 34,791
Note payable to James R. Evans (brother
of general partner, David Evans) at ten
percent (10%) per annum, due on demand ... 6,000
Note payable to limited partner, Gene
Schneider at six percent (6%) per annum,
due on demand............................. 70,000
--------
$110,791
========
</TABLE>
NOTE 5: DUE TO PALM LAKES PARTNERS, LTD.
In October 1995, the Partnership sold an operation it previously
managed, Palm Lakes Golf Course, resulting in a note receivable to
the Partnership of $400,000 plus interest. During the year ended
December 31, 1996, the note and resulting interest was paid in full,
with the proceeds deposited into the Club's bank account. These
proceeds were used to pay additional expenses relating to Palm Lakes
Golf Course, as well as subsidize the Club's current year
operations. The net of the cash received and disbursed on behalf of
Palm Lakes Golf Course has been shown in these financial statements
as monies due to the Partnership. At December 31, 1996, the amount
due to Palm Lakes Partners, Ltd. was $373,609.
NOTE 6: CONTINGENCIES
Subsequent to year-end, the Club was informed by the local utility
company that billings since the date of connection were prepared
incorrectly resulting in a balance due for this period of $167,437.
Management of the Club has indicated they are not in agreement with
this additional billing. It is uncertain at this time if the utility
company will pursue collection of this amount, and accordingly, no
accrual has been reflected in these financial statements.
10
<PAGE>
PALM ROYALE COUNTRY CLUB OPERATIONS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7: OPERATING LEASES
The Club leases a copy machine under an operating lease expiring
September, 1997.
A schedule of minimum future payments under this lease at December
31, 1996 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, AMOUNT
- -------------- --------
<S> <C>
1997......................... $652
====
</TABLE>
Operating lease expense for the year ended December 31, 1996 was $869.
NOTE 8: OPERATING LEASE AGREEMENT
The Club leases its clubhouse restaurant facilities - consisting of
the kitchen and storage room/office with use of the bar, dining and
patio areas upon request - to an outside catering company
("lessor") for the purposes of preparation of hot and cold food and
beverages for sale on and off the premises. The term of the lease is
for a five (5) year period beginning May 1, 1995, with an option to
extend the term, unless sooner terminated pursuant to cancellation
privileges contained within the lease agreement. The annual rent for
the first two (2) years is ten thousand dollars ($10,000) per year
to be paid in ten (10) equal installments on the first of each month
except for the months of July and August. The rent for the third and
fourth years of the term of this lease shall increase four percent
(4%) to ten thousand four hundred dollars ($10,400) and thereafter
increase four percent (4%) to ten thousand eight hundred sixteen
dollars ($10,816) for the fifth and last year of the lease. Lease
income earned during the year ended December 31, 1996 was $10,000.
NOTE 9: CONCENTRATION OF CREDIT RISK
The Club maintains its cash account in one commercial bank located
in the Coachella Valley. The total cash balance is secured by the
Federal Deposit Insurance Corporation ("FDIC") up to $100,000. At
December 31, 1996, and various times throughout the year, the Club's
deposits exceeded the federally insured limit.
NOTE 10: SUBSEQUENT EVENTS
Subsequent to year-end, the Partnership entered into a letter of
intent regarding the sale of the Club to an unrelated entity. Terms
of this agreement have not yet been finalized.
11
<PAGE>
Schedule 1
PALM ROYALE COUNTRY CLUB OPERATIONS
SCHEDULE OF GOLF COURSE EXPENSES
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Golf course maintenance............ $ 71,270
Golf course utilities ............. 16,039
Golf course wages.................. 82,336
Pro shop expenses.................. 6,299
--------
$175,944
========
</TABLE>
See accompanying notes and auditors' report.
12
<PAGE>
Schedule 2
PALM ROYALE COUNTRY CLUB OPERATIONS
SCHEDULE OF ADMINISTRATIVE EXPENSES
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Bank charges....................... $ 1,884
Insurance.......................... 17,369
Licenses........................... 352
Legal and accounting............... 18,522
Maintenance--clubhouse............. 4,668
Miscellaneous...................... 202
Office expense..................... 1,644
Operating expense.................. 3,649
Security........................... 296
Taxes--real and personal property . 12,686
Taxes--payroll..................... 13,401
Telephone.......................... 2,806
Utilities.......................... 10,153
Wages.............................. 52,378
--------
$140,010
========
</TABLE>
See accompanying notes and auditors' report.
13
<PAGE>
CARVER GOLF ENTERPRISES, INC.
FINANCIAL STATEMENTS
Year Ended December 31, 1996
<PAGE>
CARVER GOLF ENTERPRISES, INC.
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PAGE
--------
Accountant's Report................................... 1
Financial Statements:
Balance Sheet........................................ 2-3
Statement of Operations.............................. 4
Statement of Accumulated Deficit..................... 5
Statement of Cash Flows.............................. 6
Notes to Financial Statements........................ 7-9
Supplementary Information:
Schedule I -General and Administrative Expenses ..... 10
</TABLE>
<PAGE>
PATRICK J. BARRETT
Certified Public Accountant
1109 Washington Street
Weymouth, Massachusetts 02189
(617) 337-2066
Board of Directors
Carver Golf Enterprises, Inc.
Carver, Massachusetts
I have audited the accompanying balance sheet of Carver Golf Enterprises,
Inc. as of December 31, 1996, and the related statements of operations,
accumulated deficit and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based
on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating overall
financial statement presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Carver Golf Enterprises,
Inc., as of December 31, 1996, and the results of its operation and its cash
flows for the year then ended in conformity with generally accepted
accounting principals.
/s/ Patrick J. Barrett
Certified Public Accountant
June 30, 1997
Weymouth, Massachusetts
<PAGE>
Page 2
CARVER GOLF ENTERPRISES, INC.
BALANCE SHEET
December 31, 1996
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current Assets:
Cash $ 6,231
Prepaid expenses 37,505
Other receivables 210
-------------
Total Current Assets 43,946
-------------
Property and Equipment:
Land improvements and buildings 1,560,229
Equipment and fixtures 2,116,320
Vehicle 10,000
-------------
Total Property and Equipment 3,686,549
Less, accumulated depreciation (1,903,409)
-------------
Property and Equipment -Net 1,783,140
-------------
Other Assets:
Covenant not to compete, net of accumulated amortization of
$8,328 12,159
Organization costs, net of accumulated amortization of $3,636 9,077
-------------
Total Other Assets 21,236
-------------
Total $ 1,848,322
=============
</TABLE>
See accountant's report and accompanying notes.
<PAGE>
Page 3
CARVER GOLF ENTERPRISES, INC.
BALANCE SHEET (CONTINUED)
December 31, 1996
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
<S> <C>
Current Liabilities:
Accounts payable $ 58,305
Note payable (Note 2) 29,284
Accrued expenses 23,336
-------------
Total Current Liabilities 110,925
-------------
Long-Term Debt:
Due to affiliate (Note 3) 3,819,815
Due to stockholders (Note 4) 182,000
-------------
Total Long-Term Debt 4,001,815
-------------
Stockholders' Deficit:
Common stock,20,000 shares authorized
no par value, 6,915
shares
issued and outstanding 624,000
Accumulated deficit (2,888,418)
-------------
Total Stockholders' Deficit (2,264,418)
-------------
Total $ 1,848,322
=============
</TABLE>
See accountant's report and accompanying notes.
<PAGE>
Page 4
CARVER GOLF ENTERPRISES, INC.
