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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
December 30, 1996
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.
The Cincinnati Golf Academy
---------------------------
On December 30, 1996, Family Golf Centers, Inc. (the "Company")
acquired certain assets from Cincinnati Golf Academy, Ltd., an Ohio limited
liability company (the "Seller"). The acquired assets included (i)
approximately 31 acres of real property in Maineville, Ohio on which there is
a golf driving range, miniature golf course and related facilities operated as
the "Cincinnati Golf Academy", and (ii) certain equipment, fixtures, personal
property and contracts used in connection with the operation of the golf
center (the "Cincinnati Assets").
Pursuant to the Purchase Agreement, dated as of December 30, 1996,
between the Seller, certain members of the Seller and the Company, the Company
purchased the Cincinnati Assets for (i) $1,285,000 in cash, (ii) 40,000 shares
of the Company's Common Stock (3,500 of which have been placed in escrow for
two years to satisfy indemnification claims of the Company, if any, under the
Purchase Agreement), and (iii) an option to purchase up to 10,000 shares of
the Company's Common Stock at an exercise price of $40.00 per share, which
option expires December 30, 2006. The source of funds for the cash portion of
the purchase price was derived from working capital.
The Company intends to continue operating the golf center and to
make various capital improvements to it.
The foregoing summary of the acquisition and related transactions is
incomplete and is qualified in its entirety by reference to copies of the
Purchase Agreement and certain other ancillary documents filed as Exhibits 1
through 4 and annexed hereto.
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Fore Seasons Golf Center
------------------------
On December 31, 1996, the Company acquired certain assets from Fore
Seasons Golf, Inc., a Wisconsin corporation (the "Seller"). The acquired
assets included (i) approximately 65 acres of real property in Milwaukee,
Wisconsin on which there is a golf driving range (a portion of which is domed),
miniature golf course and related facilities operated as the "Fore Seasons
Golf Center," and (ii) certain equipment, fixtures, personal property and
contracts used in connection with the operation of the golf center (the
"Milwaukee Assets").
Pursuant to the Purchase Agreement, dated as of December 31, 1996,
between the Seller and the Company, the Company purchased the Milwaukee Assets
for $2,597,500.00, of which $1,655,240.93 was paid in cash, $200,000.00 of
which was represented by a one-year secured promissory note which bears
interest at 8% per annum and the balance of which is represented by the
assumption of certain debt which matures on February 5, 2016 and bears
interest at 7.3% per annum. The source of funds for the cash portion of the
purchase price was derived from working capital.
The Company intends to continue operating the golf center and to
make various capital improvements to it.
The foregoing summary of the acquisition and related transactions is
incomplete and is qualified in its entirety by reference to copies of the
Purchase Agreement and certain other ancillary documents filed as Exhibits 5
through 7 and annexed hereto.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(a) Financial Statements of Businesses Acquired
In accordance with Item 7(a)(4) of Form 8-K, attached hereto as
Exhibits 8 and 9, respectively are the financial statements of
Cincinnati Golf Academy, Ltd. and Fore Seasons Golf, Inc.
(b) Pro Forma Financial Information
It is impractical to file the pro forma financial statements at
this time. The required pro forma financial information will be filed
under cover of a Form 8-K/A within 60 days of January 14, 1997
(c) Exhibits
1. Purchase Agreement, dated as of December 30, 1996, by and
between Maineville Family Golf Centers, Inc., a wholly-owned
subsidiary of Family Golf Centers, Inc., Cincinnati Golf Academy,
Ltd., David Wechsler and Marvin Rosenberg.
2. Escrow Agreement, dated as of December 30, 1996, by and
between Family Golf Centers, Inc., Cincinnati Golf Academy, Ltd.,
and Continental Stock Transfer and Trust Company.
3. Form of Stock Option Agreement, dated as of December 30,
1996, by and between Family Golf Centers, Inc. and the holder
thereof.
4. Registration Rights Agreement, dated as of December 30,
1996, by and between Family Golf Centers, Inc. and Cincinnati Golf
Academy, Ltd.
5. Purchase Agreement, dated as of December 31, 1996, by and
between Milwaukee Family Golf Centers, Inc., a wholly owned
subsidiary of Family Golf Centers, Inc. and Fore Seasons Golf , Inc.
6. Second Mortgage Note, in the aggregate principal amount of
$200,000.00 made by Milwaukee Family Golf Centers, Inc. in favor of
Fore Seasons Golf, Inc.
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7. Guaranty, dated December 31, 1996, made by Family Golf
Centers, Inc. in favor of Fore Seasons Golf, Inc.
8. Audited financial statements of Cincinnati Golf Academy,
Ltd. for the period March 15, 1995 (date of inception) through
December 31, 1995 and as of December 31, 1995.
9. Audited financial statements for Fore Season Golf, Inc. for
the period November 10, 1995 (beginning of operations) through
October 31, 1996 and as of October 31, 1996.
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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.
January 14, 1997.
FAMILY GOLF CENTERS, INC.
By: /s/ Dominic Chang,
_________________________
Dominic Chang,
President and Chief Executive Officer
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EXHIBIT INDEX
Exhibit
No. Description
- -------- -----------
1. Purchase Agreement, dated as of December 30, 1996, by and
between Maineville Family Golf Centers, Inc., a wholly-owned
subsidiary of Family Golf Centers, Inc., Cincinnati Golf Academy,
Ltd., David Wechsler and Marvin Rosenberg.
2. Escrow Agreement, dated as of December 30, 1996, by and
between Family Golf Centers, Inc., Cincinnati Golf Academy, Ltd.,
and Continental Stock Transfer and Trust Company.
3. Form of Stock Option Agreement, dated as of December 30,
1996, by and between Family Golf Centers, Inc. and the holder
thereof.
4. Registration Rights Agreement, dated as of December 30,
1996, by and between Family Golf Centers, Inc. and Cincinnati Golf
Academy, Ltd.
5. Purchase Agreement, dated as of December 31, 1996, by and
between Milwaukee Family Golf Centers, Inc., a wholly owned
subsidiary of Family Golf Centers, Inc. and Fore Seasons Golf , Inc.
6. Second Mortgage Note, in the aggregate principal amount of
$200,000.00 made by Milwaukee Family Golf Centers, Inc. in favor of
Fore Seasons Golf, Inc.
7. Guaranty, dated December 31, 1996, made by Family Golf
Centers, Inc. in favor of Fore Seasons Golf, Inc.
8. Audited financial statements of Cincinnati Golf Academy,
Ltd. for the period March 15, 1995 (date of inception) through
December 31, 1995 and as of December 31, 1995.
9. Audited financial statements for Fore Season Golf, Inc. for
the period November 10, 1995 (beginning of operations) through
October 31, 1996 and as of October 31, 1996.
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PURCHASE AGREEMENT
by and between
CINCINNATI GOLF ACADEMY, LTD.
Seller,
CERTAIN MEMBERS OF SELLER
and
MAINEVILLE FAMILY GOLF CENTERS, INC.,
Purchaser
PREMISES:
7630 Columbia Road
Maineville, Ohio 45039
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INDEX OF EXHIBITS AND SCHEDULES
EXHIBIT A LEGAL DESCRIPTION
EXHIBIT B PERSONAL PROPERTY
EXHIBIT C CONTRACTS
EXHIBIT D PERMITTED EXCEPTIONS
EXHIBIT E ESCROW AGREEMENT
EXHIBIT F STOCK OPTION AGREEMENT
EXHIBIT G REGISTRATION RIGHTS AGREEMENT
EXHIBIT H RESTRICTED SECURITIES LETTER
SCHEDULE 1 CERTAIN MEMBERS OF SELLER
SCHEDULE 6.1.3 OTHER CONSENTS
SCHEDULE 6.1.7 SECURITY DEPOSITS
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PURCHASE AGREEMENT
PURCHASE AGREEMENT, made as of the 30th day of December, 1996 (this
"Agreement"), by and among CINCINNATI GOLF ACADEMY, LTD., an Ohio limited
liability company having an address at 7630 Columbia Road, Maineville, Ohio
45039 ("Seller"), CERTAIN MEMBERS OF SELLER listed on Schedule 1 hereto (the
"Members") and MAINEVILLE 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
7630 Columbia Road, Maineville, Ohio 45039 and more particularly described on
Exhibit A attached hereto and made a part hereof (the "Land") and the
buildings and improvements located on the Land (the "Improvements" and,
together with the Land, the "Premises");
WHEREAS, Seller operates a driving range and related facilities at
the Premises under the name "Cincinnati Golf Academy" (the "Business"); and
WHEREAS, Seller wants to sell the Premises to Purchaser, and
Purchaser wants to purchase the Premises from Seller, on the terms, and
subject to the conditions, set forth herein.
NOW, THEREFORE, in consideration of TEN ($10.00) DOLLARS, the terms
and conditions set forth herein, and other good and valuable consideration,
the mutual receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree to the foregoing and as follows:
1. Agreement to Sell and Purchase.
1.1 Property to be Purchased by Purchaser. Seller agrees to
sell
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and convey to Purchaser, and Purchaser agrees to purchase and acquire from
Seller, upon the terms and conditions hereinafter set forth, all of Seller's
right, title and interest in and to the following property (collectively, the
"Property"):
1.1.1 the Premises;
1.1.2 the easements, rights of way, appurtenances and
other rights and benefits of Seller in and to the Premises, including without
limitation, all of Seller's interest in any air rights, water rights and
irrigation rights;
1.1.3 all furnishings, fixtures, machinery, equipment,
vehicles and personalty attached or appurtenant to or used in connection with
the Premises that are owned by Seller, and all inventories, supplies, sales,
marketing and instructional materials of every kind and description relating
to the Business, wherever located, including without limitation, the items
described on Exhibit B attached hereto and made a part hereof (the "Personal
Property");
1.1.4 the files, books, notices and other correspondence
from any governmental agencies, and other records used or employed by Seller
or its affiliates in connection with the ownership and/or operation of the
Premises and the Business (collectively, the "Records");
1.1.5 any consents, authorizations, variances, waivers,
licenses, certificates, permits and approvals held by or granted to Seller in
connection with the ownership of the Premises (collectively, the "Permits");
1.1.6 the contracts, leases and other agreements of or
relating to the Business described on Exhibit C attached hereto and made a
part hereof, except to the extent the same relate solely to any Retained
Assets or Retained Liabilities (as hereinafter defined) (the "Contracts");
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1.1.7 all accounts receivable of Seller arising out of the
sale of goods or services rendered at the Premises or otherwise in connection
with the Business on or after the Closing Date (as hereinafter defined);
1.1.8 any manufacturers' and vendors' warranties and
guarantees, except to the extent the same relate solely to any Retained Assets
or Retained Liabilities (the "Claims"); and
1.1.9 any other properties and assets of every kind and
nature, real or personal, tangible or intangible, relating in any way
whatsoever to the Premises or the Business, except to the extent the same
relate solely to the Retained Assets or Retained Liabilities.
1.2 Assets to be Retained by Seller. Anything herein to
the contrary notwithstanding, Seller shall not sell, and Purchaser shall not
acquire, the following assets of Seller (the "Retained Assets"):
1.2.1 all trade accounts receivable arising out of the
sale of goods or services prior to the Closing Date;
1.2.2 any rights of Seller with respect to insurance
policies owned by Seller or for which Seller is the named insured; and
1.2.3 all cash, funds in bank accounts and cash
equivalents existing as of the Closing Date hereof.
1.3 Assumption of Certain Liabilities. Purchaser shall
assume and agree to pay and discharge when due all liabilities and obligations
of Seller under the Contracts to the extent the same arise from and after the
Closing 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
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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, at the Closing
Purchaser shall:
2.1 pay to Seller the sum of $1,285,000.00, payable by the wire
transfer of funds;
2.2 issue 40,000 validly issued, fully paid and non-assessable
shares of common stock (the "Parent Stock"), par value $.01 per share, of
Family Golf Centers, Inc. (the "Parent") and to deliver at Closing, free and
clear of all liens, claims and encumbrances: (i) a certificate representing
36,500 shares of Parent Stock registered in the name of the Seller or its
designees, and (ii) a certificate representing 3,500 shares of Parent Stock
registered in the name of the Escrow Agent (the "Escrow Agent") under the
Escrow Agreement (the "Escrow Agreement") to be held and dealt with as
provided in the Escrow Agreement; and
2.3 cause Parent to grant to Seller or its designees, an option
(the "Option") to purchase up to 10,000 shares of Parent Stock at an exercise
price of $40.00 per share, pursuant to the Stock Option Agreement dated as of
even date herewith.
3. Title; Permitted Exceptions. Seller will convey the Property to
Purchaser, free and clear of any and all liens, charges, encumbrances,
mortgages, pledges, security interests, easements, agreements and other
interests and adverse claims (collectively, "Encumbrances"), other than the
matters set forth in Exhibit D attached hereto and made a part hereof (the
"Permitted Exceptions").
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4. Apportionments.
4.1 The parties hereto agree that (i) all operating expenses of
Seller relating to the Premises (i.e., 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 on or before the Closing Date on the one hand, which Seller shall bear
the responsibility and benefit of, and the portion of each such expense or
revenue attributable to the period falling after the Closing Date, on the
other hand, which Purchaser shall bear the responsibility and benefit of (the
"Adjustment"). Notwithstanding the foregoing, the Purchaser shall be
responsible for and pay the taxes, sewer assessment and street assessment
attributable to the 1996 calendar year and the recoupment reflecting the
change in use of the Premises. The expenses and liabilities for which Seller
shall be liable pursuant to this Section shall be included within the meaning
of the term "Retained Liabilities".
