EXHIBIT 7
SHAREHOLDERS AND PARTNERS AGREEMENT
This Shareholders and Partners Agreement (the "Agreement") is made
effective as of July 2, 1998 by and between Dallas Price ("Wife"), and Xxxxx
Xxxxx ("Husband").
RECITALS
A. The parties hereto have entered into that certain Marital Settlement
Agreement dated July 2, 1998 (the "Settlement Agreement"), concurrently
herewith, in order to settle fully and completely their respective rights in and
claims to all property, or business relationships, of whatever kind and nature
now owned by them, or either of them, or which may hereafter be acquired by
either of them, and the settlement of any and all other claims, past, present
and future that each now has or may have against the other, his or her estate,
executors, administrators, successors and assigns whether arising out of their
material relationship or otherwise.
B. Among the property rights and claims to be divided pursuant to the
Settlement Agreement are several ongoing business enterprises and real estate,
including "Subchapter S" corporations, "C" corporations and partnerships, owned
in whole or in part by the parties hereto and listed in Exhibit A hereto (the
"Businesses"). The parties acknowledge that the provisions of this Agreement do
not apply to National Golf Properties, Inc., except for the provisions of
Section 3, which shall apply.
C. Husband and Wife desire that before either party sells an interest in any
of the Businesses (an "Ownership Interest") to a third party, that they each
give the other the opportunity to purchase the interest to be sold pursuant to a
right of first refusal; that no sale or other transfer by either of them
invalidate the favorable tax treatment accorded to the Subchapter "S"
corporations or jeopardize the favorable treatment as a "REIT" that one of the
Businesses has.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the terms,
covenants and conditions hereinafter set forth, the parties hereto mutually
agree as follows:
1. Right of First Refusal.
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(a) Right of First Refusal. Subject to the terms and conditions
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specified in this Section 1, Husband and Wife shall each have a right of first
refusal with respect to the future sale, or transfer of any portion of the other
party's Ownership Interest in any of the Businesses (the "Offered Interest").
Husband and Wife further agree that any encumbrance of any such Ownership
Interest will be made subject to this Right of First Refusal so that any
encumbrance holder must, before it obtains an Ownership Interest pursuant to the
exercise of any rights arising as a result of the encumbrance, offer the other
party the opportunity to purchase such Ownership Interest for the amount of the
encumbrance (including accrued interest and costs) and, if it does obtain an
Ownership Interest, it must, before reselling such Ownership Interest, offer it
to the other party pursuant to this Right of First Refusal. In the event a party
proposes to sell or otherwise transfer such interest (the "Selling Party"), he
or she must first give written notice (the "Right of First Refusal Notice"), to
the other party (the "Other Party"), specifying as applicable (i) his or her
intention to sell or transfer such Offered Interest to a third party, (ii) the
name and
address of the proposed purchaser(s) or recipient(s), (iii) the nature of
Offered Interest he or she proposes to sell, transfer or otherwise encumber,
(iv) the price for which the Offered Interest is proposed to be sold,
transferred or encumbered, and (v) all other material terms and conditions of
the proposed sale or transfer. Each party shall notify the other party if and
when any Ownership Interest is encumbered, specifying the nature of the
encumbrance, the party to whom the encumbrance is given and confirming such
third parties' agreement to comply with the provisions hereof.
Within thirty (30) days of receipt of the Right of First Refusal
Notice, the Other Party may elect to purchase all of the Offered Interest at the
price and on the terms and conditions set forth in the Right of First Refusal
Notice by delivery of written notice to the Selling Party. Within sixty (60)
days after delivery of such notice, the parties shall arrange for the delivery
of payment to the Selling Party at the price as set forth in the Right of First
Refusal Notice, the execution of the appropriate sale documents and the delivery
of the appropriate transfer documents; and shall each use their best reasonable
efforts to consummate the transaction as soon as reasonably possible thereafter.
The Selling Party shall be entitled to sell or transfer the Offered
Interest not purchased by the Other Party to the purchaser(s) named in the Right
of First Refusal Notice at the price specified in the Right of First Refusal
Notice and on the terms and conditions set forth in the Right of First Refusal
Notice; provided, however, that such sale or transfer must be consummated within
ninety (90) days from the date of the Right of First Refusal Notice.