STATEMENT OF OPERATIONS
Year Ended December 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNT PERCENT
------------ ---------
Income $1,099,774 100.0%
General and administrative expenses (Schedule I) 1,707,970 155.3
------------ ---------
Loss from operations (608,196) (55.3)
Other income (expense):
Interest expense (306,615) (27.9)
Bad debt (7,575) (.7)
------------ ---------
Loss before income taxes (922,386) (83.9)
Income taxes - state (456) -
------------ ---------
Net loss $ (922,842) (83.9)%
============ =========
</TABLE>
See accountant's report and accompanying notes.
<PAGE>
Page 5
CARVER GOLF ENTERPRISES, INC.
STATEMENT OF ACCUMULATED DEFICIT
Year Ended December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Accumulated Deficit
- ---------------------------
Balance, December 31, 1995
As previously reported $(1,957,576)
Adjustment -(Note 6) (8,000)
--------------
As restated (1,965,576)
Net loss (922,842)
--------------
Balance, December 31, 1996 $(2,888,418)
==============
</TABLE>
See accountant's report and accompanying notes.
<PAGE>
Page 6
CARVER GOLF ENTERPRISES, INC.
STATEMENT OF CASH FLOWS
Year Ended December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Cash flows from (used for) operations:
Net loss $(922,842)
Non-cash items included in net loss
Depreciation and amortization 703,703
------------
Changes in:
Prepaid expenses (219,139)
Other receivables 36,365
Accrued expenses (88,573)
Accounts payable (39,407)
------------
Net cash provided from (used for) operations (332,086)
------------
Cash provided from (used for) financing activities:
Payments to affiliate (50,000)
Proceeds from affiliate 300,904
Proceeds from note payable 29,284
Proceeds from stockholders 172,500
Repayment to stockholders (738,000)
------------
Net cash provided from (used for) financing
activities (285,312)
------------
Cash provided from (used for) investment activities:
Additions to fixed assets (9,283)
Issuance of common stock 624,000
------------
Net cash used for investment activities 614,717
------------
Net decrease in cash (2,681)
Cash, beginning of year 8,912
------------
Cash, end of year $ 6,231
============
</TABLE>
See accountant's report and accompanying notes.
<PAGE>
Page 7
CARVER GOLF ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996
1. Significant Accounting Policies
Company's activities:
The Company is engaged in the industry of providing entertainment
facilities to the general public.
Basis of accounting:
The Company's policy is to prepare its financial statements on the accrual
basis of accounting.
Equipment:
The cost of equipment is depreciated using the declining balance method
over the estimated useful lives of the related assets for financial
statement purposes. Repairs and maintenance are charged to operations when
incurred. Betterments, renewals and purchases of more than $500.00 are
capitalized. When fixed assets are sold or otherwise disposed of, the
asset account and related accumulated depreciation account are relieved,
and any gain or loss is included in operations.
2. Note Payable
Note payable consists of the following:
Note payable Lloyds Credit Company, monthly payments of $7,533.80,
including interest at 13.5%, due April 4, 1997, unsecured.
$29,284
3. Due to Affiliate
Due to Affiliate at December 31, 1996, consists of the following:
The Company has an informal loan with its affiliate National
Offset Blanket Supply, Inc. Payments of $50,000 have been made
during the year. This loan has no specific due date and accrues
interest at 8.25%.
$3,819,815
<PAGE>
Page 8
CARVER GOLF ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year Ended December 31, 1996
4. Due to Stockholders
Due to stockholders consists of advances to the Company by the
stockholders. Repayment terms are undefined and depend upon the continued
operation of the Company, and future decisions by management.
$182,000
5. Income Taxes
Income taxes consist of state excise taxes of $456.
6. Prior Period Adjustments
Beginning accumulated deficit has been restated in the amount of $8,000
due to the fact royalties were shown on the balance sheet as prepaid,
rather than expensed in 1995.
7. Lease Obligations
The Company has the following operating lease obligations:
A lease to rent space at its operating location in Carver, Massachusetts
with a lease term of ten years beginning December 31, 1992, and ending
December 31, 2002, with a monthly rent of $6,625.00 as of December 31,
1997, with increases each year for the remaining terms of the lease. The
lease contains an option to purchase the premises at any time after
December 31, 1997, at a total purchase price of One Million, Seventy Six
Thousand Five Hundred Dollars ($1,076,500.00).
A new lease for a copy machine with a lease term beginning February 15,
1996, and ending January 15, 1999, with monthly payments of $237.20, plus
taxes and insurance.
<PAGE>
Page 9
CARVER GOLF ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year Ended December 31, 1996
7. Lease Obligations (continued)
Minimum future rental payments under the operating leases as of December
31, 1996, are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 81,346
1998 84,846
1999 86,237
2000 89,000
2001 92,000
2002 95,000
---------
$528,429
=========
</TABLE>
8. Land Restrictions
An adjacent property owner has a right-of-way through the property,
specifically the driving range. An access road was built by Carver Golf
Enterprises, Inc. that allows access to the property by going around the
perimeter of the property which mitigates any interference. If the
adjacent property owner enforces his right to use the right-of-way instead
of utilizing the access road, it would have a material impact on income.
9. Subsequent Events
The assets of the Company have been sold to Family Golf Centers, Inc., a
publicly traded company, in exchange for 114,000 shares of Family Golf
Centers, Inc. stock which had a value of $22.75 per share, $2,593,500
total, as of the date of sale which was effective June 30, 1997. National
Offset Blanket Supply, Inc. will forgive debt to the extent liabilities
exceed assets after the sale of assets so that all liabilities can be
paid.
10. Revenue Sharing
Some equipment is not owned, (i.e.) arcade machines etc., by Carver Golf
Enterprises, Inc., but is on a revenue sharing agreement and owned by
outside parties.
<PAGE>
SUPPLEMENTARY INFORMATION
<PAGE>
Page 10
CARVER GOLF ENTERPRISES, INC.
SCHEDULE I -GENERAL AND ADMINISTRATIVE EXPENSES
Year Ended December 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
AMOUNT PERCENT
------------ ---------
Depreciation $ 691,739 62.9%
Payroll 309,174 28.1
Arcade commissions 94,755 8.6
Insurance 81,125 7.4
Advertising 72,685 6.6
Rent 72,000 6.5
Ice cream shop expenses 66,413 6.0
Utilities 51,258 4.7
Real estate taxes 39,487 3.6
Payroll taxes 38,021 3.5
Go-cart expenses 22,463 2.0
Hayride expenses 20,710 1.9
Driving range expenses 13,483 1.2
Amortization 11,964 1.1
Gasoline 11,962 1.1
Arcade redemption 11,395 1.0
Office 10,462 1.0
Operating supplies and expenses 10,079 .9
Telephone 8,183 .8
Medical insurance 8,042 .7
Legal and accounting 7,577 .7
Security 6,127 .6
Repairs and maintenance 5,697 .5
Postage 5,171 .5
Hayride consulting 4,250 .4
Mini-golf expenses 4,220 .4
Bumper boat expenses 3,952 .4
Water testing expenses 3,574 .3
Bank service charges 3,151 .3
Equipment lease 2,963 .3
Payroll fees 2,430 .2
Fees and permits 1,725 .2
Disposal 1,641 .1
Dues and subscriptions 1,605 .1
Uniforms 1,600 .1
Donations 1,436 .1
Fines 1,399 .1
Travel 1,143 .1
Orbitron commissions 1,134 .1
Open house expenses 974 .1
Batting cages expenses 801 .1
------------ ---------
Total General and Administrative Expenses $1,707,970 155.3%
============ =========
</TABLE>
See accountant's report and accompanying notes.
