<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 25, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REGISTRATION STATEMENT ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
------------------------------------
FAMILY GOLF CENTERS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 11-3223246
(State or jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
Family Golf Centers, Inc.
538 Broadhollow Road
Melville, New York 11747
(516) 694-1666/(516) 694-0918 (Fax)
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Dominic Chang, Chief Executive Officer
Family Golf Centers, Inc.
538 Broadhollow Road
Melville, New York 11747
(516) 694-1666 / (516) 694-0918 (Fax)
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
Copies to:
Kenneth R. Koch, Esq.
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
(212) 661-6500/ (212) 697-6686 (Fax)
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: FROM TIME TO TIME AFTER THE
EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED PURSUANT
TO DIVIDEND OR INTEREST REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING BOX. [ ]
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON A
DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH DIVIDEND OR
INTEREST REINVESTMENT PLANS, CHECK THE FOLLOWING BOX. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING
BOX AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ] _____________.
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C) UNDER
THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ] ________________.
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED
OFFERING PRICE MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
- -------------------------------- ------------------------- -------------------- ------------------------ -------------------
<S> <C> <C> <C> <C>
Common Stock, par value 945,822 shares $18.03125 $17,054,352.94 $5,031.04
$.01 per share
================================ ========================= ==================== ======================== ===================
</TABLE>
(1) Registration Statement covers, in addition, such indeterminable number
of shares of Common Stock as may be issued on the exercise or
conversion of the Options and Warrants by reason of adjustment of
their respective exercise prices upon certain contingencies. Since
such additional Common Stock, if issued, will be issued for no
additional consideration, no registration fee is required.
(2) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended
(the "Securities Act"), on the basis of high and low bid prices of the
Registrant's Common Stock on the Nasdaq National Market on September
18, 1998.
-----------------------------------------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION, DATED SEPTEMBER 25, 1998
FAMILY GOLF CENTERS, INC.
945,822 Shares of Common Stock
This Prospectus relates to the offering that may be made from time to
time of up to 945,822 shares (the "Shares") of common stock, par value $.01
per share (the "Common Stock"), of Family Golf Centers, Inc., a Delaware
corporation (the "Company"), by, or for the accounts of, the holders thereof
(the "Selling Security Holders"). See "Selling Security Holders." Of the
945,822 Shares being offered hereby, 30,000 are issuable at $20.66 per share
and 21,255 are issuable at $26.67 per share, in each case, upon the exercise of
certain options issued in connection with the Company's acquisition of certain
golf facilities (collectively, the "Options"). In addition, of the 945,822
Shares being offered hereby, 23,516 are issuable at $13.51 per share upon the
exercise of certain warrants issued in connection with the acquisition of
Leisure Complexes, Inc. in July 1997 (collectively, the "Warrants").
The Common Stock is quoted on the Nasdaq National Market(R) (the
"Nasdaq National Market") under the symbol "FGCI." On September 23, 1998, the
closing sale price of the Common Stock as reported by the Nasdaq National
Market was $18.75 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 HEREIN FOR A DISCUSSION OF
CERTAIN MATTERS THAT SHOULD BE CONSIDERED BY POTENTIAL INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Shares may be sold from time to time by the Selling Security
Holders or their transferees. No underwriting arrangements have been entered
into by the Selling Security Holders as of the date hereof. The distribution of
the Shares by the Selling Security Holders may be effected in one or more
transactions that may take place in the over-the-counter market, including
ordinary broker's transactions, privately negotiated transactions, or through
sales to one or more dealers for resale of such Shares as principals, at
prevailing market prices at the time of sale, prices related to such prevailing
market prices, or negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commissions will be paid by the Selling Security
Holders in connection with sales of the Shares. To the extent required, the
number of Shares to be sold, the name of the Selling Security Holder, the
purchase price, the name of any agent or broker, and any applicable
commissions, discounts or other compensation to such agents or brokers with
respect to a particular offering will be set forth in a supplement or
supplements to this Prospectus (each, a "Prospectus Supplement"). See "Plan of
Distribution."
The Company will receive proceeds upon the exercise of the Options and
Warrants, but will not receive any proceeds from the sale of the Shares. By
agreement with the Selling Security Holders, the Company will pay all of the
expenses (other than agent's commissions and discounts), incident to the
registration of the Shares under the Securities Act of 1933, as amended (the
"Securities Act"), estimated to be approximately $50,000.
The Selling Security Holders, and any broker-dealers or agents through
whom the Shares are sold, may be deemed "underwriters" within the meaning of
the Securities Act with respect to securities offered by them, and any profits
realized or commissions received by them may be deemed underwriting
compensation.
The date of this Prospectus is , 1998
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street, N.W., Washington, D.C. 20549, a Registration
Statement (the "Registration Statement") under the Securities Act with respect
to the offering and sale from time to time of the Shares. This Prospectus does
not contain all the information set forth in the Registration Statement and the
exhibits thereto, as permitted by the rules and regulations of the Commission.
For further information, reference is made to the Registration Statement and to
the exhibits filed therewith. Statements contained in this Prospectus as to the
contents of any contract or other document which has been filed or incorporated
by reference as an exhibit to the Registration Statement are qualified in their
entirety by reference to such exhibits for a complete statement of their terms
and conditions. Additionally, the Company is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports, proxy statements, and other
information statements with the Commission. Copies of such materials may be
inspected without charge at the offices of the Commission, and copies of all or
any part thereof may be obtained from the Commission's public reference
facilities at 450 Fifth Street, N.W., Washington D.C. 20549 or at the regional
offices of the Commission located at 7 World Trade Center, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, upon
payment of the fees prescribed by the Commission. In addition, the Commission
maintains a Web Site that contains reports, proxy and information statements
and other information regarding the Company (http://www.sec.gov). The Common
Stock is quoted on the Nasdaq National Market under the symbol "FGCI." Reports
and other information concerning the Company may be inspected at the offices of
the National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporated herein by reference and made a part of this Prospectus
are the following: (1) the Company's Annual Report on Form 10-K, for the fiscal
year ended December 31, 1997; (2) the Company's Proxy Statement on Schedule 14A
filed with the Commission on May 15, 1998; (3) the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998; (4) the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998; (5) the Company's
Current Reports on Form 8-K dated April 2, 1998, June 16, 1998, June 30, 1998
and July 20, 1998, (6) the Company's Amendments to Current Reports on Form
8-K/A dated January 30, 1998 and June 30, 1998 and (7) the description of the
Common Stock which is registered under Section 12 of the Exchange Act,
contained in the Company's Registration Statement on Form 8-A dated November 8,
1994. All documents subsequently filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14, or 15(d) of the Exchange Act after the
date of this Prospectus and prior to the termination of the offering made
hereby will be deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the respective dates of filing of such documents. Any
statement contained in any document incorporated by reference shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus. All information appearing in this Prospectus is qualified in
its entirety by the information and financial statements (including notes
thereto) appearing in the documents incorporated herein by reference, except to
the extent set forth in the immediately preceding statement.
The Company will provide without charge to each person who receives a
Prospectus, upon written or oral request of such person, a copy of the
information that is incorporated by reference herein (not including exhibits to
the information that is incorporated by reference herein). Requests for such
information should be directed to: Family Golf Centers, Inc., 538 Broadhollow
Road, Melville, New York 11747; Attention: Chief Financial Officer. The
Company's telephone number is: (516) 694-1666.
-2-
<PAGE>
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements included or incorporated by reference into this
Prospectus constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. These
statements appear in a number of places in this Prospectus and include
statements regarding the intent, belief or current expectations of the Company
with respect to the Company's acquisition and financing plans, (ii) trends
affecting the Company's financial condition or results of operations, (iii) the
impact of competition and (iv) the expansion of certain operations. Prospective
investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those in the forward-looking
statements as a result of various factors. The information contained or
incorporated by reference in this Prospectus, including, without limitation,
the information under "Risk Factors," identifies important factors that could
cause or contribute to such differences.
-3-
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
more detailed information and the financial statements and the notes thereto
contained or incorporated by reference herein. Unless the context otherwise
requires, references to "Family Golf" and the "Company" are to Family Golf
Centers, Inc. together with its subsidiaries. Unless otherwise indicated, the
information in this Prospectus has been adjusted to give effect to a
three-for-two stock split in the form of a stock dividend (the "Stock Split")
distributed on May 4, 1998. Each prospective investor is urged to read this
Prospectus in its entirety. This Prospectus contains "forward-looking
statements" which involve certain unknown risks and uncertainties which may
cause actual results to differ materially from those in the forward-looking
statements.
THE COMPANY
Family Golf is the leading consolidator and operator of golf centers
in North America. The Company's golf centers provide a wide variety of practice
and play opportunities, including facilities for driving, chipping, putting,
pitching and sand play. The Company's golf centers typically offer full-line
pro shops, golf lessons instructed by PGA-certified golf professionals and
other amenities such as miniature golf and snack bars to encourage family
participation. The Company has a proven track record of successfully
identifying, acquiring and integrating golf centers, having grown from one golf
facility in 1992 to 114 as of September 15, 1998, including 10 facilities under
construction.
In order to generate additional sources of revenue, attract a more
diverse customer base and offset the seasonality of its core golf business, the
Company has acquired and begun operating complementary sports and family
entertainment facilities, including ice rinks and "Family Sports Supercenters."
Family Sports Supercenters have two or more sports-related attractions
(including at least one of the Company's core sports-related attractions: golf
centers and ice rinks), and may include other sports-related attractions, such
as bowling centers, soccer facilities and batting cages, as well as a variety
of family entertainment activities. The Company is applying the strategy,
skills and resources it has used in the golf center industry by selectively
acquiring and enhancing, or constructing, such facilities. The Company
currently operates two stand-alone ice rink facilities and two Family Sports
Supercenters, and is converting a golf center in Denver, Colorado into a Family
Sports Supercenter by adding two ice rinks and other family entertainment
amenities.
The Company's principal executive offices are located at 538
Broadhollow Road, Melville, New York 11747 and its telephone number is (516)
694-1666. The Company's World Wide Web address is http://www.familygolf.com.
The contents of the Company's web-site are not part of this Prospectus.
-4-
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the specific factors
set forth below, as well as the other information included in this Prospectus,
before deciding to invest in the Shares offered hereby.
ACQUISITION AND GROWTH STRATEGY; RISKS ASSOCIATED WITH INTEGRATING NEW
FACILITIES
The Company's ability to significantly increase revenues, operating
cash flow and net income over time depends in large part upon its success in
acquiring and enhancing, or constructing, additional facilities at suitable
locations upon satisfactory terms. There can be no assurance that suitable
facility acquisitions or lease opportunities will be available or that the
Company will be able to consummate acquisitions or leasing transactions on
satisfactory terms. In addition, the acquisition of facilities may become more
expensive in the future if demand and competition increase. The likelihood of
the continued success of the Company must be considered in light of the
problems, expenses, difficulties, complications and delays frequently
encountered in connection with the improvement of existing and acquired
facilities and the construction and opening of new facilities, including delays
in obtaining required permits.
To implement its expansion strategy successfully, the Company must
integrate acquired or newly opened facilities into its existing operations,
which may necessitate the implementation of enhanced operational and financial
systems and may require additional employees and management, operational,
financial and other resources. As part of its strategy, the Company has
recently entered the ice rink and family entertainment industries, in which the
Company has only limited experience and which involve all the risks commonly
associated with the establishment of new lines of business. As the Company
grows, there can be no assurance that additional facilities can be readily
integrated into the Company's operating structure. The Company's inability to
efficiently integrate facilities or to successfully operate within the ice rink
and family entertainment industries could have a material adverse effect on the
Company's financial condition and results of operations. In addition, a number
of the facilities which the Company has acquired have, and facilities it may
acquire in the future may have, experienced losses. As a result of the timing
of the Company's acquisitions, the seasonality of the acquired businesses, the
expansion of the Company's business to include ice rinks and Family Sports
Supercenters and other factors, the Company's historical and pro forma results
of operations referred to in the reports incorporated by reference herein are
not necessarily indicative of future results. There can be no assurance that
facilities recently acquired by the Company or those that the Company may
acquire in the future will operate profitably and will not materially adversely
affect the Company's financial condition and results of operations.
The Company recently acquired a Canadian-based company with five
Canadian-based properties. Accordingly, the Company is now subject to certain
of the risks associated with properties or businesses in a foreign country,
including risks related to currency exchange rates, foreign taxation issues and
other matters.
DEPENDENCE ON THE GOLF INDUSTRY AND DISCRETIONARY CONSUMER SPENDING
Although the Company has expanded its business outside the golf
industry, the Company is highly dependent on the golf industry, and the
public's interest in utilizing golf practice centers, for the generation of its
revenues and earnings. Activities such as golf have, in the past, been
susceptible to increases and decreases in popularity that have materially
affected the financial condition and results of operations of companies
dependent on such activities, and there can be no assurance that the golf
industry will not suffer a material decrease in popularity, which would result
in a material adverse effect on the Company's financial condition and results
of operations. The amount spent by consumers on discretionary items, such as
the family entertainment activities offered by the Company, have historically
been dependent upon levels of discretionary income, which may be adversely
affected by general economic conditions. A decrease in consumer spending on
golf and other family entertainment activities could have a material adverse
effect on the Company's financial condition and results of operations.
-5-
<PAGE>
ADDITIONAL FINANCING REQUIREMENTS
The Company anticipates, based on its currently proposed expansion
plans and assumptions relating to its operations, that its available cash,
together with availability under its revolving credit and other credit
facilities, and cash flow from operations, will be sufficient to permit the
Company to conduct its operations and to carry on its contemplated expansion
through at least the next 12 months. The Company anticipates that it will need
to raise substantial additional capital in the future to continue its longer
term expansion plans. There can be no assurance that the Company will be able
to obtain additional financing on favorable terms or at all.
FLUCTUATING OPERATING RESULTS; VULNERABILITY TO WEATHER CONDITIONS AND
SEASONALITY
Historically, the second and third quarters of the calendar year have
accounted for a greater portion of the Company's revenues than have the first
and fourth quarters of the year. This is primarily due to an outdoor playing
season limited by weather. Although most of the Company's driving ranges are
designed to be all-weather facilities, portions of the Company's facilities,
including the miniature golf courses, are outdoors and vulnerable to weather
conditions. In addition, golfers are less inclined to practice when weather
conditions limit their ability to play golf on outdoor courses. The Company
expects its expansion into ice rink facilities and Family Sports Supercenters
to partially offset such seasonality. The timing of new center openings and
acquisitions may also cause the Company's results of operations to vary
significantly from quarter to quarter. Accordingly, period to period
comparisons are not necessarily meaningful and should not be relied on as
indicative of future results. In addition, variability in the Company's results
of operations could cause the price of the Company's securities to fluctuate
following the release of interim results of operations or other information and
may have a material adverse effect on the price of the Company's securities.
COMPETITION
The golf center, ice rink and family entertainment industries are each
highly competitive and include competition from other golf centers, golf
courses, other ice rinks and family entertainment outlets and other
recreational pursuits. In addition, the Company's pro shop business faces
competition from other pro shops, specialty retailers and department stores.
