AGREEMENT AND PLAN OF MERGER
AMONG
FAMILY GOLF CENTERS, INC.,
LAKE GROVE FAMILY GOLF CENTERS, INC.
AND
LEISURE COMPLEXES, INC.
DATED AS OF JULY 25, 1997
TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER...................................................................1
Section 1.1 The Merger...........................................1
Section 1.2 Closing..............................................1
Section 1.3 Effective Time; Effect of Merger.....................1
Section 1.4 Conversion of Securities.............................2
Section 1.5 Exchange Ratio.......................................3
Section 1.6 Exchange of Securities...............................3
Section 1.7 Dissenting Shares....................................4
ARTICLE II
CERTAIN MATTERS RELATING TO THE SURVIVING CORPORATION........................5
Section 2.1 Certificate of Incorporation of the Surviving
Corporation........................................5
Section 2.2 Bylaws of the Surviving Corporation..................5
Section 2.3 Directors and Officers of the Surviving
Corporation........................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................6
Section 3.1 Existence, Good Standing, Corporate Authority........6
Section 3.2 Charter Documents; Corporate Records.................6
Section 3.3 Authorization and Validity of Agreement..............6
Section 3.4 No Approvals or Notices Required; No Conflict
With Instruments...................................7
Section 3.5 Capitalization.......................................8
Section 3.6 No Subsidiaries......................................9
Section 3.7 Financial Condition..................................9
Section 3.8 No Undisclosed Liabilities..........................10
Section 3.9 Absence of Certain Changes or Events................10
Section 3.10 Tax Matters.........................................11
Section 3.11 Compliance With Laws................................12
Section 3.12 Licenses............................................12
Section 3.13 Legal Proceedings...................................13
Section 3.14 Intellectual Property...............................13
Section 3.15 Real Property.......................................13
Section 3.16 Tangible Personal Property; Sufficiency of Assets...15
Section 3.17 Material Contracts; Debt Instruments................16
Section 3.18 Employee Benefit Plans..............................18
Section 3.19 Labor Matters.......................................19
Section 3.20 Environmental Compliance............................19
Section 3.21 Insurance...........................................21
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Section 3.22 Interests of Officers and Directors.................21
Section 3.23 Brokers or Finders..................................22
Section 3.24 Restricted Shares...................................22
Section 3.25 Full Disclosure.....................................22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FAMILY GOLF AND MERGER SUB................22
Section 4.1 Existence, Good Standing, Corporate Authority.......22
Section 4.2 Authorization, Validity and Effect of Agreements....22
Section 4.3 Capitalization......................................23
Section 4.4 Family Golf SEC Filings; Financial Statements......23
Section 4.5 No Approvals or Notices Required; No Conflict
With Instruments..................................24
Section 4.6 Brokers or Finders..................................24
Section 4.7 Full Disclosure.....................................24
ARTICLE V
CONDITIONS TO THE MERGER....................................................25
Section 5.1 Conditions to the Obligations of Each Party.........25
Section 5.2 Conditions to the Obligations of Family Golf
and Merger Sub....................................25
Section 5.3 Conditions to the Obligations of the Company........26
ARTICLE VI
INDEMNIFICATION.............................................................26
Section 6.1 Survival............................................26
Section 6.2 Indemnification.....................................27
Section 6.3 Third-Party Claims..................................27
ARTICLE VII
MISCELLANEOUS...............................................................28
Section 7.1 Notices.............................................28
Section 7.2 Severability........................................29
Section 7.3 Governing Law.......................................29
Section 7.4 No Adverse Construction.............................29
Section 7.5 Counterparts........................................29
Section 7.6 Legal Fees and Expenses.............................29
Section 7.7 Successors and Assigns..............................29
Section 7.8 Amendment...........................................30
Section 7.9 Waiver..............................................30
Section 7.10 Entire Agreement....................................30
Section 7.11 Definition of Subsidiary and Affiliate..............30
Section 7.12 Definition of Knowledge of the Company..............30
Section 7.13 Stockholders are Third Party Beneficiaries..........30
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 25, 1997 (this
"Agreement"), among FAMILY GOLF CENTERS, INC., a Delaware corporation ("Family
Golf"), LAKE GROVE FAMILY GOLF CENTERS, INC., a New York corporation and a
wholly-owned subsidiary of Family Golf ("Merger Sub"), and LEISURE COMPLEXES,
INC., a New York corporation (the "Company").
WITNESSETH:
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WHEREAS, the parties wish to provide for the terms and conditions upon
which a merger of the Company with and into Merger Sub would be consummated;
and
WHEREAS, it is intended that the merger constitute a tax-free
reorganization under Section 368(a)(1)(A) of the Internal Revenue Code of 1986,
as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.3(a) below) the
Company shall be merged with and into Merger Sub (the "Merger") in accordance
with the provisions of the New York Business Corporation Law (the "NYBCL"),
whereupon the separate corporate existence of the Company shall cease and
Merger Sub shall continue as the surviving corporation of the Merger (the
"Surviving Corporation") under the laws of the State of New York.
Section 1.2 Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger shall take place at the law offices of
Xxxxxxx, Xxxxxxx & Xxxxxx, 000 Xxxxxxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000, on
the date hereof (the "Closing Date").
Section 1.3 Effective Time; Effect of Merger. (a) As soon as
practicable after all the conditions to the Merger set forth in Article VII of
this Agreement have been fulfilled or, if permissible, waived, the parties
hereto shall cause the Merger to be consummated by filing a
certificate of merger with the New York Department of State and making any
related filings required under the NYBCL. The Merger shall become effective at
such time as the certificate of merger is duly filed with the New York
Department of State, or at such later time as is specified in the certificate
of merger (the "Effective Time").
(b) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities, liabilities and duties of the Company and
Merger Sub, and the Merger shall have the effects provided in Article 9 of the
NYBCL.
Section 1.4 Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Family Golf, Merger Sub,
the Company or the holders of any of the following securities:
(a) Company Common Stock. (i) Subject to Section 1.7, each share of
Common Stock, par value $.01 per share ("Company Common Stock"), of the Company
issued and outstanding immediately prior to the Effective Time (other than any
shares of Company Common Stock to be canceled pursuant to Section 1.4(b)) shall
be converted into and represent the right to receive 0.1018 of a share of
Common Stock, par value $.01 per share ("Family Golf Common Stock"), of Family
Golf and warrants (the "Warrants") to purchase 0.0111 of a share of Family Golf
Common Stock (the "Merger Consideration"). No fractional shares of Family Golf
Common Stock and no fractional Warrants shall be issued in the Merger. Instead,
the number of shares of Family Golf Common Stock and the number of Warrants
receivable by a holder of Company Common Stock pursuant to the preceding
sentence shall in each case be rounded to the nearest whole number. Set forth
on Exhibit A hereto is the number of whole shares of Family Golf Common Stock
and the number of whole Warrants to be received by each holder of Company
Common Stock on the date hereof, after giving effect to the foregoing
provisions of this Section 1.4(a).
(ii) At the Effective Time, all issued and outstanding shares of
Company Common Stock shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each certificate previously
evidencing any such shares shall thereafter represent solely the right to
receive, upon the surrender of such certificate in accordance with the
provisions of Section 1.6 below, the Merger Consideration. The holders of
certificates previously evidencing shares of Company Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Company Common Stock, except as otherwise provided
herein or by law.
(b) Treasury Stock. Each share of Company Common Stock held in
treasury by the Company, immediately prior to the Effective Time, shall be
automatically canceled and extinguished without any conversion thereof and no
payment or other consideration shall be made or delivered with respect thereto.
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(c) Stock of Merger Sub. Each share of Common Stock, par value $.01
per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and become one share of common stock of
the Surviving Corporation with the same rights, powers and privileges as the
shares so converted and shall constitute the only outstanding shares of capital
stock of the Surviving Corporation.
Section 1.5 Exchange Ratio. Family Golf covenants and agrees with the
Company that it will not, subsequent to the execution of this Agreement and
prior to the Effective Time, effect any change to the outstanding shares of
Family Golf Common Stock, including without limitation by means of a stock
split, reverse stock split, stock dividend or other similar transaction.
Section 1.6 Exchange of Securities.
(a) Mechanics of Exchange. Promptly after the Effective Time and
subject to Section 1.6(b) below, Family Golf shall, or shall cause its transfer
agent to, upon surrender of each stock certificate formerly representing issued
and outstanding shares of Company Common Stock immediately prior to the
Effective Time (each a "Certificate"), deliver in accordance with the
instructions of the person in whose name such Certificate shall have been
issued (x) from the number of whole shares of Family Golf Common Stock into
which the shares previously represented by the Certificate shall have been
converted at the Effective Time in accordance with Section 1.4(a) above, (i) a
certificate, registered in the name of Ruskin, Moscou, Xxxxx & Faltischek,
P.C., as escrow agent (the "Stockholder Escrow Agent"), the number of whole
shares of Family Golf Common Stock specified in such instructions as being
deliverable to such escrow agent (which, in the aggregate from all
stockholders, shall equal 10,000 shares) and (ii), subject to Section 1.6(b), a
certificate, registered in the name of such person, representing the balance of
the shares of Family Golf Common Stock issuable to such person, and (y) a
Common Stock Purchase Warrant, registered in the name of such person,
representing the number of whole Warrants into which the shares previously
represented by the Certificate shall have been converted at the Effective Time
in accordance with Section 1.4(a) above. Each Certificate so surrendered shall
forthwith be canceled. The number of shares of Family Golf Common Stock to be
issued to the Stockholder Escrow Agent and the Indemnity Escrow Agent (as
defined below) by the former stockholders of the Company are intended to be pro
rata among such stockholders based on the number of shares of Company Common
Stock owned by them immediately prior to the Effective Time. Set forth on
Exhibit A hereto is (i) the number of whole shares of Family Golf Common Stock
and Warrants issuable to each holder of Company Common Stock, (ii) the number
of whole shares of Family Golf Common Stock issuable to each such holder to be
delivered to, and registered in the name of, the Stockholder Escrow Agent and
(iii) the number of whole shares of Family Golf Common Stock issuable to each
such holder to be delivered to, and registered in the name of, the Indemnity
Escrow Agent in accordance with Section 1.6(b) below.