<PAGE>
PINLEY ENTERPRISES LTD
Financial Statements
For The
Year Ended December 31, 1996
with
Accountants' Audit Report
<PAGE>
HIRSCHHORN FRY & ASSOCIATES
2300 PHILADELPHIA NATIONAL BANK BUILDING
BROAD AND CHESTNUT STREETS
SUITE 2300
PHILADELPHIA, PA 19107
To the Shareholders
Pinley Enterprises Ltd.
Southampton, PA
We have audited the accompanying balance sheet of Pinley Enterprises Ltd. as
of December 31, 1996, the related statements of income and cash flows for the
year then ended, in accordance with Statements on Standards for Accounting
and Auditing Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of the management (owners) of Pinley Enterprises Ltd. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pinley Enterprises Ltd., as
of December 31, 1996, and the results of its operations and its cash flow for
the year then ended in conformity with generally accepted accounting
principles.
Respectfully submitted,
/s/ Hirschhorn, Fry & Associates
Hirschhorn, Fry & Associates
Certified Public Accountants
May 7, 1997
<PAGE>
PINLEY ENTERPRISES, LTD.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Current Assets:
Cash .......................... $ 4,700
----------
TOTAL CURRENT ASSETS .......... $ 4,700
Other Assets:
Advances ...................... 8,000
Fixed Assets:
Land .......................... $150,000
Intangible Assets ............. 21,482
Less Accumulated amortization (16,110)
Property, Plant and Equipment 715,098
Less Accumulated Depreciation (80,947)
----------
Total Fixed Assets ............ 789,523
----------
TOTAL ASSETS .................. $802,223
==========
LIABILITIES:
Current Liabilities:
Notes Payable ................. $ 36,000
Long-term Liabilities:
Notes Payable ................. 633,092
EQUITY:
Capital Stock ................. $ 1,000
Shareholder Loans ............. 217,262
Retained Earnings ............. (85,131)
----------
Total Capital ................. 133,131
----------
TOTAL LIABILITIES AND EQUITY . $802,223
==========
</TABLE>
*See accompanying notes and accountants' audit report.
<PAGE>
PINLEY ENTERPRISES, LTD.
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
RENTAL INCOME . $70,057
---------
Total Revenue . $ 70,057
EXPENSES:
Amortization .. $ 4,296
Miscellaneous . 604
Taxes .......... 3,263
Interest ....... 64,688
Depreciation .. 22,426
---------
TOTAL EXPENSES 95,277
----------
NET INCOME ..... $(25,220)
==========
</TABLE>
*See accompanying notes and accountants' audit report
<PAGE>
PINLEY ENTERPRISES, LTD.
STATEMENT OF CASH FLOWS*
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES
Net Income .......................................................... $(25,220)
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Depreciation and Amortization ....................................... $26,722
Total Adjustments ................................................... 26,722
-----------
Net Cash Provided by Operating Activities ........................... $ 1,502
===========
</TABLE>
*See accompanying notes and accountants' audit report.
<PAGE>
PINLEY ENTERPRISES, LTD.
STATEMENT OF CASH FLOWS* (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Received from Operations ......... $ 70,057
Cash Paid to Vendors and Employees ... (8,867)
Interest Paid ......................... (59,688)
----------
$ 1,502
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Notes Payable ........... $ 34,592
Repayment of investor notes ........... (50,000)
Proceeds from Notes Payable--Related . 8,780
----------
(6,628)
---------
NET INCREASE IN CASH .................. (5,126)
CASH AT BEGINNING OF PERIOD ........... 9,826
---------
CASH AT END OF PERIOD ................. $ 4,700
=========
</TABLE>
*See accompanying notes and accountants' audit report.
<PAGE>
PINLEY ENTERPRISES, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Pinley Enterprises, Inc. is primarily engaged in management of the real
estate of the Family Golf Center. The Company was incorporated in March of
1993.
This summary of significant accounting policies of Pinley Enterprises, Inc.
is presented to assist in understanding the company's financial statements.
The financial statements and notes are representations of the company's
management, which is responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting principles and
have been consistently applied in the preparation of the financial
statements.
ACCOUNTING METHOD
The Company maintains its' books and records on a cash basis. However since
the business is seasonal the Company does not have any material accounts
receivables or payables at years end.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is provided for
income tax and financial reporting purposes at rates based on the following
useful lives:
<TABLE>
<CAPTION>
<S> <C>
Building .... 39
Furniture .. 7
Equipment .. 5
</TABLE>
Expenditures for major renewals and betterment's that extend the useful lives
of property and equipment are capitalized. Expenditures for maintenance and
repairs are charged to expenses as incurred.
INCOME TAXES
The Company files its federal income tax return as a sub chapter S
Corporation on the cash basis.
<PAGE>
PINLEY ENTERPRISES, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 2 -- NOTES PAYABLE -- SHAREHOLDERS
The Company has a notes payable and advances from its shareholder and related
entities.
NOTE 3 -- RELATED PARTY TRANSACTIONS
The Company has a notes payable and advances to its shareholders and related
entities.
The Company leases the real estate to Southampton Family Golf Center, Inc.
NOTE 4 -- COMMON STOCK
The Company is authorized to issue 1,000 shares at a par value of $1.00 per
share. The Company has 1,000 shares issued and outstanding.
<PAGE>
Southampton Family Golf Center, Inc.
Financial Statements
For The
Year Ended December 31, 1996
with
Accountants' Audit Report
<PAGE>
HIRSCHHORN FRY & ASSOCIATES
2300 PHILADELPHIA NATIONAL BANK BUILDING
BROAD AND CHESTNUT STREETS
SUITE 2300
PHILADELPHIA, PA 19107
To the Shareholders
Southampton Family Golf Center, Inc.
Southampton, PA
We have audited the accompanying balance sheet of Southampton Family Golf
Center, Inc. as of December 31, 1996, the related statements of income and
cash flows for the year then ended, in accordance with Statements on
Standards for Accounting and Auditing Services issued by the American
Institute of Certified Public Accountants. All information included in these
financial statements is the representation of the management (owners) of
Southampton Family Golf Center, Inc. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Southampton Family Golf
Center, Inc., as of December 31, 1996, and the results of its operations and
its cash flow for the year then ended in conformity with generally accepted
accounting principles.
Respectfully submitted,
/s/ Hirschhorn, Fry & Associates
Hirschhorn, Fry & Associates
Certified Public Accountants
May 7, 1997
<PAGE>
SOUTHAMPTON FAMILY GOLF CENTER, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Current Assets:
Cash .......................... $ 5,489
Fixed Assets:
Property, Plant and Equipment $ 78,182
Less Accumulated Depreciation (64,359)
----------
Total Fixed Assets ............ 13,823
---------
TOTAL ASSETS .................. $19,312
=========
LIABILITIES:
Current Liabilities:
Advances Payable .............. $ 8,000
Payroll Taxes Payable ......... 1,219
----------
Total Current Liabilities .... $ 9,219
Long-term Liabilities:
Notes Payable .................
Equity:
Capital Stock ................. $ 1,000
Shareholder Loans ............. 47,657
Retained Earnings ............. (38,564)
----------
Total Capital ................. 10,093
---------
TOTAL LIABILITIES AND EQUITY . $19,312
=========
</TABLE>
*See accompanying notes and accountants' audit report.
<PAGE>
SOUTHAMPTON FAMILY GOLF CENTER, INC.