The Company may face imitation and other forms of competition and the Company
cannot prevent others from utilizing a similar operational strategy. Many of
the Company's competitors and potential competitors may have considerably
greater financial and other resources, experience and customer recognition than
does the Company. The Company operates 21 of its golf centers under the name
"Golden Bear" pursuant to a non-exclusive license agreement (the "License
Agreement") with a subsidiary of Golden Bear Golf, Inc. (the "Licensor").
Golden Bear Golf, Inc., the parent of the Licensor, is a competitor of the
Company. The Licensor is permitted to establish, or license others to
establish, Golden Bear golf centers that compete with the Company's golf
centers, including the Company's Golden Bear golf centers, provided that the
Company has the exclusive right to operate Golden Bear golf centers within a
10-mile radius of the Company's Golden Bear golf centers except with respect to
the Golden Bear golf center located in Carrollton, Texas for which the
exclusive territory is reduced. There can be no assurance that competition will
not adversely affect the Company's business or ability to acquire additional
properties.
DEPENDENCE ON CERTAIN AGREEMENTS
The future success of the business and operations of the Company is
dependent, in part, upon certain key operating agreements, including its real
property leases, management agreements with respect to certain municipal
facilities and the License Agreement. The termination of any of these
agreements may have a material adverse effect on the Company.
After giving effect to renewal options, none of the Company's leases,
as of July 1, 1998, are scheduled to expire until June 28, 2002. However, the
leases may be terminated prior to their scheduled expiration should the Company
default in its obligations thereunder. The Company has received a letter from
counsel to the landlord of one of its properties alleging that the Company is
in breach of its lease for such property. The Company does not believe it is in
breach and has responded accordingly. The termination of any of the Company's
leases could have an adverse effect
-6-
<PAGE>
on the Company. If any of the Company's leases were to be terminated, there can
be no assurance that the Company would be able to enter into leases for
comparable properties on favorable terms or at all.
The Company manages several facilities for municipalities pursuant to
concession licenses, four of which are terminable at will by the licensor. The
Company's concession license with the City of New York (the "City") for the
Douglaston, New York golf center, which was entered into in 1994 and which
expires on December 31, 2006, the concession license with the City for the
Randall's Island, New York golf center, which was entered into in 1992 and
which expires on March 1, 2007, the concession license with the City for the
Dreier-Offerman Park, Brooklyn, New York golf center, currently under
construction, which was entered into in April 1998 and which expires on March
30, 2019 and the concession license with the Metropolitan Transportation
Authority for the Bronx, New York golf center, currently under construction,
which was entered into in 1997 and which expires on December 31, 2009
(respectively, the "Douglaston License," the "Randall's Island License," the
"Brooklyn License" and the "Bronx License"), are terminable at will. Pursuant
to the Douglaston License and the Randall's Island License, the Company has
made $3.1 million and $774,000, respectively, of capital improvements. Pursuant
to the Brooklyn License, the Company is obligated to make $4.0 million of
capital improvements prior to March 1, 1999. Pursuant to the Bronx License, the
Company is obligated to make a minimum of $3.0 million of capital improvements
prior to July 1, 2000. If any of these concession licenses are terminated,
other than a termination of the Bronx License during the first eight years of
such license, the licensor may retain, and is not obligated to pay the Company
for the value of, such capital improvements. Unless reimbursed, the Company
would immediately have to write-off, for accounting purposes, the undepreciated
value of these capital improvements and the goodwill related to its purchase of
the limited partners' minority interest in the partnership which was party to
the Douglaston License, which are currently being depreciated and amortized
over the life of the relevant concession license.
On July 1, 1998, certain parties commenced an action seeking a
temporary restraining order (the "TRO") against construction of the golf center
in Brooklyn, New York under the Brooklyn License. The case was dismessed on
September 14, 1998 and the Company is continuing construction on the site.
The Company operates 21 of its golf centers under the name "Golden
Bear" pursuant to the License Agreement with the Licensor. Termination of the
License Agreement could adversely affect the Company's Golden Bear golf centers
and, possibly, the Company. The License Agreement expires December 31, 2008,
subject to termination by the Company effective on December 31, 2000. The
License Agreement is also subject to termination by the Company or the Licensor
under certain other circumstances. The value of the "Golden Bear" name is
dependent, in part, upon the continued popularity of Jack Nicklaus.
Accordingly, the occurrence of any event which diminishes the reputation of Mr.
Nicklaus and the related "Golden Bear" symbol could adversely affect the
Company's Golden Bear golf centers.
LEVERAGE, DEBT SERVICE AND COVENANTS
The Company's level of indebtedness requires that a significant amount
of its cash flow from operations be applied to debt service, and there can be
no assurance that the Company's operations will generate sufficient cash flow
to service this indebtedness.
Certain of the instruments governing the Company's indebtedness
include covenants that restrict the operational and financial flexibility of
the Company, including a limit on the number of facilities that the Company may
construct in any rolling twelve month period and restrictions on indebtedness,
liens, acquisitions, dividends and other significant actions. Failure to comply
with certain covenants would, among other things, permit the Company's lenders
to accelerate the maturity of the obligations thereunder and could result in
cross-defaults permitting the acceleration of debt under other Company
agreements. In addition, the Company is required to maintain certain financial
ratios.
-7-
<PAGE>
ENVIRONMENTAL REGULATION
Operations at the Company's facilities involve the use and limited
storage of various hazardous materials such as pesticides, herbicides, motor
oil, gasoline, heating oil and paint, as well as various chemicals used to
create, refrigerate and maintain the ice at its ice rinks. Under various
federal, state and local laws, ordinances and regulations, an owner or operator
of real property is generally liable for the costs of removal or remediation of
hazardous substances that are released on or in its property regardless of
whether the property owner or operator knew of, or was responsible for, the
release of hazardous materials. The Company has not been informed by any
governmental authority of any non-compliance or violation by the Company of any
environmental laws, ordinances or regulations and the Company believes that it
is in substantial compliance with all such laws, ordinances and regulations
applicable to its properties or operations. However, the Company is aware of
one notice of violation issued by the New York State Department of
Environmental Conservation against the owner of the land leased by the Company
in Elmsford, New York alleging that certain hazardous materials were placed on
the site. The owner has taken remedial action and the Company does not believe
it will be affected by the alleged violation. As of the date hereof, the
Company has not incurred material costs of remediation and the Company knows of
no material environmental liability to which it may become subject. Although
the Company usually hires environmental consultants to conduct environmental
studies, including invasive procedures such as soil sampling or ground water
analysis on facilities it owns, operates or intends to acquire, in some cases
only limited invasive procedures are conducted on such properties and in a
limited number of instances no environmental studies are conducted.
Accordingly, there may be potential environmental liabilities or conditions of
which the Company is not aware.
DEPENDENCE UPON KEY EMPLOYEE; RECRUITMENT OF ADDITIONAL PERSONNEL
The Company is heavily dependent on the services of Dominic Chang, its
Chairman of the Board and Chief Executive Officer. The loss of the services of
Mr. Chang could materially adversely affect the Company. Mr. Chang has entered
into an employment agreement with the Company which terminates on December 31,
1999. The Company owns key person life insurance in the amount of $5.0 million
on the life of Mr. Chang. In addition, it is an event of default under certain
of the Company's principal credit facilities and the Company's Term Debt (as
defined herein) if Mr. Chang is not the Chairman of the Board and Chief
Executive Officer of the Company and if he does not own at least 5% of the
Company's outstanding Common Stock. The Company will also be required to hire
additional personnel and professionals to staff the additional facilities it
intends to acquire, lease or construct. There can be no assurance that the
Company will be able to attract and retain qualified personnel.
SIGNIFICANT STOCKHOLDER
As of September 22, 1998, Dominic Chang beneficially owned 3,749,001
shares of Common Stock, constituting approximately 14.78% of outstanding
shares. Mr. Chang is, therefore, able to exercise significant influence with
respect to the election of the directors of the Company and all matters
submitted to a vote of the stockholders of the Company, including the
acquisition or disposition of material assets.
VOLATILITY OF PRICE OF COMMON STOCK
The trading price of the Company's Common Stock could be subject to
fluctuations in response to variations in quarterly operating results, the gain
or loss of significant contracts, changes in management, future announcements
concerning the Company, general trends in the industry and other events or
factors.
PREFERRED STOCK; POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER, BY-LAW AND
CONTRACTUAL PROVISIONS
The Company's Certificate of Incorporation authorizes the Board of
Directors to issue up to 2,000,000 shares of preferred stock, $0.10 par value
per share. The preferred stock may be issued in one or more series, the terms
of which may be determined at the time of issuance by the Board of Directors,
without further action by stockholders. Although no preferred stock is
currently outstanding and the Company currently has no plans for the issuance
of any
-8-
<PAGE>
preferred stock, there can be no assurance that the Company will not do so in
the future. The ability of the Board of Directors to issue preferred stock
could have the effect of delaying, deferring or preventing a change of control
of the Company or the removal of existing management and, as a result, could
prevent the stockholders of the Company from being paid a premium over the
market value for their shares of Common Stock. The Company's By-Laws contain
provisions requiring advance notice of stockholder proposals and imposing
certain procedural restrictions on stockholders wishing to call a special
meeting of stockholders. Under certain of the Company's principal credit
facilities, it is an event of default if Mr. Chang is not the Chairman of the
Board, Chief Executive Officer and beneficial owner of at least 5% of the
outstanding Common Stock. In addition, the indenture with respect to the $115
million principal amount of notes (the "Indenture") gives the holders of the
notes the right to have such notes redeemed if there is a Change of Control (as
defined in the Indenture). Accordingly, such provisions could discourage
possible future attempts to gain control of the Company (which attempts, if
stockholders were offered a premium over the market value of their Common
Stock, might be viewed as beneficial to stockholders).
USE OF PROCEEDS
The net proceeds to the Company from the exercise of the Options and
Warrants are estimated to be $1,186,670.85 and $317,701.16, respectively. The
Company is unable to predict the time, if ever, when the Options and Warrants
will be exercised. Accordingly, it is expected that the net proceeds from the
exercise of the Options and Warrants will be used by the Company for general
corporate purposes. The Company will not receive any proceeds from the sale of
the Shares by the Selling Security Holders.
-9-
<PAGE>
SELLING SECURITY HOLDERS
The following table sets forth the ownership of the Common Stock by
the Selling Security Holders as of the date such information was provided to
the Company. Since the dates such information was provided to the Company, such
information may have changed. Any or all of the Shares listed below may be
offered for sale by the Selling Security Holders from time to time and
therefore no estimate can be given as to the number of Shares that will be held
by the Selling Security Holders upon termination of this offering (except that
in each case, such number will represent less than 1% of the Common Stock
outstanding, unless otherwise indicated ). The "Number of Shares of Common
Stock Owned before the Offering" listed below includes the "Number of Shares
Issuable upon Exercise of Options or Warrants" and the "Number of Shares Held
in Escrow" for each Selling Security Holder. Except as otherwise indicated, the
Selling Security Holders listed in the table have sole voting and investment
powers with respect to the Shares indicated.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
NUMBER OF SHARES ISSUABLE UPON NUMBER
OF COMMON STOCK NUMBER OF EXERCISE OF OF
OWNED BEFORE SHARES HELD OPTIONS OR SHARES
NAME OF SELLING SECURITY HOLDER THE OFFERING IN ESCROW WARRANTS OFFERED
------------------------------- ------------- --------- ---------- --------
<S> <C> <C> <C> <C>
406008 B.C. Ltd. (1) 30,807 1,681 0 545
447323 B.C. Ltd (1)(2) 25,851 1,368 0 1,230
Alalayan, Maria (1)(3) 3,304 113 0 1,253
Wright Brothers Realty Trust (Alfred L. Wright
and James B. Tiffen, as Trustees) (4) 13,650 0 0 13,650
Anderson, Robert (4) 750 0 750 (5) 750
Andromeda Agency, Inc., Profit Sharing Plan
GBO Howard L. Tomb (Howard L. Tomb,
Trustee) (4) 312 0 312 (6) 312
Bell, Philip M. (4) 3,126 0 626 (6) 626
Brule, Michael (1) 357 0 0 357
Burwash, Peter (1) 576 0 0 576
Calace, Linda (4) 239,070 (7) 0 23,516 (8) 44,687
Canadian New Ventures and Investment Group
Limited (1) (9) 224,017 12,447 0 224,017
Caravaggio, Robert (4) 750 0 750 (5) 750
Caspar, Frederick J. (4) 1,562 0 312 (6) 312
Charles F. Schierar Trust U/A Dated 6/6/83 (4) 1,562 0 312 (6) 312