(b) Escrowed Shares. Immediately prior to the Effective Time, Family
Golf shall deliver to Continental Stock Transfer & Trust Company, as escrow
agent (the "Indemnity Escrow Agent"), in accordance with the terms of an Escrow
Agreement, to be dated as of the Closing Date
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(the "Escrow Agreement"), among the Indemnity Escrow Agent, Family Golf, the
Company and Xxxxxx X. Xxxxxx Xx., as the representative of the holders of the
Company Common Stock (the "Stockholder Representative") (the form of which is
annexed to this Agreement as Exhibit B), a certificate representing 40,000
shares of Family Golf Common Stock (the "Escrowed Shares"). The Escrowed Shares
shall be registered in the name of the Indemnity Escrow Agent and deducted from
the shares of Family Golf Common Stock otherwise deliverable to the holders of
Company Common Stock in accordance with Sections 1.4(a) and 1.6(a) above, and
shall be disposed of in accordance with the terms of the Escrow Agreement. The
Escrowed Shares are being deposited in the Escrow Account for the purposes of
satisfying any indemnifiable Losses (as defined in Section 6.2) of Family Golf,
the Surviving Corporation and their respective successors, directors and
officers pursuant to Article VI hereof.
(c) Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed satisfactory to Family Golf, Family Golf will cause to be
delivered to such person, the Shareholder Escrow Agent and the Indemnity Escrow
Agent, in respect of such lost, stolen or destroyed Certificate, the Merger
Consideration deliverable in respect thereof as determined in accordance with
Sections 1.4(a), 1.6(a) and 1.6(b) above.
(d) No Further Ownership Rights in Company Common Stock. At the
Effective Time, the stock transfer books of the Company shall be closed and
there shall be no further registration of transfers of shares of Company Common
Stock thereafter on the records of the Company. Any Certificates presented to
the Surviving Corporation for any reason on or after the Effective Time shall
be converted into the Merger Consideration specified in Section 1.4(a) above.
The Merger Consideration issued upon the surrender of a Certificate for
exchange shall be deemed to have been issued in full satisfaction of all rights
pertaining to the shares of Company Common Stock formerly represented by such
Certificate.
(e) No Dividends Before Surrender of Certificates. No dividends or
other distributions (whether in cash or in kind) declared or made with respect
to Family Golf Common Stock shall be paid to the holder of any unsurrendered
Certificate, which after the Effective Time represents the right to receive
shares of Family Golf Common Stock and Warrants, with respect to such Family
Golf Common Stock until the holder of record of such Certificate shall
surrender the same as provided herein. Subject to the effect of applicable
laws, following surrender of any such Certificate there shall be paid to the
record holder of the certificates representing whole shares of Family Golf
Common Stock issued in exchange therefor, without interest, (i) at the time of
surrender, the amount of dividends or other distributions (whether in cash or
in kind), if any, theretofore payable by Family Golf with respect to such whole
shares of Family Golf Common Stock the payment date for which was on or after
the date of the Effective Time and prior to such surrender, and (ii) at the
appropriate payment date, the amount of dividends or other distributions
(whether in cash or in kind), if any, with a record date prior to such
surrender and with a payment date subsequent to such surrender payable with
respect to such whole shares of Family Golf Common Stock.
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Section 1.7 Dissenting Shares. (a) Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock which are issued and
outstanding immediately prior to the Effective Time and which are held by a
Company stockholder who is entitled to appraisal rights pursuant to Section 910
of the NYBCL, who, on a timely basis, makes and perfects a demand for appraisal
of such shares in accordance with all requirements and provisions of Section
623 of the NYBCL, and who does not effectively withdraw or lose the right to
such appraisal (the "Dissenting Shares") shall not be converted as described in
Section 1.4(a), but shall, from and after the Effective Time, represent only
the right to receive such consideration as may be determined to be due to such
Company stockholder with respect to such Dissenting Shares pursuant to Section
623 of the NYBCL; provided, however, that Dissenting Shares held by any Company
stockholder who, after the Effective Time, withdraws his demand for appraisal
or loses his right of appraisal with respect to such shares, in either case
pursuant to Section 623 of the NYBCL, shall be deemed to have been converted,
as of the Effective Time, into the right to receive the Merger Consideration
specified in Section 1.4(a), without interest.
(b) The Company shall give Family Golf prompt notice of any demands
for appraisal received by it, withdrawals of such demands, and any other
instruments served pursuant to Section 910 or Section 623 of the NYBCL and
received by the Company relating thereto.
ARTICLE II
CERTAIN MATTERS RELATING TO
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation of the Surviving Corporation.
The Certificate of Incorporation of Merger Sub, as in effect at the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended as provided by law; provided, that there shall be such
other changes made to such Certificate of Incorporation as shall be reasonably
acceptable to the parties hereto as shall be necessary or appropriate in order
to effectuate the transactions contemplated by this Agreement or to otherwise
comply with applicable law.
Section 2.2 Bylaws of the Surviving Corporation. The Bylaws of Merger
Sub, as in effect at the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
Section 2.3 Directors and Officers of the Surviving Corporation. The
directors of Merger Sub immediately prior to the Effective Time shall be the
directors of the Surviving Corporation and all such directors will hold office
from the Effective Time until their respective successors are duly elected or
appointed and qualify in the manner provided in the Certificate of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided
by applicable law. The officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation and all such
officers will hold office until their respective successors are duly
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appointed and qualify in the manner provided in the Bylaws of the Surviving
Corporation, or as otherwise provided by applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Family Golf as follows:
Section 3.1 Existence, Good Standing, Corporate Authority. The Company
is a corporation duly organized, validly existing and in good standing under
the laws of the State of New York and Genprop LLC, a New York limited liability
company ("Gen Prop"), is a limited liability company, duly formed, validly
existing and in good standing under the laws of the State of New York (except
that the notice to be published pursuant to Section 206 of the New York Limited
Liability Company Law has not been published by or on behalf of Gen Prop). Each
of the Corporation and Gen Prop has all requisite power and authority to own,
lease and operate its properties and to carry on its business as it is now
being conducted. The Company and Gen Prop are duly qualified or licensed as a
foreign corporation (in the case of the Company) or as a foreign limited
liability company (in the case of Gen Prop) to transact business, and is in
good standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so qualified, licensed or in good standing has not had, and will not have,
singly or in the aggregate, a material adverse effect on the business,
financial condition or results of operations (a "Material Adverse Effect") of
either the Company or Gen Prop, taken as a whole.
Section 3.2 Charter Documents; Corporate Records. The Company has
delivered to Family Golf true and correct copies of the Company's restated
certificate of incorporation (the "Restated Certificate of Incorporation") and
by-laws, and Gen Prop has delivered to Family Golf true and correct copies of
Gen Prop's articles of organization and operating agreement, all as amended
through and in effect on the date hereof. The minute books of the Company, as
made available to Family Golf, contain true records of all meetings of, or
written consents in lieu of meetings executed by, the Company's board of
directors (and all committees thereof) and the stockholders of the Company. All
material actions and transactions taken or entered into by the Company or Gen
Prop, as the case may be, requiring, with respect to the Company, action by the
Company's board of directors or stockholders, and with respect to Gen Prop, its
members, were duly authorized or ratified as necessary. The stock certificate
books and stock records of the Company, and the membership books and records of
Gen Prop, as made available to Family Golf, are true and complete.
Section 3.3 Authorization and Validity of Agreement. The Company has
all requisite corporate power and authority to execute and deliver this
Agreement and, subject to its obtaining the requisite vote or consent of its
shareholders, to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by the Company
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and the consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of the Company and by all other all
requisite corporate action on the part of the Company, subject, in the case of
the consummation of the Merger, to obtaining the requisite vote or consent of
the holders of the outstanding shares of Company Common Stock. This Agreement
has been duly executed and delivered by the Company and is a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms (except insofar as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by principles governing the availability of
equitable remedies).