(b) Revival of Right of First Offer and Right of First Refusal. If
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the Other Party does not exercise its Right of First Refusal and the Offered
Interest is not sold to the specified third party within the 90 day period set
forth above, the right of first refusal provided by this Section 1 shall be
deemed to be revived and such Offered Interest shall not be sold or transferred
to any third party unless first reoffered to the Other Party in accordance
herewith.
2. Maintaining Subchapter S Status.
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(a) Preservation of Status. If requested by a party, the other party
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shall execute such documents and consents and shall cause any of the Businesses
to execute such documents as are necessary in order to preserve the election, if
the Business is designated on Exhibit A as a "Subchapter S Corporation", to be
taxed as a Small Business Corporation under Subchapter S of the Internal Revenue
Code (the "Subchapter S Election"). In order to prevent the inadvertent
termination of the Subchapter S Election, the parties each agree to vote their
shares, execute any necessary documents, take any other required action and
otherwise exert their best efforts at all times in good faith to accomplish the
objective of a Subchapter S Corporation in maintaining the Subchapter S
Election, including taking actions with respect to Operations. If any documents
evidencing such consent or other actions required for filing under the
provisions of the Internal Revenue Code (the "Code") are required in order to
effectuate such objectives, and if any party is unable or unwilling or otherwise
fails to execute such documents or take such other action in a timely manner,
then such party hereby irrevocably appoints any officer of any such corporation
as such person's attorney-in-fact to execute such documents and to take such
action in such person's place and stead.
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(b) No Gifts in Violation. Each party hereby covenants and agrees
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that, so long as this Agreement is in effect, such party shall not, by gift,
bequest, sale or otherwise, transfer any shares to any person or entity whose
ownership of such shares would cause any such Business' Subchapter S Election to
terminate.
(c) Subchapter S Termination. The parties shall terminate or revoke
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any Subchapter S Election only in accordance with a determination to do so made
by Board of Directors of the Subchapter S Corporation which would lose the
Subchapter S status.
(d) Inadvertent Termination. If any Subchapter S Corporation's
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Subchapter S status is terminated inadvertently and such corporation wishes to
obtain a ruling under Section 1362(f) of the Code, each party agrees to make any
adjustments required pursuant to Section 1362(f)(4) of the Code and approved by
such Subchapter S Corporation's Board of Directors. A party's obligation to make
such adjustments shall continue after such shareholder has ceased to own stock
in such Subchapter S Corporation and after this Agreement has terminated.
3. Maintaining REIT Status.
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(a) Preservation of Status. In order to prevent the inadvertent
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termination of the status of National Golf Properties, Inc. ("NGP") as a Real
Estate Investment Trust ("REIT") under the Code, the parties each agree to vote
their shares in NGP or their partnership interest in National Golf Operating
Partnership, L.P. ("NGOP"), execute any necessary documents, take any other
required action and otherwise exert their best efforts at all times in good
faith to accomplish the objective of maintaining NGP's REIT status. If any
documents evidencing such consent or other actions required for filing under the
provisions of the Code are required in order to effectuate such objectives, and
if any party is unable or unwilling or otherwise fails to execute such documents
or take such other action in a timely manner, then such party hereby irrevocably
appoints any officer of NGP or general partner of NGOP as such person's
attorney-in-fact to execute such documents and to take such action in such
person's place and stead.
(b) No Gifts in Violation. Each party hereby covenants and agrees
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that, so long as this Agreement is in effect, such party shall not, by gift,
bequest, sale or otherwise, transfer any shares of NGP or partnership interests
of NGOP to any person or entity whose ownership, or percentage ownership, of
such shares or partnership interests would cause the NGP's REIT status to
terminate.
(c) Inadvertent Termination. If NGP's REIT status is terminated
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inadvertently, each party agrees to take such steps as NGP shall reasonably
request of such party in order to reinstate such REIT status; provided that
neither party shall be obligated to incur any significant expense to do so; and
provided, further, that neither NGP nor NGOP nor any other person or entity
shall be deemed a third party beneficiary hereof, or of Section 2 or Section 4
hereof, it being understood that the provisions of this Agreement are intended
only for the benefit of the parties. A party's obligation to provide such
cooperation shall continue after this Agreement has terminated.
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4. Sale to a Competitor.
