SECOND MORTGAGE NOTE
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$200,000.00 December 31, 1996
FOR VALUE RECEIVED, MILWAUKEE FAMILY GOLF CENTERS, INC., a Delaware
corporation (herein called "MAKER") hereby promises to pay to the order of
FORE SEASONS GOLF, INC., a Wisconsin corporation ("PAYEE") the principal sum
of Two Hundred Thousand Dollars ($200,000.00), together with accrued and
unpaid interest on such principal amount outstanding from time to time, from
the date hereof, at the rate of 8% per annum; said principal and accrued and
unpaid interest to be due and payable on the first anniversary of the date of
this Note (the "MATURITY DATE").
1. SECURITY.
This Note is secured by that certain Mortgage (the "MORTGAGE") of
even date herewith, encumbering that certain property located at 0000 Xxxxx
Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxx as more particularly described therein
(the "PROPERTY").
2. PREPAYMENTS.
Subject to Section 4 hereof, Maker shall be permitted to prepay all
or any portion of this Note at any time and from time to time prior to the
Maturity Date without penalty or premium upon not less than 30 days' prior
written notice to Payee.
3. PAYMENT.
Interest shall be payable on the first day of April, July and
October. Payment of principal and interest shall be made in lawful money of
the United States of America at such place as Payee shall have designated to
Maker.
4. CONVERSION.
(A) Payee may, at the time of any payment hereunder, on the terms
set forth in this Section 4, convert all or any portion of the amount of such
payment (the "CONVERSION RIGHT") into a number of shares of the common stock,
par value $0.01 per share (the "COMMON STOCK") of Family Golf Centers, Inc.
(the "COMPANY"), determined by dividing the amount of such payment which Payee
wishes to convert (the "CONVERSION AMOUNT") by $29.00 (as adjusted in
accordance herewith, the "CONVERSION PRICE").
(B) To exercise the Conversion Right, Payee, shall deliver to the
Company, at its office at 000 Xxxxxxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000, or
at such other place as is designated in writing by the Company, not less than
15 days prior to the Maturity Date or the specified date of any prepayment, a
notice (the "CONVERSION NOTICE") stating that
Payee is exercising the Conversion Right, the intended Conversion Amount and
the name or names in which Payee wishes the certificates for shares of Common
Stock to be issued.
(C) Fifteen days after the Company's receipt of the Conversion
Notice, Payee shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise (the "CONVERSION SHARES"),
notwithstanding that the transfer books of the Company shall then be closed or
certificates representing such Conversion Shares shall not then have been
actually delivered to Payee. As soon as practicable after exercise of the
Conversion Right, the Company shall issue and deliver to Payee a certificate
or certificates for the Conversion Shares issuable upon such exercise
registered in the name of Payee or its designees, together with two copies of
the Registration Rights Agreement in the form of EXHIBIT A attached hereto,
executed by the Company. Xxxxx shall promptly return one copy of the
Registration Rights Agreement, executed by Payee to Maker.
(D) The issuance of any shares or other securities upon the exercise
of the Conversion Right, and the delivery of certificates or other instruments
representing such shares or other securities, shall be made without charge to
Payee for any tax or other charge in respect of such issuance. Neither Maker
nor the Company shall however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of Payee and neither Maker nor the
Company shall be required to issue or deliver any such certificate unless and
until the person or persons requesting the issue thereof shall have paid to
the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
(E) Payee shall not have, solely on account of such status as a
Payee of this Promissory Note, any rights of a stockholder of the Company,
either at law or in equity, or any notice of meetings of stockholders or of
any other proceedings of the Company except as provided in this Promissory
Note.
5. ADJUSTMENT OF CONVERSION PRICE.
(A) In case the Company shall at any time after the date this
Promissory Note is first issued (i) declare a dividend on the outstanding
Common Stock payable in shares of its capital stock, (ii) subdivide the
outstanding Common Stock, (iii) combine the outstanding Common Stock into a
smaller number of shares, or (iv) issue any shares of its capital stock by
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing corporation), then, in each case, the Conversion Price, and the
number of Conversion Shares issuable upon exercise of this Promissory Note, in
effect at the time of the record date for such dividend or of the effective
date of such subdivision, combination, or reclassification, shall be
proportionately adjusted so that Payee after such time shall be entitled to
receive the aggregate number and kind of shares which, if the Conversion Right
had been exercised immediately prior to such time, he would have owned upon
such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination, or reclassification. Such adjustment shall be made
successively whenever any event listed above shall occur.
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(B) The Company shall not be required to issue fractions of
shares of Common Stock or other capital stock of the Company upon the exercise
of the Conversion Right. The remainder of the Conversion Amount which is not
fully divisible by the Conversion Price shall be satisfied by the Company in
lawful money of the United States of America.