Section 3.4 No Approvals or Notices Required; No Conflict With
Instruments. The execution and delivery by the Company of this Agreement do
not, and the performance by the Company of its obligations hereunder and the
consummation of the transactions contemplated hereby will not:
(i) assuming approval of the Merger by the requisite vote or consent
of the Company's stockholders, conflict with or violate the Restated
Certificate of Incorporation or by-laws of the Company or the articles of
organization or the operating agreement of Gen Prop;
(ii) require any consent, approval, order or authorization of or other
action by any Governmental Entity (as defined clause (v) of this Section
3.4) (a "Government Consent") or any registration, qualification,
declaration or filing with or notice to any Governmental Entity (a
"Governmental Filing"), in each case on the part of or with respect to the
Company or Gen Prop, except for (A) the filing of an appropriate
certificate of merger with the New York Department of State; (B) those
Government Consents and Governmental Filings (the "Local Approvals") with
state and local governmental authorities required with respect to Licenses
(as defined in Section 3.13(a)) held by the Company and identified on
Schedule 3.4; and (C) the Governmental Filings required pursuant to the
pre-merger notification requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvement Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act");
(iii) require, on the part of the Company or Gen Prop, any consent by
or approval of (a "Contract Consent") or notice to (a "Contract Notice")
any other person or entity (other than a Governmental Entity), whether
under any License or other Contract (as defined in clause (iv) of this
Section 3.4) or otherwise, except as and to the extent specified on
Schedule 3.4;
(iv) assuming that all Government Consents, Government Filings,
Contract Consents and Contract Notices described in clause (ii) of this
Section 3.4 or on Schedule 3.4 are obtained, made and given, conflict with,
result in any violation or breach of or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or the loss of any material
benefit under or the
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creation of a Lien (as defined in Section 3.16(a)) or other encumbrance on
any assets pursuant to (any such conflict, violation, breach, default,
right of termination, cancellation or acceleration, loss or creation, a
"Violation"), any Contract (which term shall mean and include any note,
bond, indenture, mortgage, deed of trust, lease, franchise, permit,
authorization, license, contract, instrument, employee benefit plan or
practice, or other agreement, obligation, commitment or concession of any
nature) to which the Company, Gen Prop, or any Affiliate of the Company or
Gen Prop is a party, by which the Company, Gen Prop or any Affiliate of the
Company or Gen Prop or any of their respective assets or properties is
bound or affected or pursuant to which the Company, Gen Prop, or any
Affiliate of the Company or Gen Prop is entitled to any rights or benefits
(including the Licenses); and
(v) assuming (x) that the Merger is approved by the requisite vote or
consent of the Company's stockholders and (y) the Government Consents and
Governmental Filings specified in clause (ii) of this Section 3.4 or on
Schedule 3.4 are obtained, made and given, result in a Violation of, under
or pursuant to any law, rule, regulation, order, judgment or decree
applicable to the Company or Gen Prop or, to the knowledge of the Company,
any Affiliate of the Company or Gen Prop, or by which any of their
respective properties or assets are bound or affected. As used herein, the
term "Governmental Entity" means and includes any court, administrative
agency, regulatory body, commission or other governmental authority,
department or instrumentality, Federal, state, local or foreign, or other
entity exercising executive, legislative or judicial functions.
Section 3.5 Capitalization. (a) The authorized capital stock of the
Company consists of 10,000,000 shares of Company Common Stock and 60,000 shares
of Convertible Preferred Stock, par value $1.00 per share (the "Company
Preferred Stock"). As of the date hereof, there are 5,000,000 shares of Company
Common Stock issued and outstanding and 17,500 shares of Company Preferred
Stock issued and outstanding. No shares of Company Common Stock or shares of
Company Preferred Stock are held in the treasury of the Company. All issued and
outstanding shares of Company Common Stock and Company Preferred Stock are duly
authorized, validly issued, fully paid and nonassessable, are not subject to
and have not been issued in violation of any preemptive rights and have not
been issued in violation of any federal or state securities laws. There are no
issued or outstanding bonds, debentures, notes or other indebtedness of the
Company the holders of which have the right to vote (or which are convertible
into or exercisable for securities having the right to vote) on any matter on
which stockholders may vote ("Voting Debt"). There are no authorized or
outstanding options, warrants, calls, subscriptions, convertible securities or
other rights, agreements, arrangements or commitments of any character to or by
which the Company is a party or is bound which, directly or indirectly,
obligate the Company to issue, deliver or sell or cause to be issued, delivered
or sold any additional shares of Company Common Stock or Company Preferred
Stock or any other capital stock or Voting Debt of the Company or any
securities convertible into, or exercisable or exchangeable for, or evidencing
the right to subscribe for any such shares, interests or Voting Debt or
obligating the Company to grant, extend or enter into any such option, warrant,
call, subscription or other right. Immediately after the Effective Time, there
will be no subscriptions, options, warrants, calls, rights, commitments or
agreements which will entitle
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(conditionally or unconditionally) any person or entity to purchase or
otherwise acquire, or will obligate (conditionally or unconditionally) the
Surviving Corporation (as the Company's successor) to sell, issue or deliver
any shares of capital stock, any other equity interest or any Voting Debt of
the Surviving Corporation or obligating the Surviving Corporation to grant,
extend or enter into any such subscription, warrant, call, right, commitment or
agreement (other than such as may be created by Family Golf, Merger Sub or any
of their respective Affiliates). The Company has not adopted, authorized or
assumed any plans, arrangements or practices for the benefit of its officers,
employees or directors which require or permit the issuance, sale, purchase or
grant of any capital stock, other equity interests or Voting Debt of the
Company, any options, warrants or other securities convertible into, or
exercisable or exchangeable for, any such stock, interests or Voting Debt or
any phantom shares, phantom equity interests or stock or equity appreciation
rights.
(b) The Company has complied with all of the terms of the Restated
Certificate of Incorporation relating to Company Preferred Stock, and under the
Restated Certificate of Incorporation the Company is required to redeem all
outstanding shares of Company Preferred Stock immediately prior to the Merger.
The aggregate redemption price (consisting of the "Call Price," as such term
is defined in the Restated Certificate of Incorporation, and any premium)
payable to the holders of all outstanding shares of Company Preferred Stock is
$2,210,194.42. As of the time of the redemption of the Company Preferred Stock,
and assuming satisfaction of the conditions to the obligation of the Company
to consummate the Merger set forth in Sections 5.3(iii), (iv) and (v) hereof,
the Company will have sufficient stated capital or surplus to redeem all of
the outstanding shares of Company Preferred Stock in compliance with Section
513 of the NYBCL.
Section 3.6 No Subsidiaries. Other than Gen Prop, the Company has no
Subsidiaries (as defined in Section 7.11), and does not own, directly or
indirectly, any interest or investment (whether equity or debt) in any
corporation, partnership joint venture, trust or other legal entity.
Section 3.7 Financial Condition. (a) The Company has delivered to
Family Golf correct and complete copies of the following: (i) an unaudited
statement of assets, liabilities, and shareholders equity (deficit) of the
Company as of March 31, 1997 (the "Last Balance Sheet"), and the related
statements of revenues and expenses, accumulated deficit and retained earnings
(deficit) and cash flows for the quarter then ended; (ii) unaudited statements
of assets, liabilities, and shareholders' equity (deficit) - income tax basis
of the Company as of December 31, 1996, and the related statements of revenues
and expenses, accumulated deficit and retained earnings (deficit) and cash
flows for the year then ended; and (iii) audited statements of assets,
liabilities, and shareholders' equity (deficit) - income tax basis of the
Company as of December 31, 1995, and the related statements of revenues and
expenses, accumulated deficit and retained earnings (deficit) and cash flows
for each of the years ended December 31, 1995 and 1994 (the financial
statements referred to in clauses (i), (ii) and (iii) are referred to
collectively herein as the "Company Financial Statements"). The Company
Financial Statements were prepared on the income tax basis of accounting
applied on a consistent basis throughout the period indicated. The Company
Financial Statements fairly present the financial position, results of
operations and
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cash flows of the Company as at the respective dates thereof and for the
respective periods indicated therein, subject, in the case of the
interim financial statements, to normal year-end audit adjustments. Since
December 31, 1996, there has been no change in any of the significant
accounting (including tax accounting) policies, practices or procedures of the
Company, except that Company has determined to change from the income tax to
the GAAP basis of reporting effective with the quarter ended June 30, 1997.
(b) The books of account of the Company are true and complete, have
been maintained in accordance with good business practices and accurately and
fairly reflect all of the properties, assets, liabilities and transactions of
the Company in accordance with generally accepted accounting principles
consistently applied. All fees, charges, costs and expenses associated with the
ownership, leasing, operation, maintenance and management of the Company's
business that are required by generally accepted accounting principles to be
charged and reflected in the Company Financial Statements and on the Company's
books and records have been properly charged and reflected, and such financial
statements and books and records do not, because of the provision of services
or the bearing of costs and expenses by any other person or entity or for any
other reason, materially understate the true costs and expenses of conducting
the business of the Company.
(c) The unaudited statement of assets, liabilities and shareholders
equity (deficit) of Gen Prop as of June 30, 1997, fairly presents the financial
position of Gen Prop as at that date.
Section 3.8 No Undisclosed Liabilities. Except as set forth on
Schedule 3.8 and except for liabilities and obligations incurred in the
ordinary course of business since the date of the Last Balance Sheet, which are
not, singly or in the aggregate, material, the Company does not have any
liabilities or obligation (absolute, accrued, contingent or otherwise) which,
under generally accepted accounting principles, should be fully reflected,
reserved against or disclosed in the Last Balance Sheet that are not so
reflected, reserved against or disclosed.
Section 3.9 Absence of Certain Changes or Events. (a) Since March 31,
1997 and subject to Schedule 3.9, there has not been any change in the
condition (financial or otherwise) of the assets, liabilities, earnings or
business of the Company, other than changes in the ordinary course of business,
none of which has been or will be (singly or in the aggregate) materially
adverse.