4.2 To the extent that any of the prorations made pursuant to
this Article are based upon estimates of payments to be made and/or expenses
to be incurred by Purchaser subsequent to the Closing Date, or either party
discovers any errors in or omissions in respect of 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.
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4.3 Seller and Purchaser shall maintain and make available to
each other any books or records necessary for the adjustment of any item
pursuant to this Article. The provisions of this Article shall survive the
Closing.
5. The Closing.
5.1 The closing of the transaction provided for in this
Agreement (the "Closing") shall take place 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 quitclaim deed with covenants against grantor's
acts, duly executed and acknowledged by Seller, in proper statutory form for
recording, so as to convey to Purchaser fee simple title to the Premises,
subject to and in accordance with the provisions of this Agreement (the
"Deed");
5.2.2 a bill of sale conveying, transferring and selling
to Purchaser all right, title and interest of Seller in and to all of the
Personal Property, which bill of sale shall contain a warranty that such
property is free and clear of all Encumbrances other than the Permitted
Exceptions, duly executed and acknowledged by Seller;
5.2.3 an assignment and assumption agreement (the
"Assignment and Assumption Agreement") assigning to Purchaser all of Seller's
right, title and interest in and to the Contracts, the Permits and the Claims,
duly executed and acknowledged by Seller;
5.2.4 a settlement statement (the "Settlement Statement")
setting forth the amounts paid by or on behalf of and/or credited to each of
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Purchaser and Seller pursuant to this Agreement;
5.2.5 an owner's affidavit of title;
5.2.6 a Certificate or Certificates of Occupancy for all
Improvements;
5.2.7 original counterparts of each of the Contracts;
5.2.8 any transfer tax or other return required by any
applicable governmental authority in connection with the sale of the Property,
duly executed and acknowledged by Seller;
5.2.9 an affidavit (the "FIRPTA Affidavit") duly executed
and acknowledged by Seller pursuant to Section 1445 (b)(2) of the Internal
Revenue Code of 1986, as amended, stating that Seller is not a foreign person
within the meaning of such provision;
5.2.10 keys to all locks relating to the Property,
appropriately labeled;
5.2.11 the Escrow Agreement, executed by Seller, in the
form attached as Exhibit E hereto;
5.2.12 the Restricted Securities Letter, executed by the
Seller or its designees who are to receive Parent Stock, in the form attached
as Exhibit H hereto;
5.2.13 the opinion of Katz, Greenberger & Norton;
5.2.14 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
5.2.15 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
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to Seller the following:
5.3.1 the cash consideration referred to in Section 2.1
hereof;
5.3.2 the Stock Option Agreement, executed by Parent, in
the form attached as Exhibit F hereto;
5.3.3 the Assignment and Assumption Agreement, duly
executed and acknowledged by Purchaser;
5.3.4 the Settlement Statement, duly executed and
acknowledged by Purchaser;
5.3.5 the Escrow Agreement, executed by Parent and
Purchaser, in the form attached hereto as Exhibit F hereto.
5.3.6 the Registration Rights Agreement, executed by
Parent, in the form attached hereto as Exhibit G hereto;
5.3.7 the stock certificates referred to in Section 2.2
hereof;
5.3.8 the opinion of Squadron, Ellenoff, Plesent &
Sheinfeld, LLP;
5.3.9 all other instruments and documents to be executed,
acknowledged where appropriate and/or delivered by Purchaser to Seller; and
5.3.10 such other documents as may be reasonably required
by Seller's counsel in connection with this transaction.
6. Representations and Warranties.
6.1 Each of the Members and Seller jointly and severally hereby
represents and warrants to Purchaser as follows:
6.1.1 Organization; Power and Authority. Seller is a
limited liability company duly formed, validly existing and in good standing
under the
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laws of the State of Ohio, 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 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; (b) is subject to general principles of equity
and (c) may be limited by public policy considerations.
6.1.3 Consents. Except as set forth on Schedule 6.1.3 No
consent, approval or authorization of, exemption by, or filing with, any
governmental or regulatory authority or any third party is required in
connection with the execution, delivery and performance by Seller of this
Agreement, except for consents, approvals, authorizations, exemptions and
filings, if any, which have been obtained.
6.1.4 Compliance with Applicable Laws. 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
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delivery by Seller of this Agreement or of any of the other agreements and
instruments to be executed and delivered by it pursuant hereto, the
performance by Seller of its obligations hereunder or thereunder or the
consummation of the transactions contemplated hereby or thereby will result in
any such violation. To the best of Seller's knowledge, Seller is in compliance
with all material requirements imposed in writing by any insurance carrier of
Seller to the extent such carrier is an insurer or indemnitor of the Property.
Seller has not received any notice of violation of law, municipal ordinance,
orders or requirements issued by any building department or other governmental
agency or subdivision having jurisdiction.
6.1.5 Permits. Except as set forth on Schedule 6.1.3, to
the best of Seller's knowledge all Permits required by any federal, state, or
local law, rule or regulation and necessary for the operation of the Property
and the Business as currently being conducted have been obtained and are
currently in effect. Except as set forth on Schedule 6.1.3, 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
<PAGE>
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").
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, other than as set forth on Schedule
6.1.7. Each of the Contracts are in full force and effect and neither the
Seller, nor to the best knowledge of Seller, any other party under any such
Contract, 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, there are no material structural or mechanical defects in
the Improvements, and there are no leaks in any roof on any Improvement.
6.1.9 Condition of Personal Property. To the best of
Seller's knowledge the Personal Property is in good operating condition and
repair, ordinary wear and tear excepted, and is adequate, suitable and
sufficient to meet the needs of and to operate the Property as currently
conducted.
6.1.10 Environmental Matters.
6.1.10.1 As used in this Agreement "Hazardous Material"
shall mean: (i) any "hazardous substance" as now defined pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), 42 U.S.C. ss. 9601(33); (ii) any "pollutant or contaminant" as
defined
<PAGE>
in 42 U.S.C. ss. 9601(33); (iii) any material now defined as "hazardous waste"
pursuant to 40 C.F.R. Part 261; (iv) any petroleum, including crude oil and
any fraction thereof; (v) natural or synthetic gas usable for fuel; (vi) any
"hazardous chemical" as defined pursuant to 29 C.F.R. Part 1910; (vii) any
asbestos, asbestos containing material, polychlorinated biphenyl ("PCB"), or
isomer of dioxin, or any material or thing containing or composed of such
substance or substances; and (viii) any other pollutant, contaminant,
chemical, or industrial or hazardous, toxic or dangerous waste, substance or
material, defined or regulated as such in (or for purposes of any
Environmental Law (as hereinafter defined) and any other toxic, reactive or
flammable chemicals.
6.1.10.2 To the best of Seller's knowledge, there is no
Hazardous Material at, under or on the Premises and there is no ambient air,
surface water, groundwater or land contamination within, under, originating
from or relating to the Premises. Seller has not, and has not caused to be,
manufactured, processed, distributed, used, treated, stored, disposed of,
transported or handled any Hazardous Material at, on or under the Premises.
6.1.10.3 To the best of Seller's knowledge, Seller has no
obligation or liability imposed or based upon any provision under any foreign,
federal, state or local law, rule, or regulation 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
<PAGE>
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 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.
6.1.10.6 To the best of Seller's knowledge, there are no
underground storage tanks at the Premises other than as disclosed on the Phase
I environmental report commissioned by the Purchaser in connection with this
transaction and Seller further warrants and represents that any prior use and
operation of underground storage tanks by Seller has been in compliance with
all Environmental Laws.
6.1.11 Tax Proceedings. There are no proceedings pending
regarding the reduction of real estate taxes or assessments in respect of the
Premises.
6.1.12 Utilities. All water, storm and sanitary sewer,
gas,
<PAGE>
electricity, telephone and other utilities adequately service the Premises,
enter the Premises through lands as to which valid public or private easements
exist that will inure to the benefit of Purchaser and the Premises are
furnished by facilities of public utilities and the cost of installation of
such utilities has been fully paid.
6.1.13 Access. To the best of Seller's knowledge, there
are no federal, state, county, municipal or other governmental plans to change
the highway or road system in the vicinity of the Premises which could
materially restrict or change access from any such highway or road to the
Premises or any pending or threatened condemnation or eminent domain
proceedings relating to or affecting the Premises. All roads bounding the
Premises are public roads and the Deed is the only instrument necessary to
convey to Purchaser full access to and the right to use such roads freely,
subject to the provisions of Ohio Law relating to roads and highways, as well
as to convey all rights appurtenant to the Premises in such roads.
6.1.14 Insurance Requirements. To the best knowledge of
Seller, all requirements or recommendations by any insurer or by any board of
fire underwriters or similar body in respect of the Property have been
satisfied.
6.1.15 Litigation. There is no action or proceeding
(zoning or otherwise) or governmental investigation pending, or, to the best
of Seller's knowledge, threatened against, or relating to, Seller (insofar as
it relates to the Premises or the Business), the Premises, the Business or the
transactions contemplated by this Agreement, nor, to the best knowledge of
Seller, is there any basis for any such action, proceeding or investigation.
6.1.16 Assessments. Except as set forth as a Permitted
Exception, there are no special or other assessments for public improvements
or
<PAGE>
otherwise now affecting the Premises nor does Seller know of (a) any pending
or threatened special assessments affecting the Premises or (b) any
contemplated improvements affecting the Premises that may result in special
assessments affecting the Premises.
6.1.17 Employee Agreements. There are no union or
employment contracts or agreements (written or oral) involving employees of
Seller or its affiliates affecting the Property or the Business which will
survive the Closing. All employees of Seller will have been terminated as of
the date hereof.
6.1.18 Work at the Premises. No services, material or work
have been supplied to the Premises for which payment has not been made in
full.
6.1.19 Financial Condition. Seller has delivered to
Purchaser true and correct copies of: (i) audited financial statements
consisting of balance sheets and income statements of Seller as of December
31, 1995 (ii) unaudited financial statements of Seller for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996; and (iii) monthly
internal reports for the months of October, November and the period December
1, 1996 through 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,
1995 and since September 30, 1996: (a) there has at no time been a material
adverse change in the financial condition, results of operations, businesses,
properties, assets, liabilities or to the best knowledge of Seller, 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
<PAGE>
insurance) or waived any right of substantial value.
6.1.20 The Seller. Understands that the Parent Common
Stock is being offered and sold without registration under the Securities Act
of 1933, as amended (the "Act"), pursuant to an exemption therefore provided
in Section 4(2) of the Act, (ii) that the certificates representing shares of
Parent Common Stock will bear a legend restricting their transfer thereof and
(iii) that Parent Common Stock is being acquired by it solely for its own
account, for investment purposed only and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the
meaning of the Act or other applicable securities laws or rules.
6.1.21 Full Disclosure. To the best knowledge of Seller
and the Members, none of the information supplied by Seller or the Members
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.
<PAGE>
6.2.2 Due Authorization and Execution; Effect of
Agreement. The execution, delivery and performance by Purchaser of this
Agreement and the consummation by Purchaser of the transactions contemplated
hereby have been duly authorized by all necessary corporate action required to
be taken on the part of Purchaser. This Agreement has been duly and validly
executed and delivered by Purchaser and constitutes the valid and binding
obligation of Purchaser, enforceable in accordance with its terms. The
execution, delivery and performance by Purchaser of this Agreement and the
consummation by Purchaser of the transactions contemplated hereby will not,
with or without the giving of notice or the lapse of time, or both, (a)
violate any provision of any law, rule or regulation to which Purchaser is
subject; (b) violate any order, judgment or decree applicable to Purchaser; or
(c) conflict with or result in a breach of or a default under any term or
condition of Purchaser's Certificate of Incorporation or By-Laws or any
agreement or other instrument to which Purchaser is a party or by which it or
its assets may be bound, except in each case, for violations, conflicts,
breaches or defaults which in the aggregate would not materially hinder or
impair the consummation of the transactions contemplated hereby.
6.2.3 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 November 12, 1996, there were 11,769,732 shares of Parent
Common Stock and no shares of Parent Preferred Stock, issued and outstanding.
All issued and outstanding shares of Parent Common Stock are, and the shares
of Parent Common Stock to be issued under this Agreement when issued and paid
for in accordance with this Agreement will be, duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights.
<PAGE>
6.2.4 Parent Reports and Financial Statements. Parent has
heretofore made available to CGA true and complete copies of (i) the Annual
Report of Parent on Form 10-KSB for the fiscal year ended December 31, 1995;
(ii) the Quarterly Reports of Parent on Form 10-QSB for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996; (iii) the Proxy
Statement, dated May 24, 1996, relating to the 1996 Annual Meeting of
Shareholders of Parent; (iv) the Final Prospectus, dated July 3, 1996 relating
to the offering of 3,000,000 shares of Parent Common Stock and (v) the
Registration Statement on Form S-8, filed on December 5, 1996 (such reports,
registration statements, definitive proxy statements and other documents,
together with any amendments thereto, and any Current Reports on Form 8-K, 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 Purchaser
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.
6.3 Survival. The representations and warranties of the parties
made in this Article 6 shall survive the Closing.
7. Further Assurances. At any time and from time to time after the
Closing, Seller and Purchaser shall, at the request of the other, execute and
deliver any further instruments or documents and take all such further action
as the other party may reasonably request in order to transfer into the name
of
<PAGE>
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, attorneys' fees) imposed upon or incurred by the other party by
reason of any claim for commissions or other compensation for bringing about
this transaction by any broker, finder or similar agent or party other than
the Brokers who claims to have dealt with the indemnifying party in connection
with this transaction. The provisions of this Article shall survive the
Closing or any termination of this Agreement.