Chillicothe Properties, Inc. (10) 40,000 5,000 0 40,000
Conway, Ruth L. (4) 6,828 (11) 0 1,877 (6) 1,877
Contardi, Steve (4) 1,562 0 312 (6) 312
Corporate National Realty, Inc. 3,000 (12) 0 0 3,000
Curtis Burge, Trustee of Pension & Profit
Plan; 401K Trust Dated 4/24/85 (4) 1,562 0 312 (6) 312
Dalton, John P. (Ian) (1) 21 0 0 21
Elardo, Robert and Joann (4) (13) 750 0 0 750
Estate of Ron G. Rowe (1) 351 0 0 351
Fergusson, David (1) (9) (14) 9,524 160 0 9,524
FHM, Inc. (4) 125 0 125 (6) 125
Flege, Allison (4) 3,488 (11) 938 (6) 938
Flynn, Michael T. (4) 5,850 0 0 5,850
Francis, Barbara (1) 388 (15) 5 0 286
Francis, Earl (1) 4,762 (16) 34 0 4,147
-10-
<PAGE>
NUMBER OF
SHARES
NUMBER OF SHARES ISSUABLE UPON NUMBER
OF COMMON STOCK NUMBER OF EXERCISE OF OF
OWNED BEFORE SHARES HELD OPTIONS OR SHARES
NAME OF SELLING SECURITY HOLDER THE OFFERING IN ESCROW WARRANTS OFFERED
------------------------------- ------------- --------- ---------- --------
Garnett, Jean (1) (9) 4,103 (17) 227 0 4,103
Garnett, Robert W. (1) (9) (18) 55,916 (19) 227 50,000 (20) 5,916
Golf Operations, Inc. (1) 5,711(21) 227 0 1,608
Golf Real Estate, Inc. (1) 1,608 (22) 0 0 1,608
Gould, James M. (4) 125 0 125 (6) 125
Guervara, Danilo (1) 46 0 0 46
Hart, Stacey (4) (23) 190,675 0 0 85,376
Hine, LeeAnne (1) (24) 21 0 0 21
Hochman, Richard H. (1) 593 (25) 0 0 593
Holle, Richard (4) 1,500 0 1,500 (5) 1,500
Holmstrom, Don (1) (9) (26) 57,236 514 40,000 (27) 17,236
Hood, Chris (1) (28) 303 2 0 250
Hornibrook, Hugh (1) (29) 3,794 169 0 716
Hough, John E. (1) (30) 52,140 (31) 1,687 0 21,774
Hough, Mike (1) (30) 42,502 (32) 1,694 0 12,013
Jean Schiear Meier Trust U/A dated 6/7/72 (4) 1,562 0 312 (6) 312
Kalwani, Gyan (4) 40,749 5,499 0 40,749
KKL Golf Partnership (4) 7,500 0 7,500 7,500
Klekamp, Marrianne (4) 1,562 0 312 (6) 312
Leonard, Martha V. (1) 18,724 159 0 15,852
Leong, Kevin (1) (33) 1,662 13 0 1,416
Loiodice, Tim (1) (34) 21 0 0 21
Lupkes, Neil T. (1) 351 0 0 351
McAuliffe, George P. (4) (35) 12,084 2,424 5,500 (36) 12,804
McCabe, Leo (4) 375 0 375 (5) 375
McMillen, Richard G. (1) (37) 18,533 374 7,500 (38) 4,290
Mollner, Gregory (1) (39) 15,030 683 0 2,720
Monteith, William P. (4) 25,875 0 25,875 (5) 25,875
Monteleon, Jason (1) (40) 1,430 29 0 897
Morton, Stacey (1) (41) 229 0 0 229
Munafo, Gary (4) 626 0 626 (6) 626
NationsCredit Commercial Corporation (1) (42) 13,340 0 0 13,340
O'Donnell, Mike (1) 701 0 0 701
Olson, Steve (1) (43) 574 0 0 574
Panther Springs Golf, Inc. (1) 493 0 0 493
Parker Lincoln Commercial Realty (4) 3,000 0 0 3,000
Parks, William (4) (44) 21,837 3,593 4,368 (45) 5,059
Potaschnick, Larry (4) 12,083 2,423 0 12,083
Primus Capital Corporation (1) 1,599 (46) 3 0 1,559
Prudential Securities C/f Wayne D. Hangartner
IRA Roll-over dated 5/26/92 (4) 937 0 0 937
Rabiner Partners (4) 312 0 312 (6) 312
Reddy, Kushal (1) (47) 120 0 0 120
Regent Capital Partners, L.P. (1) 21,791 (48) 227 0 17,688
Reitzig, William (4) (49) 86,471 5,896 50,425 (50) 5,059
Richards, Lolyta (1) (51) 1,001 0 0 1,001
Roban Management Corp. (1) (9) 57,076 (52) 2,487 0 57,076
Robb, John (1) (53) 323 4 0 241
-11-
<PAGE>
NUMBER OF
SHARES
NUMBER OF SHARES ISSUABLE UPON NUMBER
OF COMMON STOCK NUMBER OF EXERCISE OF OF
OWNED BEFORE SHARES HELD OPTIONS OR SHARES
NAME OF SELLING SECURITY HOLDER THE OFFERING IN ESCROW WARRANTS OFFERED
------------------------------- ------------- --------- ---------- --------
Rosenberg, Jeff (4) 1,562 0 312 (6) 312
Rosenberg, Marvin (4) 8,595 0 2,252 (6) 2,252
Rowe, Eric C. (1) 352 0 0 352
Roxburgh, Doug (1) (54) 577 0 0 577
Safrata, Robert (1) (9) (55) 13,601 0 0 13,601
Salem Realty, Inc. (4) 3,126 0 626 (6) 626
Sammons, John F. Jr. (1) (56) 1,212 0 0 1,212
Sawchuck, Lanny (1) (57) 201 0 0 201
Schraier, Barry (4) 12,083 2,423 0 12,083
Schriber, Alan R. (4) 1,562 0 312 (6) 312
Scotty's Park Lane (1) 33,719 1,355 0 9,098
Sidwell, Steve (1) 8,814 306 0 3,606
Silvestre, Jorge (1) (58) 120 0 0 120
Sirrom Capital Corporation (1) (59) 18,238 0 0 18,238
Stafford FamilyPark Partners I, L.P. (10) 24,000 (60) 4,000 0 24,000
Stanton, Thomas (1) (9) (61) 49,557 56 45,000 (62) 4,557
Starlinks Golf Inc. (1) 212 0 0 212
Susan W. Holmes 1951 Trust (4) 2,226 (11) 0 626 (6) 626
Taft, Dudley S. (4) 3,126 0 626 (6) 626
Taylor, Irvin (1) (63) 2,338 113 0 287
Tebokkel, Tobi (1) (64) 49 0 0 49
The Toronto Dominion Bank (1) (65) 27,357 0 0 27,357
Tombs, Kevin (4) 750 0 750 (5) 750
Tri-Star Realty Group (1) 4,094 113 0 2,043
Tuten, Samuel W. and Vicky R. (4) 312 0 312 (6) 312
Ultimate Family Golf Centers, LLC (10) 3,000 0 0 3,000
Vance, John C. (4) 3,488 (11) 0 938 (6) 938
Wadden, Greg (1) 143 0 0 143
Wahlke, Sharon (4) 1,562 0 312 (6) 312
Wechsler, David (4) 10,626 0 8,126 (6)(66) 626
Williams, Robert J. (4) (67) 102,129 0 0 71,490
Willis, Paul (1) 351 0 0 351
Wilson, Dick (1) 1,367 0 0 1,367
Zokol, Richard (1) 3,690 113 0 1,639
</TABLE>
(1) A former security holder of Eagle Quest Golf Centers, Inc. ("Eagle
Quest"), a Canadian company which was merged into a wholly owned
subsidiary of the Company (the "Eagle Quest Acquisition"). The former
security holders of Eagle Quest received shares of the Company's
Common Stock in exchange for Eagle Quest common stock, warrants,
options and put rights.
(2) 447323 B.C. Ltd. is a consultant to the Company.
(3) Ms. Alalayan is currently employed by the Company as a Canadian
controller.
(4) A stockholder of a company, the assets of which have been acquired by
the Company.
(5) Options were issued in connection with the acquisition by the Company
of a golf center in Mt. Olive, New Jersey. The price at which the
options are exercisable is $20.66 per share.
(6) Options were issued in connection with the acquisition by the Company
of a golf academy in Cincinnati, Ohio. The price at which the options
are exercisable is $26.67 per share.
(7) Does not include 207,222 shares beneficially held by Mrs. Calace's
husband, Arthur Calace.
(8) Warrants were issued in connection with the acquisition by the Company
of Leisure Complexes, Inc. ("LCI"). The price at which the warrants
are exercisable is $18.33 per share.
(9) Affiliate of Eagle Quest prior to the Eagle Quest Acquisition.
(10) A company, the assets of which have been acquired by the Company.
(11) Power to vote and dispose of shares of Common Stock shared with
Selling Security Holder's financial advisor, William T. Sena.
-12-
<PAGE>
(12) Shares were issued for services rendered.
(13) Mr. Elardo has been employed by the Company as a pro shop manager
since May, 1998.
(14) Mr. Fergussan is currently employed by the Company as a Vice President
of Marketing.
(15) Does not include 4,762 shares of Common Stock held by Mrs. Francis'
husband, Earl Francis.
(16) Does not include 388 shares of Common Stock held by Mr. Francis' wife,
Barbara Francis.
(17) Does not include 5,916 shares held by Mrs. Garnett's husband, Robert
Garnett.
(18) Mr. Garnett is currently employed by the Company a Senior Vice
President of Eagle Quest Family Golf Centers, Inc.., a wholly-owned
subsidiary of the Company and a Manager of the Company's Central
Division.
(19) Does not include (i) 4,103 shares of Company Common Stock held by Mr.
Garnett's wife, Jean Garnett, (ii) 2,051 shares of Company Common
Stock held by Mr. Garnett's father, Ray J. Garnett, or (iii) 44,766
shares of Company Common Stock held by Roban Management Corp., a
company controlled by Robert W. Garnett.
(20) Options issued under the Company's 1997 Stock Incentive Plan (the
"1997 Plan"). The price at which the options are exercisable is
$25.313 per share.
(21) Does not include 1,608 shares of Common Stock held by Golf Real
Estate, Inc., an affiliate of Golf Operations, Inc.
(22) Does not include 5,711 shares of Company Common Stock held by Golf
Operations, Inc., an affiliate of Golf Real Estate, Inc.
(23) Mr. Hart is currently employed by the Company as a consultant.
(24) Ms. Hine is currently employed by the Company as the Head Golf
Professional at two golf facilities.
(25) Does not include 21,791 shares of Common Stock held by Selling
Security Holder's Associate, Regent Capital Partners, L.P.
(26) Mr. Holmstrom is currently employed by the Company as a Vice President
of Corporate Development.
(27) Options issued under the Company's 1997 Plan. The price at which the
options are exercisable is $25.313 per share.
(28) Mr. Hood is currently employed by the Company as a General Manager of
a golf facility in Vancouver, Canada.
(29) Mr. Hornibrook serves as an Acquisition Consultant to the Company.
(30) John Hough and Mike Hough collectively held a first and second
mortgage on the real property comprising the golf facility known as
Douglasdale Golf Course in the aggregate principle amount of CDN$2.25
million. Such debt has been repaid.
(31) Does not include 42,502 shares of Common Stock held by Mr. Hough's
son, Mike Hough.
(32) Does not include 52,140 shares of Common Stock held by Mr. Hough's
father, John Hough.
(33) Mr. Leong was formerly employed by Eagle Quest as an Assistant Vice
President of Finance.
(34) Mr. Loiodice is currently employed by the Company as a General Manager
of a golf facility.
(35) Mr. McAuliffe is currently employed by the Company as a Vice President
and General Manager of the Company's Entertainment Division.
(36) Options issued under the Company's 1998 Stock Option and Award Plan.
The price at which the options are exercisable is $17.8125 per share.
(37) Options issued outside of the Company's stock option plans. The price
at which the options are exercisable is $13.25 per share.
(38) Mr. McMillen is currently employed by the Company as a consultant.
(39) Mr. Mollner was formerly employed by Eagle Quest as a Vice President
of U.S. Development.
(40) Mr. Monteleone is currently employed by the Company as a Manager of
Corporate Marketing.
(41) Ms. Morton is currently employed by the Company as a Manager of
Membership Marketing.
(42) NationsCredit Commercial Corporation loaned an aggregate of
$16,000,000 to Eagle Quest prior to the Eagle Quest Acquisition. The
debt has been repaid by the Company.
(43) Mr. Olson was formerly employed by Eagle Quest as a Director of
Integration.
(44) Mr. Parks is currently employed by the Company as Director of
Operations of a Family Sports Supercenter in Lake Grove, New York.
(45) 2,868 shares underlying warrants issued in connection with the
Company's acquisition of LCI. The price at which the warrants are
exercisable at $18.33 per share. 1,500 shares underlying options
issued under the Company's 1997 Plan. The price at which the options
are exercisable is $17.71 per share.
(46) Power to vote and dispose of shares of Common Stock shared with
Selling Security Holder's president, Ross Hedley.
(47) Mr. Reddy is currently employed by the Company as a Manager of Central
Division Marketing.
(48) Does not include 593 shares of Common Stock held by Selling Security
Holder's Associate, Richard H. Hochman.
(49) Mr. Reitzig is currently employed by the Company as the Chief
Executive Officer of Lake Grove Family Golf Centers, Inc., a wholly
owned subsidiary of the Company, and as a Senior Vice President of the
Company.
(50) 5,425 shares underlying warrants issued in connection with the
Company's acquisition of LCI. The price at which the warrants are
exercisable is $18.33 per share. 45,000 shares underlying options
issued under the Company's 1997 Plan. The price at which the options
are exercisable is $15.25 per share.
(51) Ms. Richards is currently employed by the Company as a Manager of
Corporate Development.
(52) Does not include 5,916 shares held by Roban Management Corp.'s
President, Robert Garnett.
(53) Mr. Robb was formerly employed by Eagle Quest as a Manager of
Operations..
(54) Mr. Roxburgh is currently employed by the Company as a General Manger
of a golf facility.
(55) Mr. Safrata is currently employed by the Company as the Chief
Executive Officer of Eagle Quest Family Golf Centers, Inc., a wholly
owned subsidiary of the Company.
(56) Mr. Sammons is currently employed by the Company as a District Manager
for Texas.
(57) Mr. Sawchuck is currently employed by the Company as a General Manager
of the golf facility at Calgary-Douglasdale.
(58) Mr. Silvestre provides consulting services to the Company.
(59) Sirrom Capital Corporation loaned Eagle Quest an aggregate of
$1,780,000 prior to the Eagle Quest Acquisition. The debt has since
been repaid.
(60) Power to vote and dispose of shares of Common Stock shared with
Selling Security Holder's general partner.
(61) Mr. Stanton is currently employed by the Company as a Regional
Operations Manager.
(62) Options issued under the Company's 1997 Plan. The price at which
options are exercisable is $25.313 per share.
-13-
<PAGE>
(63) Mr. Taylor is currently employed by the Company as a Manager of a golf
facility.
(64) Ms. Tebokkel is currently employed by the Company as an Operations
Assistant.
(65) The Toronto-Dominion Bank loaned Eagle Quest $2.4 million in 1997
prior to the Eagle Quest Acquisition. This debt was repaid in August,
1998.
(66) Includes 7,500 options issued under an employee stock option plan.
(67) Mr. Williams is currently employed by the Company as the President and
Chief Financial Officer of Confidence Golf, Inc., a wholly- owned
subsidiary of the Company.
DESCRIPTION OF CAPITAL STOCK
A description of the Company's capital stock is contained in the
Company's registration statement on Form 8-A, which is incorporated by
reference herein. See "Incorporation of Certain Documents by Reference."
PLAN OF DISTRIBUTION
The Shares offered by this Prospectus may be sold or transferred from
time to time by the Selling Security Holders or by transferees thereof. No
underwriting arrangements have been entered into by the Selling Security
Holders. The distribution of the Shares by the Selling Security Holders may
be effected in one or more transactions that may take place in the
over-the-counter market, including ordinary broker's transactions, privately
negotiated transactions, or through sales to one or more dealers for resale of
such shares as principals, at prevailing market prices at the time of sale,
prices related to prevailing market prices, or negotiated prices. Discounts
and usual and customary or specifically negotiated brokerage fees or
commissions may be paid by a Selling Security Holder in connection with sales
of the Shares. To the extent required, the number of Shares to be sold, the
name of the Selling Security Holder, the purchase price, the name of any agent
or broker, and any applicable commissions, discounts or other compensation to
such agents or brokers with respect to a particular offering will be set
forth in a Prospectus Supplement.
In order to comply with certain state securities laws, if applicable,
the Shares will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In certain states, the Shares may not be sold
unless such Shares have been registered or qualified for sale in such state or
an exemption from registration or qualification is available and is complied
with.