STATEMENT OF REVENUE AND EXPENSES
JANUARY 1, 1996 THROUGH DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
REVENUE
Gross Receipts ............. $216,335
----------
TOTAL REVENUE .............. $216,335
EXPENSES:
Insurance .................. $ 9,811
Maintenance ................ 6,546
Utilities .................. 11,941
Telephone .................. 3,152
Payroll & Related Expenses 33,911
Real Estate Taxes .......... 8,025
Supplies ................... 7,446
Miscellaneous .............. 2,089
Professional Fees .......... 2,910
Office & Related ........... 889
Payroll Taxes .............. 5,388
Other Taxes ................ 300
Advertising ................ 4,923
Rent ....................... 88,602
Rent--Pro Shop ............. (18,478)
Depreciation ............... 12,755
----------
TOTAL EXPENSES ............. 180,210
----------
NET INCOME ................. $ 36,125
==========
</TABLE>
*See accompanying notes and accountants' audit report.
<PAGE>
SOUTHAMPTON FAMILY GOLF CENTER, INC.
STATEMENT OF CASH FLOWS*
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES
Net Income .......................................................... $36,125
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Depreciation ....................................................... $12,755
Increase in Accounts Payable ....................................... 1,219
Change in Assets and Liabilities:
Total Adjustments ................................................... 13,974
---------
Net Cash Provided by Operating Activities ........................... $50,099
=========
</TABLE>
*See accompanying notes and accountants' audit report
<PAGE>
SOUTHAMPTON FAMILY GOLF CENTER, INC.
STATEMENT OF CASH FLOWS (CONTINUED)*
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Received from Operations ......... $ 217,835
Cash Paid to Vendors and Employees ... (167,736)
-----------
$50,099
CASH FLOWS FROM INVESTING ACTIVITIES
None
CASH FLOWS FROM FINANCIAL ACTIVITIES
Proceeds from Notes Payable--Related . (50,000)
-----------
NET INCREASE IN CASH ................... 99
CASH AT BEGINNING OF PERIOD ............ 5,390
---------
CASH AT END OF PERIOD .................. $ 5,489
=========
</TABLE>
*See accompanying notes and accountants' audit report
<PAGE>
SOUTHAMPTON FAMILY GOLF CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Southampton Family Golf Center, Inc. is primarily engaged in management of
Family Golf Center. The Company was incorporated in March of 1993.
This summary of significant accounting policies of Southampton Family Golf
Center, Inc. is presented to assist in understanding the company's financial
statements. The financial statements and notes are representations of the
company's management, which is responsible for their integrity and
objectivity. These accounting policies conform to generally accepted
accounting principles and have been consistently applied in the preparation
of the financial statements.
ACCOUNTING METHOD
The Company maintains its' books and records on a cash basis. However since
the business is seasonal the Company does not have any material accounts
receivables or payables at years end.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is provided for
income tax and financial reporting purposes at rates based on the following
useful lives:
<TABLE>
<CAPTION>
<S> <C>
Building .... 39
Furniture .. 7
Equipment .. 5
</TABLE>
Expenditures for major renewals and betterment's that extend the useful lives
of property and equipment are capitalized. Expenditures for maintenance and
repairs are charged to expenses as incurred.
INCOME TAXES
The Company files its federal income tax return as a sub chapter S
Corporation on the cash basis.
<PAGE>
SOUTHAMPTON FAMILY GOLF CENTER, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 2 -- NOTES PAYABLE -- SHAREHOLDERS
The Company has a notes payable and advances from its shareholder and related
entities.
NOTE 3 -- RELATED PARTY TRANSACTIONS
The Company has a notes payable and advances to its shareholders and related
entities.
The Company leases the real estate for its Golf Center from Pinley
Enterprises, Inc.
NOTE 4 -- COMMON STOCK
The Company is authorized to issue 1,000 shares at a par value of $1.00 per
share. The Company has 1,000 shares issued and outstanding.
<PAGE>
AMERICAN GOLF CORPORATION
SAN BRUNO PRACTICE CENTER
<PAGE>
AMERICAN GOLF CORPORATION
SAN BRUNO PRACTICE CENTER
FINANCIAL STATEMENTS
DECEMBER 31, 1996
<PAGE>
[WEIL & COMPANY LLP LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
May 13, 1997
American Golf Corporation
Santa Monica, California 90405
We have audited the accompanying balance sheet of San Bruno Practice Center,
a division of American Golf Corporation, as of December 31, 1996, and the
related statements of operations, home office equity, and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of San Bruno Practice Center as
of December 31, 1996, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ Weil & Company LLP
WEIL & COMPANY LLP
<PAGE>
SAN BRUNO PRACTICE CENTER
BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS
- ----------------------------------------
Current assets:
Cash.................................... $ 1,200
Inventories (note 1).................... 52,226
Prepaid expenses........................ 83,154
Other receivables....................... 80,000
------------
Total current assets................... 216,580
Property and equipment net (note 2) ..... 165,643
Leasehold rights......................... 120,000
Due from Home Office (note 5)............ 781,792
------------
Total assets........................... $1,284,015
============
LIABILITIES AND EQUITY
- ----------------------------------------
Current liabilities:
Accounts payable and accrued
liabilities............................ $ 44,000
Payable to Home Office (note 5) ........ 134,090
------------
Total current liabilities.............. 178,090
Payable to Home Office (note 5).......... 174,286
------------
Total liabilities...................... 352,376
Home Office equity....................... 931,639
------------
Total liabilities and equity........... $1,284,015
============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SAN BRUNO PRACTICE CENTER
STATEMENT OF HOME OFFICE EQUITY
DECEMBER 31, 1996
<TABLE>
<CAPTION>
RETAINED TOTAL
EARNINGS EQUITY
---------- ----------
<S> <C> <C>
Balances at December 31,
1995......................... $983,513 $983,513
Net loss..................... (51,874) (51,874)
---------- ----------
Balances at December 31,
1996......................... $931,639 $931,639
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SAN BRUNO PRACTICE CENTER
STATEMENT OF OPERATIONS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Revenue...................................... $1,341,543
Costs and expenses:
Merchandise and food costs.................. 124,733
Selling, general and administrative
expenses................................... 1,163,322
Depreciation and amortization............... 69,950
------------
Total costs and expenses................... 1,358,005
------------
Loss from operations......................... (16,462)
Interest expense (note 5)................... 35,412
------------
Net loss................................... $ (51,874)
============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SAN BRUNO PRACTICE CENTER
STATEMENT OF CASH FLOWS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net loss...................................................................... $ (51,874)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization................................................ 69,950
Decrease in inventories...................................................... 19,559
Decrease in other assets and prepaid expenses................................ 35,255
Decrease in accounts payable and accrued liabilities......................... (48,257)
-----------
Net cash provided by operating activities................................... 24,633
-----------
Cash flows used by investing activities--capital expenditures.................. (152,371)
-----------
Cash flows provided by financing activities:
Net due from Home Office...................................................... 250,968
Payable to Home Office........................................................ (123,480)
-----------
Net cash provided by financing activities................................... 127,488
-----------
Net decrease in cash........................................................... (250)
Cash at beginning of year...................................................... 1,450
-----------
Cash at end of year............................................................ $ 1,200
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SAN BRUNO PRACTICE CENTER
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
San Bruno Practice Center is a recreational facility managed by American
Golf Corporation (Home Office). The Home Office manages and operates a
driving range under a lease with the City of San Bruno (City).
(a) INVENTORIES
Inventories, consisting primarily of golf clubs and apparel, are valued
at the lower of cost (first-in, first-out) or market.
(b) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are depreciated using
the straight-line method over the shorter of the lease or the estimated
useful life of the asset.