9. Costs and Fees. Purchaser shall pay the expenses incurred in
connection with (a) the examination of title, (b) the issuance of an owner's
policy of title insurance for Purchaser, (c) a survey of the Property, (d) a
phase I environmental study and (e) deed transfer or conveyance taxes. The
Seller shall pay the cost of (a) obtaining the audited financial statements of
the Seller and the other financial information required by Section 6.1.19
hereof, and (b) its own legal expenses. Any other similar costs not expressly
provided for elsewhere in this Agreement shall be divided and borne in
accordance with the usual practices in the jurisdiction where the Premises are
located. The provisions of this Article shall survive the Closing.
<PAGE>
10. Indemnification.
10.1 Subject to the further provisions of this Article, Seller
and the Members shall protect, defend, hold harmless and indemnify Purchaser,
its officers, directors, shareholders, employees, agents and affiliates, and
their respective successors and assigns, from, against and in respect of any
and all losses, liabilities, deficiencies, penalties, fines, costs, damages
and expenses whatsoever (including without limitation, reasonable professional
fees and costs of investigation, litigation, settlement, and judgment and
interest) ("Losses") that may be suffered or incurred by any of them arising
from or by reason of (i) any Retained Liability or other liability or
obligation of Seller which is not an Assumed Liability; (ii) the breach of any
representation, warranty, covenant or agreement of Seller contained in this
Agreement or in any document or other writing delivered pursuant to this
Agreement; and (iii) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses (including without limitation,
interest, penalties, reasonable legal fees and accounting fees) incident to
the foregoing and the enforcement of the provisions of this Section 10.1.
10.2 Subject to the further provisions of this Article,
Purchaser shall protect, defend, hold harmless and indemnify Seller, its
members, 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
<PAGE>
(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 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
<PAGE>
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 Party's obligation
to protect, defend, hold harmless and indemnify the Indemnified Party pursuant
to this Article.
10.5 The obligations of the Seller and the members under
Section 10.1 hereof shall be satisfied first from the Escrowed Funds (as
defined in the Escrow Agreement, dated as of the date hereof, among Seller,
Parent and Continental Stock Transfer & Trust Company), and, if the Escrow is
inadequate to provide indemnification to Purchaser, then from Seller and the
Members 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
<PAGE>
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.
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 Katz, Greenberger & Norton, 105 East 4th
Street, 9th floor, Cincinnati, Ohio 45202-4056, Attention: Scott P. Kadish,
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.
<PAGE>
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 Delaware.
13.3 The captions or article headings in this Agreement are for
convenience only and do not constitute part of this Agreement.
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)
contains 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,
<PAGE>
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.
CINCINNATI GOLF ACADEMY, LTD.
By:
----------------------
Name:
Title:
GOLF CENTERS OF CINCINNATI, LTD.
By:
----------------------
Name:
Title:
----------------------
David Wechsler
MAINEVILLE FAMILY GOLF CENTERS,
INC.
By:
----------------------
Name:
Title:
<PAGE>
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of December 30, 1996, among FAMILY GOLF
CENTERS, INC., a Delaware corporation with executive offices at 225
Broadhollow Road, Melville, New York 11747 ("FGC"), CINCINNATI GOLF ACADEMY,
LTD. an Ohio limited liability company, having an address at 7630 Columbia
Road, Maineville, Ohio 45039 (the "Seller") and CONTINENTAL STOCK TRANSFER &
TRUST COMPANY, incorporated under the laws of the United States of America
with executive offices at 2 Broadway, New York, New York 10004 (the "Escrow
Agent").
W I T N E S E T H:
------------------
WHEREAS, simultaneously with the execution hereof, the Seller and
Maineville Family Golf Centers, Inc., a Delaware corporation (the "Purchaser")
are consummating the transactions contemplated by the Purchase Agreement,
dated as of December 30, 1996 (the "Purchase Agreement"), among the Seller,
certain members 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, 3,500 shares
(the "Escrowed Property") of the FGC Common Stock are required to be placed
into an escrow account (the "Escrow Account") to be maintained by the Escrow
Agent against any claims for indemnity
<PAGE>
under the Purchase Agreement; and
WHEREAS, this is the Escrow Agreement referred to in Section 1 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 Effective Time,
FGC shall deposit, in accordance with Section 1.03 hereof, into the Escrow
Account an aggregate of 3,500 shares of FGC Common Stock pursuant to the
Purchase Agreement.
(b) At any time prior to December 30, 1998, 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.
(c) Twenty days after the Escrow Agent has received a notice
pursuant to
-2-
<PAGE>
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
iasonable 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.
(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
- 3 -
<PAGE>
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 on
December 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 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.
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 3,500
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:
- 4 -
<PAGE>
225 Broadhollow Road
Melville, New York 11747
(516) 694-1666
with a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Kenneth R. Koch, Esq.
Tel: (212)-661-6500
Fax: (212)-697-6686
If to Seller to:
Cincinnati Golf Academy, Ltd.
7630 Columbia Road
Maineville, Ohio 45039
Attention: David Wechsler
Tel: (513) 459-4653
Fax: (513) 459-4654
with a copy to:
Katz, Greenberg & Norton
105 East 4th Street
9th Floor
Cincinnati, Ohio 45202
Attention: Scott P. Kadish, Esq.
Tel: (513) 721-5151
Fax: (513) 621-9285
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
- 5 -
<PAGE>
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.
(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
- 6 -
<PAGE>
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
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
- 7 -
<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 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) T 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
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<PAGE>
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 rtoain 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 parties hereto or on such parties'
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<PAGE>
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 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.
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<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:
CINCINNATI GOLF ACADEMY, LTD.
.
BY:_________________________________
NAME:
TITLE:
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
BY: ________________________________
NAME:
TITLE:
-11-
<PAGE>
EXHIBIT A
ESCROW AGENT FEES: $100.00 PER MONTH
- 12 -
<PAGE>
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December _, 1996, among FAMILY GOLF
CENTERS, INC., a Delaware corporation, with executive offices at 225
Broadhollow Road, Melville, New York 11747 ("FGC") and _____________________,
with an address of ____________________________ (the "Holder").
W I T N E S E T H:
------------------
WHEREAS, simultaneously with the execution hereof, the Cincinnati Golf
Academy, Ltd. (the "Seller") and Maineville Family Golf Centers, Inc., a
Delaware corporation (the "Purchaser") are consummating the transactions
contemplated by the Purchase Agreement, dated as of December __, 1996 (the
"Purchase Agreement"), among the Seller, certain members of Seller and
Purchaser, pursuant to which, among other things, the Purchaser is purchasing
certain assets of the Seller;
WHEREAS, as part of the consideration for the Seller's assets, the
Purchaser has agreed to grant the Seller or its designees an aggregate of up
to 10,000 Options and the Seller has designated the Holder to receive ______
of such Options;
WHEREAS, this is the Stock Option Agreement referred to in Section 2 of
the Purchase Agreement. Capitalized terms used in this Stock Option Agreement
and not otherwise defined herein shall have the respective meanings given to
them in the Purchase Agreement.
<PAGE>
NOW, THEREFORE, it is agreed as follows:
I. GRANT OF OPTION. FGC hereby grants to the Holder the option (the
"Option") to purchase, upon the terms and conditions hereinafter set forth, up
to an aggregate of _______ shares of Common Stock of FGC (subject to
adjustment as hereinafter provided), at the exercise price of $40.00 per share
(the "Exercise Price").
II. EXERCISE OF OPTION. Holder may exercise the option, in whole or in
part, at any time on or after the date hereof until the tenth anniversary of
the date hereof (the "Exercise Period").
III. MANNER OF EXERCISE. In the event the Holder wishes to exercise the
Option, the Holder shall send a written notice (the "Notice") to the Board of
Directors of the Company specifying: (i) the number of shares of Common Stock
the Holder will purchase pursuant to such exercise; and (ii) the place and
date for the closing of such purchase, which date shall be not less than
three, nor more than twenty, business days from the date of the delivery of
the Notice ( each a "Closing"). Each Closing shall take place at the principal
executive offices of FGC.
IV. PAYMENT AND DELIVERY OF CERTIFICATES. At each Closing, (i) the Holder
will make payment to FGC of the aggregate Exercise Price per share for the
shares of Common Stock being purchased upon exercise of any Option by bank
cashier's or certified check, and (ii) FGC shall deliver to the Holder a
certificate or certificates representing the number of shares of Common Stock
so purchased in the denominations designated by the Holder. At any such
Closing, the Holder shall deliver a letter to FGC agreeing that the Holder is
purchasing the shares of Common Stock for investment purposes and not with a
view to distribution otherwise than in compliance with the Securities Act of
1933, as amended (the "Securities Act"), and agreeing not to offer to sell,
sell or otherwise dispose of, any of such shares acquired by it pursuant to
this Agreement in violation of the Securities Act or any
2
<PAGE>
applicable state securities laws.
V. ADJUSTMENTS. In case FGC shall (i) pay a dividend in Common Stock of
FGC or make a distribution in Common Stock, (ii) subdivide its outstanding
Common Stock, (iii) combine its outstanding Common Stock into a smaller number
of shares of Common Stock, or (iv) issue by reclassification of its Common
Stock other securities of FGC, the number of shares of Common Stock
purchasable upon exercise of the Option shall be adjusted so that Holder shall
be entitled to receive the kind and number of shares or other securities of
FGC which it would have owned or would have been entitled to receive after the
happening of any of the events described above had the Option been exercised
immediately prior to the happening of such event or any record date with
respect thereto and the Exercise Price shall also be adjusted to reflect the
happening of any of the events described above.
VI. LEGEND. The Holder consents to the placement of any legend required
by applicable state securities laws and of the following legend on each
certificate representing the Common Stock:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, TRANSFERRED,
EXCHANGED OR OTHERWISE DISPOSED OF UNLESS (1) A REGISTRATION STATEMENT
UNDER SUCH ACT IS THEN IN EFFECT WITH RESPECT THEREOF, (2) A WRITTEN
OPINION FROM COUNSEL FOR THE ISSUER OR OTHER COUNSEL FOR THE HOLDER
REASONABLY ACCEPTABLE TO THE ISSUER HAS BEEN OBTAINED TO THE EFFECT THAT
NO SUCH REGISTRATION IS REQUIRED, OR (3) A "NO ACTION" LETTER OR ITS THEN
EQUIVALENT HAS BEEN ISSUED BY THE SECURITIES EXCHANGE COMMISSION TO THE
EFFECT THAT NO SUCH REGISTRATION IS REQUIRED IN CONNECTION THEREWITH."
VII. TYPE OF OPTION. This Option is not an "incentive stock option", as
defined in Section 422A of the Internal Revenue Code of 1986, as amended, and
is not being issued pursuant to any plan of FGC, including FGC's 1996 Stock
Option Plan. The Holder shall have no rights as a stockholder of FGC with
respect to shares of Common Stock covered by this
3
<PAGE>
Option until payment for such shares shall have been made in full and until
the date of the issuance of a stock certificate for such shares.
VIII. REPRESENTATIONS AND WARRANTIES OF FGC. FGC hereby represents and
warrants to the Holder as follows:
(a) FGC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. FGC is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the failure to so qualify would have a material adverse effect on its
business or properties.
(b) FGC has all requisite corporate power and authority to own the
properties owned by it and to carry on its business as now conducted and has
taken all necessary corporate action to enter into this Agreement. FGC has all
requisite corporate power to grant the Options and to carry out and perform
its obligations under the terms of this Agreement, and all transactions
contemplated hereby.
(c) When issued and paid for in accordance with the terms of this
Agreement, the shares of Common Stock underlying the Option will be duly
authorized, validly issued, fully paid and non-assessable.
(d) Upon delivery of the shares of Common Stock to the Holder upon the
exercise of the Options, the Holder will receive good and marketable title to
such shares free and clear of any pledge, lien, security interest, charge,
claim, equity or encumbrance of any kind arising by, through or under FGC,
other than any restrictions on resales imposed by federal or state securities
laws.
(e) The execution and delivery of this Agreement does not, and the
performance of this Agreement will not, with or without the giving of notice
or the lapse of time, or both, (i) violate the Certificate of Incorporation,
as amended or Amended and Restated By-Laws of FGC, (ii) conflict with or
result in a breach of any terms or provisions of, or constitute a default or
give rise to a right of acceleration or termination under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of FGC under any indenture, mortgage, loan agreement or other
instrument to which FGC is a party or by which any of its property is
4
<PAGE>
bound, or (iii) violate or require governmental, judicial or regulatory
consent under any existing applicable, law, rule, regulation, judgment, order
or decree of any governmental instrumentality or court having jurisdiction
over FGC or any of its property.
IX. REPRESENTATIONS AND WARRANTIES OF HOLDER. The Holder hereby
represents and warrants to FGC as follows:
IF HOLDER IS A CORPORATION, TRUST OR PARTNERSHIP:
(a) Holder is a corporation, trust or partnership duly formed, validly
existing and in good standing under the laws of its state of organization.
(b) Holder has all requisite power and authority to carry on its business
as it is now being conducted and has taken all necessary action to enter into
this Agreement. Holder has all requisite power to carry out and perform its
obligations under the terms of this Agreement, and all transactions
contemplated hereby.