(b) Without limiting the generality of the foregoing, since March 31,
1997, and except as set forth on Schedule 3.9, the Company has not:
(i) incurred or become subject to or made any commitment with respect
to any obligation or liability (absolute or contingent) which commits the
Company to pay an amount, in any single transaction or series of related
transactions, in excess of $25,000, except current liabilities incurred,
and obligations under Contracts entered into, by the Company in the
ordinary course of business and on terms consistent with past practices;
10
(ii) discharged or satisfied any Lien, or paid, canceled, compromised
or otherwise satisfied any obligation, indebtedness or liability (absolute
or contingent), other than the payment in the ordinary course of business
of current liabilities;
(iii) declared or made any payment of any dividend or other
distribution (whether in cash, securities, properties or otherwise) in
respect of the Company Common Stock or the Company Preferred Stock or
purchased or redeemed (except to the extent contemplated by Section 5.1(ix)
hereof) any of the Company Common Stock or Company Preferred Stock;
(iv) mortgaged, pledged, subjected to or (except for the Liens
described on Schedule 3.15 and Schedule 3.16) suffered to exist any Liens
upon any of its properties or assets, except Permitted Liens (as such term
is defined in Section 3.16 hereof);
(v) sold or transferred any portion of its assets, other than
immaterial assets sold or transferred in the ordinary course of business,
or canceled or agreed to cancel any debts or claims;
(vi) suffered any material loss or damage to any of its assets or
properties, whether or not covered by insurance, or waived or released, or
agreed to waive or release, any rights of substantial value;
(vii) entered into any transaction other than in the ordinary course
of business and on terms consistent with past practices;
(viii) (A) increased the rate of compensation payable or to become
payable by the Company to any of its officers or directors, or (B) granted,
made or accrued any bonus, incentive compensation, service award or other
like benefit, contingently or otherwise, to or for the credit of any of its
officers, directors, employees or agents, except pursuant to the existing
plans described in Schedule 3.18 or (C) made any employee welfare, pension,
retirement, profit-sharing or similar payment or arrangement except
pursuant to the existing plans and arrangements described in Schedule 3.18
or (D) paid or granted any right to receive any severance or termination
pay to any officer, director, employee or agent;
(ix) terminated, rescinded, modified, amended or renewed, or waived or
released in writing any term, condition or provision of, any Material
Contract (as such term is defined in Section 3.18(a) hereof);
(x) purchased, leased or acquired any additional assets other than in
the ordinary course of business and on terms consistent with past practices
or made any extraordinary capital or operating expenditure, capital
addition or improvement not contemplated by the capital or operating
budgets provided to the Company; or
11
(xi) entered into any contractual arrangement or understanding
(written or oral, express or implied) to do any of the foregoing.
Section 3.10 Tax Matters. Except as set forth on Schedule 3.10, (i)
there has been duly filed by or on behalf of each of the Company (and its
predecessors), or filing extensions from the appropriate federal, state, local
and foreign Governmental Entities have been obtained with respect to, all
federal, state, local and foreign tax returns and reports required to be filed
on or prior to the date hereof and (ii) payment in full of all taxes required
to be paid in respect of the periods covered by such tax returns and reports
has been made. Prior to the date hereof, Gen Prop has not been required to file
any federal, state, local or foreign tax return. None of (x) the federal income
tax returns filed by or on behalf of the Company and its predecessors (the
"Company Federal Returns") under the Code, or (y) the New York State income tax
returns filed by or on behalf of the Company and its predecessors (the "Company
State Returns") under Article 9-A of the New York Tax Law are currently under
examination by the Internal Revenue Service ("IRS") or with the State of New
York Department of Taxation and Finance (the "NY Dept. of Taxation"),
respectively. There have not been any deficiencies or assessments asserted in
writing by the IRS or the NY Dept. of Taxation with respect to the Company
Federal Returns or the Company State Returns, respectively. Except as set forth
on Schedule 3.11, none of the Company, Gen Prop nor any of their respective
predecessors has, with regard to any assets or property held, acquired or to be
acquired by any of them, filed a consent pursuant to Section 341(f) of the Code
or any predecessor statute. For the purposes of this Agreement, the term "tax"
(including, with correlative meaning, the terms "taxes" and "taxable") shall
include all federal, state, local and foreign income, profits, franchise, gross
receipts, payroll, sales, employment, use, property, withholding, excise and
other taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts.
Section 3.11 Compliance With Laws. (a) Each of the Company and Gen
Prop is in substantial compliance with all Laws (as such term is defined in
Section 3.11(c) below) in respect to the conduct of its business and the
ownership, possession, maintenance and operation of its assets and properties,
except any such noncompliance which, singly or in the aggregate, would not have
a Material Adverse Effect on (i) the Company and Gen Prop, taken as a whole, or
(ii), except as set forth on Schedule 3.11 the business conducted by the
Company at any of the Owned Property or the Leased Real Estate. No claims or
investigations by any Governmental Entity alleging any violation by the
Company of any such Laws have at any time been made or settled during the last
two years.
(b) The Company has not, nor has any director, officer, agent or
employee of the Company: (i) made or agreed to make any contributions, payments
or gifts of its funds or property to any governmental official, employee or
agent where either the payment or the purpose of such contribution, payment or
gift was or is illegal under the laws of the United States, any state thereof
or any other jurisdiction (foreign or domestic); (ii) established or maintained
any unrecorded fund or asset for any purpose, or made any false or artificial
entries on any of its books or records for any reason; (iii) made or agreed to
make any contribution, or reimbursed any political gift or contribution made by
any other person or entity, to candidates for public office whether federal,
state, local or
12
foreign, where such contributions were or would be violative of applicable Law;
or (iv) otherwise violated the Federal Corrupt Practices Act of 1977, as
amended.
(c) For purposes of this Agreement, "Law" shall mean the common law
and any statute, ordinance, code or other law, rule, regulation, order,
technical or other standard, requirement or procedure enacted, adopted,
promulgated, applied or followed by any Governmental Entity or court.
Section 3.12 Licenses. (a) Each of the Company and Gen Prop holds all
licenses (including without limitation liquor licenses), franchises,
registrations, ordinances, authorizations, permits, certificates, variances,
qualifications, exemptions, orders, approvals and waivers of any Governmental
Entity (federal, state and local) (collectively, "Licenses") which are required
for the conduct of its business operations as currently conducted. All of the
Licenses (including without limitation all liquor licenses) are in full force
and effect, and no action, complaint, claim, prosecution, indictment, suit,
arbitration, investigation or proceeding (an "Action") by or before any
Governmental Entity is pending or, to the knowledge of the Company, threatened,
seeking the revocation or limitation of any of the Licenses. Schedule 3.12
lists all Licenses (including all liquor licenses) that are material to the
business of the Company and/or Gen Prop. Except as indicated on Schedule 3.12,
no License will terminate as a result of the Merger.
(b) Schedule 3.12 lists all entities ("Concession Entities") other
than the Company that hold licenses to serve or sell alcoholic beverages in
locations on the premises of or associated with or contiguous to the facilities
operated by the Company in connection with the business of the Company.
Section 3.13 Legal Proceedings. Except as set forth on Schedule 3.13,
neither the Company nor Gen Prop has been served with notice of any pending
Action and, to the knowledge of the Company, there is no Action threatened
against the Company (other than claims against the Company of a type routinely
incurred in the ordinary course of the business conducted by the Company, which
claims are fully covered by insurance (other than the first $125,000 in the
aggregate of such claims during any policy year) or Gen Prop nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or any
arbitrator outstanding against the Company or Gen Prop. To the knowledge the
Company, there is no Action pending against any Affiliate of the Company, or
against any officer, director or shareholder of the Company or any such
Affiliate which, if adversely resolved against such Affiliated, officer or
director, could be reasonably expected to have a Material Adverse Effect on the
Company or the Surviving Corporation.
Section 3.14 Intellectual Property. The ownership, operation and
conduct by the Company of its business, as presently owned, operated, and
conducted, does not, to the knowledge of the Company, infringe upon or conflict
in any respect with any patent, copyright, trademark, trade name, service xxxx,
brand name or other intellectual property rights (collectively, "Intellectual
Property") of any other person and, to the knowledge of the Company and except
as set forth on Schedule 3.14, no other person is infringing upon any
Intellectual Property of the Company.
13
Schedule 3.14 sets forth an accurate and complete list of the Intellectual
Property owned or used by the Company in the conduct of its business. The
Company has filed a trademark application for the name "SPORTS PLUS," and as of
the date hereof the Company has no knowledge of any objections being filed in
response to such application, except as described on Schedule 3.14.
Section 3.15 Real Property. (a) Schedule 3.15 sets forth a list of all
real property owned in fee by the Company and Gen Prop (individually, an
"Owned Property" and, collectively, the "Owned Properties"). Except as set
forth on Schedule 3.15, either the Company or Gen Prop has good and marketable
fee title to each Owned Property, including the buildings, structures and other
improvements located thereon, in each case free and clear of all mortgages,
liens, claims, charges, security interests, easements, restrictive covenants,
rights-of-way, leases, purchases agreements, options and other encumbrances and
agreements ("Liens"), except for (i) Liens for taxes and other governmental
charges, assessments or fees which are not yet due and payable and (ii)
imperfections of title which, individually or in the aggregate, do not
materially detract from the value of or materially interfere with the present
use of any of the Owned Properties ("Permitted Liens"). There are no
condemnations or eminent domain (which term, as used herein, shall include all
compulsory acquisitions or takings by Governmental Entities) proceedings
pending or, to the knowledge of the Company and Genprop, threatened against any
Owned Property or any material portion thereof. Neither the Company nor Genprop
has received any notice from any city, village or other Governmental Entity of
any zoning, ordinance, land use, building, fire or health code or other legal
violation in respect of any Owned Property, other than violations which have
been corrected. There are no material structural defects relating to the
improvements on the Owned Property at which the Sports Plus complex is located
and, to the knowledge of the Company, there are no material structural defects
relating to any of the improvements at any of the other Owned Properties. There
are no improvements on the Owned Property of Gen Prop.