In connection with distributions of the Shares or otherwise, the Selling
Security Holders may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the Shares in the course of hedging the positions they assume with Selling
Security Holders. The Selling Security Holders may also sell Shares short and
redeliver the Shares to close out such short positions. The Selling Security
Holders may also enter into option or other transactions with broker-dealers
which require the delivery to the broker-dealer of the Shares registered
hereunder, which the broker-dealer may resell or otherwise transfer pursuant to
this Prospectus. The Selling Security Holders may also loan or pledge the
Shares to a broker-dealer and the broker-dealer may sell the Shares so loaned,
or upon a default, the broker-dealer may effect sales of the pledged Shares
pursuant to this Prospectus.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Shares may not simultaneously engage in
market-making activities with respect to such Shares for a period of one or
five business days prior to the commencement of such distribution. In addition
to, and without limiting, the foregoing, each of the Selling Security Holders
and any other person participating in a distribution will be subject to the
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Regulation M, which provisions may
limit the timing of purchases and sales of any of the Shares by the Selling
Security Holders or any such other person. All of the foregoing may affect the
marketability of the Shares.
Pursuant to the Options and Warrants and certain registration rights
agreements, the Company will pay all the fees and expenses incident to the
registration of the Shares (other than discounts and commissions, if any, and
the Selling Security Holders' counsel fees and expenses, if any).
-14-
<PAGE>
In addition, the Company has agreed to indemnify the Selling Security
Holders against certain liabilities, including liabilities under the Securities
Act. In addition, each Selling Security Holder has agreed to indemnify the
Company against certain liabilities, including liabilities under the Securities
Act. Such agreements also provide for rights of contribution if such
indemnification is not available.
The Selling Security Holders, and any broker-dealers or agents through
whom the Shares are sold, may be deemed "underwriters" within the meaning of
the Securities Act with respect to securities offered by them, and any profits
realized or commissions received by them may be deemed underwriting
compensation.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by Delaware law. Delaware law
provides that directors of a company will not be personally liable for monetary
damages for breach of their fiduciary duties as directors, except for liability
for (i) any breach of their duty of loyalty to the company or its stockholders,
(ii) acts or omissions not in good faith or involving intentional misconduct or
a knowing violation of law, (iii) unlawful payment of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law or (iv) any transaction from which the director derived
an improper personal benefit.
The Company's Certificate of Incorporation provides that the Company
shall indemnify its officers, directors, employees and other agents to the
fullest extent permitted by Delaware law.
The Company maintains a policy of insurance under which the directors
and officers of the Company are insured, subject to the limits of the policy,
against certain losses arising from claims made against such directors and
officers by reason of any acts or omissions covered under such policy in their
respective capacities as directors or officers, including liabilities under the
Securities Act. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
LEGAL MATTERS
The validity of the Shares has been passed upon for the Company by
Squadron, Ellenoff, Plesent & Sheinfeld, LLP, 551 Fifth Avenue, New York, New
York 10176. Kenneth R. Koch, Esq. a partner of Squadron, Ellenoff, Plesent &
Sheinfeld, LLP, holds options to purchase shares of the Company's Common Stock.
EXPERTS
The consolidated financial statements of the Company as at December
31, 1997 and December 31, 1996 and for each of the years in the three-year
period ended December 31, 1997, have been audited by Richard A. Eisner &
Company, LLP, independent auditors, as indicated in their report with respect
thereto and are incorporated by reference herein in reliance upon such report
given upon authority of said firm as experts in accounting and auditing. The
supplemental consolidated financial statements of Family Golf Centers, Inc. and
subsidiaries (reflecting the consolidation of Family Golf Centers, Inc. and
Eagle Quest Golf Centers, Inc.) as at December 31, 1997 and December 31, 1996
and for each of the years in the three-year period ended December 31, 1997,
have been audited by Richard A. Eisner & Company, LLP, independent auditors, as
indicated in their report therein which, is based in part on the report of
other auditors and are incorporated by reference herein in reliance upon such
reports given upon authority of said firms as experts in accounting and
auditing. The consolidated financial statements of MetroGolf Incorporated as at
December 31, 1997 and for the year then ended have been audited by Richard A.
Eisner & Company, LLP,
-15-
<PAGE>
independent auditors, as indicated in their report with respect thereto and are
incorporated by reference herein in reliance upon such report given upon the
authority of said firm as experts in accounting and auditing. The consolidated
financial statements of Eagle Quest Golf Centers Inc. as at December 31, 1997
and 1996 and for the year ended December 31, 1997 and for the period from
incorporation on February 5, 1996 to December 31, 1996 have been incorporated by
reference herein in reliance upon the report of KPMG, independent chartered
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The consolidated financial
statements of Golden Bear Golf Centers, Inc. at December 31, 1997 and 1996 and
for the years then ended incorporated by reference in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said reports. The financial statements of
Leisure Complexes, Inc. at and for the year ended December 31, 1996 are
incorporated by reference herein in reliance on the report of Feldman,
Gutterman, Meinberg & Co., independent auditors, given upon the authority of
said firm as experts in accounting and auditing.
-16-
<PAGE>
No dealer, salesman, or any other person has been authorized
to give any information or to make any representation not
contained in this Prospectus in connection with the offering
made hereby, and, if given or made, such information or
representation must not be relied upon as having been
authorized by the Company. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy,
any of the securities offered hereby in any jurisdiction to any
person to whom it is unlawful to make such an offer or
solicitation in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any
circumstances create any implication that there has been no
change in the affairs of the Company since the date hereof or
that the information contained herein is correct as of any time
subsequent to the dates as of which such information is
furnished.
--------------------
TABLE OF CONTENTS
Page
Available Information.........................................2
Incorporation of Certain Documents by Reference...............2
Special Note Regarding Forward Looking Statements.............3
The Company...................................................4
Risk Factors..................................................5
Use of Proceeds...............................................9
Selling Security Holders.....................................10
Description of Capital Stock.................................14
Plan of Distribution.........................................14
Limitation of Liability and Indemnification of Directors
and Officers............................................15
Legal Matters................................................15
Experts......................................................15
945,822 SHARES
_________________
FAMILY GOLF
CENTERS, INC.
COMMON STOCK
_________________
PROSPECTUS
_________________
, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all expenses (subject to future
contingencies) incurred or expected to be incurred by the Company in connection
with the issuance and distribution of the securities being offered hereby
(items marked with an asterisk (*) represent estimated expenses):
SEC Registration Fee ............................. $5,031.04
Legal Fees and Expenses............................15,000.00
Accounting Fees and Expenses........................5,000.00
Transfer Agent and Registrar Fees.................. 1,000.00
Miscellaneous......................................23,968.96
---------
Total..............................................50,000.00
* Estimate
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Delaware General Corporation Law, Section 102(b)(7), enables a
corporation in its original certificate of incorporation, or an amendment
thereto validly approved by stockholders, to eliminate or limit personal
liability of members of its Board of Directors for violations of a director's
fiduciary duty of care. However, the elimination or limitation shall not apply
where there has been a breach of the duty of loyalty, failure to act in good
faith, intentional misconduct or a knowing violation of a law, the payment of a
dividend or approval of a stock repurchase which is deemed illegal or an
improper personal benefit is obtained. The Company's Certificate of
Incorporation includes the following language:
No director of the Corporation shall be liable to the Corporation or any
of its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that this provision does not eliminate the liability of the
director (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of Title 8 of the Delaware Code, or (iv) for any transaction
from which the director derived an improper personal benefit.
Article Eighth of the Certificate of Incorporation of the Company
permits indemnification of, and advancement of expenses to, among others,
officers and directors of the Corporation. Such Article provides as follows:
"(a) Each person who was or is made a party or is threatened to be made
a party to or is otherwise involved in any action, suit, or proceeding, whether
civil, criminal, administrative, or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she is or was a director, officer, employee,
or agent of the Corporation or any of its direct or indirect subsidiaries or is
or was serving at the request of the Corporation as a director, officer,
employee, or agent of any other corporation of a partnership, joint venture,
trust, or other enterprise, including service with respect to an employee
benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee, or agent or in any other capacity while serving as a director,
officer, employee, or agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than permitted prior
thereto), against all expense, liability, and loss (including attorneys' fees,
judgments, fines, excise or other taxes assessed with respect to an employee
benefit plan, penalties, and amounts paid in settlement) reasonable incurred or
suffered by such indemnitee in connection therewith, and such indemnification
shall continue as to an indemnitee who has ceased to be a director, officer,
employee, or agent and shall inure to the benefit of the indemnitee's heirs,
executors, and
II-I
<PAGE>
administrators; provided, however, that, except as provided in paragraph (c) of
this Article Eighth with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify and such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation.
(b) The right to indemnification conferred in paragraph (a) of this
Article Eighth shall include the right to be paid by the Corporation the
expenses incurred in defending any proceeding for which such right to
indemnification is applicable in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking (hereinafter an "undertaking"),
by or on behalf of such indemnitee, to repay all amounts so advanced if it
shall ultimately be determined by final judicial decision from which there is
not further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Article Eighth or otherwise.
(c) The rights to indemnification and to the advancement of expenses
conferred in paragraphs (a) and (b) of this Article Eighth shall be contract
rights. If a claim under paragraph (a) or (b) of this Article Eighth is not
paid in full by the Corporation within sixty days after a written claim has
been received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be twenty
days, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole
or in part in any such suit, or in a suit brought by the Corporation to recover
an advancement of expenses pursuant to the terms of an undertaking, the
indemnitee shall be entitled to be paid also the expenses of prosecuting or
defending such suit. In (i) any suit brought by the indemnitee to enforce a
right to indemnification hereunder (but not in a suit brought by an indemnitee
to enforce a right to an advancement of expenses) it shall be a defense that,
the indemnitee has not met any applicable standard for indemnification set
forth in the Delaware General Corporation Law, and (ii) any suit by the
Corporation to recover an advancement of expense pursuant to the terms of an
undertaking, the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the indemnitee has not met such
applicable standard of conduct, shall create a presumption that the indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the indemnitee, be a defense to such suit. In any suit brought by
the indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under this Article Eighth or otherwise, shall be on the Corporation.
(d) The rights to indemnification and to the advancement of expenses
conferred in this Article Eighth shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, this
certificate of incorporation, by-law, agreement, vote of stockholders or
disinterested directors, or otherwise.
(e) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee, or agent of the Corporation or
another corporation, partnership, joint venture, trust, or other enterprise
against any expense, liability, or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability, or
loss under the Delaware General Corporation Law.
(f) The Corporation's obligation, if any, to indemnify any person who
was or is serving as a director, officer, employee, or agent of any direct or
indirect subsidiary of the Corporation or, at the request of the Corporation,
II-II
<PAGE>
of any other corporation or of a partnership, joint venture, trust, or other
enterprise shall be reduced by an amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust
or other enterprise.
(g) Any repeal or modification of the foregoing provisions of this
Article Eighth shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of
such repeal or modification."
The Company maintains a policy of insurance under which the directors
and officers of the Company are insured, subject to the limits of the policy,
against certain losses arising from claims made against such directors and
officers by reason of any acts or omissions covered under such policy in their
respect capacities as directors and officers.
ITEM 16. EXHIBITS
(a) The following exhibits are filed herewith:
*3.1 Certificate of Incorporation, as amended.
**3.2 Amended and Restated Bylaws.
4.1 Form of Stock Certificate
4.2 Form of Option Agreement
4.3 Option Agreement, dated September 30, 1996, between the
Company and KKL Golf Partnership.
***4.4 Form of Warrant
4.5 Form of Registration Rights Agreement.
4.6 Form of Registration Rights Agreement by and between Family
Golf Centers, Inc. and Gyan Kalwani.
****4.7 Registration Rights Agreement, dated June 30, 1998, between
Family Golf Centers, Inc. and the former stockholders of
Eagle Quest Golf Centers Inc.
5.1 Opinion of Squadron, Ellenoff, Plesent & Sheinfeld, LLP.
23.1 Consent of Squadron, Ellenoff, Plesent & Sheinfeld, LLP
(contained in Opinion filed as Exhibit 5.1).
23.2(A) Consent of Richard A. Eisner & Company, LLP.
23.2(B) Consent of Richard A. Eisner & Company, LLP.
23.3 Consent of KPMG.
23.4 Consent of Feldman, Gutterman, Meinberg & Co.
23.5 Consent of Arthur Andersen, LLP
24.1 Power of Attorney (included on page II-VI, the signature page
hereto).
- ----------
* Incorporated by reference to exhibit 3.1 filed in Amendment No. 1 to
the Company's Registration Statement on Form SB-2 filed on June 12,
1996 (Registration No. 333-4541).
II-III
<PAGE>
** Incorporated by reference to exhibit 3.2 to the Company's Registration
Statement on Form SB-2 filed on May 24, 1996 (Registration Statement
No. 333-4541).
*** Incorporated by reference to exhibit 4.1 to the Company's Registration
Statement on Form S-3 filed on November 20, 1997 (Registration
Statement No. 33-40693).
**** Incorporated by reference to exhibit 4 of the Company's Current Report
on Form 8-K, as amended, dated June 30, 1998 and filed July 13, 1998.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering;
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of Registrant
pursuant to the foregoing provisions, or otherwise, Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a director, officer, or controlling person of Registrant in
the successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities
being registered, Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-IV
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing this Registration Statement on Form S-3
("Registration Statement") and has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Melville, State of New York on September 25, 1998.
FAMILY GOLF CENTERS, INC.
By: /s/ Krishnan P. Thampi
--------------------------------------------
Name: Krishnan P. Thampi
Title: President and Chief Operating Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Dominic Chang, Krishnan P.
Thampi, and Jeffrey C. Key or any one of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign and file (i) any and all pre- or post-effective amendments
to this Registration Statement, and other documents in connection therewith,
and (ii) a Registration Statement, and any and all amendments thereto, relating
to the offering covered hereby filed pursuant to Rule 462(b) under the
Securities Act of 1933, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitutes, may
lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of
1933, this Registration Statement has been signed by the following persons in
the capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Dominic Chang Chairman of the Board and Chief Executive Officer September 25, 1998
-------------------------- (Principal Executive Officer)
Dominic Chang
/s/ Krishnan P. Thampi President, Chief Operating Officer and Director September 25, 1998
-------------------------
Krishnan P. Thampi
/s/ Jeffrey c. Key Chief Financial Officer September 25, 1998
------------------------- (Principal Financial and Accounting Officer)
Jeffrey C. Key
------------------------- Director September 25, 1998
James Ganley
------------------------- Director September 25, 1998
Jimmy C.M. Hsu
/s/ Yupin Wang Director September 25, 1998
-------------------------
Yupin Wang
</TABLE>
II-V
<PAGE>
Index to Exhibits
Page In
Sequential
Exhibit Numbering
No. Exhibit System
- ------- ------- ----------
*3.1 Certificate of Incorporation, as amended.
**3.2 Amended and Restated Bylaws.
4.1 Form of Stock Certificate
4.2 Form of Option Agreement
4.3 Option Agreement, dated September 30, 1996, between the Company
and KKL Golf Partnership.
***4.4 Form of Warrant
4.5 Form of Registration Rights Agreement.
4.6 Form of Registration Rights Agreement by and between Family Golf
Centers, Inc. and Gyan Kalwani.
****4.7 Registration Rights Agreement, dated as of June 30, 1998, between
Family Golf Centers, Inc. and the former stockholders of Eagle
Quest Golf Centers Inc.