(c) The execution and delivery of this Agreement does not, and the
performance of this Agreement will not, with or without the giving of notice
or the lapse of time, or both, (i) violate any provision of any law, rule or
regulation to which Holder is subject; (ii) violate any order, judgment or
decree applicable to Holder; or (iii) conflict with or result in a breach of
or a default under any term or condition of Holder's organizational or
operating documents or any agreement or other instrument to which Holder is a
party or by which it or its assets may be bound.
IF AN INDIVIDUAL:
(a) This Agreement has been duly executed and delivered by such Holder
and represents the binding obligation of such Holder.
X. NOTICES. All notices, demands, requests, consents or other
communications ("Notices") which either party may desire or be required to
give to the other hereunder shall be in
5
<PAGE>
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 Holder to FGC 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 FGC or
Purchaser to Holder shall simultaneously be given in either manner provided
above to Katz, Greenberger & Norton, 105 East 4th Street, 9th floor,
Cincinnati, Ohio 45202-4056, Attention: Scott P. Kadish, 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.
XI. MISCELLANEOUS.
(a) BINDING EFFECT. This Agreement shall be binding upon, and inure
solely to the benefit of, the parties hereto and their respective successors
and assigns, heirs, administrators, and representatives, and shall not be
enforceable by, or inure to the benefit of, any other third party.
(b) NONTRANSFERABLE. The Option granted hereunder may not be transferred,
assigned or otherwise disposed of by the Holder and any such attempt to
transfer the same shall be void ab initio.
(c) CHOICE OF LAW. This Agreement shall be construed in accordance with,
and governed by, the internal law of the State of Delaware (without reference
to its rules as to conflicts of law).
6
<PAGE>
(d) MODIFICATION. This Agreement may only be modified by a writing signed
by each of the parties hereto.
(e) HEADINGS. The section headings herein are for convenience only and
shall not affect the construction thereof. Unless otherwise indicated,
references to Sections and Articles are to Sections and Articles,
respectively, contained herein.
(f) COUNTERPARTS. This Agreement may be executed in one or more
counterparts but all such separate counterparts shall constitute but one and
the same instrument; provided that, although executed in counterparts, the
executed signature pages of each such counterpart may be affixed to a single
copy of this Agreement which shall constitute an original.
IN WITNESS WHEREOF, the parties hereto have caused this Stock Option
Agreement to be executed as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
By:______________________
Name:
Title:
______________________
Name:
7
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of December
30, 1996, by and among FAMILY GOLF CENTERS, INC., a Delaware corporation (the
"Company"), and CINCINNATI GOLF ACADEMY, LTD., an Ohio limited liability
company (the "Seller").
WHEREAS, Maineville Family Golf Centers, Inc., a wholly-owned
subsidiary of the Company (the "Purchaser") and the Seller are parties to a
Purchase Agreement, dated as of December 30, 1996 (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 40,000 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.
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 Denver, Colorado 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.
Company Indemnified Parties: As defined in Section 6(b).
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 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
<PAGE>
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 Seller
pursuant to the Transaction Agreement, other than the shares held in escrow
pursuant to the Escrow Agreement dated as of even date herewith, 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.
Registraston 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.
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 thereof 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 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).
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 and then again if Stockholders may not
sell 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
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<PAGE>
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 David Wechsler, a 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 Registgible 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 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 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 securities to be sold for the account of the
Company as well as a registration statement which includes securities to be
offered for the account of other holders of Common Stock.
(d) The Company may, without the consent of any Stockholder, delay,
suspend, abandon or withdraw any Registration Statement described in Section
2(a) and any related proposed 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
- 3 -
<PAGE>
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 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 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) 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:
(1) subject to Section 4(b), use its diligent efforts to cause
the Registration Statement to remain effective, and to
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 (A) in the case of a shelf
Registration Statement, the sooner to occur of the
expiration of a two-year period following the date of this
Agreement and the sale of all of the Registrable Shares
covered by such shelf Registration Statement, and (B) in
the case of any other Registration Statement, 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;
(2) 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;
(3) furnish to each Selling Stockholder a conformed copy of
the Registration Statement as declared effective by the
Commission
- 4 -
<PAGE>
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;
(4) 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
(5) 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) Notwithstanding anything to the contrary contained herein, if at
any time after the filing of a Registration Statement which includes
Registrable Shares the Company determines, in its reasonable business
judgment, that such registration and offering could interfere with or
otherwise adversely affect any financing, acquisition, corporate
reorganization, or other material transaction or development involving the
Company or any of its affiliates or require the Company to disclose matters
that otherwise would not be required to be disclosed at such time, then the
Company may require the suspension by each Selling Stockholder of the
distribution of any of the Registrable Shares by giving notice to such Selling
Stockholder. 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 be or might result in any such disclosure. In the event that such notice
is given, then until the Company has determined, in its reasonable business
judgment, that such registration and offering would no longer interfere with
the matters described in the preceding sentence and has given notice thereof
to the Selling Stockholders, the Company's obligations under Section 4(a)(1),
if the Registration Statement has become effective, will be suspended. In the
event of a
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<PAGE>
suspension pursuant to this Section 4(b), the two-year period of effectiveness
of such Registration Statement that is referred to in Section 4(a)(1) and the
ninety-day period of effectiveness of such Registration Statement that is
referred to in Section 4(a)(1) will each be extended by a number of days equal
to the total number of days for which the distribution of Registrable Shares
included in such Registration Statement by the Selling Stockholder has been
suspended under this Section 4(b).
(c) 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 for so long as the Company is obligated to
keep the Registration Statement effective, 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 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
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 Rules 10b-6 and 10b-7
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 Shares owned by such Selling Stockholder
solely in the manner described
- 6 -
<PAGE>
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)(2), or that, as set forth in Section 4(b), it
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 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 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)(4)), 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
- 7 -
<PAGE>
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 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 nonunderwritten 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 icch
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 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 obligation of the Company hereunder to keep the Registration
Statement effective and current has expired or been suspended 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
- 8 -
<PAGE>
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 specifically
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
obligation of the Company hereunder to keep the Registration Statement
effective and current has expired or been suspended 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 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
- 9 -
<PAGE>
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 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
- 10 -
<PAGE>
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) The liability of each Selling Stockholder under this Section 6
shall not exceed an amount equal to the public offering price of the
Registrable Shares sold by such Selling Stockholder pursuant to the
Registration Statement.
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: Dominic Chang
Facsimile: (516) 694-0918
with a copy to:
Squadron, Ellenoff, Plesent
& Sheinfeld, LLP
551 Fifth Avenue
New York, New York 11076
Attention: Kenneth R. Koch, Esq.
Facsimile: (212) 697-6686
(ii) if to Seller or the Representative:
Cincinnati Golf Academy, Ltd.
7630 Columbia Road
Maineville, Ohio 45039
Attention: David Wechsler
Facsimile: (513) 459-4654
with a copy to:
Katz, Greenberger & Norton
105 East 4th Street
Cincinnati, Ohio 45202
Attention: Scott P. Kadish, Esq.
Facsimile: (513) 621-9285
or to such other person or address as any party shall specify by notice in
writing to the other party.
- 11 -
<PAGE>
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 last definition 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.
- 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:
CINCINNATI GOLF ACADEMY, LTD.
By:______________________________
Name:
Title:
- 13 -
<PAGE>
COUNTERPART SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
Cincinnati Golf Academy, Ltd. (the "Seller") hereby designates the
persons whose signatures appears below as a Stockholder under the Registration
Rights Agreement, dated as of December __, 1996, by and among Family Golf
Centers, Inc. (the "Company") and Seller (the "Registration Rights
Agreement"). By their execution hereof, each of the undersigned agrees to be
bound by all of the terms and conditions of the Registration Rights Agreement
as a Stockholder thereunder.
Curtis Burge, Trustee of Pension & Profit
Plan; 401K Trust Dated 4/24/85
By:
----------------------------------
Name:
Title:
-------------------------------------
Name: Philip M. Bell
-------------------------------------
Name: Frederick J. Caspar
-------------------------------------
Name: Ruth L. Conway
FHM, Inc.
By:
----------------------------------
Name:
Title:
-------------------------------------
Name: Allison Flege
Susan W. Holmes 1951 Trust
By:
----------------------------------
Name:
Title:
- 14 -
<PAGE>
H:\SSDOCS\SQUAD01\DK\COGENER2\160476-1.WPD
-------------------------------------
Name: James M. Gould
-------------------------------------
Name: Marianne Klekamp
-------------------------------------
Name: Gary Munafo
Rabiner Partners
By:__________________________________
Name:
Title:
-------------------------------------
Name: Jeff Rosenberg
-------------------------------------
Name: Marvin Rosenberg
Salem Realty, Inc.
By:
----------------------------------
Name:
Title:
-------------------------------------
Name: Alan R. Schriber
Dr. Vincent W. Schiel, Trustee u/Amended
Agreement of Trust Dated 1/18/89
By:
----------------------------------
Name:
Title:
-------------------------------------
Name: Dudley S. Taft
- 15 -
<PAGE>
Andromeda Agency, Inc. Profit Sharing Plan
FBO Howard L. Tomb (Howard L. Tomb, Trustee)
By:
----------------------------------
Name:
Title:
--------------------------------------
Name: Samuel W. Tuten & Vicky R. Tuten
--------------------------------------
Name: John C. Vance
--------------------------------------
Name: Sharon Wahlke
--------------------------------------
Name: David Wechsler
Jean Schlear Meier Trust U/A Dated 6/7/72
By:
----------------------------------
Name:
Title:
Charles F. Schiear Trust U/A Dated 6/683
By:
----------------------------------
Name:
Title:
--------------------------------------
Name: Steve Contardi
- 16 -
<PAGE>
SCHEDULE I
1. The registration rights attaching to the 300,000 shares to be
issued upon exercise of the Warrants for such shares (not yet exercised)
issued in connection with a public offering in December 1995, (See Exhibit
10.28 of the Registration Statement dated October 3, 1995 (Registration Number
33-97686)).
2. Any registration rights in respect of the Common Stock or any
other class of capital stock of the Company, except those registration rights
in respect of shares of Common Stock issued in connection with the acquisition
by the Company of a golf center.
- 17 -
<PAGE>
PURCHASE AGREEMENT
BY AND BETWEEN
FORE SEASONS GOLF, INC.
SELLER,
AND
MILWAUKEE FAMILY GOLF CENTERS, INC.,
PURCHASER
PREMISES:
8500 NORTH GRANVILLE ROAD,
MILWAUKEE, WISCONSIN
<PAGE>
PURCHASE AGREEMENT
------------------
PURCHASE AGREEMENT, made as of the 31st day of December, 1996 (this
"AGREEMENT"), by and between FORE SEASONS GOLF, INC., a Wisconsin corporation
having an address 8500 North Granville Road, Milwaukee, Wisconsin 53224
("SELLER"), MILWAUKEE FAMILY GOLF CENTERS, INC., a Delaware corporation having
an address at 225 Broadhollow Road, Suite 106E, Melville, New York 11747
("PURCHASER") and FAMILY GOLF CENTERS, INC., a Delaware corporation having an
address at 225 Broadhollow Road, Suite 106E, Melville, New York 11747
("PARENT").
W I T N E S S E T H :
---------------------
WHEREAS, Seller is the owner of certain real property located at
8500 North Granville Road, Milwaukee, Wisconsin 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 driving range and related facilities
at the Premises under the name "Fore Seasons Golf Center" (the "BUSINESS");
WHEREAS, Purchaser is a wholly-owned subsidiary of Parent; and
WHEREAS, Seller wants to sell the Premises to Purchaser, and
Purchaser wants to purchase the Premises from Seller, on the terms, and
subject to the conditions, set forth herein.
NOW, THEREFORE, in consideration of TEN ($10.00) DOLLARS, the terms
and conditions set forth herein, and other good and valuable consideration,
the mutual receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree to the foregoing and as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 PROPERTY TO BE PURCHASED BY PURCHASER. Seller agrees to
sell and convey to Purchaser, and Purchaser agrees to purchase and acquire
from Seller, upon the terms and conditions hereinafter set forth, all of
Seller's right, title and interest in and to the following property
(collectively, the "PROPERTY"):
1.1.1 the Premises;
1.1.2 the easements, rights of way, appurtenances and
other rights and benefits of Seller in and to the Premises, including without
limitation, all of Seller's interest in any air rights, water rights and
irrigation rights;
<PAGE>
1.1.3 all furnishings, fixtures, machinery, equipment,
vehicles and personalty attached or appurtenant to or used in connection with
the Premises that are owned by Seller, and all inventories, supplies, sales,
marketing and instructional materials of every kind and description relating
to the Business, wherever located, including without limitation, the items
described on EXHIBIT B-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;
1.1.4 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");
1.1.5 any consents, authorizations, variances, waivers,
licenses, certificates, permits and approvals (other than any liquor license)
held by or granted to Seller in connection with the ownership of the Premises
(collectively, the "PERMITS"), provided that such Permits are transferable by
Seller to Purchaser;
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 (as such terms are hereinafter defined) (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 any rights of Seller with respect to insurance
policies owned by Seller or for which Seller is the named insured;
1.2.2 all cash, funds in bank accounts and cash
equivalents existing
as of the date hereof; and
1.2.3 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").