When property and equipment are sold or otherwise disposed of, the asset
account and related accumulated depreciation account are relieved, and
any gain or loss is included in operations. Expenditures for maintenance
and repairs are charged against operations. Renewals and betterments
that materially extend the life of an asset are capitalized.
(c) STATEMENT OF CASH FLOWS
For purpose of the statement of cash flows, the Home Office considers
temporary cash investments purchased with original maturities of three
months or less and which are available for use in operations to be cash
equivalents. No cash was paid for interest or income taxes in 1996.
(d) USE OF ESTIMATES
Management of the Home Office has made certain estimates and assumptions
relating to the reporting of assets and liabilities to prepare the
accompanying financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
--------------
<S> <C> <C>
Golf course and clubhouse
equipment........................ $ 238,379 4-7 years
Buildings......................... 145,122 20 years
-----------
383,501
Less accumulated depreciation ... (217,858)
-----------
$ 165,643
===========
</TABLE>
Depreciation expense for the year ended December 31, 1996 was $9,950.
<PAGE>
SAN BRUNO PRACTICE CENTER
NOTES TO FINANCIAL STATEMENTS
(3) LEASEHOLD RIGHTS
As a condition to exercise the option to extend the lease term. San
Bruno was required to pay the City a lease extension payment of
$300,000. This amount is being amortized straight line over the term of
the lease. Amortization for the year ended December 31, 1996 was
$60,000.
(4) INCOME TAX
The Home Office has elected to be taxed as an S corporation under the
Internal Revenue Code of 1986, as amended. Accordingly, corporate income
is taxed directly to the shareholders for federal income tax reporting
purposes. The Home Office therefore has no provision in its consolidated
financial statements for federal income taxes.
(5) RELATED PARTY TRANSACTIONS
The amounts due from the Home Office at December 31, 1996 represent net
advances to and from the Home Office pursuant to a cash sharing
arrangement with the City under which the Home Office withdraws cash
from San Bruno on a periodic basis for deposit in a concentration
account and provides cash to San Bruno to cover necessary operating
expenditures. The net advances are due on demand and are
noninterest-bearing. These advances are included in long term assets
since San Bruno does not intend to demand payment.
The Payable to Home Office represents funding from the Home Office for
capital improvements at San Bruno Practice Center.
The following is a summary of the Payable to Home Office at December 31,
1996:
<TABLE>
<CAPTION>
<S> <C>
Advance due February, 1999 at 10% annual interest
rate.............................................. $217,328
Advance due February, 1999 at 10% annual interest
rate.............................................. 91,048
----------
Total advances payable............................. 308,376
Less current maturities............................ 134,090
----------
Advance payable, non-current....................... $174,286
==========
</TABLE>
The amounts allocated to interest expense are eliminated on the Home
Office books in consolidation.
(6) LEASES
American Golf Corporation leases the practice center from the City for a
period of 5 years expiring on December 31, 1998 with three consecutive
options to extend for five years each. The lease provides for minimum
annual payments of $320,000 payable quarterly. In addition, minimum rent
is due once a year for occupancy computed at 10% of the base lease
payment not to exceed $7,500. The lease also provides for percentage
rent, which is based on the following:
<PAGE>
SAN BRUNO PRACTICE CENTER
NOTES TO FINANCIAL STATEMENTS
o 16% of driving range fees, rental income from the Gymnasium and club
repair concession at the Premises
o 6% of merchandise sales
o 8% of food and beverage sales
o 6% of golf school operations
o 8% of club rentals
o the greater of 50% of net rental income from the School Building or
32% of the gross revenue from the operations of the School Building
o 6% of all other income not included in any of the above categories
Rental expense for the year ended December 31, 1996 was $362,370.
In addition San Bruno leases certain range and office equipment from the
Home Office. These leases, when applicable, are accounted for as capital
leases on the Home Office books. San Bruno treats all leased equipment
from the Home Office as operating leases regardless of the treatment on
the Home Office books. The commitments for these operating leases are as
follows:
<TABLE>
<CAPTION>
<S> <C>
December 31, 1997.................. $ 6,268
December 31, 1998.................. 4,575
December 31, 1999.................. 3,520
December 31, 2000.................. 3,275
December 31, 2001.................. 98
--------
Future value of minimum lease
payments.......................... $17,736
========
</TABLE>
(7) SUBSEQUENT EVENT
San Bruno Practice Center was sold in April 1997.
<PAGE>
GREEN OAKS GOLF PRACTICE CENTER, INC.
AUDITOR'S REPORT
FINANCIAL STATEMENTS
FOR CALENDAR YEAR 1996
GERARD MCEVOY
CERTIFIED PUBLIC ACCOUNTANT
10300 N. CENTRAL EXPWY., STE. 295
DALLAS, TEXAS 75231
<PAGE>
GREEN OAKS GOLF PRACTICE CENTER, INC.
AUDITED FINANCIAL STATEMENTS
FOR CALENDAR YEAR 1996
INDEX
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Auditor's Report.................. 1
Balance Sheet..................... 2
Income Statement.................. 3
Statement of Cash Flow............ 4
Notes to Financial Statements .... 5
</TABLE>
<PAGE>
[GERARD MCEVOY, CPA LETTERHEAD]
REPORT ON AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
To the Board of Directors and Stockholders
of Green Oaks Golf Practice Center, Inc.
INDEPENDENT AUDITOR'S REPORT
I have audited the accompanying balance sheet of Green Oaks Golf Practice
Center, Inc. (an S corporation) as of December 31, 1996, and the related
statements of income, retained earnings, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Green Oaks Golf Practice
Center, Inc. as of December 31, 1996, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Gerard McEvoy
Gerard McEvoy
Certified Public Accountant
June 6, 1997
1
<PAGE>
GREEN OAKS GOLF PRACTICE CENTER, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1996
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
CURRENT ASSETS:
Cash on hand............ $ 2,642
Accounts
Receivable--Trade....... 500
Inventory............... 12,869
---------
Total current assets.. $16,011
FIXED ASSETS:
Furniture & Equipment... $13,663
Transportation
Equipment.............. 5,654
Leasehold Improvements.. 1,023
Accumulated
Depreciation........... (6,751) 13,589
---------
OTHER ASSETS:
Deposit................. 25,000
---------
Total Assets.......... $54,600
=========
</TABLE>
LIABILITIES AND SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
CURRENT LIABILITIES:
Bank Overdraft.............. $ 5,747
Accounts Payable............ 57,416 $ 63,163
----------
LONG TERM LIABILITIES:
Loan from Shareholder....... $ 103,451
SHAREHOLDER'S EQUITY:
Common Stock................ $ 1,000
Retained Earnings........... (54,243)
Current Net Income (Loss)... (58,771) (112,014)
---------- -----------
Total Liabilities and
Capital................. $ 54,600
===========
</TABLE>
See Auditor's Report and Notes to Financial Statements.
2
<PAGE>
GREEN OAKS GOLF PRACTICE CENTER, INC.
INCOME STATEMENT
FOR THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
INCOME:
Gross Sales............. $203,273
----------
COST OF SALES:
Purchases............... 115,361
----------
Gross Profit.......... 87,912
----------
OPERATING EXPENSES:
Contract Labor.......... 3,751
Advertising............. 10,610
Bank Charges............ 3,723
Car and Truck Expenses.. 2,762
Depreciation............ 4,139
Freight................. 251
Insurance............... 4,577
Interest................ 154
Legal and Professional
Fees.................. 1,954
Miscellaneous Services.. 722
Office Supplies......... 361
Printing................ 159
Rent.................... 65,507
Repairs and Maintenance. 11,918
Security................ 503
Supplies--Maintenance... 2,442
Taxes................... 13,167
Telephone............... 3,570
Travel and Lodging...... 398
Meals and Entertainment. 365
Utilities............... 15,650
----------
Total Operating
Expenses............ $146,683
----------
Net Income (loss)... $(58,771)
==========
</TABLE>
See Auditor's Report and Notes to Financial Statements.