5.1 Opinion of Squadron, Ellenoff, Plesent & Sheinfeld, LLP.
23.1 Consent of Squadron, Ellenoff, Plesent & Sheinfeld, LLP (contained
in Opinion filed as Exhibit 5.1).
23.2(A) Consent of Richard A. Eisner & Company, LLP.
23.2(B) Consent of Richard A. Eisner & Company, LLP.
23.3 Consent of KPMG.
23.4 Consent of Feldman, Gutterman, Meinberg & Co.
23.5 Consent of Arthur Andersen, LLP
24.1 Power of Attorney (included on page II-VI, the signature page
hereto).
- ----------
* Incorporated by reference to exhibit 3.1 filed in Amendment No. 1
to the Company's Registration Statement on Form SB-2 filed on
June 12, 1996 (Registration No. 333-4541).
** Incorporated by reference to exhibit 3.2 to the Company's
Registration Statement on Form SB-2 filed on May 24, 1996
(Registration Statement No. 333-4541).
II-VI
<PAGE>
*** Incorporated by reference to exhibit 4.1 to the Company's Registration
Statement on Form S-3 filed on November 20, 1997 (Registration
Statement No. 33-40693).
**** Incorporated by reference to exhibit 4 of the Company's Current Report
on Form 8-K, as amended, dated June 30, 1998 and filed July 13, 1998.
II-VII
<PAGE>
SPECIMEN
FGC 2567 SPECIMEN
FAMILY GOLF CENTERS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CUSIP 30701A 106
THIS CERTIFIES THAT SEE REVERSE FOR
CERTAIN DEFINITIONS
SPECIMEN
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, OF $.01 PAR VALUE, OF
------FAMILY GOLF CENTERS, INC.------
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney, upon surrender of this certificate properly
endorsed.
This certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
/s/ Krishman P. Olampi
SECRETARY PRESIDENT
<PAGE>
THE CORPORATION IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OR SERIES OF
STOCK. THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER
WHO SO REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL, OR OTHER SPECIAL RIGHTS OF EACH
CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. SUCH REQUEST MAY BE MADE
TO THE CORPORATION OR TO ITS TRANSFER AGENT AND REGISTRAR.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- __________ Custodian ___________
(Cust) (Minor)
TEN ENT -- as tenants by the entireties
under Uniform Gifts to Minors
JT TEN -- as joint tenants with right of
survivorship and not as tenants Act_____________________
in common (State)
Additional abbreviations may also be used though not in the above list.
For Value Received, __________________________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFICATION NUMBER OF ASSIGNEE
--------------------------------------------
| |
| | S P E C I M E N
--------------------------------------------
___________________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE)
___________________________________________________________________________________________
___________________________________________________________________________________________
____________________________________________________________________________________ Shares
of the Common Stock represented by the within certificate, and do hereby irrevocably
constitute and appoint
_________________________________________________________________________________ Attorney
to transfer the said shares on the books of the within-named Corporation with full power of
substitution in the premises.
Dated _______________________________________
____________________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
By
________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (BANKS. STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
</TABLE>
<PAGE>
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of ________ _, 199_, among FAMILY
GOLF CENTERS, INC., a Delaware corporation, with executive offices at 538
Broadhollow Road, Melville, New York 11747 ("FGC") and [OPTIONEE] address of
[ADDRESS] (the "Holder").
W I T N E S E T H:
WHEREAS, simultaneously with the execution hereof, the [SELLER] (the
"Seller") and [FAMILY GOLF SUBSIDIARY], a Delaware corporation (the
"Purchaser") are consummating the transactions contemplated by the Purchase
Agreement, dated as of ________ __, 199_ (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
______ 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.
1
<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 $_____ 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 Ie 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
2
<PAGE>
agreeing not to offer to sell, sell or otherwise dispose of, any of such shares
acquired by it pursuant to this Agreement in violation of the Securities Act or
any applicable state securities laws.
V. 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."
3
<PAGE>
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 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.
4
<PAGE>
(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 bound, or (iii) violate or
require governmental, judicial or regulatory consent under any existing
applicable, law, rule, regulation, judgment, order or
5
<PAGE>
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.
6
<PAGE>
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 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
7
<PAGE>
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).
(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.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Stock Option
Agreement to be executed as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
By:
---------------------------
Name:
Title:
[OPTIONEE]
By:
---------------------------
Name:
Title:
<PAGE>
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of September 30, 1996, among FAMILY
GOLF CENTERS, INC., a Delaware corporation with executive offices at 225
Broadhollow Road, Melville, New York 11747 ("FGC") and KKL GOLF PARTNERSHIP.,
an Illinois general partnership with an address at c/o Kemper Sports
Management, 500 Skokie Boulevard, Suite 444, Northbrook, Illinois 60062 (the
"Seller").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution hereof, the Seller and
Carolina Springs Family Golf Centers, Inc., a wholly-owned Delaware subsidiary
of FGC ("Subsidiary"), are consummating the transactions contemplated by the
Purchase Agreement, dated as of September 30, 1996 (the "Purchase Agreement"),
among the Seller, and Subsidiary, pursuant to which, among other things,
Subsidiary shall purchase certain assets of Seller in exchange for (i)
$3,350,000.00 in cash and (ii) options to purchase up to 5,000 shares of the
common stock, par value $.01 per share, of FGC (the "Common Stock");
WHEREAS, this is the Stock Option Agreement referred to in Section 5
of the Purchase Agreement. Capitalized terms used in this Stock Option
Agreement and not otherwise defined herein shall have the respective meanings
given to them in the Purchase Agreement.
NOW, THEREFORE, it is agreed as follows:
I. GRANT OF OPTION. FGC hereby grants to the Seller the following
irrevocable option (the "Option") to purchase, upon the terms and conditions
<PAGE>
hereinafter set forth, an aggregate of 5,000 shares of Common Stock of FGC
(subject to adjustment as hereinafter provided), at the exercise price of
$40.00 per share (the "Exercise Price").
II. EXERCISE OF OPTION. Seller may exercise the option, in whole or in
part, at any time from the date hereof until September 30, 2001 (the "Exercise
Period").
III. MANNER OF EXERCISE. In the event the Seller wishes to exercise
the Option, the Seller shall send a written notice (the "Notice") to the Board
of Directors of FGC specifying: (i) the number of shares of Common Stock the
Seller will purchase pursuant to such exercise; and (ii) the place and date for
the closing of such purchase, which date shall be not less than three, nor more
than twenty, business days from the date of the delivery of the Notice ( each a
"Closing"). Each Closing shall take place at the principal executive offices of
FGC. At the Closing FGC shall deliver to Seller a Registration Rights Agreement
substantially in the form attached hereto as Exhibit A.
IV. PAYMENT AND DELIVERY OF CERTIFICATES. At each Closing, (i) the
Seller will make payment to FGC of the aggregate Exercise Price per share for
the shares of Common Stock being purchased upon exercise of any Option by bank
cashier's or certified check, and (ii) FGC shall deliver to the Seller a
certificate or certificates representing the number of shares of Common Stock
so purchased in the denominations designated by the Seller. At any such
Closing, the Seller shall deliver a letter to FGC agreeing that the Seller is
purchasing the shares of Common Stock for investment purposes and not with a
view to distribution otherwise than in compliance with the Securities Act of
1933, as amended (the "Securities Act"), and agreeing not to offer to sell,
2
<PAGE>
sell or otherwise dispose of, any of such shares acquired by it pursuant to
this Agreement in violation of the Securities Act or any applicable state
securities laws.
V. CONVERSION RIGHT. In lieu of the payment of the Exercise Price, the
Holder shall have the right (but not the obligation), to require FGC to convert
this Option in whole into shares of Stock (the "Conversion Right") as provided
for in this Section V. Upon exercise of the Conversion Right, FGC shall deliver
to the Holder (without payment by the Holder of any of the Execrise Price) that
number of shares of Stock equal to the quotient obtained by dividing (x) the
value of the Option at the time the Conversion Right is exercised (determined
by subtracting the aggregate Exercise Price in effect immediately prior to the
exercise of the Conversion Right from the aggregate Market Price (as
hereinafter defined) for the shares of Stock issuable upon exercise of the
Option immediately prior to the exercise of the Conversion Right) by (y) the
Market Price of one share of Stock immediately prior to the exercise of the
Conversion Right. "Market Price" shall mean the Stock Price (as defined below)
obtained by taking the average over a period of thirty consecutive trading days
ending on the second trading day prior to the date of determination. As used in
this paragraph, the term Stock Price shall mean (A) the mean, on each such
trading day, between the high and low sale price of a share of Stock or if no
such sale takes place on any such trading day, the mean of the closing bid and
lowest closing asked prices therefor on any such trading day, in each case as
officially reported on all national securities exchanges on which the Stock is
then listed or admitted to trading, or (B) if the Stock is not then listed or
admitted to trading on any national securities exchange, the closing price of
the Stock on such date, or (C) if no closing price is available on any such
trading day, the mean between the highest and lowest
3
<PAGE>
closing bid prices thereof on any such trading date, in the over-the-counter
market as reported by NASDAQ, (D) if the Stock is not then quoted in such
system, the mean between the highest and lowest bid prices reported by the
market makers and dealers for the Stock listed as such by the National
Quotation Bureau, Incorporated or any similar successor organization, or (E)
the higher of the last bona fide sale made by FGC and the fair market value of
the Stock as determined by the Board of Directors in its good faith judgement.
VI. EXERCISE OF CONVERSION RIGHT. The conversion rights provided under
Section V hereof may be exercised in whole at any time and from time to time
while any Option remains outstanding. In order to exercise the conversion
privilege, the Holder shall surrender to FGC, at its offices, this Stock Option
Agreement accompanied by a duly completed Notice of Conversion in the form
attached hereto as Exhibit B. The presentation and surrender shall be deemed a
waiver of the Holder's obligation to pay all or any portion of the aggregate
purchase price payable for the shares of Stock issuable upon exercise of this
Option. This Stock Option Agreement shall be deemed to have been converted
immediately prior to the close of business on the day of surrender of such
Stock Option Agreement for conversion in accordance with the foregoing
provisions. As promptly as practicable on or after the conversion date, FGC
shall issue and shall deliver to the Holder a certificate or certificates
representing the largest number of whole shares of Stock to which the Holder
shall be entitled as a result of the conversion. FGC shall not be required to
issue fractions of shares of Stock upon the exercise of the Conversion Right.
Any fractional shares to which the Seller shall be entitled shall be satisfied
by FGC in lawful money of the United States of America.
VII. ADJUSTMENTS. In case FGC shall (i) pay a dividend in Common Stock
of FGC or make a distribution in Common Stock, (ii) subdivide its outstanding
4
<PAGE>
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 Seller shall be entitled
to receive the kind and number of shares or other securities of FGC which it
would have owned or would have been entitled to receive after the happening of
any of the events described above had the Option been exercised immediately
prior to the happening of such event or any record date with respect thereto
and the Exercise Price shall also be adjusted to reflect the happening of any
of the events described above.
VIII. LEGEND. The Seller consents to the placement of any legend
required by applicable state securities laws and of the following legend on
each certificate representing the Common Stock:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
TRANSFERRED, EXCHANGED OR OTHERWISE DISPOSED OF UNLESS (1) A
REGISTRATION STATEMENT UNDER SUCH ACT IS THEN IN EFFECT WITH RESPECT
THEREOF, (2) A WRITTEN OPINION FROM COUNSEL FOR THE ISSUER OF OTHER
COUNSEL FOR THE HOLDER REASONABLE ACCEPTABLE TO THE ISSUER HAS BEEN
OBTAINED TO THE EFFECT THAT NO SUCH REGISTRATION IS REQUIRED, OR (3) A
"NO ACTION" LETTER OR ITS THEN EQUIVALENT HAS BEEN ISSUED BY THE
SECURITIES EXCHANGE COMMISSION TO THE EFFECT THAT NO SUCH REGISTRATION
IS REQUIRED IN CONNECTION THEREWITH."
VII. TYPE OF OPTION. This Option is not an "incentive stock option",
as defined in Section 422A of the Internal Revenue Code of 1986, as amended,
and is not being issued pursuant to any plan of FGC. The Seller shall have no
rights as a stockholder of FGC with respect to shares of Common Stock covered
by this Option until payment for such shares shall have been made in full and
until the date of the issuance of a stock certificate for such shares.
VIII. REPRESENTATIONS AND WARRANTIES OF FGC. FGC hereby represents and
5
<PAGE>
warrants to the Seller as follows:
(a) FGC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. FGC is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the failure to so qualify would have a material adverse effect on its
business or properties.
(b) FGC has all requisite corporate power and authority to own the
properties owned by it and to carry on its business as now conducted and has
taken all necessary corporate action to enter into this Agreement. FGC has all
requisite corporate power to grant the Options and to carry out and perform its
obligations under the terms of this Agreement, and all transactions
contemplated hereby.
(c) When issued and paid for or converted in accordance with the terms
of this Agreement, the shares of Common Stock underlying the Option will be
duly authorized, validly issued, fully paid and non-assessable.
(d) Upon delivery of the shares of Common Stock to the Seller upon the
exercise of the Options, the Seller will receive good and marketable title to
such shares free and clear of any pledge, lien, security interest, charge,
claim, equity or encumbrance of any kind arising by, through or under FGC,
other than any restrictions on resales imposed by federal or state securities
laws.
(e) The execution and delivery of this Agreement does not, and the
performance of this Agreement will not, with or without the giving of notice or
the lapse of time, or both, (i) violate the Certificate of Incorporation or
By-Laws of FGC, (ii) conflict with or result in a breach of any terms or
6
<PAGE>
provisions of, or constitute a default or give rise to a right of acceleration
or termination under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of FGC under any indenture,
mortgage, loan agreement or other instrument to which FGC is a party or by
which any of its property is bound, or (iii) violate or require governmental,
judicial or regulatory consent under any existing applicable, law, rule,
regulation, judgment, order or decree of any governmental instrumentality or
court having jurisdiction over FGC or any of its property.
IX. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents
and warrants to the Seller as follows:
(a) Seller is a partnership duly formed, validly existing and in good
standing under the laws of the State of Illinois.
(b) Seller has all requisite power and authority to carry on its
business as it is now being conducted and has taken all necessary partnership
action to enter into this Agreement. Seller has all requisite partnership power
to carry out and perform its obligations under the terms of this Agreement, and
all transactions contemplated hereby.
(c) The execution and delivery of this Agreement does not, and the
performance of this Agreement will not, with or without the giving of notice or
the lapse of time, or both, (i) violate any provision of any law, rule or
regulation to which Seller is subject; (ii) violate any order, judgment or
decree applicable to Seller; or (iii) conflict with or result in a breach of or
a default under any term or condition of Seller's certificate of limited
partnership or partnership agreement or any agreement or other instrument to
which Seller is a party or by which it or its assets may be bound.