- 2 -
<PAGE>
1.3 ASSUMPTION OF CERTAIN LIABILITIES. Purchaser shall assume
all liabilities and obligations (the "ASSUMED LIABILITIES") of Seller under
the equipment leases described on EXHIBIT C attached hereto and made a part
hereof (the "EQUIPMENT LEASES") to the extent the same arise from and after
November 1, 1996 (the "EFFECTIVE DATE"). 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 Two Million Five Hundred Ninety Seven Thousand Five Hundred
Dollars ($2,597,500.00), subject to adjustment as hereinafter provided,
payable as follows:
2.1 One Million Six Hundred Fifty Five Thousand Two Hundred
Forty and 93/100 Dollars ($1,655,240.93), payable on the date hereof in cash,
or by certified or bank check or by the wire transfer of funds;
2.2 Seven Hundred Forty Two Thousand Fifty Nine and 07/100
Dollars ($742,259.07), by assuming that certain mortgage now encumbering the
Property in favor of Wisconsin Business Development (the "FIRST MORTGAGE");
and
2.3 Two Hundred Thousand Dollars ($200,000.00) payable in
accordance with that certain Second Mortgage Note (the "SECOND MORTGAGE NOTE")
being executed and delivered by Purchaser to Seller simultaneously with the
execution and delivery hereof, and which Second Mortgage Note shall be secured
by a second mortgage on the Premises (the "SECOND MORTGAGE").
3. TITLE; PERMITTED EXCEPTIONS. Seller will convey the Property to
Purchaser free and clear of any and all liens, charges, encumbrances,
mortgages, pledges, security interests, easements, agreements and other
interests and adverse claims (collectively, "ENCUMBRANCES"), other than the
First Mortgage, the Second Mortgage and the matters set forth in EXHIBIT D
attached hereto and made a part hereof (the "PERMITTED EXCEPTIONS").
4. APPORTIONMENTS.
4.1 The parties hereto agree that (a) all operating expenses of
Assignor relating to the Business (i.e., advertising, collections, fees, hired
services, insurance, miscellaneous expenses, postage, repairs and maintenance,
supplies, taxes, utilities, wages and interest on indebtedness, but
specifically not including professional fees and expenses, travel , lodging
and depreciation), and (b) all income of Assignor, shall be apportioned
between Assignor and Assignee as of Effective Date based on the portion
- 3 -
<PAGE>
of each such expense or revenue attributable to the period falling on or
before the Effective Date on the one hand, which Assignor shall bear the
responsibility and benefit of, and the portion of each such expense or revenue
attributable to the period falling after the Effective Date, on the other
hand, which Assignee shall bear the responsibility and benefit of (the
"ADJUSTMENT"). The net Adjustment will be paid by the party owing the same to
the other in cash or by certified or official bank check or wire transfer. The
expenses and liabilities for which Assignor shall be liable pursuant to this
Section shall be included within the meaning of the term "Retained
Liabilities".
4.2 To the extent that any portions of the Adjustment are based
upon estimates of payments to be made and/or expenses to be incurred by
Assignee subsequent to the Effective Date, or either party discovers any
errors in or omissions in respect of the Adjustment, Assignor and Assignee
agree to adjust such prorations promptly upon receipt by Assignor or Assignee,
as the case may be, of such payments or of bills or other documentation
setting forth the actual amount of such expenses.
4.3 Assignor and Assignee shall maintain and make available to
each other any books or records necessary for the adjustment of any item
pursuant to this Article. The provisions of this Article shall survive the
closing of the transactions described herein (the "CLOSING").
5. THE CLOSING.
5.1 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 Property (receipt of which
may be actual or constructive) and the following:
5.2.1 a full warranty deed with covenants against
grantor's acts, duly executed and acknowledged by Seller, in proper statutory
form for recording, so as to convey to Purchaser fee simple title to the
Premises, subject to and in accordance with the provisions of this Agreement
(the "DEED");
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
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interest in and to the Equipment Leases, the Permits (to the extent
transferable by Seller) 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 sale of the Property,
duly executed and acknowledged by Seller;
5.2.7 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;
5.2.8 keys to all locks relating to the Property,
appropriately labeled;
5.2.9 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
5.2.10 such other documents as may be reasonably required
by Purchaser's counsel in connection with this transaction.
5.3 At the Closing, Purchaser shall deliver or cause to be
delivered to Seller the following:
5.3.1 the cash consideration referred to in Section 2
hereof;
5.3.2 the Assignment and Assumption Agreement, duly
executed and acknowledged by Purchaser;
5.3.3 the Second Mortgage Note, duly executed and
acknowledged by Purchaser;
5.3.4 the Second Mortgage, duly executed and acknowledged
by Purchaser;
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5.3.5 the Settlement Statement, duly executed and
acknowledged by Purchaser;
5.3.6 the unconditional guaranty of payment and
performance by Parent of all of Purchaser's obligations and duties under the
Second Mortgage Note and the Second Mortgage the "GUARANTY");
5.3.7 all other instruments and documents to be executed,
acknowledged where appropriate and/or delivered by Purchaser to Seller; and
5.3.8 such other documents as may be reasonably required
by Seller's counsel in connection with this transaction.
6. REPRESENTATIONS AND WARRANTIES.
6.1 Seller represents and warrants to Purchaser as follows:
6.1.1 ORGANIZATION; POWER AND AUTHORITY. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Wisconsin, and has all requisite power and authority to
carry on its business as it is now being conducted, to execute, deliver and
perform its obligations under this Agreement and to consummate the
transactions contemplated hereby.
6.1.2 DUE AUTHORIZATION AND EXECUTION; EFFECT OF
AGREEMENT. The execution, delivery and performance by Seller of this Agreement
and the consummation by Seller of the transactions contemplated hereby have
been duly authorized by all necessary corporate action required to be taken on
the part of Seller. This Agreement has been duly and validly executed and
delivered by Seller and constitutes the valid and binding obligation of
Seller, enforceable in accordance with its terms, except to the extent that
such 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
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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. All Permits required by any federal, state,
or local law, rule or regulation and necessary for Seller's operation of the
Property and the Business as currently being conducted have been obtained and
are currently in effect (except for the sale of beer or other alcohol), other
than Purchaser's qualification to do business as a foreign corporation in
Wisconsin and the issuance to Purchaser of a Wisconsin Sales Tax Certificate.
No registrations, filings, applications, notices, transfers, consents,
approvals, orders, qualifications, waivers or other actions of any kind are
required by virtue of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby (a) to avoid the loss of
any Permit or the violation of any law, regulation, order or other requirement
of law, or (b) to enable Purchaser to continue the operation of the Property
as presently conducted after the Closing. The current use and occupation of
any portion of the Property does not violate any of, and, where applicable, is
in material compliance with, the Permits, any applicable deed restrictions or
other covenants, restrictions or agreements including without limitation, any
of the Permitted Exceptions, site plan approvals, zoning or subdivision
regulations or urban redevelopment plans applicable to the Premises.
6.1.6 TITLE TO ASSETS. Seller has good and marketable
title to the Property free and clear of all Encumbrances other than the
Permitted Exceptions and those Encumbrances which will be fully paid at
Closing.
6.1.7 CONTRACTS. Seller is not a party to any leases,
contracts, orders or agreements relating to the Property or the Business
(written or otherwise) other than the Equipment Leases. Purchaser has been
provided with true, correct and complete copies of the Equipment Leases, and
the Equipment Leases have not been amended or modified in any way except as
expressly disclosed to Purchaser. The Equipment Leases are in full force and
effect and there exists no default, or any fact or circusmstance which, with
the giving of notice, the passage of time or both would constitute a default,
by Seller or the lessor under any of the Equipment Leases. Exhibit C attached
hereto sets forth the amounts necessary to pay each of the lessors under the
Equipment Leases in full.
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6.1.8 CONDITION OF THE IMPROVEMENTS. To the best of
Seller's knowledge, there are no material structural or mechanical defects in
the Improvements, and there are no leaks in any roof on any Improvement.
6.1.9 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.
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 To the best of Seller's knowledge, there is no
Hazardous Material at, under or on the Premises and there is no ambient air,
surface water, groundwater or land contamination within, under, originating
from or relating to the Premises. Seller has not, and has not caused to be,
manufactured, processed, distributed, used, treated, stored, disposed of,
transported or handled any Hazardous Material at, on or under the Premises.
6.1.10.3 To the best of Seller's knowledge, Seller has no
obligation or liability imposed or based upon any provision under any foreign,
federal, state or local law, rule, or regulation 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,
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transport or handling of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes (hereinafter collectively referred to
as "ENVIRONMENTAL LAWS").
6.1.10.4 Seller has not been subject to any civil,
criminal or administrative action, suit, claim, hearing, notice of violation,
investigation, inquiry or proceeding for failure to comply with, or received
notice of any violation or potential liability under the Environmental Laws in
respect of the Premises.
6.1.10.5 The Premises are not (a) listed or proposed for
listing on the National Priority List or (b) listed on the Comprehensive
Environmental Response, Compensation, Liability Information System List
("CERCLIS") promulgated pursuant to CERCLA, 42 U.S.C. ss. 9601(9), or 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 and Seller further warrants and
represents that it has no knowledge of any prior use and operation of
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. All water, storm and sanitary sewer,
gas, electricity, telephone and other utilities adequately service the
Premises, enter the Premises through lands as to which valid public or private
easements exist that will inure to the benefit of Purchaser and the Premises
are furnished by facilities of public utilities and the cost of installation
of such utilities has been fully paid.
6.1.13 ACCESS. To the best of Seller's knowledge, there
are no federal, state, county, municipal or other governmental plans to change
the highway or road system in the vicinity of the Premises which could
materially restrict or change access from any such highway or road to the
Premises or any pending or threatened condemnation or eminent domain
proceedings relating to or affecting the Premises. All roads bounding the
Premises are public roads and the Deed is the only instrument necessary to
convey to Purchaser full access to and the right to use such roads freely as
well as to convey all rights appurtenant to the Premises in such roads.
6.1.14 INSURANCE REQUIREMENTS. All requirements or
recommendations by any insurer or by any board of fire underwriters or similar
body in respect of the Property have been satisfied.
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6.1.15 LITIGATION. There is no action or proceeding
(zoning or otherwise) or governmental investigation pending, or, to the best
of Seller's knowledge, threatened against, or relating to, Seller (insofar as
it relates to the Premises or the Business), the Premises, the Business or the
transactions contemplated by this Agreement, nor is there any basis for any
such action, proceeding or investigation.
6.1.16 ASSESSMENTS. There are no special or other
assessments for public improvements or otherwise now affecting the Premises
nor does Seller know of (a) any pending or threatened special assessments
affecting the Premises or (b) any contemplated improvements affecting the
Premises that may result in special assessments affecting the Premises.
6.1.17 EMPLOYEE AGREEMENTS. There are no union or
employment contracts or agreements (written or oral) involving employees of
Seller or its affiliates affecting the Property or the Business which will
survive the Closing. All employees of Seller have been terminated as of the
date hereof.
6.1.18 WORK AT THE PREMISES. No services, material or work
have been supplied to the Premises for which payment has not been made in
full.
6.1.19 FINANCIAL CONDITION. Seller has delivered, or will
promptly after the closing deliver, to Purchaser true and correct copies of
(1) audited financial statements consisting of balance sheets and income
statements of Seller as of December 31, 1994 and December 31, 1995; and (2)
internal operating reports for the period commencing January 1, 1996 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, 1995: (a) there has at no time been a material
adverse change in the financial condition, results of operations, businesses,
properties, assets, liabilities or future prospects of 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:
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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 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 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Parent hereby
represents and warrants to Seller as follows:
6.3.1 ORGANIZATION; POWER AND AUTHORITY. Parent 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 the Guaranty and to
consummate the transactions contemplated hereby and thereby.
6.3.2 DUE AUTHORIZATION AND EXECUTION; EFFECT OF
AGREEMENT. The execution, delivery and performance by Parent of this Agreement
and the Guaranty and the consummation by Parent of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action required to be taken on the part of Parent. This Agreement
has been duly and validly executed and delivered by Parent and constitutes the
valid and binding obligation of Parent, enforceable in accordance with its
terms. The execution, delivery and performance by Parent of this Agreement and
the consummation by Parent 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 Parent is
subject; (b) violate any order, judgment or decree applicable to Parent; or
(c) conflict with or result in a breach of or a
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default under any term or condition of Parent's Certificate of Incorporation
or By-Laws or any agreement or other instrument to which Parent 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.
6.4 SURVIVAL. The representations and warranties of the parties
made in this Article 6 shall survive the Closing.
7. FURTHER ASSURANCES. At any time and from time to time after the
Closing, Seller shall, at the request of Purchaser, execute and deliver any
further instruments or documents and take all such further action as Purchaser
may reasonably request in order to transfer into the name of Purchaser any and
all Property contemplated to be sold pursuant to this Agreement and to further
consummate the transactions contemplated by this Agreement. This Article shall
survive the Closing.
8. BROKERS. Seller and Purchaser warrant and represent to each other
that they dealt with no broker, finder or similar agent or party who or which
might be entitled to a commission or compensation on account of introducing
the 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.
9. COSTS AND FEES. Documentary stamps for the Deed, deed transfer or
conveyancing taxes, if any, shall be payable by Seller, and in no event be
payable by Purchaser. Purchaser shall pay the expenses incurred in connection
with (a) the examination of title, (b) the issuance of a policy of title
insurance for Purchaser, (c) a survey of the Property, (d) an environmental
survey of the Premises and (e) the assumption of the First Mortgage. 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 parties shall pay for their own attorneys,
accountants and other professionals and consultants. 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,
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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 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 10.1.