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(a) Added Time. Wife acknowledges that if she desires to sell all or
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any part of her Ownership Interest in any of the Businesses to a "Competitor" of
any such Business (a "Sale to Competitor"), that the provisions of Section 1
(right of First Refusal) set forth above shall apply but that (i) Husband will
have 60 days (instead of 30) after receipt of the Right of First Refusal Notice
to elect to purchase all of the Offered Interest and (ii) Husband will have 90
days after delivery of such notice electing to make the purchase, instead of the
60 days otherwise provided for.
(b) Determination of Who Is A Competitor. The Business Decision
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Makers (the Board of Directors of such Business, if it is a corporation,
equivalent governing body if it is not) shall promptly determine if any proposed
transferee of an Ownership Interest is a "Competitor" after being requested to
do so by either party. The other party agrees to use reasonable efforts to
assist in obtaining a prompt decision from the Business Decision Makers on such
issue.
5. Dispute Resolution.
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(a) Any and all claims, grievances, demands, controversies, causes of
action or disputes of any nature whatsoever (including but not limited to tort
and contract claims, and claims upon any law, statute, order, or regulation)
(hereinafter "Claims"), arising out of, in connection with, or in relation to
(i) the interpretation, performance or breach of this Agreement, (ii) the
arbitrability of any Claims under this Agreement, or (iii) any relationship
before, at the time of entering, during the term of, upon or after expiration or
termination of this Agreement, by and among the parties, shall be resolved in
accordance with a two-step dispute resolution process administered by
JAMS/Endispute involving, first, mediation before a retired judge from the
JAMS/Endispute panel, following, if necessary, by final and binding arbitration
before the retired judge, or if requested by an aggrieved party, another retired
judge from the JAMS/Endispute panel. Such dispute resolution process shall be
confidential and shall be conducted in accordance with California Evidence Code
Section 1119.
(b) Mediation. In the event any Claim is not resolved by an informal
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negotiation between the Company and the aggrieved party within 30 days after the
aggrieved party notifies the Company and other parties that a Claim exists, the
matter shall be referred to the Los Angeles offices of JAMS/Endispute for an
informal, non-binding mediation consisting of one or more conferences between
the aggrieved parties in which a retired judge will seek to guide the aggrieved
parties to a resolution of the Claims. The aggrieved parties shall select a
mutually acceptable neutral from among the JAMS/Endispute panel of mediators. In
the event the aggrieved parties cannot agree on a mediator, the Administrator of
JAMS/Endispute will appoint a mediator. The mediation process shall continue
until the earliest to occur of the following: (i) the Claims are resolved, (ii)
the mediator makes a finding that there is no possibility of resolution through
mediation, or (iii) 30 days have elapsed since the Claim was first scheduled for
mediation.
(c) Arbitration. Should any Claims remain after the completion of the
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mediation process described above, each party agrees to submit all remaining
Claims to final and
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binding arbitration before one arbitrator administered by JAMS/Endispute in
accordance with the then existing JAMS/Endispute Arbitration Rules. Neither
party nor the arbitrator shall disclose the existence, content, or results of
any arbitration hereunder without the prior written consent of all parties.
Except as provided herein, the California Arbitration Act shall govern the
interpretation, enforcement and all proceedings pursuant to this subparagraph
(c). The arbitrator shall render an award and a written, reasoned opinion in
support thereof. Such award may include reasonable attorneys' fees to the
prevailing party. Judgment upon the award may be entered in any court having
jurisdiction thereof.
(d) Exclusivity. This dispute resolution procedure is intended to be
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the exclusive method of resolving any Claims arising out of or relating to this
Agreement.
(e) Survival. This dispute resolution process shall survive the
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termination of the Agreement. If any provision in the Agreement is adjudged to
be void or otherwise unenforceable, in whole or in part, such adjudication shall
not affect the validity of the remainder of the Agreement. The parties expressly
acknowledge that by signing this Agreement, they are giving up their respect
right to a jury trial.
6. Tag Along Rights
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(a) Neither party may sell or otherwise transfer in any transaction
or series of related transactions (a "Sale") an amount which exceeds the lower
of five percent (5%) or $2,500,000 of an Ownership Interest in any of the
Businesses held by them at the time of such Sale without triggering application
of this Section 6.