(b) Schedule 3.15 lists all real property (including all land and
buildings) which is leased by Company as lessee or sublessee (the "Leased Real
Estate"). Gen Prop does not lease any real property. The Company has delivered
or caused to be delivered to Family Golf complete and accurate copies of the
written leases and subleases which are listed in Schedule 3.15. The Company has
not received written notice of condemnation or eminent domain proceedings
pending or threatened against any Leased Real Estate. The Company has not
received any notice from any city, village or other Governmental Entity of any
zoning, ordinance, building, fire or health code or other legal violation in
respect of any Leased Real Estate, other than violations which have been
corrected. To the knowledge of the Company, there are no material structural
defects relating to any Leased Real Estate. Except as set forth on Schedule
3.15:
(i) each of the leases or subleases relating to the Leased Real Estate
(each, a "Lease" and collectively, the "Leases") is in full force and
effect and, to the knowledge of the Company, valid and binding on the
lessor or sublessor and enforceable in accordance with its terms (except
insofar as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights
14
generally or by principles governing the availability of equitable
remedies), and all consents required under any Lease in connection with the
Merger have been obtained;
(ii) no amount payable under any Lease is past due;
(iii) the Company is in compliance in all material respects with all
commitments and obligations on its part to be performed or observed under
each Lease and is not aware of the failure by any other party to such Lease
to comply in all material respects with all of its commitments and
obligations;
(iv) the Company has not received any written notice (A) of a default
(which has not been cured), offset or counterclaim under any Lease, or any
other communication calling upon the Company to comply with any provision
of any Lease or asserting noncompliance, or asserting the Company has
waived or altered its rights thereunder, and no event or condition has
happened or presently exists which constitutes a default or, after notice
or lapse of time or both, would constitute a default under any Lease on the
part of Company or any other party thereto, or (B) of any Action against
any party under any Lease which if adversely determined would result in
such Lease being terminated or modified in a manner adverse to the Company;
(v) the Company has not assigned, mortgaged, pledged or otherwise
encumbered its interest, if any, under any Lease; and
(vi) the Company has exercised within the time prescribed in each
Lease any option provided therein to extend or renew the term thereof.
(c) The Owned Properties and the Leased Real Estate constitute, in the
aggregate, all of the real property used to conduct the business of Company in
the manner in which such business was conducted during the fifteen-month period
ended March 31, 1997 and since such time. Except as set forth on Schedule 3.15,
no consent is required of any party to any of the Leases by virtue of the
Merger, and the Merger will not result in the termination of any Lease. Except
as set forth on Schedule 3.15, none of the Leased Real Estate is owned, in
whole or in part, by any director, officer or stockholder of the Company, by
any Affiliate of the Company or by any entity created for the benefit of any
family member(s) of any of the foregoing persons.
Section 3.16 Tangible Personal Property; Sufficiency of Assets. (a)
Except as disclosed on Schedule 3.16, the Company has good and valid title to
all tangible personal property which it owns or uses in the operation of its
business, including all such tangible personal property reflected in the Last
Balance Sheet as owned by the Company, except (x) for personal property leased
(exclusive of capitalized leases) by the Company pursuant to a written
agreement identified on Schedule 3.16 and (y) for such tangible personal
property disposed of to third parties since the date of the Last Balance Sheet
in the ordinary course of business and consistent with past practices, in each
case free and clear of all Liens, except (i) mechanics', materialmen's,
carriers', workmen's,
15
warehousemen's, repairmen's, landlord's or other like Liens securing
obligations that are not delinquent; (ii) Liens for Taxes and other
governmental charges which are not due and payable or which may be paid without
penalty; (iii) purchase money liens securing the purchase price of the related
personal property listed as purchase money liens on Schedule 3.16; and (iv)
other Liens, if any, set forth in Schedule 3.16. Except as set forth in
Schedule 3.16, none of the tangible personal property which is used in the
business of the Company is leased by the Company. The tangible personal
property owned or used in the operation of the business of the Company are in
good working order, reasonable wear and tear excepted, and are suitable for the
use for which they are intended in all material respects.
(b) Schedule 3.16 sets forth a list, as of July 14, 1997, of the
video, amusement and arcade games owned or leased by the Company at each Owned
Property and Leased Real Estate. Since July 14, 1997, none of such games have
been removed or replaced, except that certain leased games may have been
replaced or removed in the ordinary course of business in accordance with the
terms of the applicable lease agreements. Except as set forth on Schedule 3.16,
the Company owns all such video, amusement and arcade games, free and clear of
all Liens. All of the inventory of the Company consists of a quality and
quantity reasonably usable and saleable in the ordinary course of business
consistent with past practice, subject to normal and customary allowances for
spoilage, damage and outdated items reflected on the books and records of the
Company. All items included in the inventory of the Company are the property of
the Company, free and clear of all Liens, are not held by the Company on
consignment from others and conform in all material respects to all standards
applicable to such inventory or its use or sale imposed by Law.
(c) Except as set forth on Schedule 3.16, the tangible personal
property of the Company which is currently owned or leased by it is, in the
aggregate, all of the tangible personal property used to conduct such business
in the manner in which such business was conducted during the 15 month period
ended March 31, 1997 and since such time, except for additions thereto and
deletions therefrom in the ordinary course of business and consistent with past
practice which could not reasonably be expected to have a Material Adverse
Effect on the Company.
Section 3.17 Material Contracts; Debt Instruments. (a) Except as
disclosed on Schedule 3.17, the Company is not a party or subject to any of the
following (collectively, "Material Contracts"):
(i) any collective bargaining or other agreements with labor unions,
trade unions, employee representatives, work committees, guilds or
associations representing employees of the Company;
(ii) any employment consulting, severance, termination, or
indemnification agreement, contract or arrangement, written or oral, with
any current or former officer, consultant, director or employee which (x)
provides for payments in excess of $25,000 per annum or (y) requires
aggregate payments over the life of such agreement, contract or arrangement
in excess of $50,000 or which in any case is not terminable by the Company
or
16
its subsidiaries on 30 days' notice or less without penalty or
obligation to make payments related to or after such termination;
(iii) any joint venture contract or arrangement or any other agreement
which has involved or is expected to involve a sharing of revenues with
other persons or entities;
(iv) any management agreements, lease or other significant agreement
or arrangement between the Company and any Concession Entity;
(v) any lease for real or personal property in which the amount of
payments which the Company is required to make, or is expected to receive,
on an annual basis exceeds $10,000;
(vi) any material agreement, contract, policy, License, document,
instrument, arrangement or commitment which has not been terminated or
performed in its entirety and which may be, by its terms, terminated,
impaired or adversely affected by reason of the execution of this
Agreement, the closing of the Merger, or the consummation of the other
transactions contemplated hereby;
(vii) any agreement, contract, policy, License, document, instrument,
arrangement or commitment that materially limits the freedom of the Company
to compete in any line of business or with any person or entity or in any
geographic area or which would so materially limit the freedom of the
Surviving Corporation or Family Golf or any of its subsidiaries after the
Effective Time;
(viii) any agreement or contract relating to any outstanding
commitment for capital expenditures in excess of $10,000 individually or
$25,000 in the aggregate, or any partially or fully executory agreement or
contract relating to the acquisition or disposition of rights or assets
having a value of in excess of $10,000 individually or $25,000 in the
aggregate;
(ix) any sale-leaseback, conditional sale, exclusive dealing,
brokerage, finder's fee or take-or-pay contract or agreement; or
(x) any other agreement, contract, policy, License, document,
instrument arrangement or commitment not made in the ordinary course of
business which is material to the Company.
(b) Set forth on Schedule 3.17 is (x) a list of all loan or credit
agreements, notes, bonds, mortgages, indentures and other agreements and
instruments pursuant to which any indebtedness of the Company is outstanding or
may be incurred (collectively, "Loan Agreements") and (y) the respective
principal amounts outstanding thereunder at June 30, 1997. Except as set forth
on Schedule 3.17, all such indebtedness is prepayable at any time without
penalty, subject to the notice provisions of the agreements governing such
indebtedness. For purposes of this Section 3.17,
17
"indebtedness" shall mean, without duplication, (A) all obligations for
borrowed money, or with respect to deposits or advances of any kind, (B) all
obligations evidenced by bonds, debentures, notes or similar instruments, (C)
all obligations upon which interest charges are customarily paid, (D) all
obligations under conditional sale or other title retention agreements relating
to purchased property, (E) all obligations issued or assumed as the deferred
purchase price of property or services (excluding obligations to creditors for
inventory, services and supplies incurred in the ordinary course of business),
(F) all capitalized lease obligations, (G) all obligations of others secured by
any Lien on property or assets owned or acquired, whether or not the
obligations secured thereby have been assumed, (H) all obligations under
interest rate or currency swap transactions (valued at the termination value
thereof), (I) all letters of credit issued for the account of the Company
(excluding letters of credit issued for the benefit of suppliers to support
accounts payable to suppliers incurred in the ordinary course of business), (J)
all obligations to purchase securities (or other property) which arises out of
or in connection with the sale of the same or substantially similar securities
or property, and (K) all guarantees and arrangements having the economic effect
of a guarantee of any indebtedness of any other person or entity.
(c) Except as set forth on Schedule 3.17, as of the date hereof each
of the Material Contracts and Loan Agreements is in full force and effect and
is a valid and binding obligation of the Company and, to the knowledge of the
Company and Gen Prop, the other parties thereto. Except as set forth on
Schedule 3.17, the Company is not in default under any Material Contract or
Loan Agreement in any material respect, nor does any condition exist that with
notice or lapse of time or both would constitute a material default thereunder.
To the knowledge of the Company, no other party to any Material Contract or
Loan Agreement is in material default thereunder. The Company has no reason to
believe that any of the Material Contracts or Loan Agreements that are
renewable will not be renewed on reasonable terms, nor does the Company know of
any expressed desire or intent, on the part of any other party to any of the
Material Contracts or Loan Agreements, to materially reduce or terminate the
amount of its business with the Company in the future. Except as set forth on
Schedule 3.17, no consent is required of any party to any of the Material
Contracts or any of the Loan Agreements by virtue of the Merger, and the Merger
will not result in the termination of any Material Contract or Loan Agreement.