10.2 Subject to the further provisions of this Article,
Purchaser and Parent 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 or Parent
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 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
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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 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 offset against any amounts owing under the Second
Mortgage Note and Second Mortgage and, such amounts 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 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 transfer of any part of the Property or Business ineffective as to
creditors of, or claimants against the Seller.
12. ALLOCATION OF PURCHASE PRICE. The parties hereby agree that the
Purchase Price is and shall be allocated as follows: (a) $475,000 shall be
allocated to the Land; (b) $1,756,684 shall be allocated to the Improvements;
(c) $270,816 shall be allocated to the Personal Property; and (d) $95,000 for
termination of the existing lease. The parties agree that all tax returns and
reports filed by Seller, Purchaser and Parent with respect to the transactions
contemplated by this Agreement shall be consistent with the foregoing
allocation.
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13. NOTICES. All notices, demands, requests, consents or other
communications ("NOTICES") which either party may desire or be required to
give to the other hereunder shall be in writing and shall be delivered by
hand, overnight express carrier, or sent by registered or certified mail,
return receipt requested, postage prepaid, in either event, addressed to the
parties at their respective addresses first above set forth. A copy of any
Notice given by Seller to Purchaser shall simultaneously be given in either
manner provided above to Squadron, Ellenoff, Plesent & Sheinfeld, LLP, 551
Fifth Avenue, New York, New York 10176, Attention: Kenneth R. Koch, Esq. A
copy of any Notice given by Purchaser to Seller shall simultaneously be given
in either manner provided above to Sletteland & Associates, S.C., 1555 North
RiverCenter Drive, Suite 203, Milwaukee, Wisconsin 53212, Attention: George
Sletteland, Esq. Notices given in the manner aforesaid shall be deemed to have
been given three (3) business days after the day so mailed, the day after
delivery to any overnight express carrier and on the day so delivered by hand.
Either party shall have the right to change its address(es) for the receipt of
Notices by giving Notice to the other party in either manner aforesaid. Any
Notice required or permitted to be given by either party may be given by that
party's attorney.
14. MISCELLANEOUS.
14.1 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns.
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
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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.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
FORE SEASONS GOLF, INC.
By: ______________________
Name: Michael Brielmaier
Title: President
MILWAUKEE FAMILY GOLF
CENTERS, INC.
By: ______________________
Name: Robert Krause
Title: Vice President
FAMILY GOLF CENTERS, INC.
By: ______________________
Name: Robert Krause
Title: Vice President
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SECOND MORTGAGE NOTE
--------------------
$200,000.00 December 31, 1996
FOR VALUE RECEIVED, MILWAUKEE FAMILY GOLF CENTERS, INC., a Delaware
corporation (herein called "MAKER") hereby promises to pay to the order of
FORE SEASONS GOLF, INC., a Wisconsin corporation ("PAYEE") the principal sum
of Two Hundred Thousand Dollars ($200,000.00), together with accrued and
unpaid interest on such principal amount outstanding from time to time, from
the date hereof, at the rate of 8% per annum; said principal and accrued and
unpaid interest to be due and payable on the first anniversary of the date of
this Note (the "MATURITY DATE").
1. SECURITY.
This Note is secured by that certain Mortgage (the "MORTGAGE") of
even date herewith, encumbering that certain property located at 8500 North
Granville Road, Milwaukee, Wisconsin as more particularly described therein
(the "PROPERTY").
2. PREPAYMENTS.
Subject to Section 4 hereof, Maker shall be permitted to prepay all
or any portion of this Note at any time and from time to time prior to the
Maturity Date without penalty or premium upon not less than 30 days' prior
written notice to Payee.
3. PAYMENT.
Interest shall be payable on the first day of April, July and
October. Payment of principal and interest shall be made in lawful money of
the United States of America at such place as Payee shall have designated to
Maker.
4. CONVERSION.
(A) Payee may, at the time of any payment hereunder, on the terms
set forth in this Section 4, convert all or any portion of the amount of such
payment (the "CONVERSION RIGHT") into a number of shares of the common stock,
par value $0.01 per share (the "COMMON STOCK") of Family Golf Centers, Inc.
(the "COMPANY"), determined by dividing the amount of such payment which Payee
wishes to convert (the "CONVERSION AMOUNT") by $29.00 (as adjusted in
accordance herewith, the "CONVERSION PRICE").
(B) To exercise the Conversion Right, Payee, shall deliver to the
Company, at its office at 225 Broadhollow Road, Melville, New York 11747, or
at such other place as is designated in writing by the Company, not less than
15 days prior to the Maturity Date or the specified date of any prepayment, a
notice (the "CONVERSION NOTICE") stating that
<PAGE>
Payee is exercising the Conversion Right, the intended Conversion Amount and
the name or names in which Payee wishes the certificates for shares of Common
Stock to be issued.
(C) Fifteen days after the Company's receipt of the Conversion
Notice, Payee shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise (the "CONVERSION SHARES"),
notwithstanding that the transfer books of the Company shall then be closed or
certificates representing such Conversion Shares shall not then have been
actually delivered to Payee. As soon as practicable after exercise of the
Conversion Right, the Company shall issue and deliver to Payee a certificate
or certificates for the Conversion Shares issuable upon such exercise
registered in the name of Payee or its designees, together with two copies of
the Registration Rights Agreement in the form of EXHIBIT A attached hereto,
executed by the Company. Payee shall promptly return one copy of the
Registration Rights Agreement, executed by Payee to Maker.
(D) The issuance of any shares or other securities upon the exercise
of the Conversion Right, and the delivery of certificates or other instruments
representing such shares or other securities, shall be made without charge to
Payee for any tax or other charge in respect of such issuance. Neither Maker
nor the Company shall however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of Payee and neither Maker nor the
Company shall be required to issue or deliver any such certificate unless and
until the person or persons requesting the issue thereof shall have paid to
the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
(E) Payee shall not have, solely on account of such status as a
Payee of this Promissory Note, any rights of a stockholder of the Company,
either at law or in equity, or any notice of meetings of stockholders or of
any other proceedings of the Company except as provided in this Promissory
Note.
5. ADJUSTMENT OF CONVERSION PRICE.
(A) In case the Company shall at any time after the date this
Promissory Note is first issued (i) declare a dividend on the outstanding
Common Stock payable in shares of its capital stock, (ii) subdivide the
outstanding Common Stock, (iii) combine the outstanding Common Stock into a
smaller number of shares, or (iv) issue any shares of its capital stock by
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing corporation), then, in each case, the Conversion Price, and the
number of Conversion Shares issuable upon exercise of this Promissory Note, in
effect at the time of the record date for such dividend or of the effective
date of such subdivision, combination, or reclassification, shall be
proportionately adjusted so that Payee after such time shall be entitled to
receive the aggregate number and kind of shares which, if the Conversion Right
had been exercised immediately prior to such time, he would have owned upon
such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination, or reclassification. Such adjustment shall be made
successively whenever any event listed above shall occur.
2
<PAGE>
(B) The Company shall not be required to issue fractions of
shares of Common Stock or other capital stock of the Company upon the exercise
of the Conversion Right. The remainder of the Conversion Amount which is not
fully divisible by the Conversion Price shall be satisfied by the Company in
lawful money of the United States of America.
6. SECURITIES ACT; LEGEND.
(A) Payee acknowledges that he has been advised that neither this
Promissory Note nor the Conversion Shares have been registered under the
Securities Act of 1933 (the "ACT"), that the Promissory Note is being or has
been issued and the Conversion Shares may be issued on the basis of the
statutory exemption provided by Section 4(2) of the Act or Regulation D
promulgated thereunder, or both, relating to transactions by an issuer not
involving any public offering. Payee acknowledges that he has been informed
of, or is otherwise familiar with, the nature of the limitations imposed by
the Act and the rules and regulations thereunder on the transfer of
securities. In particular, Payee agrees that no sale, assignment or transfer
of the Promissory Note or Conversion Shares shall be valid or effective, and
the Company shall not be required to give any effect to any such sale,
assignment or transfer, unless (i) the sale, assignment or transfer of the
Promissory Note or Conversion Shares is registered under the Act, it being
understood that neither the Promissory Note nor the Conversion Shares are
currently registered for sale and that the Company has no obligation or
intention to so register the Promissory Note or Conversion Shares except as
specifically provided herein, or (ii) the Promissory Note or Conversion Shares
are sold, assigned or transferred in accordance with all the requirements and
limitations of Rule 144 under the Act, it being understood that Rule 144 is
not available at the time of the original issuance of this Promissory Note for
the sale of the Promissory Note or the Conversion Shares and that there can be
no assurance that Rule 144 sales will be available at any subsequent time, or
(iii) such sale, assignment, or transfer is otherwise exempt from registration
under the Act.
(B) Unless registered, the Conversion Shares issued upon exercise of
the Conversion Right shall be subject to a stop transfer order and the
certificate or certificates evidencing such Conversion Shares shall bear the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED
OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND
OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED
IN THE
3
<PAGE>
MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS."
7. EVENTS OF DEFAULT.
If any of the following events shall occur (each a "DEFAULT"): (i)
Maker shall fail to pay any principal of or interest on this Promissory Note
when due and such failure shall remain unremedied for fifteen days after
written notice thereof, (ii) an entry of a decree or order by a court having
jurisdiction adjudging Maker bankrupt or insolvent, or approving a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of Maker, under federal bankruptcy law, as now or hereafter
constituted, and the continuance of such decree or order is unstayed and in
effect for a period of 60 days; (iii) the commencement by Maker of a voluntary
case under federal bankruptcy law, as now or hereafter constituted, or the
consent of Maker to the institution of bankruptcy or insolvency proceedings
against it; (iv) the filing by Maker of a petition or consent seeking
reorganization or relief under federal bankruptcy law; or (v) the appointment
of a receiver, liquidator, assignee, trustee, or similar official of Maker or
the making by Maker of an assignment for the benefit or creditors; then Payee
may declare the outstanding principal amount of this Promissory Note and all
other amounts due hereunder to be immediately due and payable, whereupon the
outstanding principal amount of this Promissory Note and all such other
amounts shall become and shall be forthwith due and payable, without
diligence, presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived.
8. NOTICES.
(A) Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service or delivered (in person or by telecopy,
telex or similar telecommunications equipment) against receipt to the party to
whom it is to be given, (i) if to Payee, for itself and as agent for all of
its transferees, at its address at 3333 W. Burgundy Court, Mequon, Wisconsin
53092, with a copy simultaneously given to Sletteland & Associates, S.C., 1555
North RiverCenter Drive, Suite 203, Milwaukee, Wisconsin 53212, Attention:
George B. Sletteland, Esq., (ii) if to Maker, at its address at 225
Broadhollow Road, Melville New York 11747, Attention: Robert J. Krause; (iii)
if to the Company at its address at 225 Broadhollow Road, Melville, New York
11747, Attention: Robert J. Krause; or (iv) in any case, to such other address
as the party shall have furnished in writing in accordance with the provisions
of this Section 8. Any notice or other communication given by certified mail
shall be deemed given at the time of certification thereof, except for a
notice changing a party's address which shall be deemed given at the time of
receipt thereof. Any notice given by other means permitted by this Section 8
shall be deemed given at the time of receipt thereof.
(B) Maker hereby covenants and agrees to provide Payee with
notice, at least 20 days prior to the Company filing any registration
statement under the Act, covering equity securities of the Company (other than
registration statements on Form S-8 or S-4 or any other
4
<PAGE>
form not generally available for the registration of securities for sale to
public) for its own account or for the account of others.
9. MISCELLANEOUS.
The rights and obligations of Maker under this Promissory Note may
not be assigned, conveyed or otherwise transferred to any third party and any
attempt to assign, convey or transfer such rights and/or obligations shall be
null and void. Prior written notice of any assignment; conveyance or transfer
of this Promissory Note by Payee must be given to Maker. This Promissory Note
may not be changed orally, but only by an agreement in writing and signed by
the party against whom enforcement of any waiver, change, modification or
discharge is sought.
This Promissory Note is made and delivered in New York, New York,
and shall be governed by the laws of the State of New York.
MILWAUKEE FAMILY GOLF
CENTERS, INC.
By: ______________________
Name: Robert Krause
Title: Vice President
5
<PAGE>
STOCK NO. 11043
GUARANTY OF SPECIFIC TRANSACTION
(For Consumer or Business Transactions)
(Revised For Wisconsin Marital Property Act)
GUARANTY, For value received, and to induce FORE SEASONS GOLF, INC. of
---------------------------
Milwaukee, Wisconsin ("Bank"), to extend credit to
- -------- ------------------------
MILWAUKEE FAMILY GOLF CENTERS, INC., a Delaware corporation ("Debtor"), the
undersigned jointy and severally guarantee payment of and promise to pay or
cause to be paid to Bank or any other holder of any of the obligations defined
below when due or, to the extent not prohibited by law, at the time any Debtor
becomes the subject of bankruptcy or other insolvency proceedings, a note or
agreement payable to Bank dated December , 1996, executed by Debtor in the
principal amount of $200,000.00, plus interest, charges and fees provided for
in the note, agreement or any agreement securing either, and in any extensions,
renewals and deferrals of it, and also including the amount of any payments
made to Bank or another by or on behalf of Debtor which are recovered from Bank
by a trustee, receiver, creditor or other party pursuant to applicable federal
or state law, and to the extent not prohibited by law, all costs, expenses and
fees at any time paid or incurred in endeavoring to collect all or part of any
of the above, or to realize upon this Guaranty, or any colleteral securing any
of the above (all called the "Obligations"). No claim, including a claim for
contribution or subrogation, which any of the undersigned may have against a
co-guarantor of any of the Obligations or against Debtor shall be enforced nor
any payment accepted until the Obligations are paid in full and the payments
are not subject to any right of recovery. To the extent not prohibited by law,
the undersigned grants to the Bank a security interest and lien in any deposit
account the undersigned may at any time have with the Bank (except accounts,
the interest on which is exempt from federal income tax). Bank may, at any time
after the occurrence of an event of default with respect to any Obligation and
notice and opportunity to cure, if required by $425,105, Wis. Stats., set-off
any amount unpaid on such Obligation against any deposit balances the
undersigned may at any time have with the Bank, or other money now or hereafter
owed the undersigned by Bank. This Guaranty is also secured (to the extent not
prohibited by law) by all existing and future security agreements between Bank
and any of the undersigned and by any mortgage stating it secures this
Guaranty. To the extent not prohibited by law, this Guaranty is valid and
enforceable against the undersigned even though any Obligation is invalid and
unenforceable against Debtor.