3
<PAGE>
GREEN OAKS GOLF PRACTICE CENTER, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss................................................................. $(58,771)
Adjustments to reconcile net loss to net cash needed in operating
activities:
Depreciation........................................................... 4,139
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts Receivable...................................................... (500)
Inventory................................................................ 1,349
Accounts Payable......................................................... 26,357
-----------
Net cash used in operating activities.................................. (27,426)
CASH FLOW FROM FINANCING ACTIVITIES:
Repayment of loan from Plano Bank & Trust................................ (17,000)
Advances from shareholder................................................ 42,590
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of Equipment.................................................... (6,063)
-----------
Net decrease in cash and cash equivalents.................................... (7,899)
Cash and cash equivalents at beginning of year............................... 4,795
-----------
Cash and cash equivalents at end of year..................................... $ (3,104)
===========
</TABLE>
See Auditor's Report and Notes to Financial Statements.
4
<PAGE>
GREEN OAKS GOLF PRACTICE CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The company operates a family golf center consisting of a driving range,
miniature golf facility, clubhouse, maintenance building and other related
facilities in Arlington, Texas.
INVENTORY
The inventory is valued at the lower of cost or market.
CASH AND CASH EQUIVALENTS
The company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
INCOME TAXES
The company has elected to be taxed under the provisions of Subchapter S
of the Internal Revenue Code. Under those provisions, the company does not
pay federal corporate income taxes on its taxable income. Instead, the
shareholders are liable for individual federal income taxes on their
respective share of corporate taxable income.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is provided using
the double declining balance method over a 5 to 7 year life. Expenditures for
major renewals and betterments that extend the useful lives of the property
and equipment are capitalized. Expenditures for maintenance and repairs are
charged to expenses as incurred.
USE OF ESTIMATES
In preparing the company's financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
5
<PAGE>
GREEN OAKS GOLF PRACTICE CENTER, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE B -- LEASES
The company, pursuant to a sublease agreement with CCA Golf
Center-Arlington, Inc. (landlord), dated October 28, 1994, leases the golf
premises, furniture, and equipment from the landlord. The lease expires on
October 31, 2001. Under the terms of the lease, the company pays a base
monthly rental of $4,166.66 per month. The base rent is increased by the
amount, if any, by which eight percent (8%) of gross revenue for the lease
year exceeds base rent for such base year. In addition to the base lease
rental payable, the company pays a percentage rental equal to the sum of ten
percent (10%) of non-golf merchandise gross revenue, plus five percent (5%)
of golf merchandise gross revenue. The additional rent is payable monthly
based on the sales for the preceding month. The minimum lease payments for
the next five years are $50,000 per year.
NOTE C -- OTHER ASSETS -- DEPOSIT
The company, under the terms of the sublease agreement (Note B), has the
right to purchase the personal property and landlord's leasehold interest in
the leased premises, including all buildings and improvements situated
thereon and all property affixed thereto. The option shall be exercised by
the company by delivery of written notice to the landlord no later than
September 30, 2001. The company paid $25,000 (option fee) as consideration
for this option upon execution of the lease. The purchase price for the
option property is an amount equal to $325,000 less the aggregate of all
percentage rent paid by the company prior to the date of closing. At closing,
the company is required to pay the purchase price by cash or its equivalent.
NOTE D -- LOANS FROM SHAREHOLDER
Shareholder advanced funds as needed to cover monthly operating deficits.
The advances are recorded as long term liabilities and are unsecured.
NOTE E -- CAPITAL STOCK
The company has 1,000,000 shares authorized. No par value per share, of
which 1,000 shares are outstanding.
6
<PAGE>
GREEN OAKS GOLF PRACTICE CENTER, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE F -- SUBSEQUENT EVENTS
STOCK PURCHASE AGREEMENT
Family Golf Centers, Inc., a Delaware corporation, purchased all of the
outstanding shares held by Margo Massamos, the sole corporate shareholder, on
April 2, 1997.
INSURANCE PROCEEDS
The company received $25,000 in insurance proceeds in March 1997 as
compensation for theft of range balls.
7
<PAGE>
RANDALL'S ISLAND PRACTICE CENTER
<PAGE>
[WEIL & COMPANY LLP LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
April 18, 1997
American Golf Corporation
Santa Monica, California 90405
We have audited the accompanying balance sheet of Randall's Island Practice
Center, a division of American Golf Corporation, as of December 31, 1996, and
the related statements of operations, home office equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Randall's Island Practice
Center as of December 31, 1996, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Weil & Company LLP
WEIL & COMPANY LLP
<PAGE>
RANDALL'S ISLAND PRACTICE CENTER
BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS
- -------------------------------------------------------
Current assets:
Cash $ 18,476
Inventories (note 1) 4,697
-------------
Total current assets 23,173
Property and equipment, net (note 2) 1,687,129
Licensing Fee (note 3) 160,000
-------------
Total assets $ 1,870,302
=============
LIABILITIES AND EQUITY
- -------------------------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 6,988
Payable to Home Office (note 4) 317,123
-------------
Total current liabilities 324,111
Payable to Home Office (note 4) 945,792
-------------
Total liabilities 1,269,903
-------------
Home Office equity:
Contributed capital (note 4) 3,410,626
Accumulated deficit (2,810,227)
-------------
Total equity 600,399
-------------
Total liabilities and equity $ 1,870,302
=============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RANDALL'S ISLAND PRACTICE CENTER
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Revenue $ 797,037
-----------
Costs and expenses:
Merchandise and food costs 79,860
General and administrative 256,098
Operating expenses 999,265
Depreciation and amortization 210,198
-----------
Total costs and expenses 1,545,421
-----------
Interest expense (note 4) 142,077
-----------
Net loss $ (890,461)
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RANDALL'S ISLAND PRACTICE CENTER
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net loss $ (890,461)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 210,198
Inventories 705
Accounts payable and accrued liabilities (1,170)
------------
Cash used by operating activities (680,728)
------------
Cash flows used by investing activities--capital expenditures: (26,077)
------------
Cash flows used by financing activities:
Contributed capital 1,009,104
Payments on payable to Home Office (287,065)
------------
Cash provided by financing activities 722,039
------------
Increase in cash 15,234
Cash at beginning of year 3,242
------------
Cash at end of year $ 18,476
============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RANDALL'S ISLAND PRACTICE CENTER
STATEMENT OF HOME OFFICE EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
CONTRIBUTED ACCUMULATED TOTAL
CAPITAL DEFICIT EQUITY
------------- -------------- -----------
<S> <C> <C> <C>
Balances at December 31, 1995 $2,401,522 $(1,919,766) $ 481,756
Net loss -- (890,461) (890,461)
Contributed capital 1,009,104 -- 1,009,104
------------- -------------- -----------
Balances at December 31, 1996 $3,410,626 $(2,810,227) $ 600,399
============= ============== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RANDALL'S ISLAND PRACTICE CENTER
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Randall's Island Practice Center is a recreational facility managed by
American Golf Corporation (Home Office). The Home Office manages and
operates a golf driving range, miniature golf course, batting cages,
snack bar and pro shop under a lease with the City of New York (Owner).
(a) Inventories
Inventories, consisting primarily of golf clubs and apparel, are valued
at the lower of cost (first-in, first-out) or market.