(b) If any party (the "Selling Party"), intends to effect a Sale,
such party shall give written notice (the "Seller's Notice"), to the other party
(the "Recipient"), stating that the Selling Party intends to effect such a Sale,
identifying the party who made the subject offer (the "Proposed Transferee"),
specifying the size of the Ownership Interest proposed to be sold, transferred
or otherwise affected under such offer (the "Sale Interest"), and specifying the
per share or unit price and any other consideration that the Proposed Transferee
has offered to pay for the Sale and all other terms of such offer (the "Sale
Price and Terms"). A written copy of the offer shall be attached to the Seller's
Notice.
(c) The Recipient shall have the right upon written notice to the
Selling Party within (10) business days after receiving the Seller's Notice, and
the obligation following giving such notice, to participate on a pro rata basis
(based on each party's then respective Ownership Interests) in the Selling
Party's Sale at and upon the Sale Price and Terms.
(d) The exercise or non-exercise of the right of a party to
participate in one or more Sales made by the other party shall not adversely
affect such party's rights to participate in subsequent Sales by the other
party.
7. Drag Along Rights.
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(a) If Husband agrees to engage in a Sale of at least 80% of the
Ownership Interest in any Business then held by him in a bona fide arm's-length
transaction with a third party, then Husband may elect to require Wife to vote
affirmatively for the transaction and to sell
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to the proposed purchaser (the "Proposed Purchase") on a pro rata basis, her
Ownership Interest in such Business, concurrently with the Sale by Husband and
at the same price and on the same terms.
(b) Such election shall be made by Husband by delivering to Wife a
written notice (the "Drag Along Notice') informing her of the material terms of
the proposed Sale, including, without limitation, the identity of the Proposed
Transferee, the number of shares or units of the Business proposed to be sold or
otherwise transferred, the per share or unit price that the Proposed Transferee
has offered to pay (the "Offered Price") and the scheduled closing date for the
Sale transaction (the "Sale Date").
(c) At least three (3) days prior to the Sale Date specified in the
Drag Along Notice, Wife shall deliver to Husband certificate(s) evidencing the
number of shares or unit of Business to be sold by Wife, duly endorsed for
transfer to the Proposed Transferee. On the Sale Date, and provided that Husband
consummates such Sale, Husband shall deliver to the Proposed Purchaser
certificate(s) evidencing the sales of stock or units being sold by Wife and
Husband against payment of the aggregate Offered Price therefor, and Husband
shall promptly remit to Wife her share of such payments.
8. Wife's Corporate Benefits. Husband agrees that he will use his best
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reasonable efforts to cause American Golf Corporation ("AGC") to continue to
provide to Wife the following benefits that AGC is currently providing to her:
for so long as Husband and Wife own, in the aggregate, greater than 50% of the
equity of AGC, (in substantially the same amounts or such lower amounts as may
be then provided to Husband and the other senior AGC officers) an office;
secretarial assistance; gas credit cards for use in the AGC business; Hertz and
Avis car rental cards for use in the AGC business; health insurance and medical
liability coverage; Corporate American Express card for use in the AGC business;
and car phones and hand held cellular phone expenses to the extent used for AGC
business; and excess liability insurance. If, at any time, any of the Businesses
provides a company car and expenses thereof to Husband, such Business will
provide a similar automobile benefit to Wife.
9. Directorships. Husband and Wife agree that each shall vote his or her
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shares in order to support the election of the other to the Board of Directors
of any of the Businesses of which such party presently serves.
10. Miscellaneous.
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(a) Integration. This Agreement, the Revocable Business Management
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Agreement (the "Other Agreement"), the Agreement Regarding Certain Jointly Owned
Receivables, Taxes and Joint Payables and the Settlement Agreement represent the
entire understanding of the parties with respect to the management of the
Businesses and related matters and is intended to be a full, complete, final and
integrated agreement between the parties hereto with respect to the subject
matter hereof, superseding any other agreements or understandings between the
parties entered into prior to the date of execution hereof with respect thereto.
In the event of any conflict between this Agreement and the Other Agreement,
this Agreement shall be followed.
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(b) Assignment. This Agreement may not be altered, amended or
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modified, except by an instrument in writing signed by both Husband and Wife.