WAIVER. To the extent not prohibited by law the undersigned expressly
waive notice of the acceptance of this Guaranty, the creation of any
present or future Obligation, default under any Obligation, proceedings to
collect from Debtor or anyone else, and all diligence of collection and
presentment, demand, notice and protest and any right to disclosures from Bank
regarding the financial condition of any Debtor or guarantor of the
Obligations or the collectability or enforceability of the Obligations.
CONSENT. With respect to any of the Obligations, the Bank may from time
to time without notice to the undersigned and without affecting the liability
of the undersigned (a) surrender, release or impair, sell or otherwise dispose
of any security or collateral, (b) surrender, release or agree not to sue any
guarantor or surety, (c) fail to perfect its security interest in or realize
upon any security or collateral, (d) fall to realize upon any of the
Obligations or to proceed against the Debtor or any guarantor or surety, (e)
renew or extend the time of payment, (f) increase or decrease the rate of
Interest, (g) accept additional security or collateral, (h) determine the
allocation and application of payments and credits and accept partial payments,
(i) determine what, if anything, may at any time be done with reference to any
security or collateral, and (j) settle or compromise the amount due or owing or
claimed to be due or owing. The undersigned expressly consent to and waive
notice of all of the above. To the extent not prohibited by law, the
undersigned consent that venue for any legal proceeding relating to the
collection of this Guaranty shall be, at the Bank's option, the county in which
the Bank has it's principal office in this state, the county in which any of
the undersigned resides or the county in which this Guaranty was executed by
the undersigned.
REPRESENTATIONS. The undersigned acknowledges and agrees that the Bank
(a) has not made any representations or warranties with respect to, (b) does
not assume any responsibility to the undersigned for, and (c) has no duty to
provide information to the undersigned regarding, the collectability or
enforceability of any of the Obligations or the financial condition of any
Debtor or guarantor. The undersigned has independently determined the
collectability and enforceability of the Obligations and until the Obligations
are paid in full will independently and without reliance on Bank continue
to make such determinations.
PERSONS BOUND. This Guaranty benefits Bank, its successors and assigns,
and binds the undersigned, their respective heirs, personal representatives,
successors and assigns.
Dated December , 1996 FAMILY GOLF CENTERS, INC., a Delaware corporation
- ----------------------- ----------------------------------------------
By:
X (SEAL) X /s/ Robert J. Krause (SEAL)
- ----------------------- -----------------------------------------------
Robert J. Krause
Title: Senior Vice President
- ----------------------- -----------------------------------------------
225 Broadhollow Road, Melville, NY 11747
- ----------------------- -----------------------------------------------
(Address) (Address)
- -------------------------------------------------------------------------------
MARITAL PURPOSE. For Wisconsin residents only: Each guarantor who signs
above and is married represents that this obligation is incurred in the
interest of his or her marriage or family.
X N/A X N/A
- ---------------------- -----------------------------------------------
- -------------------------------------------------------------------------------
FOR BANK CLERICAL USE ONLY
<PAGE>
CINCINNATI GOLF ACADEMY, LIMITED
INDEPENDENT AUDITOR'S REPORT
AND SUPPLEMENTARY SCHEDULE
DECEMBER 31, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
INDEPENDENT AUDITOR'S REPORT ..................... 1
FINANCIAL STATEMENTS
Balance Sheet ................................... 2
Statement of Operations and Members' Equity .... 4
Statement of Cash Flows ......................... 5
Notes to Financial Statements ................... 7
SUPPLEMENTARY INFORMATION
Schedule 1--Operating Expenses .................. 13
</TABLE>
<PAGE>
Aronowitz, Chaiken & Hardesty, L.L.P. Letterhead
Certified Public Accountants
INDEPENDENT AUDITOR'S REPORT
To the Members
Cincinnati Golf Academy, Limited
Cincinnati, Ohio
We have audited the accompanying balance sheet of Cincinnati Golf Academy,
Limited as of December 31, 1995, and the related statements of operations and
members' equity, and cash flows for the period from March 15, 1995 (Date of
Inception) through December 31, 1995. 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 Cincinnati Golf Academy,
Limited as of December 31, 1995, and the results of its operations and its
cash flows for the initial period then ended, in conformity with generally
accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information in
Schedule 1 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has not
been subjected to the auditing procedures applied in the audit of the basic
financial statements, and, accordingly, we express no opinion on it.
ARONOWITZ, CHAIKEN & HARDESTY, L.L.P.
Certified Public Accountants
Cincinnati, Ohio
December 13, 1996
- 1 -
<PAGE>
CINCINNATI GOLF ACADEMY, LIMITED
BALANCE SHEET
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .......................................... 10,352
Merchandise inventory .............................................. 750
-----------
TOTAL CURRENT ASSETS ........................................................... 11,102
PROPERTY AND EQUIPMENT: AT COST
Land ............................................................... 700,000
Buildings .......................................................... 265,793
Equipment .......................................................... 158,278
Land improvements .................................................. 1,158,776
-----------
2,282,847
Accumulated depreciation ........................................... (118,448)
-----------
2,164,399
OTHER ASSETS:
Deposits ........................................................... 310
Loan, organization and start-up costs (less amortization of $3,906) 34,407
-----------
34,717
-----------
2,210,218
===========
SEE ACCOMPANYING NOTES AND INDEPENDENT AUDITOR'S REPORT
- 2 -
<PAGE>
LIABILITIES
CURRENT LIABILITIES:
Current portion of long-term debt .................................. 7,470
Accounts payable ................................................... 10,681
Notes payable--member .............................................. 206,827
Construction loan payable .......................................... 1,000,000
Accrued expenses ................................................... 495
Accrued interest ................................................... 8,312
-----------
TOTAL CURRENT LIABILITIES ...................................................... 1,233,785
LONG-TERM DEBT:
Notes payable ...................................................... 33,422
Current portion .................................................... (7,470)
-----------
25,952
-----------
TOTAL LIABILITIES .............................................................. 1,259,737
MEMBER'S EQUITY
MEMBER'S EQUITY ..................................................... 950,481
-----------
2,210,218
===========
</TABLE>
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<PAGE>
CINCINNATI GOLF ACADEMY, LIMITED
STATEMENT OF OPERATIONS AND MEMBER'S EQUITY
FOR THE PERIOD FROM MARCH 15, 1995 (DATE OF INCEPTION) THROUGH
DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
SALES ....................................... 225,378
OPERATING EXPENSES (Schedule 1) ............. 500,358
-----------
NET OPERATING LOSS .......................... (274,980)
OTHER INCOME ................................ 25,461
-----------
NET LOSS FOR THE PERIOD ..................... (249,519)
MEMBERS' EQUITY--At inception, March 15,
1995 ....................................... --
ADD: MEMBERS' EQUITY CONTRIBUTIONS .......... 1,200,000
-----------
MEMBERS' EQUITY--December 31, 1995 .......... 950,481
===========
</TABLE>
SEE ACCOMPANYING NOTES AND INDEPENDENT AUDITOR'S REPORT
- 4 -
<PAGE>
CINCINNATI GOLF ACADEMY, LIMITED
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MARCH 15, 1995 (DATE OF INCEPTION) THROUGH
DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the period ............................................ (249,519)
Adjustments to reconcile net loss to net cash used in operating
activities:
Amortization ....................................... 3,906
Depreciation ....................................... 118,448
(Increase) Decrease in assets:
Merchandise inventory ............................. (750)
Deposits .......................................... (310)
Increase (Decrease) in liabilities:
Accounts payable .................................. 10,680
Accrued expenses .................................. 495
Accrued interest .................................. 8,312
-------------
TOTAL ADJUSTMENTS ............................................... 140,781
-------------
NET CASH USED IN OPERATING ACTIVITIES ........................... (108,738)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for start-up of organization ............... (21,124)
Payments for the purchase of property and equipment (2,282,847)
-------------
NET CASH USED IN INVESTING ACTIVITIES ........................... (2,303,971)
SEE ACCOMPANYING NOTES AND INDEPENDENT AUDITOR'S REPORT
- 5 -
<PAGE>
CINCINNATI GOLF ACADEMY, LIMITED
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MARCH 15, 1995 (DATE OF INCEPTION) THROUGH
DECEMBER 31, 1995
CASH FLOWS FROM FINANCING ACTIVITIES:
Members' equity contributions ....................... 1,200,000
Proceeds from notes payable ......................... 526,065
Proceeds from construction loan payable ............. 1,000,000
Payments on notes payable ........................... (285,810)
Loan origination fees ............................... (17,194)
-------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ....................... 2,423,061
-------------
NET INCREASE IN CASH AND CASH EQUIVALENTS ........................... 10,352
CASH AND CASH EQUIVALENTS--At inception, March 15, 1995 ............ --
-------------
CASH AND CASH EQUIVALENTS--December 31, 1995 ........................ 10,352
=============
</TABLE>
SEE ACCOMPANYING NOTES AND INDEPENDENT AUDITOR'S REPORT
- 6 -
<PAGE>
CINCINNATI GOLF ACADEMY, LIMITED
NOTES TO FINANCIAL STATEMENTS
NOTE 1: COMPANY INFORMATION
Cincinnati Golf Academy, Limited provides complete golfing assistance through
the use of driving ranges, putting greens, video review of the golf swing and
professional lessons to residents in the greater Cincinnati area.
Cincinnati Golf Academy, Limited is a limited liability company. Members
of the Cincinnati Golf Academy maintain limited liability exposure. The
Company shall continue in existence as a limited liability company until
December 31, 2014 or unless terminated sooner.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents -- The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to be
cash equivalents.
Merchandise Inventory -- Merchandise inventory consists of merchandise for
resale and is valued at the lower of cost or market. Cost is determined by
the first-in, first-out method.
Property and Equipment -- Property and equipment are stated at cost and are
depreciated over the estimated useful lives of such assets using the
straight-line method. Land improvements are amortized over the terms of the
respective service lives of the improvements. Maintenance and repairs are
charged to expense as incurred, and renewals and improvements are
capitalized.
Federal Income Tax -- For federal income tax purposes, the Company is a
limited liability corporation, which passes the character of it's income to
its members who are responsible for paying their portion the income tax.
Fair Value of Financial Instruments -- the fair values of cash, accounts
receivable, accounts payable and other short-term obligations approximate
their carrying values because of the short maturity of these financial
instruments. The carrying value of Cincinnati Golf Academy, Limited's
long-term obligations approximate their fair value. In accordance with
Statement of Financial Accounting Standards No. 107, Disclosure About Fair
Value of Financial Instruments, rates available to the Company at statement
of financial position date are used to estimate the fair value of existing
debt.
SEE ACCOMPANYING INDEPENDENT AUDITOR'S REPORT
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<PAGE>
CINCINNATI GOLF ACADEMY, LIMITED
NOTES TO FINANCIAL STATEMENTS
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Intangible Assets -- Intangible assets are stated at cost and are
depreciated over the estimated useful lives of such assets using the
straight-line method. Intangible assets include loan, organization and start-up
costs.
NOTE 3: PROPERTY AND EQUIPMENT
The estimated useful lives by asset category are as follows:
<TABLE>
<CAPTION>
ESTIMATED USEFUL
ASSETS LIVES
- --------------------- ----------------
<S> <C>
Buildings ............ 30 years
Equipment ............ 5-7 years
Land improvements ... 15 years
</TABLE>
Depreciation for the period ended December 31, 1995 was $118,448.
SEE ACCOMPANYING INDEPENDENT AUDITOR'S REPORT
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<PAGE>
CINCINNATI GOLF ACADEMY, LIMITED
NOTES TO FINANCIAL STATEMENTS
NOTE 4: NOTES PAYABLE -- MEMBER
At December 31, 1995, the Company has borrowed $206,827 from a member. This
note is payable on demand with interest at prime plus one percent. There is
no set schedule for the payment of the interest.
NOTE 5: CONSTRUCTION LOAN PAYABLE
At December 31, 1995, the Company has a promissory note payable for
$1,000,000 which is secured by the land and land improvements. The note
provides for monthly installments of interest, calculated at the prime rate
plus 1%, originally due at May 1, 1996, which was extended until December 31,
1996, at which time all principal, interest and other costs will be due in
full.
Upon maturity, subject to the terms of the agreement, the note will be
refinanced into a seven-year term mortgage loan of $1,000,000. For the first
three years of the mortgage, interest will be calculated at 225 basis points
over the treasury rate. For years four through six, the interest rate will be
adjusted and calculated at 225 basis points over the treasury rate at that
time. For year seven, the interest rate will again be adjusted and calculated
at 225 basis points over the treasury rate at that time.