(b) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated
useful lives of the assets. Leasehold Improvements are depreciated using
the straight-line method over the shorter of the lease or the estimated
useful life of the asset.
When property and equipment are sold or otherwise disposed of, the asset
account and related accumulated depreciation account are relieved, and
any gain or loss is included in operations. Expenditures for maintenance
and repairs are charged against operations. Renewals and betterments that
materially extend the life of an asset are capitalized.
Depreciation expense for the year ended December 31, 1996 was $196,865.
(c) Statement of Cash Flows
For purpose of the statements of cash flows, the Home Office considers
temporary cash investments purchased with original maturities of three
months or less and which are available for use in operations to be cash
equivalents. No cash was paid for interest or income taxes in 1996.
(d) Use of Estimates
The preparation of financial statement in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
Estimated
useful lives
--------------
Golf course and clubhouse equipment $ 555,448 7-15 years
Buildings 766,986 15 years
Leasehold improvements 1,016,265 15 years
-----------
2,338,669
Less, accumulated depreciation and amortization (651,570)
-----------
$1,687,129
===========
</TABLE>
<PAGE>
RANDALL'S ISLAND PRACTICE CENTER
NOTES TO FINANCIAL STATEMENTS
(3) LICENSING FEE
Upon execution of the license to operate the practice center the Home
Office was required to pay the Owner the sum of $200,000 as a licensing
fee. This amount was non-refundable after all necessary permits,
approvals, and entitlements required by Federal, State, and City laws,
rules and regulations to construct the Recreation Facility were obtained.
This amount is being amortized on a straight line basis over the life of
the lease. Amortization expense for the year ended December 31, 1996 was
$13,333.
(4) RELATED PARTY TRANSACTIONS
Contributed capital at December 31, 1996 represents funding from the Home
Office for cash flow deficit.
The payable to Home Office represents funding from the Home Office for
capital improvements at Randall's Island Practice Center. In 1992, the
original amount of the loan was $2,154,170. The payable bears interest at
10% and matures in June, 2000. Minimum future principal payments are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 317,123
1998 350,330
1999 387,014
2000 208,448
-----------
$1,262,915
===========
</TABLE>
The amounts allocated to interest expense are eliminated on the Home
Office books in consolidation.
(5) LEASE
The Home Office leased the practice center for a period of 15 years
expiring March 1, 2007. The lease provides for minimum annual payments of
$500,000 adjusted annually by the Consumer Price Index. In addition to
minimum rental payments, the lease requires payment of the excess of
percentage of gross revenue over the minimum rental payments, as defined
below. Rental expense for the year ended December 31, 1996 was $538,825.
<TABLE>
<CAPTION>
<S> <C>
Golf driving range
first $2 million of gross revenue 40%
gross revenue in excess of $2 million 45%
Miniature golf 15%
Batting cages 15%
Pro shop merchandise 10%
Snack bar 10%
Lessons 10%
Other 10%
</TABLE>
Randall's Island Practice Center also leases certain range and office
equipment from the Home Office. These leases, when applicable, are
accounted for as capital leases on the Home Office books. Randall's
Island Practice Center treats all leased equipment from the Home Office
as
<PAGE>
RANDALL'S ISLAND PRACTICE CENTER
NOTES TO FINANCIAL STATEMENTS
(5) (CONTINUED)
operating leases regardless of the treatment on the Home Office books.
The commitments for these operating leases are as follows:
<TABLE>
<CAPTION>
<S> <C>
December 31, 1997 $ 8,138
December 31, 1998 4,933
December 31, 1999 3,146
December 31, 2000 2,555
December 31, 2001 738
--------
Present value of minimum
lease payments $19,510
========
</TABLE>
(6) INCOME TAX
The Home Office has elected to be taxed as an S corporation under the
Internal Revenue Code of 1986, as amended. Accordingly, corporate income
is taxed directly to the shareholders for federal income tax reporting
purposes. The Home Office therefore has no provision in its consolidated
financial statements for federal income taxes.
(7) SUBSEQUENT EVENT
The Randall's Island Practice Center was sold in March, 1997.
<PAGE>
WEIL & COMPANY LLP
233 WILSHIRE BOULEVARD, SUITE 600
SANTA MONICA, CALIFORNIA 90401-1298
310-451-9871 FAX 310-394-4512
[email protected]
CERTIFIED
PUBLIC
ACCOUNTANTS
INDEPENDENT AUDITOR'S REPORT
April 18, 1997
American Golf Corporation
Santa Monica, California 90405
We have audited the accompanying balance sheet of Darlington Driving Range, a
division of American Golf Corporation, as of December 31, 1996, and the
related statements of operations, home office equity, and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Darlington Driving Range as
of December 31, 1996, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ Weil & Company LLP
WEIL & COMPANY LLP
<PAGE>
DARLINGTON DRIVING RANGE
BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS
- ------------------------------------------
Current Assets:
Cash ..................................... $ 2,702
Inventories (note 1) ..................... 7,096
-----------
Total current assets ................... 9,798
Property and equipment, net (note 2) ..... 575,549
-----------
Total assets ........................... $ 585,347
===========
LIABILITIES AND EQUITY
- ------------------------------------------
Current Liabilities:
Accounts payable and accrued liabilities $ 1,721
Payable to Home Office (note 4) ........... 279,949
-----------
Total liabilities ...................... 281,670
-----------
Home Office equity:
Contributed capital (note 4) ............. 452,719
Accumulated deficit ...................... (149,042)
-----------
Total equity ........................... 303,677
-----------
Total liabilities and equity ........... $ 585,347
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DARLINGTON DRIVING RANGE
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Revenue ........................ $701,255
----------
Costs and expenses:
Merchandise and food costs .... 43,764
General and administrative ... 196,703
Operating expenses ............ 303,653
Depreciation and amortization 42,493
----------
Total costs and expenses .... 586,613
----------
Interest expense (note 4) ..... 34,060
----------
Net income ................... $ 80,582
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DARLINGTON DRIVING RANGE
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net income ...................................................................... $ 80,582
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization .................................................. 42,493
Inventories .................................................................... 1,026
Other assets and prepaid expenses .............................................. 647
Accounts payable and accrued liabilities ....................................... (3,519)
-----------
Cash provided by operating activities ......................................... 121,229
-----------
Cash flows used by investing activities--capital expenditures: (26,000)
-----------
Cash flows used by financing activities:
Contributed capital ............................................................. 16,052
Payments on payable to Home Office .............................................. (110,191)
-----------
Cash used for financing activities ............................................ (94,139)
-----------
Increase in cash ................................................................. 1,090
Cash at beginning of year ........................................................ 1,612
-----------
Cash at end of year .............................................................. $ 2,702
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DARLINGTON DRIVING RANGE
STATEMENT OF HOME OFFICE EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
CONTRIBUTED ACCUMULATED TOTAL
CAPITAL DEFICIT EQUITY
------------- ------------- ----------
<S> <C> <C> <C>
Balances at December 31, 1995 $436,667 $(229,624) $207,043
Net income ................... -- 80,582 80,582
Contributed capital .......... 16,052 -- 16,052
------------- ------------- ----------
Balances at December 31, 1996 $452,719 $(149,042) $303,677
============= ============= ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DARLINGTON DRIVING RANGE
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Darlington Driving Range is a recreational facility managed by American
Golf Corporation (Home Office). The Home Office manages and operates a
driving range for the County of Bergen (the Owner).
(a) Inventories
Inventories, consisting primarily of gold clubs and apparel, are valued
at the lower of cost (first-in, first-out) or market.