Section 3.18 Employee Benefit Plans. (a) The names of and the IRS
identification numbers of (i) all "employee pension benefit plans," as defined
in Section 3(2) and subject to Title IV of the Employee Retirement Income
Security Act of 1984, as amended ("ERISA"), which have been maintained or
contributed to by the Company during any of the last five years (the "Pension
Plans"), (ii) all other "employee pension benefit plans" as defined in Section
3(2) of ERISA which have been maintained or contributed to by the Company
during any of the last five (5) years, and (iii) all other employee benefit
plans (including all "employee welfare benefit plans" as defined in Section
3(1) of ERISA and all other "employee benefit plans" as defined in Section 3(3)
of ERISA) which have been maintained or contributed to by the Company and (A)
which currently exist or (B) for which any continuing liabilities exist (all of
which plans described in clauses (i), (ii) and (iii) are referred to
collectively as the "Company Plans"), are listed on Schedule 3.18. Except as
otherwise indicated on Schedule 3.18, none of the Pension Plans is a
"multi-employer plan" as defined in
18
Section 4001(a)(3) of ERISA or single-employer plan subject to Section 4063 of
ERISA, and the Company has not incurred and is not expected to incur any
withdrawal liability under ERISA with respect to any "multi-employer plan" or
any single-employer plan subject to Section 4063 of ERISA. Gen Prop has no
benefit plans for its members, managers or employees.
(b) Favorable determination letters from the IRS with respect to the
status of each Pension Plan which is intended to qualify under Section 401 of
the Code have been received. The Company is not aware of any facts which would
adversely affect the qualified status of any Pension Plan that is intended to
so qualify.
(c) The Company has not incurred in connection with the termination of
a Pension Plan, and has no knowledge of any event or condition which would be
reasonably likely to cause, any liability to the Pension Benefit Guaranty
Corporation (the "PBGC") or otherwise under ERISA. Except as set forth in
Schedule 3.19, were any Pension Plan to terminate on the date hereof the
Company would not incur any material liability to the PBGC or otherwise under
ERISA, nor be required to contribute any material additional amounts to any
Pension Plan in order to terminate such Pension Plan.
(d) The Company has not been served with any Action against the assets
of any of the trusts under the Company Plans or against the Company or any
fiduciary.
(e) The Company Plans have been maintained and administered in all
material respects in accordance with their terms and with all provisions of
ERISA and the Code or any predecessor statute (including rules and regulations
under ERISA, the Code and any predecessor statute) applicable thereto and
neither the Company nor any "party in interest" or "disqualified person"
(within the meaning of Section 4975 of the Code or Title I, Part 4 of ERISA)
within the control of the Company with respect to the Company Plans has engaged
in a "prohibited transaction" within the meaning of Section 4975 of the Code or
Title I, Part 4 of ERISA. Without limiting the generality of the foregoing,
none of the Pension Plans has incurred a material "accumulated funding
deficiency" within the meaning of Section 302 of ERISA or Section 412 of the
Code whether or not waived; no Pension Plan has been the subject of a
"reportable event" as defined in Section 4043 of ERISA, as to which notices
would be required to be filed with the PBGC, and all required contributions
under each Pension Plan for all periods through and including the date hereof
have been made.
(f) At the Effective Time, each of the Company Plans will be fully
funded with assets available for allocation to the appropriate participants and
former participants.
Section 3.19 Labor Matters. Except as set forth on Schedule 3.19, the
Company is not a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization, and there are no unfair labor practices or labor arbitration
proceedings pending or, to the knowledge of the Company, threatened against the
Company relating to its business. Other than as disclosed on Schedule 3.19: (i)
there are no
19
organization efforts with respect to the formation of a collective bargaining
unit presently being made or threatened involving employees of the Company;
(ii) there is no labor strike, dispute, slowdown or work stoppage pending or,
to the knowledge of the Company, threatened against the Company nor has the
Company experienced any of the same within the past five years; and (iii) all
employees of the Company are employed at will. A list of the Company's
employees, together with each employee's job title and salary, as of June 22,
1997, is set forth on Schedule 3.19.
Section 3.20 Environmental Compliance. (a) For purposes of this
Section 3.20, (A) "Hazardous Substance" means any pollutant, contaminant,
hazardous or toxic substance or waste, solid waste, petroleum or any fraction
thereof, or any other chemical, substance or material listed or identified or
regulated by or under any Environmental Law; (B) "Environmental Law" means the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 et seq., the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act, 42 U.S. C. Section 6901 et seq., the
Clean Water Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C.
Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq., the Safe Drinking Water Act, 42 U.S.C. Section 300 et seq., the
Emergency Planning and Community Right to Know Act, 42 U.S.C. Section 11001 et
seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.,
the Oil Pollution Act, 33 U.S.C. Section 2701 et seq., in each case as amended
from time to time and all regulations promulgated thereunder, and any other
state or federal statute, law regulation, ordinance, bylaw, rule, judgment,
order, decree or directive of any Governmental Entity dealing with the
pollution or protection of natural resources or the indoor or ambient
environment or with the protection of human health or safety; and (C) "RCRA
Hazardous Waste" means a solid waste that is listed or classified as hazardous
waste, as that term is defined in or pursuant to the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. Section 6901 et seq.
(b) Except as set forth on Schedule 3.20, there are no claims pending
against the Company relating to a Hazardous Substance or arising under an
Environmental Law, nor has the Company received any form of notice that the
Company or any Owned Property or Leased Real Estate or any real property
previously owned or operated by the Company is, has been or may be in
noncompliance with or subject to liability under any Environmental Law.
(c) Except as set forth on Schedule 3.20, no Hazardous Substances are
now present in amounts, concentrations or conditions requiring investigation,
removal, remediation or any other response action or corrective action under,
or forming the basis of a claim pursuant to, any Environmental Law, in, on,
from or under any Owned Property or Leased Real Estate or any real property
previously owned or operated by the Company.
(d) Except as set forth on Schedule 3.20, none of the Owned Property
or Leased Real Estate is being, and, to the knowledge of the Company, has not
been during the period of time such property has been owned or leased by the
Company, used in connection with the business of manufacturing, storing or
transporting Hazardous Substances, and no RCRA Hazardous Wastes are
20
being or, to the knowledge of the Company, have been during the period of time
owned or operated by the Company treated, stored or disposed of there in
violation of any Environmental Law.
(e) Except as set forth on Schedule 3.20, there neither are nor, to
the knowledge of the Company, have been during the period of time they have
been owned or operated by the Company any asbestos-containing materials,
polychlorinated biphomyl ("PCB")-containing materials or equipment,
underground storage tanks, lagoons or other containment facilities of any kind
which contain or contained any Hazardous Substances on any of the Owned
Property or Leased Real Estate.
(f) Except as set forth on Schedule 3.20, there are no locations,
facilities or properties at which Hazardous Substances originating at the
Company, the Owned Property or the Leased Real Estate were treated, stored,
recycled or disposed so as to give rise to liability on the part of the Company
under an Environmental Law.
(g) The Company has made available to Family Golf true and correct
copies of, all environmental audits or assessments, analyses of soil,
groundwater, indoor and outdoor air, sediment, surface water and
asbestos-containing materials conducted on or after January 1, 1992 relating in
whole or in part to the Company, any Owned Property or any Leased Real Estate
undertaken by or on behalf of the Company, and any written communications
received by the Company since January 1, 1992 relating in whole or in part to
the existence of Hazardous Substances at any Owned Property or Leased Real
Estate or any real property previously owned or operated by the Company or the
compliance of the Company with respect to any Environmental Law.
Section 3.21 Insurance. Schedule 3.21 sets forth all policies or
binders of fire, liability, workmen's compensation, vehicular or other
insurance held by or on behalf of the Company (specifying the insurer, the
policy number or covering note number with respect to binders, and describing
each pending claim thereunder of more than $5,000, setting forth the aggregate
amounts paid out under each such policy through the date of this Agreement and
the aggregate limit of any of the insurer's liability thereunder). Such
policies and binders are in full force and effect and insure against risks and
liabilities customary for companies of similar size, financial condition and
engaged in the business in which the Company is engaged. The Company is not in
default with respect to payment of any premium or any provision contained in
any such policy or binder and has not failed to give any notice or present any
claim under any such policy or binder in due and timely fashion. Except for
claims set forth on Schedule 3.21, there are no outstanding unpaid claims under
any such policy or binder, and the Company has not been advised of any defense
to coverage in connection with any claim to coverage asserted or noticed by the
Company under or in connection with any of its extant insurance policies. The
Company has not received any written notice from or on behalf of any insurance
carrier issuing policies or binders relating to or covering the Company that
there will be a cancellation or non-renewal of existing policies or binders, or
that alteration of any equipment or assets or any improvements to real estate
occupied by or leased to or by the Company, purchase of additional equipment or
assets, or material modification of any of the methods of doing business, will
be required. The Company has no knowledge of any inaccuracy in any application
for
21
such policies or binders, any failure to pay premiums when due or any
similar state of facts which might form the basis for termination of any such
insurance.
Section 3.22 Interests of Officers and Directors. Except as set forth
on Schedule 3.22, none of the Company's officers, directors or stockholders has
any interest in any property, real or personal, tangible or intangible, used in
or pertaining to the business of the Company, or in any supplier to or
distributor or customer of the Company. Except as set forth on Schedule 3.22,
the Company does not hold, and has not guaranteed, any indebtedness of any of
the Company's officers, directors or stockholders or any of their respective
Affiliates.