SEE ACCOMPANYING INDEPENDENT AUDITOR'S REPORT
- 9 -
<PAGE>
CINCINNATI GOLF ACADEMY, LIMITED
NOTES TO FINANCIAL STATEMENTS
NOTE 6: LONG-TERM DEBT
Long-term debt at December 31, 1995 consisted of the following:
<TABLE>
<CAPTION>
<S> <C>
Note payable -- John Deere Credit -- Secured by
mower; interest at 9.5%, payable in monthly
installments of $118, maturing in May, 1997 .. 1,864
Note payable -- John Deere Credit -- Secured by
equipment; interest at 9.5%, payable in
monthly installments of $518, maturing in May,
1999 .......................................... 18,033
Note payable -- John Deere Credit -- Secured by
equipment; interest at 9.5%, payable in
monthly installments of $307, maturing in
March, 2001 ................................... 13,525
---------
33,422
Current portion ................................ (7,470)
---------
25,952
=========
</TABLE>
Maturities of long-term debt for the six-year period ending in 2001 are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1996 7,470
1997 7,966
1998 8,210
1999 5,545
2000 3,331
2001 900
-------
33,422
=======
</TABLE>
Interest expense was $61,380 for the period ended December 31, 1995.
SEE ACCOMPANYING INDEPENDENT AUDITOR'S REPORT
- 10 -
<PAGE>
CINCINNATI GOLF ACADEMY, LIMITED
NOTES TO FINANCIAL STATEMENTS
NOTE 7: INTANGIBLE ASSETS
The estimated useful lives by asset category are as follows:
<TABLE>
<CAPTION>
ESTIMATED USEFUL
ASSETS LIVES
- ---------------------- ----------------
<S> <C>
Loan closing costs ... 7 years
Organization costs ... 5 years
Start up costs ........ 5 years
</TABLE>
Amortization for the period ended December 31, 1995 was $3,906 using the
straight-line method.
NOTE 8: SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
<TABLE>
<CAPTION>
<S> <C>
Income tax .. --
Interest .... 53,068
</TABLE>
NOTE 9: RENTAL AGREEMENTS
The Company has entered into two operating lease agreements for leased
departments for the pro shop and golf equipment repair and maintenance
facilities on its premises. The company has also entered into management
agreement with the pro shop. All agreements have initial terms of one year,
ending on May 31, 1996. Rental income is determined on a base rent and a
percentage of sales. No percentage of sales rent was charged during 1995.
Rent received for the period ending December 31, 1995 was $13,181. Minimum
rent revenues for 1996 are $7,086.
SEE ACCOMPANYING INDEPENDENT AUDITOR'S REPORT
- 11 -
<PAGE>
CINCINNATI GOLF ACADEMY, LIMITED
NOTES TO FINANCIAL STATEMENTS
NOTE 10: RELATED PARTY TRANSACTIONS
The Company borrowed money from a member. The balance as of December 31,
1995 was $206,827.
The land was purchased from a member. The purchase price was $700,000.
The Company hired a member to act as general contractor to manage
development of the land. The member was paid $83,167.
The Company hired a member to act as general manager to oversee day-to-day
operations. The member was paid $40,000.
NOTE 11: SUBSEQUENT EVENT
The Company intends to sell substantially all of its assets to a wholly
subsidiary of Family Golf Centers, Inc., a publicly held corporation. The
sale transaction is scheduled to be signed on Friday, December 27, 1996, with
an effective date of December 30, 1996.
The purchase price for the assets is $1,285,000 in cash, 40,000 shares of
common stock, and an option to purchase an additional 10,000 shares common
stock.
SEE ACCOMPANYING INDEPENDENT AUDITOR'S REPORT
- 12 -
<PAGE>
CINCINNATI GOLF ACADEMY, LIMITED
SUPPLEMENTARY INFORMATION
FOR THE PERIOD FROM MARCH 15, 1995 (DATE OF INCEPTION) THROUGH
DECEMBER 31, 1995
SCHEDULE 1: OPERATING EXPENSES
<TABLE>
<CAPTION>
<S> <C> <C>
Salaries ............... 131,808
Payroll taxes .......... 25,085
Advertising ............ 53,600
Commissions ............ 9,539
Amortization ........... 3,906
Depreciation ........... 118,448
Dues and subscriptions 509
Insurance .............. 6,849
Interest ............... 61,380
License ................ 328
Cost of goods sold .... 4,147
Office supplies ........ 5,409
Professional fees ...... 10,720
Equipment rental ....... 1,030
Repairs and maintenance 49,233
State and local taxes . 150
Telephone .............. 4,906
Postage ................ 1,261
Pagers ................. 149
Bank charges ........... 3,142
Utilities .............. 7,819
Miscellaneous .......... 940
---------
500,358
========
</TABLE>
SEE ACCOMPANYING INDEPENDENT AUDITOR'S REPORT
- 13 -
<PAGE>
Fore Seasons Golf, Inc.
Financial Statements
Period November 10, 1995 (Beginning of Operations)
Through October 31, 1996
<PAGE>
Fore Seasons Golf, Inc.
Contents
Independent auditors' report 3
Financial statements
Balance sheet 4
Statement of loss 5
Statement of stockholder's equity 6
Statement of cash flows 7
Summary of accounting policies 8
Notes to financial statements 9 - 11
2
<PAGE>
BDO BDO Seidman, LLP Two Plaza East
Accountants and Consultants 330 East Kilbourn Avenue, Suite 950
Milwaukee, Wisconsin 53202-3143
Telephone: (414) 272-5900
Fax: (414) 272-1090
Independent Auditors' Report
Fore Seasons Golf, Inc.
Milwaukee, Wisconsin
We have audited the accompanying balance sheet of Fore Seasons Golf, Inc. as of
October 31, 1996 and the related statements of loss, stockholder's equity and
cash flows for the period November 10, 1995 (beginning of operations) through
October 31, 1996. 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 Fore Seasons Golf, Inc. at
October 31, 1996, and the results of their operations and cash flows for the
period November 10, 1995 (beginning of operations) through October 31, 1996, in
conformity with generally accepted accounting principles.
BDO Seidman, LLP
December 13, 1996
3
<PAGE>
<TABLE>
<CAPTION>
October 31, 1996
- ----------- ----
<S> <C>
Assets
Current assets
Cash $ 11,282
----------
Total current assets 11,282
----------
Property and equipment
Equipment and vehicle 61,941
Buildings, dome and outdoor ranges 1,756,684
Land 475,000
----------
2,293,625
Less accumulated depreciation and amortization 74,555
----------
Net property and equipment 2,219,070
----------
Other assets
Intangible assets, net of accumulated
amortization of $171 16,246
----------
Total other assets 16,246
----------
$2,246,598
==========
</TABLE>
<PAGE>
Fore Seasons Golf, Inc.
Balance Sheet
<TABLE>
<CAPTION>
October 31, 1996
- ----------- ----
<S> <C>
Liabilities and Stockholder's Equity
Current liabilities
Accountants payable - trade $ 83,893
Accrued liabilities (Note 3) 151,792
Deferred revenue 17,766
Notes payable - related parties (Note 6) 315,000
Current maturities of long-term debt (Note 2) 77,268
-----------
Total current liabilities 645,719
Long-term liabilities
Long-term debt, less current maturities (Note 2) 1,518,362
-----------
Total liabilities 2,164,081
-----------
Commitments and contingencies (Notes 3 and 4)
Stockholder's equity
Common stock (Note 4) 100
Additional paid-in capital 429,884
Deficit (347,467)
-----------
Total stockholder's equity 82,517
-----------
$ 2,246,598
===========
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements.
4
<PAGE>
Fore Seasons Golf, Inc.
Statement of Loss
<TABLE>
<CAPTION>
Period November 10, 1995
(beginning of operations) through October 31, 1996
- --------------------------------------------- -----
<S> <C>
Operating revenue
Golf revenue $ 412,562
Rental revenue 31,211
Snack bar sales 37,752
---------
Total operating revenue 481,525
Operating expenses (Note 3) 668,521
---------
Loss from operations (186,996)
Interest expense (net of $3,139 of interest income) (129,441)
---------
Net loss $(316,437)
=========
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements.
5
<PAGE>
Fore Seasons Golf, Inc.
Statement of Stockholder's Equity
<TABLE>
<CAPTION>
Total
Additional Stock-
Common Common Paid-in holder's
Shares Stock Capital Deficit Equity
------ ----- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Balance, November 9, 1995 (end of development stage) 100 $100 $ 429,884 $ -- $ 429,984
Net loss for fiscal year 1996 -- -- -- (316,437) (316,437)
Distributions -- -- -- (31,030) (31,030)
---- ---- --------- --------- ---------
Balance, October 31, 1996 100 $100 $ 429,884 $(347,467) $ 82,517
==== ==== ========= ========= =========
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements.
6
<PAGE>
Fore Seasons Golf, Inc.
Statement of Cash Flows
<TABLE>
<CAPTION>
Period November 10, 1995
(beginning of operations) through October 31, 1996
- --------------------------------------------- -----
<S> <C>
Cash flows from operating activities
Net loss $(316,437)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 74,726
Increase (decrease) in liabilities:
Accounts payable - trade 83,893
Accrued liabilities 151,792
Deferred revenue 17,766
---------
Net cash provided by operating activities 11,740
---------
Cash flows from investing activities
Purchase of property and equipment (522,301)
---------
Cash flows from financing activities
Proceeds from long-term debt 240,808
Loan fees paid (16,417)
Principal payments on long-term debt (9,155)
Proceeds from related party notes payable 315,000
Distributions (31,030)
---------
Net cash provided by financing activities 499,206
---------
Net decrease in cash (11,355)
Cash, November 9, 1995 (end of development stage) 22,637
---------
Cash, October 31, 1996 $ 11,282
=========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 108,574
=========
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements.
7
<PAGE>
Fore Seasons Golf, Inc.
Summary of Accounting Policies
Use of The preparation of financial statements in conformity
Estimates 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 the reported amounts
of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash For purposes of the statement of cash flows, the Company
Equivalents considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash
equivalents.
Property and Property and equipment are stated at cost. Depreciation
Equipment and amortization are computed using the straight-line
method over the estimated useful life of the assets for
financial reporting purposes.
Intangible Intangible assets primarily consist of loan fees charged
Assets against long-term notes payable. The cost of intangible
assets is amortized on a straight-line basis over 20 years,
the term of the loan.
Income Taxes The corporation has elected, and the stockholder has
consented, to include his respective share of the 1996 net
loss of the corporation in his individual tax returns.
8
<PAGE>
Fore Seasons Golf, Inc.
Notes to Financial Statements
1. Nature of Fore Seasons Golf, Inc. (the "Company") owns and operates an
Business indoor golf facility, as well as an outdoor driving range and
miniature golf course in southeastern Wisconsin. The Company
is a Wisconsin corporation incorporated on November 17, 1994.
The Company was a development stage enterprise from
incorporation date (inception) to November 9, 1995. Activities
through November 9, 1995 were primarily directed toward
organizing the Company and construction of the facilities.
All expenditures during the development stage, consisting
mainly of construction, were capitalized.
2. Long-term Long-term debt consists of the following:
Debt
October 31, 1996
----------- ----
Notes payable, bank, collateralized by property
and equipment, guaranteed by Gerald Brielmaier
and Michael and Lisa Brielmaier, prime plus 1%
(currently 9.25%), payments of $11,352 per month
including interest through March 2006. $ 853,660
Note payable, finance corporation, collateralized
by property and equipment, 7.917%, payments of
$6,327 per month including interest and fees
through August 2016. 741,970
----------
1,595,630
Less current maturities 77,268
----------
Long-term debt $1,518,362
==========
9
<PAGE>
Fore Seasons Golf, Inc.
Notes to Financial Statements
2. Long-term The aggregate maturities of long-term debt maturing in each
Debt of the next five years are as follows: 1997 - $77,268;
(Continued) 1998 - $84,362; 1999 - $85,865; 2000 - $99,980;
2001 - $116,587.
3. Subsequent The Company has entered into an agreement to sell
Event substantially all of its assets on or before December 31, 1996.
Included in accrued liabilities is a lease termination expense.
The Company leases space to a retail golf equipment store.
In connection with the sale of assets, the Company has
negotiated to terminate this lease for $95,000.
4. Commitments Leases
and Contin-
gencies The Company leases certain equipment and automobiles under
operating leases that expire over the next one to three
years. In most cases, management expects that in the normal
course of business these leases will be renewed or replaced
by other leases. Rent expense under all operating leases
approximated $17,838 for the period ending October 31, 1996.
The following is a schedule by years of the future minimum
lease payments under operating leases that have initial or
noncancellable terms in excess of one year, together with the
present value of the net minimum lease payments at October 31,
1996:
October 31, 1996
----------- ----
1997 $21,522
1998 19,421
1999 6,185
-------
Total minimum lease payments $47,128
=======
10
<PAGE>
Fore Seasons Golf, Inc.
Notes to Financial Statements
5. Common Fore Seasons Golf, Inc. has authorized 9,000 shares of common
Stock stock at $1 par value and 100 shares issued and outstanding.
6. Notes Payable- The notes payable - related parties are payable to Michael
Related Party Brielmaier and Gerald Brielmaier, due on demand with interest
rates from 6.0% to 10.75%. Interest expense on these notes
amounted to $11,200.
11