7
<PAGE>
X. NOTICES. All notices, demands, requests, consents or other
communications ("Notices") which either party may desire or be required to give
to the other hereunder shall be in writing and shall be delivered by hand,
overnight express carrier, or sent by registered or certified mail, return
receipt requested, postage prepaid, in either event, addressed to the parties
at their respective addresses first above set forth. A copy of any Notice given
by Seller to Purchaser shall simultaneously be given in either manner provided
above to Squadron, Ellenoff, Plesent & Sheinfeld, LLP, 551 Fifth Avenue, New
York, New York 10176, Attention: Kenneth R. Koch, Esq. A copy of any Notice
given by Purchaser to Seller shall simultaneously be given in either manner
provided above to D'Ancona & Pflaum, 30 North LaSalle Street, Suite 2900,
Chicago, Illinois 60602, Attention: Allan J. Reich, Esq. or Michael D.
Miselman, Esq. Notices given in the manner aforesaid shall be deemed to have
been given three (3) business days after the day so mailed, the day after
delivery to any overnight express carrier and on the day so delivered by hand.
Either party shall have the right to change its address(es) for the receipt of
Notices by giving Notice to the other party in either manner aforesaid. Any
Notice required or permitted to be given by either party may be given by that
party's attorney.
8
<PAGE>
XI. MISCELLANEOUS.
(a) BINDING EFFECT. This Agreement shall be binding upon, and inure
solely to the benefit of, the parties hereto and their respective successors
and assigns, heirs, administrators, and representatives, and shall not be
enforceable by, or inure to the benefit of, any other third party.
(b) NONTRANSFERABLE. The Option granted hereunder may not be
transferred, assigned or otherwise disposed of by the Seller (other than to a
partner of the Seller) and any such attempt to transfer the same shall be void
ab initio.
(c) CHOICE OF LAW. This Agreement shall be construed in accordance
with, and governed by, the internal law of the State of New York (without
reference to its rules as to conflicts of law).
(d) MODIFICATION. This Agreement may only be modified by a writing
signed by each of the parties hereto.
(e) HEADINGS. The section headings herein are for convenience only and
shall not affect the construction thereof. Unless otherwise indicated,
references to Sections and Articles are to Sections and Articles, respectively,
contained herein.
(f) COUNTERPARTS. This Agreement may be executed in one or more
counterparts but all such separate counterparts shall constitute but one and
the same instrument; provided that, although executed in counterparts, the
executed signature pages of each such counterpart may be affixed to a single
copy of this Agreement which shall constitute an original.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Stock Option
Agreement to be executed as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
BY:
------------------------------------
NAME:
TITLE:
KKL GOLF PARTNERSHIP
BY: KEMPER SPORTS MANAGEMENT,
INC., GENERAL PARTNER
BY: /s/ ROBERT L. WALLACE
------------------------------------
NAME: ROBERT L. WALLACE
TITLE: CHIEF FINANCIAL OFFICER
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Stock Option
Agreement to be executed as of the day and year first above written.
FAMILY GOLF CENTERS, INC.
BY: /s/ ROBERT J. KRAUSE
------------------------------------
NAME: ROBERT J. KRAUSE
TITLE: VICE PRESIDENT
KKL GOLF PARTNERSHIP
BY: KEMPER SPORTS MANAGEMENT,
INC., GENERAL PARTNER
BY:
------------------------------------
NAME:
TITLE:
11
<PAGE>
151512-1.
EXHIBIT B
CASHLESS EXERCISE FORM
(To be executed upon exercise of Option pursuant to Section VI)
The undersigned hereby irrevocably elects to surrender its
Option for such shares of Stock pursuant to the cashless exercise provisions of
the within the Stock Option Agreement, as provided for in Section V of such
Stock Option Agreement.
Please issue a certificate or certificates for such Stock
in the name of, and pay cash for fractional shares pursuant to Section VI of
the Stock Option Agreement.
Name
--------------------------------------
(Please Print Name, Address and
Social Security No.)
Address
--------------------------------------
--------------------------------------
--------------------------------------
Social
Security No.
--------------------------------------
Signature
--------------------------------------
NOTE: The above signature should
correspond exactly with the name
on the first page of the Stock
Option Agreement.
12
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of ________, 1998 by
and between FAMILY GOLF CENTERS, INC., a Delaware corporation (the "Company")
and [NAME OF SELLER] (the "Seller").
WHEREAS, the Company and the seller are parties to a Stock Exchange
Agreement, dated as of the date hereof (the "Transaction Agreement");
WHEREAS, in connection with the Transaction Agreement, the Seller received,
as consideration the purchase price of an aggregate of[___] shares of Common
Stock, $.01 par value per share, of the Company (the "Common Stock"), which
shares are "restricted securities" (as defined in Rule 144 promulgated under
the Securities Act of 1933, as amended) and the Company has agreed to provide
the Seller with the registration rights set forth herein with respect to such
shares.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, the parties hereto agree as
follows:
1. Certain Definitions.
Business Day: Any day other than a Saturday, Sunday or holiday on which
banking institutions in New York, New York are closed.
Commission: The Securities and Exchange Commission, or any other Federal
agency at the time administering the Securities Act or the Exchange Act.
Common Stock: As defined in the second "WHEREAS" clause above.
Company: As defined in the first paragraph of this Agreement.
Company Indemnified Parties: As defined in Section 6(b).
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 as of such date,
included all documents incorporated by reference therein, as
<PAGE>
-2-
amended, and each prospectus supplemented relating to the offering and sale of
any of the Registrable Shares.
Registrable Shares: Shares of Common Stock issued to the Seller as
compensation for services provided in connection with the Transaction
Agreement, and any other shares of capital stock of the Company issued in
respect of such shares as a result of stock splits, stock dividends,
reclassification, recapitalizations, mergers, consolidations or similar events.
References in this Agreement to amounts or percentages of Registable Shares as
of or on any particular date shall be deemed to refer to amounts or percentages
after giving effect to any applicable events contemplated by the preceding
sentence.
Registration Statement: A registration statement of the Company on any
form (to be selected by the Company) for which the Company then qualifies and
which permits the secondary resale thereunder of Registrable Shares. The term
Registration Statement shall also include all exhibits and financial statements
and schedules and documents incorporated by reference in such Registration
Statement when it becomes effective under the Securities Act, and in the case
of the references to the Registration Statement as of a date subsequent to the
effective date, as amended or supplemented as of such date.
Securities Act: The Securities Act of 1933, as amended, or any successor
Federal statute, and the rules and regulations of the Commission promuglated
thereunder, as they each may, from time to time, be in effect.
Seller: As defined in the first paragraph of this Agreement.
Selling Stockholder: Any Stockholder whose Registrable Shares are included
at the request of such Stockholder in any Registration Statement filed pursuant
to Section 2.
Stockholder: The Seller or any transferee of Registrable Shares held by
the Seller permitted hereunder if such transferee (i) is designated a
Stockholder by the Seller and (ii) has executed a counterpart hereof at the
time of the transfer to such transferee, unless the Registable 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).
Stockholder Indemnified Parties: As defined in Section 6(a).
Transaction Agreement: As defined in the first "WHEREAS" clause above.
<PAGE>
-3-
2. Incidental Registration.
(a) At any time until the time at which Stockholders may sell publicly all
Registrable Shares owned by such Stockholders without registration under the
Securities Act, each time the Company proposes to register shares of its Common
Stock under the Securities Act for cash pursuant to either an underwritten
public offering, the Seller-dealer transactions, or a combination of the
foregoing (other than in connection with a dividend reinvestement, employee
benefit, stock option or similar plan, an offering of rights, warrants or
securities directly or indirectly convertible into or exchangeable or
exercisable for Common Stock or as registration solely for the account of the
Company pursuant to Rule 415 under the Securities Act or a registration of
shares on Form S-8 or S-4 or any other form not generally available for the
registration of securities for sale to the public), the Company shall give
written notice to [SELLER], as the representative of the Stockholders (the
"Representative"), of its intention to do so. Upon receipt of such notice, the
Representative may give the Company a written request to register all or some
of such Stockholders' Registrable Shares in the registration described in the
written notice from the Company as set forth in the foregoing sentence,
provided that such written request is given within seven (7) days after any
such notice has been given by the Company (with such request stating (i) the
amount of Registrable Shares to be included and (ii) any other information
reasonably requested by the Company to properly effect the registration of such
Registrable Shares). Subject to Section 2(b) and 3, upon receipt of such
request, if the registration form proposed to be used by the Company may also
be used to register Registrable Shares for distribution by such Selling
Stockholders, the Company will use its reasonable best effort to promptly cause
all such Registrable Shares requested to be included in such registration to be
so included (in accordance with the methods of distribution set forth in the
Company's notice of intended registration).
(b) If the proposed method of distribution is a firm commitment
underwritten public offering and the managing underwriter thereof determines in
good faith that the inclusion of such Registrable Shares would materially
adversely affect the offering, the number of Registrable Shares to be offered
for the accounts of the Selling Stockholders shall be reduced or limited in
proportion to the number of Registrable Shares owned by all such Selling
Stockholders to the extent necessary to reduce the total number of shares to be
included in such offering to the amount recommended by such managing
underwriter; provided, that if securities are being offered for the account of
other persons or entities (other than, or in addition to, the Company), such
reduction shall be made pro rata from the securities intended to be offered by
such other persons (regardless of whether such other persons acquire or have
acquired their shares of Common Stock before, on or after the date hereof) and
the Selling Stockholders and subject to the registration rights of those
persons set forth on Schedule I hereto, but no such reduction shall be made
from the securities to be offered for the account of the Company.
(c) The Company's obligations under this Section 2 shall apply to a
registration to be effected for Common Stock to be sold for the account of the
Company as well as a registration statement which includes Common Stock to be
offered for the account of other holders of Common Stock.
<PAGE>
-4-
(d) The Company may at any time and from time to time, without the consent
of any Stockholder, delay, suspend, abandon or withdraw any Registration
Statement described in Section 2(a) and any related proposed or actual offering
or other distribution in which any Stockholder has requested inclusion of such
Stockholder's Registrable Shares pursuant to this Section 2.
3. Limitations on Registration Rights. Notwithstanding the provisions of
Section 2 hereof, the Company shall not be required to effect or maintain any
registration if (i) the Company has previously filed with the Commission a
Registration Statement which included any of the Stockholders Registrable
Shares pursuant to Section 2 of this Agreement; provided, however, that (A) if
pursuant to Section 2(b) the number of Registrable Shares requested to be
registered by the Selling Stockholders was reduced, then such Selling
Stockholders shall be given another opportunity to register their excluded
Registrable Shares in accordance with this Section 2 or (B) if the Company
shall not, for any reason other than the failure of any Stockholder to comply
with this Agreement, cause the Registration Statement to remain effective, and
prepare and file with the Commission any amendments and supplements to the
Registration Statement and to the Prospectus used in connection therewith as
may be necessary to keep the Prospectus current and in compliance in all
material respects with the provisions of the Securities Act, until the sooner
to occur of the sale of all the Registrable Shares covered by such Registration
Statement or the 90th day following the effective date of such Registration
Statement (as such 90th day may be extended for the period of any suspension
of the offering or distribution of Registrable Shares covered thereby pursuant
to subsection (d) of Section 2), then the Selling Stockholders shall be given
another opportunity to register their Registrable Shares in accordance with
this Section 2; or (ii) there shall have been a material breach of a
representation, warranty, covenant or agreement contained in the Transaction
Agreement or an unsatisfied claim under any indemnity arrangement relating
relating thereto by a party other than the Company or the Purchaser, which
breach continues after the expiration of any applicable notice or cure periods.
4. Obligations with Respect to Registration.
(a) Subject to Section 2(d) hereof, if and whenever the Company is
obligated by the provisions of this Agreement to effect the registration of any
Registrable Shares under the Securities Act, the Company shall use its
commercially reasonable efforts:
(1) to notify the Selling Stockholders, (A) when a Registration
Statement becomes effective, (B) when the filing of a post-effective amendment
to a Registration Statement or supplement to the Prospectus is required, when
the same is filed, and in the case of a post-effective amendment, when the same
becomes effective, (C) of any request by the Commission for any amendment of or
supplement to a Registration Statement or any Prospectus relating thereto or
for additional information and (D) of the entry of any stop order suspending
the effectiveness of such Registration Statement or of the initiation of any
proceedings for that purpose;
(2) to furnish to each Selling Stockholder a conformed copy of the
Registration Statement as declared effective by the Commission and of each
post-effective
<PAGE>
-5-
amendment thereto, and such number of copies of the final Prospectus and of
each supplement thereto as may reasonably be required to facilitate the
distribution of the Registrable Shares;
(3) to register or qualify the Registrable Shares covered by a
Registration Statement under the securities or blue sky laws of such
jurisdictions in the United States as the Selling Stockholders shall reasonably
request, and do any and all other acts and things which may be necessary to
enable each Selling Stockholder whose Registrable Shares are covered by such
Registration Statement to consummate the disposition in such jurisdictions of
such Registrable Shares; provided, however, that the Company shall in no event
be required to qualify to do business as a foreign corporation or a dealer in
any jurisdiction where it is not so qualified, to conform its capitalization or
the composition of its assets at the time to the securities or blue sky laws
of such jurisdiction, to execute or file any general consent to service of
process under the laws of any jurisdiction, to take any action that would
subject it to service of process in suits other than those arising out of the
offer and sale of the Registrable Shares covered by such Registration
Statement, or to subject itself to taxation in any jurisdiction where it has
not theretofore done so; and
(4) to cause such Registrable Shares covered by a Registration
Statement to be listed on the principal exchange or exchanges or qualified for
trading on the principal over the counter market on which the Common Stock is
then listed or traded upon the sale of such Registable Shares pursuant to such
Registration Statement.
(b) The Company's obligations under this Agreement with respect to a
Selling Stockholder shall be conditioned upon such Selling Stockholder's
compliance with the following:
(1) such Selling Stockholder shall cooperate with the Company in
connection with the preparation of the Registration Statement, and such Selling
Stockholder will provide to the Company, in writing, for use in the
Registration Statement, all information regarding such Selling Stockholder and
such other information as may be necessary to enable the Company to prepare the
Registration Statement and Prospectus covering the Registrable Shares and to
maintain the currency and effectiveness thereof;
(2) such Selling Stockholder shall permit the Company, the proposed
underwriters, agents or the Seller-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, the Seller-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;
<PAGE>
-6-
(4) during such time as such Selling Stockholder may be engaged in a
distribution of the Registrable Shares, such Selling Stockholder will comply
with all applicable laws, including, but not limited to Regulation M
promulgated under the Exchange Act, and pursuant thereto will, among other
things: (A) not engage in any stabilization activity in connection with the
securities of the Company in contraventention of such rules; (B) distribute the
Registrable Shares owned by such Selling Stockholder solely in the manner
described in the Registration Statement; (C) cause to be furnished to each
underwriter, agent or the Seller-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 document incorporated
by reference therein as may be required by such underwriter, agent, the
Seller-dealer or offeree; and (D) not bid for or 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
the Seller-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 the Seller-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 clause (B), (C) or (D) of Section 4 (a)(1), to that, as set forth
in Section 2(d), it has delayed, suspended, abandoned or withdrawn any
Registration Statement or any related offering or other distribution or it
otherwise requires the suspension by such Selling Stockholder of the
distribution of any of the Registrable Shares, then such Selling Stockholder
shall cease offering or distributing the Registrable Shares until such time, if
any, as the Company notifies such Selling Stockholder that offering and
distribution of the Registrable Shares may recommence.