Section 3.23 Brokers or Finders. No agent, broker, investment banker,
financial advisor or other person or entity is or will be entitled, by reason
of any agreement, act or statement by the Company, to any financial advisory,
broker's, finder's or similar fee or commission in connection with any of the
transactions contemplated by this Agreement.
Section 3.24 Restricted Shares. The Company acknowledges and
understands that (i) the shares of Family Golf Common Stock to be issued in the
Merger to the stockholders of the Company in exchange for their shares of
Company Common Stock have not been, and as of the Effective Time will not have
been, registered under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities laws and (ii) such shares of Family Golf Common
Stock may not be sold except pursuant to an effective registration statement
filed by the Company under the Securities Act or pursuant to an applicable
exemption from the registration requirements of the Securities Act and any
state securities laws.
Section 3.25 Full Disclosure. No statement herein or in the Schedules
hereto or in any certificate delivered pursuant to the requirements of this
Agreement by or on behalf of the Company contains or will contain any untrue
statement of a material fact concerning the Company or any of its Affiliates,
or omits or will omit to state a material fact necessary in order to make the
statements made herein or therein concerning the Company or any of its
Affiliates, in light of the circumstances under which they were made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
FAMILY GOLF AND MERGER SUB
Family Golf and Merger Sub, jointly and severally, hereby represent
and warrant to the Company as follows:
Section 4.1 Existence, Good Standing, Corporate Authority. Each of
Family Golf and Merger Sub is a corporation duly organized, validly existing
and in good standing under the laws of the state of Delaware and have all
requisite power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted. Each of Family Golf and
22
Merger Sub is duly qualified or licensed as a foreign corporation to transact
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so qualified or licensed or in good standing, individually or
in the aggregate, would not have a Material Adverse Effect on Family Golf and
its Subsidiaries, taken as a whole.
Section 4.2 Authorization, Validity and Effect of Agreements. Each of
Family Golf and Merger Sub has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Family
Golf and Merger Sub and the consummation of the transactions contemplated
hereby has been duly authorized by the Board of Directors or each of Family
Golf and Merger Sub, respectively, and by all other requisite corporate action
on the part of Family Golf and Merger Sub. This Agreement has been duly
executed and delivered by each of Family Golf and Merger Sub and is a valid and
legally binding obligation of each of Family Golf and Merger Sub, enforceable
against them in accordance with its terms.
Section 4.3 Capitalization. The authorized capital stock of Family
Golf consists of 50,000,000 shares of Family Golf Common Stock and 1,000,000
shares of "blank check" preferred stock, par value $.10 per share (the "Family
Golf Preferred Stock"). As of May 12, 1997, there were 11,878,617 shares of
Family Golf Common Stock and no shares of Family Golf Preferred Stock issued
and outstanding. No shares of Family Golf Common Stock are held in the treasury
of the Company. All issued and outstanding shares of Family Golf Common Stock
are duly authorized, validly issued, fully paid, nonassessable, are not subject
to and have not been issued in violation of any preemptive rights and have not
been issued in violation of any federal or state securities laws. As of June
25, 1997, 1,075,600 shares of Family Golf Common Stock were reserved for
issuance upon exercise of options and warrants issued by the Company.
Section 4.4 Family Golf SEC Filings; Financial Statements. (a) Family
Golf has timely filed all forms, reports and documents required to be filed by
it with the Securities and Exchange Commission (the "SEC") since December 31,
1995, and has heretofore made available to the Company, in the form filed with
the SEC (excluding any exhibits thereto), its Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "Family Golf Annual Report") and
its Quarterly Report on Form 10-Q for the three-months ended March 31, 1997
(the "Family Golf Quarterly Report"). The Family Golf Annual Report and the
Family Golf Quarterly Report, and any other forms, reports and other documents
filed by Family Golf with the SEC since December 31, 1995 and on or before the
date hereof, (x) were prepared in accordance with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the SEC thereunder and (y) did not, at the time they were
filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading.
23
(b) The consolidated financial statements (including the notes
thereto) contained in the Family Golf Annual Report and the Family Golf
Quarterly Report were prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position, results of operations and cash flows of Family
Golf and its consolidated subsidiaries as at the respective dates thereof and
for the respective periods indicated therein, subject, in the case of the
unaudited interim financial statements included in the Family Golf Form 10-Q,
to normal year-end audit adjustments. Since March 31, 1997, (i) there has been
no change in any of the significant accounting (including tax accounting)
policies, practices or procedures of the Company and (ii) there has not been
any material adverse change in the business, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole.
Section 4.5 No Approvals or Notices Required; No Conflict With
Instruments. The execution and delivery by Family Golf and Merger Sub of this
Agreement do not, and the performance by Family Golf and Merger Sub of their
respective obligations hereunder and the consummation of the transactions
contemplated hereby will not:
(i) conflict with or violate the certificate of incorporation or
bylaws of Family Golf or Merger Sub;
(ii) require any Government Consent or Governmental Filing, in each
case on the part of or with respect to Family Golf or any of its
Subsidiaries, except for (A) the filing of certificates of merger with the
New York Department of State; (B) such Government Approvals as may be
required with respect to the Licenses held by the Company; and (C) the
Governmental Filings required pursuant to the HSR Act;
(iii) require, on the part of Family Golf or Merger Sub, a Contract
Consent from, or a Contract Notice to, any other person or entity (other
than a Governmental Entity), whether under any License or other Contract or
otherwise;
(iv) result in any Violation of or under any Contract to which Family
Golf or any of its Subsidiaries is a party, by which Family Golf or any of
its Subsidiaries or any of their respective assets or properties is bound
or affected or pursuant to which Family Golf or any of its Subsidiaries is
entitled to any rights or benefits; or
(v) assuming that the Government Consents and Governmental Filings
specified in clause (ii) of this Section 4.5 are obtained, made and given,
result in a Violation of, under or pursuant to any law, rule, regulation,
order, judgment or decree applicable to Family Golf or any of its
Subsidiaries or by which any of their respective properties or assets are
bound or affected.
Section 4.6 Brokers or Finders. No agent, broker, investment banker,
financial advisor or other person or entity is or will be entitled, by reason
of any agreement, act or statement
24
by Family Golf or Merger Sub, to any financial advisory, broker's, finder's or
similar fee or commission in connection with any of the transactions
contemplated by this Agreement.
Section 4.7 Full Disclosure. No statement herein or in the Schedules
hereto or in any certificate delivered pursuant to the requirements of this
Agreement by or on behalf of Family Golf or Merger Sub contains or will contain
any untrue statement of a material fact concerning Family Golf, Merger Sub or
any of their Affiliates, or omits or will omit to state a material fact
necessary in order to make the statements made herein or therein concerning
Family Golf, Merger Sub or any of their Affiliates, in the light of the
circumstances under which they were made, not misleading.
ARTICLE V
CONDITIONS TO THE MERGER
Section 5.1 Conditions to the Obligations of Each Party. The
obligation of the Company, Family Golf and Merger Sub to consummate the Merger
and the other transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions:
(i) Shareholder Approval. The plan of merger contemplated by this
Agreement shall have been approved and adopted by either (x) the requisite
vote of the holders of the outstanding shares of the Company Common Stock
under the NYBCL or (y) the unanimous written consent of all of the holders
of the Company Common Stock, in each case in accordance with Section 903 of
the NYBCL.
(ii) HSR Act. The waiting period under the HSR Act relating to the
Merger shall have expired or been terminated.
(iii) Escrow Agreement. The Indemnity Escrow Agent, the Company,
Merger Sub, Family Golf and the Stockholder Representative shall have
executed and exchanged the Escrow Agreement, and Family Golf shall have
delivered to the Escrow Agent, to hold in accordance with the terms of the
Escrow Agreement, 40,000 shares of Family Golf Common Stock registered in
the name of the Indemnity Escrow Agent.
(iv) Registration Rights Agreement. Family Golf and each stockholder
of the Company who is to receive shares of Family Golf Common Stock in the
Merger shall have executed and exchanged a registration rights agreement,
dated the date hereof, in the form of Exhibit B hereto.
(v) Release of Pledged Company Common Stock. The 2,550,000 shares of
Company Common Stock pledged to The Chase Manhattan Bank (as successor to
Chemical Bank) shall have been delivered to Xxxxxx X. Xxxxxx, as the
representative of the stockholders of the Company who pledged such shares.
25
(vi) Redemption of Company Preferred Stock. The Company Preferred
Stock shall have been duly and validly redeemed prior to the Effective
Time.
Section 5.2 Conditions to the Obligations of Family Golf and Merger
Sub. The obligations of Family Golf and Merger Sub to consummate the Merger and
the other transactions contemplated by this Agreement are further subject to
the satisfaction of the following conditions, each of which may, to the extent
legally permissible, be waived by Family Golf and Merger Sub:
(i) Opinion of Counsel for the Company. Family Golf and Merger Sub
shall have received from Ruskin, Moscou, Xxxxx & Faltischek, counsel to the
Company, an opinion, dated the date hereof, in form and substance
satisfactory to Family Golf, Merger Sub and their counsel.
(ii) Dissenting Shares. On the Closing Date none of the shares of
Company Common Stock shall be Dissenting Shares.
(iii) Receipt of Licenses, Permits and Consents. All Government
Consents and Contract Consents in respect of the Company as are required in
connection with the consummation of the transactions contemplated hereby
shall have been obtained and shall be in full force and effect (including,
without limitation, all consents required under the Loan Agreements), all
Governmental Filings and Contract Notices in respect of the Company or its
business as are required in connection with the consummation of such
transactions shall have been made, and all Licenses of the Company that are
required to be transferred in connection with the consummation of such
transactions shall have been transferred. Each Contract Consent received
from a lessor under the terms of any Lease shall include estoppel language
acceptable to Family Golf.