(c) Headings. Paragraph headings and other titles contained in this
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Agreement are for reference purposes only and are in no way intended to
describe, interpret, define or limit the scope, extent or meaning of this
Agreement or any provision hereof.
(d) California Law. This Agreement shall be interpreted under and in
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accordance with the laws of the State of California.
(e) Continuation. In the event of a marital reconciliation between
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the parties hereto, this Agreement nevertheless shall continue in full force and
effect until modified, altered or terminated by an agreement in writing signed
by each of the parties hereto.
(f) Notice. All notices and demands of any kind which either party
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hereto may be required to or desire to serve upon any other party hereto under
the terms of this Agreement shall be in writing and shall be served upon such
other party by personal service or by leaving a copy of such notice or demand at
the address hereinafter set forth, whereupon such service shall be deemed
complete, or by mailing a copy thereof by certified or registered mail, postage
prepaid with return receipt requested, addressed as follows:
If to Wife: Dallas Price
00000 Xxxxxx Xxxx
Xxxxx Xxxxxx, XX 00000
With a copy to: Xxxxxx X. Xxxxx
Xxxxx & Xxxxxxx
000 X. Xxxxxx Xx., Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
If to Husband: Xxxxx X. Xxxxx
0000 00xx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, XX 00000
With a copy to: Xxxxxx & Xxxxxxx
000 Xxxx 0xx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxx
In the case of service by mail, it shall be deemed complete on the
date of delivery as shown on the addressee's registry or certification receipt,
or at the expiration of the fifth calendar day after the date of mailing,
whichever occurs first. The addresses to which notices and demands shall be
delivered or sent may be changed from time to time by notice addressed as herein
provided by any party upon all other parties.
(g) Full Force and Effect; Independent Application. If any provision
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of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remaining provisions shall nevertheless continue in
full force and effect without being impaired
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or invalidated in any way. If any provision of this Agreement is held by a court
of competent jurisdiction to be too great in scope or duration, such provision
shall be reformed by such court in order that it shall comply with the laws or
regulations applicable to such provision. The provisions of Sections 1, 2, 3, 4,
6 and 7 shall each be applied independently to any sale, assignment or other
transfer, so that, for example, the failure of a party to exercise such party's
Right of First Refusal shall not affect such party's tag along rights; and the
right to prevent the sale to a competitor shall be applied independently of the
other rights or obligations hereunder.
(h) Binding on Successors. This Agreement is binding upon and shall
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inure to the benefit of the parties hereto and to their respective successors,
assigns, personal representatives, heirs and legatees.
(i) Additional Documents. The parties hereto shall execute any
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additional documents or amendments to documents and shall take any further
actions that may be necessary to carry out the terms of this Agreement.
(j) Non-Complying Transfer Not Effective. Any transfer made without
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complying with the provisions hereof shall be null and void and of no force and
effect, and any transferee of the Offered Interest who obtains an interest other
than in full compliance with the provisions of this Agreement shall, in any
event, take subject to the provisions of this Agreement.
(k) Term. This Agreement shall terminate, on a Business by Business
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basis, as to any of the Businesses, on the first to occur of the following: (i)
the expiration of 10 years from the execution date hereof; or (ii) the sale or
transfer by one party of all of such party's interest in any such Business.
(l) Counterparts. This Agreement may be executed in one or more
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counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
(m) NGOP Conversions. Other than Section 3 hereof, which shall apply,
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nothing contained herein shall prevent Wife from converting her partnership
interest in NGOP into shares of NGP in accordance with the rights associated
with that partnership interest.
(n) Financial Reports. Wife shall be entitled to receive copies of
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the financial statements and tax returns prepared in the ordinary course of
business of the Businesses within a reasonable time, and shall have the right,
upon notice to the applicable Business(es) to review, at her expense, the books
and records thereof.
(SIGNATURE PAGE FOLLOWS)
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IN WITNESS WHEREOF, this Agreement is effective as of the date first
above written.
/s/ Dallas Price
_______________________________
Dallas Price
/s/ Xxxxx X. Xxxxx
_______________________________
Xxxxx X. Xxxxx
Approved as to form:
Xxxxx & Xxxxxxx
By:___________________________
Xxxxxx X. Xxxxx
Attorney for Wife
Xxxxxx & Xxxxxxx
By:___________________________
Xxxxx X. Xxxxxxxx
Attorney for Husband
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