5. Expenses of Registration
All expenses in connection with any Registration Statement, any
qualification or compliance with Federal or state laws required in connection
therewith, and the distribution of the Registrable Shares shall, as between the
Selling Stockholders and the Company, be borne as follows:
(i) The Company shall pay and be responsible for the registration fee
payable under the Securities Act, blue sky fees and expenses, if applicable
(subject to the limitations set forth in Section 4(a)(3)), printing fees and
all fees and disbursements of the Company's counsel and accountants. Solely at
its discretion, the Company may, in lieu of engaging the services of a
financial printing company with respect to the Registration Statement or the
Prospectus, arrange for the photocopying thereof, in which event the Company
will bear the applicable photocopying costs.
<PAGE>
-7-
(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 the Sellerage discounts, commissions and fees) related to the
distribution of the Registrable Shares that have not expressly been assumed by
the Company as set forth above.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Selling
Stockholder and each person (if any) who controls such Selling Stockholder
within the meaning of either the Securities Act or the Exchange Act
(collectively, the "Stockholder Indemnified Parties") from and against any
losses, claims, damages or liabilities (collectively "Losses"), joint or
several, to which such Stockholder Indemnified Parties may become subject,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstance 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, the Seller-dealer or underwriter engaged by them) or in the case
of a non-underwritten offering, any failure by such Selling Stockholder to give
any purchaser of Registrable Shares at or prior to the written comfirmation of
such sale, a copy of the most recent Prospectus or (ii) if the untrue
statement, omission or allegation thereof upon which Losses or expenses are
based (x) was made in reliance upon and in conformity with the information
provided by or on behalf of any Stockholder Indemnified Party for use or
inclusion in the Registration Statement or any Prospectus, or (y) was made in
any Prospectus used after such time as the Company advised such Selling
Stockholder that the filing of a post-effective amendment or supplement thereto
was required, except the Prospectus as so amended or supplemented, or (z) was
made in any Prospectus used after such time as the Registration Statement
ceases to be effective or current or has been withdrawn or abandoned or the
use of any such Registration Statement or Prospectus or any offering or
distribution pursuant thereto shall have been suspended or delayed hereunder.
(b) Each Selling Stockholder, individually and not jointly, agrees to
indemnify and hold harmless the Company, its directors and officers and each
person, if any, who controls the Company within the meaning of either the
Securities Act or the Exchange Act (the "Company Indemnified Parties"), from
and against any Losses, joint or several, to which the Company Indemnified
Parties may become subject, insofar as such Losses (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
the Prospectus, or any omission or
<PAGE>
-8-
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 information provided by or on
behalf of such Selling Stockholder or any person who controls such Selling
Stockholder for use or inclusion in the Registration Statement or any
Prospectus, or (ii) the use of any Prospectus after such time as the Company
has advised such Selling Stockholder that the filing of a post-effective
amendment or supplement thereto is required, except the Prospectus as so
amended or supplemented, or (iii) the use of any Prospectus after such time as
the Registration Statement ceases to be effective or current or has been
withdrawn or abandoned or the use of any such Registration Statement or
Prospectus or any offering or distribution pursuant thereto shall have been
suspended or delayed hereunder, or (iv) any violation by such Selling
Stockholder or any person who controls such Selling Stockholder within the
meaning of either the Securities Act or the Exchange Act (or any agent, the
Seller-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 obligation 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
Indemnified Party elects to assume the defense in any action or proceeding, the
Indemnified Party shall have the right to employ separate counsel in any such
action or proceeding and to participate in the defense thereof, but the fees
and expenses of such separate counsel shall be such Indemnified Party's expense
unless (i) the Indemnifying Party has agreed to pay such fees and expenses or
(ii) the named parties to any such action or proceeding (including any
impleaded parties) include an Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall have been advised by counsel that there may be
a conflict of interest between such Indemnified Party and the Indemnifying Party
in the conduct of the defense of such action (in which case, if such
<PAGE>
-9-
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 Indemnifying 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 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 Indemnifying 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 had 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 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
<PAGE>
-10-
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
7. Notices. All notices, requests, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed, certified or registered mail
with postage prepaid, or sent by telex, telegram or telecopier, as follows:
(i) if to the Company:
Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Attention: General Counsel
Facsimile: (516) 694-1935
(ii) if to the Seller or the Representative:
[SELLER]
[ADDRESS]
or to such other person or address as any party shall specify by notice in
writing to the other party. All notices and other communications given to a
party in accordance with the provisions of this Agreement shall be deemed to
have been given (i) three Business Days after the same are sent by certified
or registered mail, postage prepaid, return receipt requested, (ii) when
delivered by hand or transmitted by telecopy (answer back received) or (iii)
one Business Day after the same are sent by a reliable overnight courier
service, with acknowledgment of receipt requested. Notwithstanding the
preceding sentence, notice of change of address shall be effective only upon
actual receipt thereof.
8. Amendment. Any provision of this Agreement may be amended or modified
in whole or in part at any time by an agreement in writing among the Company
and the Stockholders who hold a majority of the Registrable Shares then
outstanding, executed in the same manner as this Agreement. No consent,
waiver or similar act shall be effective unless in writing.
9. Entire Agreement. This Agreement constitutes the entire agreement among
the parties hereto and supersedes all prior agreements and understandings,
oral and written, among the parties hereto with respect to the subject matter
hereof.
<PAGE>
-11-
10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
11. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the internal laws of the State of Delaware, without giving
effect to principles of conflicts of laws.
12. Assignment. Subject to the definition of "Stockholder" contained in
Section 1 hereof, the Seller may not assign its rights under this Agreement
without the prior written consent of the Company. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
FAMILY GOLF CENTERS, INC.
By:
----------------------------------------
Name: Robert J. Krause
Title: Senior Vice President
----------------------------------------
Name [SELLER]
<PAGE>
-12-
SCHEDULE I
1. Any registration rights in respect of the Company 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.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of ___________, 1998 (this
("Agreement"), by and between FAMILY GOLF CENTERS, INC., a Delaware
corporation (the "Company"), and GYAN KALWANI ("Kalwani").
WHEREAS, Elk Grove Family Golf Centers, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Company ("EGFGC"), and Kalwani, are parties to
a Purchase and Sale Agreement dated as of ___________, 1998 (the "Purchase
Agreement"), pursuant to which, among other things, Kalwani will receive, as
part of the consideration for the sale of EGFGC of the Property described
therein, an aggregate of ______ shares of Common Stock, par value of $1.00
per share, of the Company (the "Common Stock"); and
WHEREAS, the shares of Common Stock are "restricted securities" (as
defined in Rule 144 under the Securities Act of 1933, as amended), and the
Company has agreed to provide Kalwani with the registration rights set forth
herein with respect to the shares of Common Stock issuable in EGFGC's
acquisition of the Property; and
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the obligations of the EGFGC and Kalwani to consummate the sale
and acquisition of the Property and the other transactions contemplated by
the Purchase Agreement.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, the parties hereto agree as
follows:
1. Certain Definitions.
Business Day: Any day other than a Saturday, Sunday or holiday on which
banking institutions located in New York, New York are authorized or
obligated by law, regulation or executive order to close.
Commission: The Securities and Exchange Commission, or any other federal
agency at the time administering the Securities Act and the Exchange Act.
Common Stock: As defined in the first recital above.
Company: As defined in the preamble of this Agreement.
Company Indemnified Parties: As defined in Section 6(b).
Stock Escrow Agreement: The Stock Escrow Agreement referred to in the
Purchase Agreement, as the same may be amended in accordance with its terms.
-1-
<PAGE>
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) hereof.
Purchase Agreement: As defined in the first recital above.
Prospectus: The prospectus included in the Registration Statement as of
the date it becomes effective under the Securities Act and, in the case of
references to the Prospectus as of a date subsequent to the effective date of
the Registration Statement, as amended or supplemented as of such date,
including all documents incorporated by reference therein, as amended, and
each prospectus supplement relating to the offering and sale of any of the
Registrable Shares.
Registrable Shares: Shares of Common Stock issued to Kalwani as part of
consideration for the purchase of the Property by EGFGC, and any other shares
of capital stock of the Company issued in respect of such Registrable Shares
as a result of stock splits, stock dividends, reclassification,
recapitalizations, mergers, consolidations or similar events. Any Registrable
Share will cease to be a Registrable Share when (x) a registration statement
covering such Registrable Share has been declared effective by the Commission
and such Registrable Share has been disposed of pursuant to such effective
registration statement, (y) such Registrable Share may be publicly resold
without registration pursuant to Rule 144 promulgated by the Commission under
the Securities Act or (z) such Registrable Share is no longer held by
Kalwani.
Registration Statement: A "shelf" registration statement of the Company on
any form for which the Company then qualifies which permits the secondary
resale thereunder of the Registrable Shares on a delayed or continuous basis
under Rule 415 of the Commission under the Securities Act, or any successor
rule that may be promulgated by the Commission under the Securities Act, as
they each may, from time to time, be in effect. The term "Registration
Statement" shall also include all exhibits and financial statements and
schedules and documents incorporated by reference in such Registration
Statement when it becomes effective under the Securities Act, and in the case
of references to the Registration Statement as of a date subsequent to the
effective date, as amended as of such date.
Securities Act: The Securities Act of 1933, as amended, or any successor
federal statute, and the rules and regulations of the Commission promulgated
thereunder, as they each may, from time to time, be in effect.
2. Shelf Registration.
(a) The Company shall:
(1) file, within the period commencing 180 days and ending 225 days,
inclusive, after the date hereof, the Registration Statement covering all
Registrable Shares. The section of the Registration Statement entitled
"Plan of Distribution" shall provide that Kalwani may distribute
Registrable Shares pursuant to the Registration Statement only in the
manner set forth on Exhibit
-2-
<PAGE>
A hereto.
(ii) use its commercially reasonable efforts to cause the Registration
Statement to be declared effective by the Commission as promptly as
practicable after filing; and
(iii) use its commercially reasonable efforts to keep the Registration
Statement continuously effective under the Securities Act until the sooner
to occur of (x) the sale of all Registrable Shares under the Registration
Statement and (y) the first anniversary of the issuance of the Registrable
Shares pursuant to EGFGC's acquisition of the Property.
(b) The Company shall amend the Registration Statement or supplement the
related Prospectus from time to time as necessary to comply with applicable
rules and regulations promulgated by the Commission under the Securities Act
or the instructions applicable to the form used for the Registration
Statement.
3. Limitation on Registration Rights. Notwithstanding the provisions of
Section 2 hereof, the Company shall not be required to effect or maintain the
effectiveness or the Registration Statement if (i) Kalwani shall have
breached any of its warranties, representations, covenants or agreements in
the Purchase Agreement in any material respect and shall have failed to cure
such breach within a reasonable time, or (ii) the Company shall have made a
valid claim for indemnification pursuant to Sections 11, 13, 15, 16 or 22 of
the Purchase Agreement and Kalwani shall have refused to honor such claim.
4. Obligations with Respect to Registration.
(a) In connection with the obligations of the Company pursuant to
Section 2 hereof, and subject to Section 3 hereof, the Company shall:
(i) prepare and file with the Commission the Registration Statement;
provided, however, that before filing the Registration Statement and the
related Prospectus or any amendments thereto the Company shall afford
Kalwani an opportunity to review copies thereof. The Company shall not
file the Registration Statement or any amendments thereto if Kalwani shall
reasonably object on a timely basis;
(ii) notify Kalwani (A) of the receipt of any comments from the Commission
on the Registration Statement prior to its becoming effective, and the
Company's responses thereto, (B) when the Registration Statement becomes
effective, (C) when the filing of a post-effective amendment to the
Registration Statement or a supplement to the Prospectus is required, when
the same is filed, and in the case of a post-effective amendment, when the
same becomes effective, (D) of any request by the Commission or any state
securities authority for any amendment of or supplement to the Registration
Statement or the Prospectus relating thereto or for additional information,
(E) of the entry of any stop order suspending the effectiveness of the
Registration Statement or of the initiation of any proceedings for that
purpose, (F) of the happening of any event or the failure of any event to
occur or the discover of any facts or otherwise that makes any statement made
in the Registration Statement or the Prospectus relating thereto untrue in
any material respect or that causes such Registration Statement or Prospectus
to omit to state a
-3-
<PAGE>
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading and (G) of the
reasonable determination by the Company that a post-effective amendment to
the Registration Statement would be appropriate;
(iii) use commercially reasonable efforts to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement as soon as
reasonably practicable;
(iv) furnish to Kalwani a conformed copy of the Registration Statement as
declared effective by the Commission and each post-effective amendment
thereto, and such number of copies of the final Prospectus and of each
supplement thereto as may reasonably be required to facilitate the
distribution of the Registrable Shares by Kalwani in accordance with the
methods of distribution described in the Registration Statement;
(v) cooperate with Kalwani to facilitate the timely preparation and
delivery of certificates representing Registrable Shares to be sold under the
Registration Statement and not bearing any restrictive legends and in such
denominations and registered in such names as Kalwani may reasonably request
at least one Business Days prior to the closing of any sale of Registrable
Shares by Kalwani pursuant to the Registration Statement;
(vi) prepare, as soon as reasonably practicable, an appropriate
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or file a Form 8-K or other report that will be
incorporated by reference into the Prospectus so that, following the
occurrence of any circumstance requiring such a filing, the Prospectus
included in the Registration Statement, as thereafter delivered to the
purchasers of Registrable Shares, will not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(vii) make generally available to its security holders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act) no
later than 45 days after the end of the 12-month period (or 90 days after the
end of any 12-month period if such period is a fiscal year), commencing on
the first day of the first fiscal quarter of the company after the effective
date of the Registration Statement, which statements shall cover said
12-month period;
(viii) register or qualify the Registrable Shares covered by the
Registration Statement under the securities or blue sky laws of up to five
jurisdictions in the United States designated by Kalwani, and do any and all
other acts and things which may be necessary to enable Kalwani to consummate
the disposition in such jurisdictions of Registrable Shares in accordance
with a method of distribution described in such Registration Statement;
provided, however, that the Company shall in no event be required to qualify
to do business as a foreign corporation or as a dealer in any jurisdiction
where it is not so qualified, to conform its capitalization or the
composition of its assets at the time to the securities or blue sky laws of
such jurisdiction, to execute or file any general consent to service of
process under the laws of any jurisdiction, to take any action that would
subject it to service of process in suits other than those arising out of the
offer and sale of the Registrable Shares covered by such Registration
Statement, or to subject
-4-
<PAGE>
itself to taxation in any jurisdiction where it has not theretofore done so;
(ix) cause the Registrable Shares covered by the Registration Statement
to be listed on the principal exchange or exchanges or qualified for
trading on the principal over-the-counter market on which the shares of
Common Stock are then listed or traded upon the sale of Registrable Shares
pursuant to the Registration Statement; and
(x) otherwise comply with applicable rules and regulations of the
Commission and use its commercially reasonable efforts to take such other
actions as may be required to permit unrestricted sales of Registrable
Shares under the Registration Statement in accordance with the methods of
distribution described therein.