6. SECURITIES ACT; LEGEND.
(A) Payee acknowledges that he has been advised that neither this
Promissory Note nor the Conversion Shares have been registered under the
Securities Act of 1933 (the "ACT"), that the Promissory Note is being or has
been issued and the Conversion Shares may be issued on the basis of the
statutory exemption provided by Section 4(2) of the Act or Regulation D
promulgated thereunder, or both, relating to transactions by an issuer not
involving any public offering. Xxxxx acknowledges that he has been informed
of, or is otherwise familiar with, the nature of the limitations imposed by
the Act and the rules and regulations thereunder on the transfer of
securities. In particular, Xxxxx agrees that no sale, assignment or transfer
of the Promissory Note or Conversion Shares shall be valid or effective, and
the Company shall not be required to give any effect to any such sale,
assignment or transfer, unless (i) the sale, assignment or transfer of the
Promissory Note or Conversion Shares is registered under the Act, it being
understood that neither the Promissory Note nor the Conversion Shares are
currently registered for sale and that the Company has no obligation or
intention to so register the Promissory Note or Conversion Shares except as
specifically provided herein, or (ii) the Promissory Note or Conversion Shares
are sold, assigned or transferred in accordance with all the requirements and
limitations of Rule 144 under the Act, it being understood that Rule 144 is
not available at the time of the original issuance of this Promissory Note for
the sale of the Promissory Note or the Conversion Shares and that there can be
no assurance that Rule 144 sales will be available at any subsequent time, or
(iii) such sale, assignment, or transfer is otherwise exempt from registration
under the Act.
(B) Unless registered, the Conversion Shares issued upon exercise of
the Conversion Right shall be subject to a stop transfer order and the
certificate or certificates evidencing such Conversion Shares shall bear the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED
OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND
OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED
IN THE
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MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS."
7. EVENTS OF DEFAULT.
If any of the following events shall occur (each a "DEFAULT"): (i)
Maker shall fail to pay any principal of or interest on this Promissory Note
when due and such failure shall remain unremedied for fifteen days after
written notice thereof, (ii) an entry of a decree or order by a court having
jurisdiction adjudging Maker bankrupt or insolvent, or approving a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of Maker, under federal bankruptcy law, as now or hereafter
constituted, and the continuance of such decree or order is unstayed and in
effect for a period of 60 days; (iii) the commencement by Maker of a voluntary
case under federal bankruptcy law, as now or hereafter constituted, or the
consent of Maker to the institution of bankruptcy or insolvency proceedings
against it; (iv) the filing by Maker of a petition or consent seeking
reorganization or relief under federal bankruptcy law; or (v) the appointment
of a receiver, liquidator, assignee, trustee, or similar official of Maker or
the making by Maker of an assignment for the benefit or creditors; then Payee
may declare the outstanding principal amount of this Promissory Note and all
other amounts due hereunder to be immediately due and payable, whereupon the
outstanding principal amount of this Promissory Note and all such other
amounts shall become and shall be forthwith due and payable, without
diligence, presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived.
8. NOTICES.
(A) Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service or delivered (in person or by telecopy,
telex or similar telecommunications equipment) against receipt to the party to
whom it is to be given, (i) if to Payee, for itself and as agent for all of
its transferees, at its address at 0000 X. Xxxxxxxx Xxxxx, Xxxxxx, Xxxxxxxxx
00000, with a copy simultaneously given to Sletteland & Associates, S.C., 0000
Xxxxx XxxxxXxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxx 00000, Attention:
Xxxxxx X. Xxxxxxxxxx, Esq., (ii) if to Maker, at its address at 000
Xxxxxxxxxxx Xxxx, Xxxxxxxx Xxx Xxxx 00000, Attention: Xxxxxx X. Xxxxxx; (iii)
if to the Company at its address at 000 Xxxxxxxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx
00000, Attention: Xxxxxx X. Xxxxxx; or (iv) in any case, to such other address
as the party shall have furnished in writing in accordance with the provisions
of this Section 8. Any notice or other communication given by certified mail
shall be deemed given at the time of certification thereof, except for a
notice changing a party's address which shall be deemed given at the time of
receipt thereof. Any notice given by other means permitted by this Section 8
shall be deemed given at the time of receipt thereof.
(B) Maker hereby covenants and agrees to provide Payee with
notice, at least 20 days prior to the Company filing any registration
statement under the Act, covering equity securities of the Company (other than
registration statements on Form S-8 or S-4 or any other
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form not generally available for the registration of securities for sale to
public) for its own account or for the account of others.
9. MISCELLANEOUS.
The rights and obligations of Maker under this Promissory Note may
not be assigned, conveyed or otherwise transferred to any third party and any
attempt to assign, convey or transfer such rights and/or obligations shall be
null and void. Prior written notice of any assignment; conveyance or transfer
of this Promissory Note by Payee must be given to Maker. This Promissory Note
may not be changed orally, but only by an agreement in writing and signed by
the party against whom enforcement of any waiver, change, modification or
discharge is sought.
This Promissory Note is made and delivered in New York, New York,
and shall be governed by the laws of the State of New York.
MILWAUKEE FAMILY GOLF
CENTERS, INC.
By: ______________________
Name: Xxxxxx Xxxxxx
Title: Vice President
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