(b) Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated
useful lives of the assets. Leasehold Improvements are depreciated using
the straight-line method over the shorter of the lease or the estimated
useful life of the asset.
When property and equipment are sold or otherwise disposed of, the asset
account and related accumulated depreciation account are relieved, and
any gain or loss is included in operations. Expenditures for maintenance
and repairs are charged against operations. Renewals and betterments
that materially extend the life of an asset are capitalized.
Depreciation expense for the year ended December 31, 1996 was $42,493.
(c) Statement of Cash Flows
For purpose of the statements of cash flows, the Home Office considers
temporary cash investments purchased with original maturities of three
months or less and which are available for use in operations to be cash
equivalents. No cash was paid for interest or income taxes in 1996.
(d) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
--------------
<S> <C> <C>
Golf course and clubhouse equipment ............. $ 226,233 7-15 years
Buildings ....................................... 561,908 15 years
-----------
788,141
Less, accumulated depreciation and amortization (212,592)
-----------
$ 575,549
===========
</TABLE>
<PAGE>
(3) INCOME TAX
The Home Office has elected to be taxed as an S corporation under the
Internal Revenue Code of 1986, as amended. Accordingly, corporate income
is taxed directly to the shareholders for federal income tax reporting
purposes.
The Home Office therefore has no provision in its consolidated financial
statements for federal income taxes.
(4) RELATED PARTY TRANSACTIONS
Contributed capital at December 31, 1996 represents funding from the
Home Office for cash flow deficit.
The payable to Home Office represents funding from the Home Office for
capital improvements at Darlington Driving Range. In 1992, the original
amount of the payable was $724,072. The payable bears interest at 10%
and matures in February 1999. Minimum future principal payments are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1997 ... $121,729
1998 ... 134,476
1999 ... 21,184
----------
$277,389
==========
</TABLE>
(5) LEASE
The Home Office leased the driving range for a period of 20 years
expiring in November 2009. The lease provides for minimum annual
payments of $66,000 adjusted annually by the Consumer Price Index.
Commencing February 1, 1995, the minimum annual payments are to be
reduced by $182,500 over a period of four years for the operational loss
incurred by the range closure for several months during 1993 and 1994.
Rental expense for the year ended December 31, 1996 was $39,102.
(6) COMMITMENTS
The Home Office has entered into an operating lease for golf-course
maintenance equipment used at Darlington Driving Range. The lease
expires in March, 1999 with monthly lease payments totaling $3,770.
(7) SUBSEQUENT EVENT
The Darlington Driving Range was sold in March, 1997.
<PAGE>
CAROLINA CAPITAL VENTURES, LTD.
D/B/A CAPITAL SPORTS
FINANCIAL STATEMENTS
DECEMBER 31, 1996
GOLDBERG & DAVIS, CPA'S
<PAGE>
[LETTERHEAD OF GOLDBERG & DAVIS, CPA'S]
REPORT OF INDEPENDENT ACCOUNTANTS
March 5, 1997
To the Board of Directors and shareholders
of Carolina Capital Ventures, Ltd.
We have audited the accompanying balance sheet of Carolina Capital Ventures,
Ltd. (d/b/a Capital Sports) as of December 31, 1996 and the related
statements of operations and of cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Carolina Capital Ventures,
Ltd. at December 31, 1996 and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Goldberg & Davis
<PAGE>
CAROLINA CAPITAL VENTURES, LTD.
D/B/A CAPITAL SPORTS
FINANCIAL STATEMENTS
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1996
<S> <C>
ASSETS
Current assets
Cash ........................................................................ $ 38,023
Inventory ................................................................... 140,535
-----------------
Total current assets ....................................................... 178,558
-----------------
Property and equipment:
Land ........................................................................ 387,500
Land improvements ........................................................... 106,383
Building .................................................................... 269,591
Equipment ................................................................... 227,583
-----------------
991,057
Less--Accumulated depreciation .............................................. (232,764)
-----------------
758,293
-----------------
$ 936,851
=================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (Note 2) .................................. $ 58,895
Accounts payable and accrued liabilities .................................... 39,120
Due to shareholders ......................................................... 36,860
-----------------
Total current liabilities .................................................. 134,875
LONG-TERM DEBT (NOTE 2) ...................................................... 266,035
-----------------
Total liabilities .......................................................... 400,910
-----------------
Shareholders' equity:
Capital stock, $10 par value; 10,000 shares authorized, 300 shares issued
and outstanding ............................................................ 245,262
Retained earnings ........................................................... 290,679
-----------------
Total shareholders' equity ................................................. 535,941
-----------------
$ 936,851
=================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CAROLINA CAPITAL VENTURES, LTD.
D/B/A CAPITAL SPORTS
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
<S> <C>
Revenues ............................. $728,653
Cost of goods sold ................... 427,131
-----------------
301,522
-----------------
General and administrative expenses:
Salaries ............................ 45,609
Interest ............................ 31,867
Depreciation ........................ 29,127
Utilities ........................... 16,587
Insurance ........................... 12,939
Taxes and licenses .................. 11,598
Credit card fees .................... 5,881
Repairs and maintenance ............. 5,335
Advertising ......................... 5,029
Other ............................... 1,365
-----------------
165,337
-----------------
Net income ........................... 136,185
Retained earnings, beginning of year 154,494
-----------------
Retained earnings, end of year ...... $290,679
=================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CAROLINA CAPITAL VENTURES, LTD.
D/B/A CAPITAL SPORTS
FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
<S> <C>
Cash flows from operating activities:
Net income ...................................................................... $136,185
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation ................................................................... 29,127
Changes in operating assets and liabilities:
Inventory ..................................................................... (54,521)
Due to shareholders ........................................................... (47,624)
-----------------
Net cash provided by operating activities ........................................ 63,167
-----------------
Cash flows for financing activities:
Principal payments on long-term debt ............................................ (35,048)
-----------------
Net increase in cash ............................................................. 28,119
Cash at beginning of year ........................................................ 9,904
-----------------
Cash at end of year .............................................................. $ 38,023
=================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CAROLINA CAPITAL VENTURES, LTD.
D/B/A CAPITAL SPORTS
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BUSINESS:
Carolina Capital Ventures, Ltd. (the "Company") is a family entertainment
center, including golf range, batting cage, and indoor children's play space.
The center also serves as a golf teaching facility and retail golf
merchandise outlet. All activities are conducted for its lone facility in
Wake Forest, NC. The Company's more significant accounting policies are as
follows:
INVENTORY:
Inventory consists of golf equipment and supplies and is stated at the lower
of cost or market, with cost determined on the first-in, first-out method.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the various classes of assets, which range from 5-31.5 years.
INCOME TAXES:
The Company has elected to be a small business corporation (S Corporation)
for federal and state income tax purposes whereby each item of income,
deduction, gain, loss or credit is allocated to the Company's shareholders.
Accordingly, the Company does not pay federal or state income taxes.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
NOTE 2 -- LONG-TERM DEBT:
Long-term debt at December 31, 1996 consists of a note payable to a bank,
secured by land and improvements and guaranteed by the shareholders, payable
in monthly installments of $7,468.20, including interest at 8.25%, through
May 2001.
Maturities of this debt are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 ... $ 58,895
1998 ... 70,289
1999 ... 76,312
2000 ... 82,851
2001 ... 36,583
---------
$324,930
=========
</TABLE>
NOTE 3 -- SUBSEQUENT EVENT:
On February 7, 1997 the Company entered into a letter of intent to sell its
building, equipment, and inventory to an unrelated party.