(b) Notwithstanding anything to the contrary contained herein, if at any
time after the filing of the Registration Statement or after it is declared
effective by the Commission, the Company determines, in its reasonable business
judgment, that such registration and the offering of Registrable Shares
thereunder would require the Company to disclose matters that otherwise would
not be required to be disclosed at such time, and such disclosure would
interfere with or otherwise adversely affect any financing, acquisition,
corporate reorganization, or other material transaction or development involving
the Company, then the obligation of the Company under Section 2(a)(ii) or
2(a)(iii), as the case may be, shall be suspended upon the giving of notice to
Kalwani of such suspension; provided, however, that any such suspension shall
not last more than 90 days, or past the date on which any Quarterly Report on
Form 10-Q or Annual Report on Form 10-K is filed by the Company, following the
giving of such notice. Any such notice need not specify the reasons for such
suspension if the Company determines, in its reasonable business judgment, that
doing so would interfere with or adversely affect such transaction or
development or would result in the disclosure of material non-public
information. In the event of a suspension pursuant to this Section 4(b), the
one-year period referred to in Section 2(a)(iii)(y) will be extended by a
number of days equal to the total number of days for which the suspension of
the Company's obligations under Section 2(a)(ii) or 2(a)(iii), as the case may
be, was in effect.
(c) The Company's obligations under this Agreement to Kalwani shall be
conditioned upon the compliance by Kalwani with the following:
(1) Kalwani shall cooperate with the Company in connection with the
preparation of the Registration Statement and related Prospectus and, for
so long as the Company is obligated to keep the Registration Statement
effective, Kalwani shall provide to the Company, in writing, for use in
the Registration Statement and the Prospectus, all information regarding
Kalwani and such other information as may be reasonably required to enable
the Company to prepare the Registration Statement and Prospectus covering
the Registrable Shares and to maintain the currency and effectiveness
thereof;
(2) during such time as Kalwani may be engaged in a distribution of the
Registrable Shares, Kalwani shall comply with all applicable laws,
including, but not limited to, Regulation M promulgated by the Commission
under the Exchange Act and pursuant thereto will, among other things: (A)
not engage in any stabilization activity in connection with the securities
of the Company in contravention of such rules;
-5-
<PAGE>
(B) distribute the Registrable Shares solely in the manner described in
the Registration Statement; and (C) not bid for or purchase any
securities of the Company or attempt to induce any person to purchase
any securities of the Company other than as permitted under the Exchange
Act;
(3) at least one Business Day prior to any distribution by Kalwani of
Registrable Shares, Kalwani shall advise the Company in writing of the
dates on which the distribution will commence and, to the best knowledge
of Kalwani at that time, the date on which the distribution will
terminate, the number of Registrable Shares to be sold, the terms and the
manner of sale (including, to the extent applicable, the purchase price,
the name of any broker-dealer to or through whom such distribution is
being made, and the amount of any selling commissions or other items
constituting compensation to such broker-dealer) and the number of shares
of Common Stock that will be owned beneficially by Kalwani after giving
effect to such sale;
(4) on notice from the Company of the happening of any of the events
specified in clauses (C), (D), (E), (F) or (G) of Section 4(a)(ii),
Kalwani shall cease offering or distributing the Registrable Shares until
such time as the Company notifies Kalwani that offering and distribution
of the Registrable Shares may recommence; and
(5) on notice from the Company that (x) it is about to effect a primary
public offering of shares of Common Stock and (y) the managing
underwriter(s) for such offering have so requested in writing, then
Kalwani shall cease offering or distributing any of such shares (including
Registrable Shares owned by Kalwani) during the 7 days prior to, and
during the 30-day period beginning on, the effective date of the
registration statement for such primary public offering.
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
Kalwani and the Company, be borne as follows:
(a) The Company shall pay and be responsible for the registration fee
payable under the Securities Act, blue sky fees and expenses, if applicable
(subject to the limitations set forth in Section 4(a)(x)), printing fees and
all fees and disbursements of the Company's counsel and accountants. Solely
at its discretion, the Company may, in lieu of engaging the services of a
financial printing company with respect to the Registration Statement or the
Prospectus, arrange for the photocopying thereof, in which event the Company
will bear the applicable photocopying costs.
(b) Kalwani shall pay all fees and disbursements of his 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 brokerage
discounts, commissions and fees) related to the distribution of the
Registrable Shares that have not expressly been assumed by the Company as set
forth above.
-6-
<PAGE>
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless Kalwani from and
against any losses, claims, damages or liabilities (collectively "Losses"),
joint or several, to which Kalwani 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
Section6(c), the Company will reimburse Kalwani 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 Kalwani 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 Kalwani, or any failure by
Kalwani to give any purchaser of Registrable Shares, at or prior to the
written confirmation of sale, a copy of the most recent Prospectus or (ii) if
the untrue statement, omission or allegation thereof upon which Losses or
expenses are based (x) was made in reliance upon and in conformity with the
information provided by or on behalf of any Stockholder Indemnified Party for
use or inclusion in the Registration Statement or any Prospectus, or (y) was
made in any Prospectus used after such time as the Company advised Kalwani
that the filing of a post-effective amendment or supplement thereto was
required, except the Prospectus as so amended or supplemented, or (z) was
made in any Prospectus used after such time as the Registration Statement
ceases to be effective or current or has been withdrawn or abandoned or the
use of any such Registration Statement or Prospectus or any offering or
distribution pursuant thereto shall have been suspended or delayed hereunder.
(b) Kalwani agrees to indemnify and hold harmless the Company, its
directors and officers and each person, if any, who controls the Company
within the meaning of either the Securities Act or the Exchange Act (the
"Company Indemnified Parties"), from and against any Losses, joint or
several, to which the Company Indemnified Parties may become subject, insofar
as such Losses (or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or the Prospectus, or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, if the statement or
omission was made in reliance upon and in conformity with the information
provided in writing specifically by or on behalf of Kalwani for use in the
Registration Statement or any Prospectus, (ii) the use of any Prospectus
after such time as the Company has advised Kalwani that the filing of a
post-effective amendment or supplement thereto is required, except the
Prospectus as so amended or supplemented, (iii) the use of any Prospectus
after such time as the Registration Statement ceases to be effective or
current or has been withdrawn or abandoned or the use of any such
Registration Statement or Prospectus or any offering or distribution pursuant
thereto shall have been suspended or delayed hereunder or (iv) any violation
by Kalwani of any federal or state securities law or rule or regulation
thereunder or any failure by Kalwani to give any purchaser of Registrable
Shares, at or prior to the written confirmation of sale, a copy of the most
recent Prospectus; and, subject to Section 6(c), Kalwani 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
-7-
<PAGE>
generality thereof, any information concerning Kalwani or plan of distribution
included in any Registration Statement or Prospectus which is provided to
Kalwani for review within a reasonable period before filing or use thereof and
to which information Kalwani has not promptly provided written notice of
objection to the Company shall be deemed to have been provided by Kalwani
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 in writing that there may be a conflict of interest between such
Indemnified Party and the Indemnifying Party in the conduct of the defense of
such action (in which case, if such Indemnified Party notifies the Indemnifying
Party in writing that it elects to employ separate counsel at the expense of
the Indemnifying Party, the Indemnifying Party shall not assume the defense of
such action or proceeding on such Indemnified Party's behalf, it being
understood, however, that the Indemnifying Party shall not, in connection with
any one such action or proceeding or separate but substantially similar or
related actions or proceedings arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for all Indemnified Parties, which firm
shall be designated in writing by Kalwani 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.
7. Notices. All notices, requests, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed, certified or registered mail
with postage prepaid, or sent by telecopier, as follows:
-8-
<PAGE>
(a) if to the Company:
Family Golf Centers, Inc.
225 Broadhollow Road
Melville, New York 11747
Attention: General Counsel
Facsimile: 516-694-1935
(b) if to Kalwani:
10401 Grantline Road
Elk Grove, California 95624
or to such other person or address as any party shall specify by notice in
writing to the other party. All notices and other communications given to a
party in accordance with the provisions of this Agreement shall be deemed to
have been given (i) three Business Days after the same are sent by certified
or registered mail, postage prepaid, return receipt requested, and (ii) when
delivered by hand or transmitted by telecopy (answer back received);
provided, however, if any notice sent by telecopy is received by the
recipient after 4:00 p.m. local time, or on a day other than a business day,
then the notice shall be deemed received on the next following business day.
Notwithstanding the preceding sentence, notice of change of address shall be
effective only upon actual receipt thereof.
8. Amendment. Any provision of this Agreement may be amended or modified
in whole or in part at any time by an agreement in writing between the
Company and Kalwani. No consent, waiver or similar act shall be effective
unless in writing.
9. Entire Agreement. This Agreement constitutes the entire agreement among
the parties hereto and supersedes all prior agreements and understandings,
oral and written, among the parties hereto with respect to the subject matter
hereof.
10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
11. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the internal laws of the State of New York, without giving
effect to principles of conflicts of laws.
12. Assignment. Kalwani may not assign its rights under this Agreement
without the prior written consent of the Company. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Company:
FAMILY GOLF CENTERS, INC.
By:
----------------------------------------
Name:
Title:
Kalwani:
--------------------------------------------
GYAN KALWANI
-10-
<PAGE>
EXHIBIT "A"
PLAN OF DISTRIBUTION
The Registrable Shares may be sold by Kalwani directly or through agents
designated from time to time or to or through broker-dealers designated from
time to time. To the extent required, any such agent or broker-dealer
involved in the offer and sale of the Registrable Shares and any applicable
commissions, discounts or other items constituting compensation to such
agents or broker-dealers will be set forth in a Prospectus Supplement.
The distribution of the Registrable Shares may be effected from time to
time in one or more transactions at a fixed price or prices, which may be
changed, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at prices determined on a negotiated or
competitive bid basis. Registrable Shares may be sold through a broker-dealer
acting as agent or broker for Kalwani, or to a broker-dealer acting as
principal. In the latter case, the broker-dealer may then resell such
Registrable Shares to the public at varying prices to be determined by such
broker-dealer at the time of resale.
-1-
<PAGE>
Exhibit 5.1
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
(212) 661-6500
September 25, 1998
Family Golf Centers, Inc.
538 Broadhollow Road
Melville, New York 11747
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
You have requested our opinion, as counsel for Family Golf Centers,
Inc., a Delaware corporation (the "Company"), in connection with the
registration statement on Form S-3 (the "Registration Statement"), filed with
the Securities and Exchange Commission under the Securities Act of 1933 (the
"Act"). The Registration Statement relates to an offering by certain selling
stockholders named therein (the "Stockholders") from time to time of up to
945,822 shares (the "Shares") of common stock, par value $.01 per share, of
the Company (the "Common Stock"). Of the 945,822 Shares being offered hereby,
30,000 are issuable at $20.66 per share and 21,255 are issuable at $26.67 per
share, in each case, upon the exercise of certain options issued in connection
with the Company's acquisition of certain golf facilities (collectively, the
"Options"). The shares underlying the Options are referred to herein as the
"Option Shares." In addition, of the 945,822 Shares being offered hereby,
23,516 are issuable at $13.51 per share upon the exercise of certain warrants
issued in connection with the acquisition of Leisure Complexes, Inc. in July
1997 (collectively, the "Warrants"). The shares underlying the Warrants are
referred to herein as the "Warrant Shares."
We have examined such records and documents and made such examinations
of law as we have deemed relevant in connection with this opinion. We have
assumed that there will be no changes in applicable law between the date of
this opinion and the date the Shares proposed to be sold by the Stockholders
pursuant to the Registration Statement are actually sold. It is our opinion
that (i) the Option Shares and Warrant Shares have been duly authorized and,
when issued and delivered upon exercise of the Options or Warrants, as the case
may be, in accordance with their respective terms of the Warrants, will be
validly issued, fully paid and non-assessable, and (ii) the Shares (other than
the Warrant Shares) have been duly authorized and validly issued and are
fully-paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Registration Statement. In so doing, we do not admit
that we are in the category of persons whose consent is required under Section
7 of the Act or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
Very truly yours,
/s/ Squadron, Ellenoff, Plesent
& Sheinfeld, LLP
<PAGE>
EXHIBIT 23.1(A)
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to our firm under the caption "Experts" in this
registration Statement on Form S-3 and to the Incorporation by reference
therein of our reports dated i) March 26, 1998, except as to Notes M and N as to
which the dates are June 30, 1998 and July 21, 1998, respectively, on our audit
of the financial statements of Family Golf Centers, Inc. and subsidiaries and
ii) March 26, 1998 except as to Notes B and P as to which the dates are
June 30, 1998 and July 21, 1998, respectively, on our audit of the supplemental
financial statements of Family Golf Centers, Inc. and subsidiaries as of
December 31, 1997 and 1996 and for each of the years in the three-year period
ended December 31, 1997, included in its Registration Statement on Form S-3
dated July 23, 1998, filed with the Securities and Exchange commission.
/s/ Richard A. Eisner & Company, LLP
New York, New York
September 24, 1998
<PAGE>
EXHIBIT 23.1(B)
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to our firm under the caption "Experts" in this
Registration Statement on Form S-3 and to the incorporation by reference therein
of our report dated April 10, 1998 on our audit of the financial statements of
MetroGolf Incorporated and subsidiaries as of December 31, 1997 and for the year
then ended, included in the Registration Statement of Family Golf Centers, Inc.
on Form S-3 dated July 23, 1998 filed with the Securities and Exchange
Commission.
/s/ Richard A. Eisner & Company, LLP
New York, New York
September 24, 1998
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Eagle Quest Golf Centers, Inc.
We consent to the incorporation herein by reference of our report dated
March 13, 1998, except as to note 16(a) which is as of April 2, 1998, with
respect to the consolidated balance sheets of Eagle Quest Golf Centers Inc. and
subsidiaries as of December 31, 1997 and 1996 and the related consolidated
statements of operations, shareholders' equity (deficit) and cash flows for the
year ended December 31, 1997 and the period from incorporation on February 5,
1996 to December 31, 1996, which report appears in Amendment No. 2 to Form S-3
(No. 333-53503) dated July 21, 1998 of Family Golf Centers, Inc. Our report
includes additional comments for U.S. readers that cast substantial doubt as to
Eagle Quest's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from the
outcome of that uncertainty. We also consent to the reference to our firm under
the heading "Experts" in the prospectus.
/s/ KPMG
Chartered Accountants
Vancouver, Canada
September 24, 1998
<PAGE>
Exhibit 23.4
[FGM & Co. LOGO]
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Registration Statement on Form S-3 of
inclusion by reference of our report dated June 27, 1997 of our audit of the
financial Statements of Leisure Complexes, Inc. as at December 31, 1996. We also
consent to the inclusion by reference to our firm under the caption "Experts".
/s/ Feldman Gutterman, Meinberg & Co.
Manhasset, New York
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use
of our reports (and to all references to our Firm) incorporated by reference or
made a part of this Registration Statement.
/s/ Arthur Andersen LLP
West Palm Beach, Florida,
September 25, 1998.