Section 5.3 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger and the other transactions
contemplated by this Agreement are further subject to the satisfaction of the
following conditions, each of which may, to the extent legally permissible, be
waived by the Company:
(i) Opinion of Counsel for Family Golf and Merger Sub. The Company
shall have received from Xxxxx & Xxxxx, L.L.P., counsel to Family Golf and
Merger Sub, an opinion, dated the date hereof, in form and substance
satisfactory to the Company and its counsel.
(ii) Capital Contribution by Family Golf. Family Golf shall have made
a contribution of capital to the Company in the amount of $3.13 million
(the "Capital Contribution"). The Company shall apply the proceeds from the
Capital Contribution, prior to the Effective Time, (x) to the redemption of
all of the outstanding shares of Company Preferred Stock, (y) to the
repayment of all outstanding stockholder loans and (z) to the payment of
all past-due rent for any Leased Properties.
26
ARTICLE VI
INDEMNIFICATION
Section 6.1 Survival. All representations, warranties, covenants and
agreements contained herein shall survive until the first anniversary of the
Closing Date; provided, however, that the indemnification liability as set
forth in this Article VI shall not terminate as to the breach of any
representation or warranty of the Company which occurs, and with respect to
which an Indemnified Party gives notice to the Stockholder Representative,
within such one-year period.
Section 6.2 Indemnification. (a) Subject to Section 6.1, Family Golf,
the Surviving Corporation and their respective successors, directors and
officers (each an "Indemnified Party" and collectively, the "Indemnified
Parties") shall be indemnified against and held harmless from any and all
demands,claims, losses, costs, fines, liabilities, damages (excluding
consequential damages), judgments, settlements and expenses, including
reasonable fees and expenses incurred in the investigation and defense of
claims and actions (collectively, "Losses"), arising out of the breach of any
representation or warranty of the Company contained herein. Payment in respect
of any indemnifiable Losses hereunder shall be available solely from the 40,000
shares of Family Golf Common Stock held by the Escrow Agent under the Escrow
Agreement. Each share of Family Golf Common Stock held pursuant to the Escrow
Agreement shall be deemed to have a cash value of $27.50.
(b) Notwithstanding anything to the contrary herein, the Indemnified
Parties shall not be entitled to indemnification under Section 6.2(a) with
respect to the first $50,000 of Losses (the "Threshold Amount"); provided,
however, that if the Threshold Amount is surpassed, than thereafter all Losses
(including such first $50,000) shall be subject to the indemnification
provisions of Section 6.2.
Section 6.3 Third-Party Claims. Subject to Section 6.1, if any claim
or assertion of liability is made or asserted against any Indemnified Person by
any person or legal entity who is not a party to this Agreement (a "Third Party
Claim"), and such claim or assertion of liability arises out of the breach of
any representation or warranty of the Company contained herein for which
indemnification is available pursuant to Section 6.2, then the Indemnified
Person shall give the Stockholder Representative prompt written notice of such
claim or assertion (an "Indemnification Notice"), or of any event or proceeding
by or in respect of a third party of which it has knowledge, concerning any
liability or damage as to which such Indemnified Person may request
indemnification hereunder. The Stockholder Representative may elect to defend,
with its separate counsel and at no cost to the Indemnified Person, any such
Third Party Claim unless (i) the Third Party Claim seeks an injunction or other
equitable or declaratory relief against the Indemnified Party or (ii) the
Indemnified Party, after consultation with its counsel, shall have reasonably
concluded that there is a conflict of interest between the Indemnified Person
and the Stockholder Representative with respect to the defense of such Third
Party Claim. If the Stockholder Representative elects to defend any Third Party
Claim, he shall, within thirty days after receipt of the Indemnification
27
Notice, notify the Indemnified Person of his intent to do so, and the
Indemnified Person shall cooperate in the defense of such claim. If the
Stockholder Representative does not defend the Third Party Claim, is not
permitted to defend by reason of the second sentence of this Section 6.3, or
fails to timely notify the Indemnified Party of its election as herein
provided, the Indemnified Person may pay, compromise or defend such claim or
assertion at the expense of the Stockholder Representative (in his capacity as
such, and not in his individual capacity). If the Stockholder Representative
elects not to defend any Third Party Claim, the Indemnified Person shall cause
its counsel to promptly provide to the Stockholder Representative notice of all
proceedings and a copy of all correspondence and papers with respect to such
Third Party Claim. Notwithstanding the foregoing, neither the Stockholder
Representative nor the Indemnified Person may settle or compromise any Third
Party Claim unless (x) the other is first notified of any such proposed
settlement or compromise and (y) any such settlement or compromise includes a
complete release of each of the Indemnified Persons and the Stockholder
Representative, if they so request. No Indemnified Person shall settle any
claim for which indemnification is sought hereunder without the prior consent
of the Stockholder Representative, which consent shall not be unreasonably
withheld.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Notices. All notices or other communications hereunder
shall be in writing and shall be deemed to have been duly given or made if (i)
delivered in person, on the date actually delivered, (ii) by United States
mail, certified or registered, with return receipt requested, on the date which
is two business days after the date of mailing, or (iii) if sent by facsimile
transmission, with a copy mailed on the same day in the manner provided in (iv)
above, on the date transmitted provided receipt is confirmed by telephone:
If to the Company :
000 Xxx Xxxxxxxx Xxxx
Xxxx Xxxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxx
Telecopy No.: 000-000-0000
with copies to:
Ruskin, Moscou, Xxxxx & Faltischek
000 Xxx Xxxxxxx Xxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telecopy No.: 000-000-0000
28
If to Family Golf or Merger Sub:
000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telecopy No.: 000-000-0000
with a copy to:
Xxxxx & Xxxxx, L.L.P.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx Xx.
Telecopy No.: 000-000-0000
or at such other address as may have been furnished by a party in writing to
the other parties.
Section 7.2 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other terms and provisions of this Agreement shall
nonetheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon any such determination that a term or
other provision is invalid, illegal or incapable of being enforced, the parties
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
Section 7.3 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of law.
Section 7.4 No Adverse Construction. The rule that a contract is to be
construed against the party drafting the contract is hereby waived, and shall
have no applicability in construing this Agreement or any provision hereof.
Section 7.5 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section 7.6 Legal Fees and Expenses. Family Golf or the Surviving
Corporation shall pay the fees and disbursements of Ruskin, Moscou, Xxxxx &
Faltischek, counsel to the Company, up to a maximum of $175,000.
29
Section 7.7 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns, but neither this Agreement nor any of the rights,
interests or other obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties.
Section 7.8 Amendment. This Agreement may not be amended without the
written consent of Family Golf, the Company, Merger Sub and, after the
Effective Time only, the Stockholder Representative.
Section 7.9 Waiver. Any party hereto may (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties of
the other parties contained herein or in any document delivered pursuant
hereto, and (iii) waive compliance by the other parties with any of the
agreements or conditions contained herein. Any such extension or waiver shall
be valid only if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
Section 7.10 Entire Agreement. This Agreement (including the Exhibits
and Schedules attached hereto and other documents referred to herein and which
form a part hereof) constitutes the entire agreement among the parties hereto
and supersedes all prior agreements and understandings, oral and written, among
the parties with respect to the subject matter hereof.
Section 7.11 Definition of Subsidiary and Affiliate. As used in this
Agreement, (i) a "Subsidiary" of any person means any corporation, partnership,
joint venture or other legal entity of which such person (either alone or
together with one or more other Subsidiaries) (x) is a general partner or (y)
owns, directly or indirectly, 50% or more of the stock or other equity
interests, the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or other
legal entity, and (ii) an "Affiliate" of any person means any individual,
corporation or other organization, whether incorporated or unincorporated,
which directly or indirectly controls, or is controlled by, or is under common
control with, such first mentioned person. The term "control" (including the
terms "controlled," "controlled by" and "under common control with" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a person, corporation or other
entity, whether through the ownership of voting securities, by contract or
otherwise.
Section 7.12 Definition of Knowledge of the Company. As used in this
Agreement, "knowledge of the Company" or words to similar effect shall mean the
knowledge of any or all of the following persons: Xxxxxx X. Xxxxxx, Xx., Xxxx
Xxxxxx and Xxxxxxx Xxxxxxx, and, solely for purposes of Section 3.15 (insofar
as such Section relates to SPORTS PLUS and the Syosset Bowl), Xxxxxx Xxxxxxxx
Xx.
Section 7.13 Stockholders are Third Party Beneficiaries. This
Agreement is for the sole benefit of the parties hereto and their permitted
assigns, except that the representations and warranties of Family Golf and
Merger Sub set forth in Article IV of this Agreement shall also inure
30
to the benefit of the holders (and their respective heirs, personal
representatives and successors) of the Company Common Stock immediately
prior to the Effective Time.
NOW THEREFORE, the parties hereto have executed and delivered this Agreement as
of the date first above written.
LEISURE COMPLEXES, INC.
By:
--------------------------------
Name:
Title:
FAMILY GOLF CENTERS, INC.
By:
--------------------------------
Name:
Title:
LAKE GROVE FAMILY GOLF CENTERS, INC.
By:
--------------------------------
Name:
Title:
Xxxxxx X. Xxxxxx Xx. is executing this Agreement in the space provided
below solely in his capacity as Stockholder Representative, and not in his
individual capacity, and solely with respect to the provisions of Article VI
and Section 7.8 of this Agreement.
--------------------------------
Xxxxxx X. Xxxxxx, Xx.
31
